10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

ý For the fiscal year ended December 31, 2005

OR

o 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
incorporation or organization)	Identification No.)
1065 Woodman Drive, Dayton, Ohio	45432
(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:

Title of each class	Name of each exchange on which registered
Common Stock, $0.01 par value and Preferred Share Purchase Rights	New York Stock Exchange

Outstanding at

February 28, 2006

126,556,404

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ý    No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes o   No ý

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 ý   No o

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. ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ý Accelerated filer o Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o   No ý

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of June 30, 2005 was approximately $3.5 billion based on a closing sale price on that date as reported on the New York Stock Exchange.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement for its 2006 Annual Meeting of Shareholders are incorporated by reference in Part III of this Form 10-K.

DPL INC.

Index to Annual Report on Form 10-K

Fiscal Year Ended December 31, 2005

		Page No.
	Part I
Item 1	Business	3
Item 1a	Risk Factors	17
Item 1b	Unresolved Staff Comments	21
Item 2	Properties	21
Item 3	Legal Proceedings	22
Item 4	Submission of Matters to a Vote of Security Holders	25
	Part II
Item 5	Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	25
Item 6	Selected Financial Data	27
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 7A	Quantitative and Qualitative Disclosures about Market Risk	47
Item 8	Financial Statements and Supplementary Data	48
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	94
Item 9A	Controls and Procedures	94
Item 9B	Other Information	94
	Part III
Item 10	Directors and Executive Officers of the Registrant	94
Item 11	Executive Compensation	95
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	95
Item 13	Certain Relationships and Related Transactions	95
Item 14	Principal Accountant Fees and Services	95
	Part IV
Item 15	Exhibits and Financial Statement Schedules	96
	Other
	Signatures	103
	Schedule II Valuation and Qualifying Accounts	105
	Subsidiaries of DPL Inc.
	Consent of Independent Registered Public Accounting Firm

Available Information

DPL Inc. (DPL, the Company, we, us, our, or ours unless the context indicates otherwise) files current, annual and quarterly reports, proxy statements and other information required by the Securities Exchange Act of 1934, as amended, with the Securities and Exchange Commission (SEC). You may read and copy any document we file at the SEC’s public reference room located at 100 F Street N.E., Washington, D.C. 20549, USA. Please call the SEC at (800) SEC-0330 for further information on the public reference rooms. Our SEC filings are also available to the public from the SEC’s web site at http://www.sec.gov.

Our public internet site is http://www.dplinc.com. We make available, free of charge, through our internet site, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and Forms 3, 4 and 5 filed on behalf of our directors and executive officers and amendments to those reports filed or furnished pursuant to the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

In addition, our public internet site includes other items related to corporate governance matters, including, among other things, our governance guidelines, charters of various committees of the Board of Directors and our code of business conduct and ethics applicable to all employees, officers and directors. You may obtain copies of these documents, free of charge, by sending a request, in writing, to DPL Investor Relations, 1065 Woodman Drive, Dayton, Ohio 45432.

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PART I

Item 1 – Business

DPL INC.

We are a diversified regional energy company organized in 1985 under the laws of Ohio. Our executive offices are located at 1065 Woodman Drive, Dayton, Ohio 45432 - telephone (937) 224-6000.

Our principal subsidiary is The Dayton Power and Light Company (DP&L). DP&L is a public utility incorporated in 1911 under the laws of Ohio. DP&L sells electricity to residential, commercial, industrial and governmental customers in a 6,000 square mile area of West Central Ohio. Electricity for DP&L’s 24 county service area is primarily generated at eight coal-fired power plants and is distributed to more than 500,000 retail customers. DP&L also purchases retail peak load requirements from DPL Energy LLC (DPLE, one of our wholly-owned subsidiaries). Principal industries served include automotive, food processing, paper, plastic manufacturing, and defense. DP&L’s sales reflect the general economic conditions and seasonal weather patterns of the area. DP&L sells any excess energy and capacity into the wholesale market.

Our significant subsidiaries (all of which are wholly-owned) include DPLE, which engages in the operation of peaking generating facilities; DPL Energy Resources, Inc. (DPLER), which sells retail electric energy under contract to major industrial and commercial customers in West Central Ohio; MVE, Inc., which was primarily responsible for the management of our financial asset portfolio; DPL Finance Company, Inc., which provides financing to us and our subsidiaries; and Miami Valley Insurance Company (MVIC), our captive insurance company that provides insurance sources to us and our subsidiaries.

We conduct our principal business in one business segment - Electric.

Under the recently-enacted Public Utility Holding Company Act of 2005, the Federal Energy Regulatory Commission (FERC) requires that utility holding companies comply with certain accounting, record retention and filing requirements. We believe we are exempt from these requirements because DP&L’s operations are confined to a single state. On January 31, 2006, we filed a FERC 65B Waiver Notification with the FERC, requesting that the FERC approve our waiver and avoid FERC regulation.

DPL and our subsidiaries employed 1,381 persons as of December 31, 2005, of which 1,147 were full-time employees and 234 were part-time employees.

SIGNIFICANT DEVELOPMENTS

Sale of Private Equity Funds

On February 13, 2005, our subsidiaries, MVE and MVIC, entered into an agreement to sell their respective interests in forty-six private equity funds to AlpInvest/Lexington 2005, LLC, a joint venture of AlpInvest Partners and Lexington Partners, Inc. Sales proceeds and any related gains or losses were recognized as the sale of each fund closed. Among other closing conditions, each fund required the transaction to be approved by the respective general partner. During 2005, MVE and MVIC completed the sale of their interests in forty-three private equity funds and a portion of one private equity fund resulting in a $46.6 million pre-tax gain ($53.1 million less $6.5 million professional fees) from discontinued operations and providing approximately $796 million in net proceeds, including approximately $52 million in distributions from funds while held for sale. As part of this pre-tax gain, we realized $30 million that was previously recorded as an unrealized gain in other comprehensive income.

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During this same period, MVE entered into alternative closing arrangements with AlpInvest/Lexington 2005, LLC for funds where legal title to said funds could not be transferred until a later time. Pursuant to these arrangements, MVE transferred the economic aspects of the remaining private equity funds, consisting of two funds and a portion of another fund, to AlpInvest/Lexington 2005, LLC without a change in ownership of the interests. The terms of the alternative arrangements do not meet the criteria for recording a sale. We are obligated to remit to AlpInvest/Lexington 2005, LLC any distributions MVE receives from these funds, and AlpInvest/Lexington 2005, LLC is obligated to provide funds to us to pay any contribution notice, capital call or other payment notice or bill for which MVE receives notice with respect to such funds. The alternative arrangements resulted in a deferred gain of $27.1 million until such terms of a sale can be completed (contingent upon receipt of general partner approvals of the transfer) and provided approximately $72.3 million in net proceeds on these funds. We recorded an impairment loss of $5.6 million to write down to estimated fair value the assets transferred pursuant to the alternative arrangements. Ownership of these funds will transfer after the general partners of each of the separate funds consent to the transfer. It is anticipated that this will occur no later than the first quarter of 2007.

Debt Reduction

During 2005 we used part of the proceeds from the sale of its private equity funds to retire all or part of four outstanding long-term debt issues in the aggregate amount of $446.6 million as described below.

On May 15, 2005 we redeemed all of the outstanding 7.83% Senior Notes due 2007 in the amount of $39 million. A premium of 5.38% was paid on the 7.83% Senior Notes that were redeemed.

On July 14, 2005, we extended an Offer to Purchase three debt securities for a maximum aggregate purchase price of $246 million. The Offer to Purchase was made in three tiers. The first tier was to purchase all the tendered 8.125% Capital Securities due 2031 up to the aggregate purchase price of $246 million. The second tier was to purchase as many of the tendered 6.875% Senior Notes due 2011 with funds remaining from the aggregate purchase price. If any funds were still remaining, the third tier was to purchase as many as possible of the tendered 8.0% Senior Notes due 2009.

On August 11, 2005, we executed the results of the Offer to Purchase and purchased $105.0 million of the 8.125% Capital Securities, $102.6 million of the 6.875% Senior Notes and none of the 8.0% Senior Notes. Premiums of 26.46% and 10.32% were paid on the 8.125% Capital Securities and on the 6.875% Senior Notes, respectively, that were tendered and accepted for purchase.

On August 29, 2005, we executed a make whole call option and purchased $200 million of the 8.25% Senior Notes due 2007. A premium of 5.69% was paid on the 8.25% Senior Notes that were tendered and accepted for purchase.

Stock Repurchase Plan

On July 27, 2005, our Board authorized the repurchase up to $400 million of stock from time to time in the open market through private transactions. During December 2005, a total of 406,000 shares at a cost of $10.6 million were repurchased and settled in January 2006. These shares are currently held as treasury shares. There were no other repurchases during 2005 and 2004.

Rate Stabilization Surcharge

On April 4, 2005, DP&L filed a request at the Public Utilities Commission of Ohio (PUCO) to implement a new rate stabilization surcharge effective January 1, 2006 to recover cost increases associated with environmental capital and related Operations and Maintenance costs, and fuel expenses. On November 3, 2005, DP&L entered into a settlement agreement that extended DP&L’s rate stabilization period through December 31, 2010. During this time, the Company will continue to provide retail electric service at fixed rates with the ability to recover increased fuel and environmental costs through surcharges and riders. Specifically, the agreement provides for:

•      A rate stabilization surcharge equal to 11% of generation rates beginning January 1, 2006 and continuing through December 2010. Based on 2004 sales, this rider is expected to result in approximately $65 million in net revenues per year.

•      A new environmental investment rider to begin January 1, 2007 equal to 5.4% of generation rates, with incremental increases equal to 5.4% each year through 2010. Based on 2004 sales, this rider is expected to result in approximately $35 million in annual net revenues beginning January 2007, growing to approximately $140 million by 2010.

•      An increase to the residential generation discount from January 1, 2006 through December 31, 2008 which is expected to result in a revenue decrease of approximately $7 million per year for three years, based on 2004 sales. The residential discount will expire on December 31, 2008.

On December 28, 2005, the PUCO adopted the settlement with certain modifications (RSS Stipulation). The PUCO ruled that the environmental rider will be bypassable by all customers who take service from alternate generation suppliers. Future additional revenues are dependent upon actual sales and levels of customer switching. On February 22, 2006, the PUCO denied applications for rehearing filed by the Office of the Ohio Consumers’ Counsel (OCC), as well as Ohio Partners for Affordable Energy.

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Collective Bargaining Agreement Ratification

On December 2, 2005, Local 175 of the Utility Workers of America ratified a new three year collective bargaining agreement with DP&L. Major components include: 3%, 2% and 2.5% annual wage increases over three years, improvements to the pension and 401(k) programs, increases in DP&L’s contribution to employees’ healthcare costs, employment security for three years, measurable productivity and service improvements, an emergency response program targeted to enhance customer service response time and changes in DP&L’s illness benefits. On December 31, 2005, 760 employees were members of Local 175.

Increase in Dividends on Common Stock

On February 1, 2006, our Board of Directors announced that it had raised the quarterly dividend to $0.25 per share payable March 1, 2006 to common shareholders of record on February 14, 2006. This increase results in an annualized dividend rate of $1.00 per share, or a 4% increase.

Governmental and Regulatory Inquiries

On April 7, 2004, we received notice that the staff of the PUCO was conducting an investigation into the financial condition of DP&L as a result of previously disclosed matters raised by one of our executives during the 2003 year-end financial closing process (the Memorandum). On May 27, 2004, the PUCO ordered DP&L to file a plan of utility financial integrity that outlined the actions the Company had taken or will take to insulate DP&L utility operations and customers from its unregulated activities. DP&L was required to file this plan by March 2, 2005. On February 4, 2005, DP&L filed its protection plan with the PUCO. On June 29, 2005, the PUCO closed its investigation citing significant positive actions we had taken including changes in our Board of Directors as well as our executive management of DP&L, and that no apparent diminution of service quality had occurred because of the events that initiated the investigation.

On May 20, 2004, the staff of the SEC notified us that it was conducting an inquiry covering our exempt status under the Public Utility Holding Company Act of 1935 (the ‘35 Act). The staff of the SEC requested we provide certain documents and information on a voluntary basis. On October 8, 2004, we received a notice from the SEC that a question existed as to whether such exemption from the Public Utility Holding Company Act was detrimental to the public interest or the interests of investors or consumers. On November 5, 2004, we filed a good faith application seeking an order of exemption from the SEC. In light of the repeal of the ‘35 Act, effective February 8, 2006, and based upon the information previously provided to the staff of the SEC, this inquiry is moot.

On March 3, 2005, DP&L received a notice that the Federal Energy Regulatory Commission (FERC) had instituted an operational audit of DP&L regarding its compliance with the Code of Conduct within the transmission and generation areas. On October 7, 2005, the FERC issued its Findings and Conclusions, stating that DP&L “generally complied with the FERC Standard of Conduct” except for three areas, all of which were corrected to the satisfaction of the FERC prior to the issuance of these Findings and Conclusions.

Sale of Warrants and Repurchase of Voting Preferred Shares

As a result of an investment made by Dayton Ventures, LLC, an affiliate of Kohlberg, Kravis & Roberts & Co. (KKR), in March 2000, Dayton Ventures, LLC owned 31,560,000 warrants. During the twelve

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year period commencing March 13, 2000, each warrant can be exercised and converted into a common share of our common stock for an exercise price of $21.00. Additionally, as a part of Dayton Ventures, LLC’s investment in us, we sold and issued 6,800,000 shares of voting preferred shares, 200,000 shares of which we redeemed in 2001. During December 2004 and January 2005 in four transactions, Dayton Ventures, LLC transferred all of its warrants to an unaffiliated third party which has subsequently transferred approximately 25 million warrants to unaffiliated third parties. In conjunction with transactions in 2005, we repurchased at par of $0.01 per share all of the outstanding 6,600,000 voting preferred shares. As a result of the reduction of Dayton Ventures, LLC’s warrant ownership below 12,640,000, KKR was no longer eligible to receive an annual $1 million management, consulting and financial services fee and Dayton Ventures, LLC no longer had the right to designate one person to serve as a DPL and DP&L director or to designate one person to serve as a non-voting observer on DPL and DP&L Boards of Directors.

COMPETITION AND REGULATION

DP&L has historically operated in a rate-regulated environment providing electric generation and energy delivery, consisting of transmission and distribution services, as a single product to its retail customers. Prior to the legislation discussed below, DP&L did not have retail competitors in its service territory.

In October 1999, legislation became effective in Ohio that gave electric utility customers a choice of energy providers beginning on January 1, 2001. Under this legislation, electric generation, power marketing, and power brokerage services supplied to retail customers in Ohio are deemed to be competitive and are not subject to supervision and regulation by the PUCO.

DP&L filed an Electric Transition Plan with the PUCO and received regulatory approval of the plan on September 21, 2000 which provided for a three-year market development period and specified rates, which included the recovery of approximately $600 million in transition costs.

On October 28, 2002, DP&L filed with the PUCO a request for an extension of its market development period through December 31, 2005. On September 2, 2003, the PUCO adopted a Stipulation entered into by DP&L and certain parties to the proceeding with modifications (the MDP Stipulation). The MDP Stipulation also provided that beginning January 1, 2006, rates may be modified by up to 11% of generation rates to reflect increased costs associated with fuel, environmental compliance, taxes, regulatory changes, and security measures. Further, the PUCO conditionally approved an increase to the residential generation discount commencing January 1, 2006. The PUCO’s decision was appealed to the Ohio Supreme Court. On December 17, 2004, the Ohio Supreme Court affirmed the PUCO’s Order, approving the MDP Stipulation.

On April 4, 2005, DP&L filed a request at the Public Utilities Commission of Ohio (PUCO) to implement a new rate stabilization surcharge effective January 1, 2006 to recover cost increases associated with environmental capital and related Operations and Maintenance costs, and fuel expenses. On November 3, 2005, DP&L entered into a settlement agreement that extended DP&L’s rate stabilization period through December 31, 2010. During this time, the Company will continue to provide retail electric service at fixed rates with the ability to recover increased fuel and environmental costs through surcharges and riders. Specifically, the agreement provides for:

•      A rate stabilization surcharge equal to 11% of generation rates beginning January 1, 2006 and continuing through December 2010. Based on 2004 sales, this rider is expected to result in approximately $65 million in net revenues per year.

•      A new environmental investment rider to begin January 1, 2007 equal to 5.4% of generation rates, with incremental increases equal to 5.4% each year through 2010. Based on 2004 sales, this rider is expected to result in approximately $35 million in annual net revenues beginning January 2007, growing to approximately $140 million by 2010.

•      An increase to the residential generation discount from January 1, 2006 through December 31, 2008 which is expected to result in a revenue decrease of approximately $7 million per year for three years, based on 2004 sales. The residential discount will expire on December 31, 2008.

On December 28, 2005, the PUCO adopted the settlement with certain modifications (RSS Stipulation). The PUCO ruled that the environmental rider will be bypassable by all customers who take service from alternate generation suppliers. Future additional revenues are dependent upon actual sales and levels of customer switching. On February 22, 2006, the PUCO denied applications for rehearing filed by the Office of the Ohio Consumers’ Counsel (OCC), as well as Ohio Partners for Affordable Energy.

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As a part of the MDP Stipulation, DP&L agreed to implement a Voluntary Enrollment Process that would provide customers with an option to choose a competitive supplier to provide their retail generation service should switching not reach 20% in each customer class by October 2004. During 2005, approximately 51 thousand residential customers that volunteered for the program were bid out to Competitive Retail Electric Service (CRES) providers who were registered in DP&L’s service territory. In August 2005, the fourth and final bid took place, however no bids were received and the 2005 program ended. As part of the RSS Stipulation, DP&L agreed to implement the Voluntary Enrollment Program again in 2006 and 2007. The magnitude of any customer switching and the financial impact of this program were not material to our results of operations, cash flows or financial position in 2005. Future period effects cannot be determined at this time.

On February 20, 2003, the PUCO requested comments from interested stakeholders on the proposed rules for the conduct of a competitive bidding process that will take place at the end of the rate stabilization period. DP&L submitted comments in March 2003. The PUCO issued final rules on December 23, 2003. Under DP&L’s RSS Stipulation discussed above, these rules will not affect DP&L until January 1, 2011. However, the PUCO retains the authority to, at any time, require an Ohio electric utility to conduct a competitive bidding process to measure the market price of competitive retail generation.

As of December 31, 2005, four unaffiliated marketers were registered as CRES providers in DP&L’s service territory; to date, there has been no significant activity from these suppliers. DPL Energy Resources, Inc. (DPLER), an affiliated company, is also a registered CRES provider and accounted for nearly all load served by CRES providers within DP&L’s service territory in 2005. In addition, several communities in DP&L’s service area have passed ordinances allowing the communities to become government aggregators for the purpose of offering alternative electric generation supplies to their citizens. To date, none of these communities have aggregated their generation load.

There was a complaint filed on January 21, 2004 at the PUCO concerning the pricing of DP&L’s billing services. Previously, on December 16, 2003, a complaint was filed at the PUCO alleging that DP&L had established improper barriers to competition. On October 13, 2004, the parties reached a settlement on the pricing of DP&L’s billing services that DP&L will charge CRES providers. Additionally, on October 19, 2004, DP&L entered into a settlement that resolves all matters in the barrier to competition complaint. This settlement provides that DP&L will modify the manner in which customer partial payments are applied to billing charges and DP&L will no longer offer to purchase the receivables of CRES providers who operate in DP&L’s certified territory. On February 2, 2005, the PUCO issued an Order approving both settlements with minor modifications. This Order gives DP&L the right to defer costs of approximately $16 million and later file for recovery over a five year period, subject to PUCO approval. The Office of the Ohio Consumers’ Counsel (OCC) filed a Motion for Rehearing which was later denied by the PUCO and on May 23, 2005, the OCC appealed the order to the Ohio Supreme Court. On June 17, 2005, DP&L filed a subsequent case, requesting PUCO approval for recovery of the deferred billing costs plus carrying charges beginning January 1, 2006. If approved as proposed, this new rider will result in approximately $7 million in additional annual revenue through 2010. A hearing was held on January 23, 2006, and a PUCO decision is pending in this case. On August 16, 2005, the OCC filed a Complaint against DP&L in Mercer County Common Pleas Court relating to billing costs that may be charged to residential customers. DP&L filed a motion to dismiss the case. On February 24, 2006, the OCC filed a notice of voluntary dismissal of the Mercer County proceeding.

On September 1, 2005, DP&L filed an application requesting the PUCO grant it authority to recover distribution costs associated with storm restoration efforts for ice storms that took place in December

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2004 and January 2005. On February 10, 2006, DP&L filed updated schedules in support of its application upon discussions with PUCO Staff. If approved as proposed, this new rider is designed to recover over $6.5 million in previously deferred costs plus carrying costs for a total of $8.6 million over a two year period. (See Note 3 of Notes to Consolidated Financial Statements.)

Like other electric utilities and energy marketers, DP&L and DPLE may sell or purchase electric products on the wholesale market. DP&L and DPLE compete with other generators, power marketers, privately and municipally-owned electric utilities, and rural electric cooperatives when selling electricity. The ability of DP&L and DPLE to sell this electricity will depend on how DP&L’s and DPLE’s price, terms and conditions compare to those of other suppliers.

As part of Ohio’s electric deregulation law, all of the state’s investor-owned utilities are required to join a Regional Transmission Organization (RTO). In October 2004, DP&L successfully integrated its 1,000 miles of high-voltage transmission into the PJM Interconnection, L.L.C. (PJM) RTO. The role of the RTO is to administer an electric marketplace and insure reliability. PJM ensures the reliability of the high-voltage electric power system serving 51 million people in all or parts of Delaware, Indiana, Illinois, Kentucky, Maryland, Michigan, New Jersey, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia. PJM coordinates and directs the operation of the region’s transmission grid; administers, the world's largest, competitive wholesale electricity market, and plans regional transmission expansion improvements to maintain grid reliability and relieve congestion.

As a member of PJM, the value of DP&L’s generation capacity may be affected by a PJM proposal pending before The Federal energy Regulatory Commission (FERC). The proposal introduces a new Reliability Pricing Model (RPM) that would change the way generation capacity is priced and planned for by PJM. The outcome of this proceeding is uncertain at this time.

DP&L provides transmission and wholesale electric service to twelve municipal customers in its service territory, which distribute electricity principally within their incorporated limits. DP&L also maintains an interconnection agreement with one municipality that has the capability to generate a portion of its own energy requirements. Sales to these municipalities represented less than 1% of total electricity sales in 2005. DP&L’s contract with one municipality expired in February 2005, creating reduced future generation sales to municipalities.

As of December 31, 2004, DP&L had invested a total of approximately $18.0 million in its efforts to join an RTO. On March 8, 2005, DP&L, along with Commonwealth Edison and American Electric Power Service Corporation, filed to recover a portion of integration expenses to join an RTO. On May 6, 2005, FERC approved the filing subject to certain modifications, allowing for recovery to begin in 2005. Recovery of these costs is dependent on pending settlement discussions.

Effective October 1, 2004, PJM began to assess a FERC-approved administrative fee on every megawatt consumed by DP&L customers. On October 26, 2004, DP&L filed an application with the PUCO for authority to modify its accounting procedures to defer collection of this PJM administrative fee, plus carrying charges, until such time as DP&L obtained the authority to adjust its rates to recover this cost from customers (i.e., after January 1, 2006). On June 1, 2005, the PUCO authorized DP&L to defer the PJM administrative fee, plus carrying charges incurred after the date of our application. On July 1, 2005, the OCC filed an Application for

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Rehearing, which was subsequently denied by the PUCO, and on September 9, 2005 the case was appealed to the Ohio Supreme Court. On July 1, 2005, DP&L filed a subsequent case requesting PUCO authority for recovery of the PJM administrative fee from retail customers. On January 25, 2006, the PUCO issued an order approving the tariff as filed, which should result in approximately $8 million in additional revenue per year for three years beginning in February 2006. On February 13, 2006, the OCC filed an application for rehearing claiming the PUCO erred by not conducting a hearing and rejecting the OCC’s request for intervention. Commission action on the rehearing application is pending.

On July 23, 2003, the FERC issued an Order that the rates for transmission service of seven  companies, including DP&L, may be unjust, unreasonable, or unduly discriminatory or preferential.  DP&L is operating under FERC-approved rates through December 2008.  In addition, the FERC ordered transitional payments, known as Seams Elimination Charge Adjustment (SECA), effective December 1, 2004 through March 31, 2006, subject to refund. Through this proceeding, we are obligated to pay SECA charges to other utilities but we receive a net benefit from these transitional payments.  Several parties have sought rehearing of the FERC orders and there likely will be appeals filed in the matter.  All motions for rehearing are pending.  The hearing is scheduled to take place in May 2006.  Beginning May 2005, DP&L began receiving these FERC ordered transitional payments and has received over $23 million of SECA collections, net of SECA charges, through December 2005.  DP&L management believes that appropriate reserves have been established in the event that SECA collections are required to be refunded.  The ultimate outcome of the proceeding establishing SECA rates is uncertain at this time. However, based on the amount of reserves established for this item, the results of this proceeding are not expected to have a material adverse effect on DP&L’s financial condition, results of operations or cash flows.

On May 31, 2005, the FERC instituted a proceeding under Federal Power Act Section 206 concerning the justness and reasonableness of PJM’s rate design. This proceeding sets the rates for hearing and requests that all of PJM members, which include DP&L, address the justness and reasonableness of the current rate design. On November 22, 2005, DP&L, along with ten other transmission owners, filed in support of PJM’s existing rate design. DP&L cannot determine what effect, if any, the outcome of this proceeding may have on its future recovery of transmission revenues. An April 18, 2006 hearing is scheduled in this case.

On August 8, 2005, the Energy Policy Act of 2005 (the 2005 Act) was enacted. This new law encompasses several areas including, but not limited to:  electric reliability, repeal of the Public Utility Holding Company Act of 1935, promotion of energy infrastructure, preservation of a diverse fuel supply for electricity generation and energy efficiency. As a result of this legislation, the PUCO initiated an investigation to review their actions with respect to net metering, smart metering and demand response, cogeneration, and interconnection standards. The PUCO received comments on this proceeding and has established a series of technical conferences. At the conclusion of the conferences, parties will have an opportunity to provide additional comments by April 28, 2006. The PUCO could approve new regulatory requirements as a result of this proceeding. Also in response to the Energy Policy Act of 2005, on September 1, 2005, the FERC issued a Notice of Proposed Rulemaking to amend its regulations to incorporate the criteria any entity must satisfy to qualify to be an Electric Reliability Organization (ERO) that will propose and enforce reliability standards subject to FERC approval. The proposed rule also included related matters on delegating ERO authority, the creation of advisory bodies and reporting requirements. Other rulemakings are expected as a result

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of the Energy Policy Act of 2005, such that DP&L cannot at this time measure the financial, operating and reporting impact of this new law.

On October 11, 2005, the FERC issued a proposed rulemaking relating to significant modifications to the FERC’s regulations on the Public Utility Regulatory Policies Act (PURPA). A final rule was issued on February 2, 2006 that supports the development of new cogeneration facilities that truly conserve energy. The new rules (1) assume new cogeneration facilities of 5 megawatts or less satisfy the requirement that the thermal output of the new cogeneration facility is used in a productive and beneficial manner; (2) ensure that there is continuing progress in the development of efficient electric energy generating technology and extend existing efficiency standards from gas and oil-fired qualified facilities to coal-fired qualifying facilities; (3) partially eliminate qualifying facility exemptions from regulation under the Federal Power Act; and (4) require that 50 percent of the annual energy output of the facility will be used for industrial, commercial, institutional or residential purposes and not sold to a utility. The impact of this rule change on DP&L is unclear at this time.

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. On October 7, 2005, the FERC issued its Findings and Conclusions, stating that DP&L “generally complied with the FERC’s Standard of Conduct” with a few recommendations that were corrected to the satisfaction of the FERC prior to the issuance of their Findings and Conclusions.

On April 7, 2004, DP&L received notice that the staff of the PUCO was conducting an investigation into the financial condition of DP&L as a result of financial reporting and governance issues raised by the Memorandum. 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 was required to file this plan by March 2, 2005. On February 4, 2005, DP&L filed its protection plan with the PUCO and expressed its intention to continue to cooperate with the PUCO in their investigation. On March 29, 2005, the OCC filed comments with the PUCO on DP&L’s financial plan of integrity, requesting the PUCO continue the investigation and monitor DP&L’s progress toward implementation of its financial plan of integrity. On June 29, 2005, the PUCO closed its investigation, citing significant positive actions taken by DP&L including changes in the Board of Directors as well as executive management of DP&L, and that no apparent diminution of service quality has occurred because of the events that initiated the investigation.

On August 2, 2004, in order to strengthen MVIC’s financial position, the Vermont Department of Banking, Insurance, Securities and Health Care Administration notified MVIC of MVIC’s requirement to reduce its intercompany receivable to a maximum no greater than MVIC’s total capital and surplus plus $250,000 minimum capital. As a result, we transferred $5 million from our operating cash to our subsidiary, MVIC, in satisfaction of this requirement during the fourth quarter of 2004. In January 2005, MVE transferred a private equity financial asset valued in excess of $31.5 million to MVIC to further strengthen MVIC’s financial position. During 2005 the private equity financial assets owned by MVIC were sold along with the rest of the private equity funds. MVIC distributed dividends to DPL from the proceeds of these sales. During the review of the second quarter financial statements, we noted that these transactions inadvertently caused the shareholder equity of MVIC to fall below the required level. In discussions with the Vermont Department of Banking, Insurance, Securities and Health Care Administration it was decided that we would maintain a loss reserve to shareholder equity ratio of 3:1 in MVIC. As a result, during the third quarter of 2005 we transferred $12.3 million from our operating cash to MVIC in satisfaction of this new requirement.

CONSTRUCTION ADDITIONS

Construction additions were $180 million, $98 million and $102 million in 2005, 2004 and 2003, respectively, and are expected to approximate $365 million in 2006. Planned construction additions

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for 2006 relate to DP&L’s environmental compliance program, power plant equipment, and its transmission and distribution system.

Capital projects are subject to continuing review and are revised in light of changes in financial and economic conditions, load forecasts, legislative and regulatory developments and changing environmental standards, among other factors. Over the next three years, we are projecting to spend an estimated $750 million in capital projects, approximately 60% of which is to meet changing environmental standards. Our ability to complete capital projects and the reliability of future service will be affected by our financial condition, the availability of internal funds and the reasonable cost of external funds, and adequate and timely return on these capital investments. We expect to finance our construction additions in 2006 with a combination of cash and short-term investments on hand, tax-exempt debt and internally-generated funds.

See ENVIRONMENTAL CONSIDERATIONS for a description of environmental control projects and regulatory proceedings that may change the level of future construction additions. The potential effect of these events on our operations cannot be estimated at this time.

ELECTRIC OPERATIONS AND FUEL SUPPLY

Our present summer generating capacity – including Peaking Units — is approximately 4,405 MW. Of this capacity, approximately 2,856 MW or 65% is derived from coal-fired steam generating stations and the balance of approximately 1,549 MW or 35% consists of combustion turbine and diesel peaking units. Combustion turbine output is dependent on ambient conditions and is higher in the winter than in the summer. Our all-time net peak load was 3,243 MW, occurring July 25, 2005.

Approximately 87% of the existing steam generating capacity is provided by certain units owned as tenants in common with The Cincinnati Gas & Electric Company (CG&E) or its subsidiary, Union Heat, Light & Power, and Columbus Southern Power Company (CSP). As tenants in common, 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. DP&L’s remaining steam generating capacity (approximately 365 MW) is derived from a generating station owned solely by DP&L. Additionally, DP&L, CG&E and CSP own as tenants in common, 884 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 2005, we generated 99% of our electric output from coal-fired units and 1% from oil or natural gas-fired units.

The following table sets forth DP&L’s and DPLE’s generating stations and, where indicated, those stations which DP&L owns as tenants in common.

				Approximate Summer
		Operating		MW Rating
Station	Ownership*	Company	Location	DPL Portion	Total
Coal Units
Hutchings	W	DP&L	Miamisburg, OH	365	365
Killen	C	DP&L	Wrightsville, OH	412	615
Stuart	C	DP&L	Aberdeen, OH	832	2,376
Conesville-Unit 4	C	CSP	Conesville, OH	129	780
Beckjord-Unit 6	C	CG&E	New Richmond, OH	207	414
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	23	23
Yankee Street	W	DP&L	Centerville, OH	107	107
Monument	W	DP&L	Dayton, OH	12	12
Tait Diesels	W	DP&L	Dayton, OH	10	10
Sidney	W	DP&L	Sidney, OH	12	12
Tait Units 1-3	W	DP&L	Moraine, OH	256	256
Killen	C	DP&L	Wrightsville, OH	12	18
Stuart	C	DP&L	Aberdeen, OH	3	10
Greenville Units 1-4	W	DPLE	Greenville, OH	192	192
Darby Station Units 1-6	W	DPLE	Darby, OH	438	438
Montpelier Units 1-4	W	DPLE	Montpelier, IN	192	192
Tait Units 4-7	W	DPLE	Moraine, OH	292	292
Total approximate summer generating capacity				4,405	9,012

*W = Wholly-Owned

C = Commonly-Owned

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We have approximately 95% of the total expected coal volume needed for 2006 under contract.  The percentage of coal under contract at our individual facilities is as low as 80%.  Contracted coal volumes at certain facilities exceed 100% of the expected need.  Due to the differences in contracted volumes at various facilities, it is expected we will be in the spot market for more than 5% of our 2006 coal volume at some facilities while we may make no spot purchases at other facilities.  We may have excess coal volumes to meet 2007 needs at some facilities.  The majority of our contracted coal is purchased at fixed prices.  Some contracts provide for periodic adjustment and some are priced based on market indices.  Substantially all contracts have features that limit price escalations in any given year.  Our 2006 emission allowance (SO2) consumption is expected to be similar to 2005.  Our holdings of 2006 SO2 allowances are approximately equal to its expected needs.  There may be small exchanges of allowances between 2006 and future years to balance our 2006 position.  We do not expect to purchase allowances outright for 2006.  The exact consumption of SO2 allowances will depend on market prices for power, availability of our generating units and the actual sulfur content of the coal burned.

The average cost of fuel used per kilowatt-hour (kWh) generated was 1.93¢ in 2005, 1.56¢ in 2004 and 1.33¢ in 2003.

SEASONALITY

The power generation and delivery business is seasonal and weather patterns have a material impact on operating performance. In the region served by our subsidiaries, demand for electricity is generally greater in the summer months associated with cooling and in the winter months associated with heating as compared to other times of the year. Historically, the power generation and delivery operations of our subsidiaries have generated less revenue and income when weather conditions are warmer in the winter and cooler in the summer.

RATE REGULATION AND GOVERNMENT LEGISLATION

DP&L’s sales to retail customers are subject to rate regulation by the PUCO. 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 established the Office of the Ohio Consumers’ Counsel (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

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existing PUCO authorization, regulatory assets and liabilities are recorded on the Consolidated Balance Sheets. (See Note 3 of Notes to Consolidated Financial Statements.)

See COMPETITION AND REGULATION for more detail regarding the effect of legislation.

ENVIRONMENTAL CONSIDERATIONS

The operations of DPL and DP&L, including DP&L’s commonly-owned facilities, are subject to a wide range of federal, state, and local environmental regulations and laws as to air and water quality, disposal of solid waste and other environmental matters. Governance also includes the location, construction and operation of new and existing electric generating facilities and most electric transmission lines. As such, existing environmental regulations may be periodically revised and new legislation could be enacted that may affect our estimated construction expenditures. See CONSTRUCTION ADDITIONS. In the normal course of business, DP&L has ongoing programs and activities underway at these facilities to comply, or to determine compliance, with such existing, new and/or proposed regulations and legislation.

DP&L has been identified, either by a government agency or by a private party seeking contribution to site clean-up costs, as a potentially responsible party (PRP) at two sites pursuant to state and federal laws. DP&L records liabilities for probable estimated loss in accordance with Statement of Financial Accounting Standards No. 5 (SFAS 5), “Accounting for Contingencies.”  To the extent a probable loss can only be estimated by reference to a range of equally probable outcomes, and no amount within the range appears to be a better estimate than any other amount, DP&L accrues for the low end of the range. Because of uncertainties related to these matters, accruals are based on the best information available at the time. DP&L evaluates the potential liability related to probable losses quarterly and may revise its estimates. Such revisions in the estimates of the potential liabilities could have a material effect on the Company’s results of operations and financial position.

Air and Water Quality

In November 1999, the United States Environmental Protection Agency (USEPA) filed civil complaints and Notices of Violations (NOVs) against operators and owners of certain generation facilities for alleged violations of the Clean Air Act (CAA). Generation units operated by CG&E (Beckjord 6) and Columbus Southern Power Company (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 USEPA’s action against CG&E and CSP. DP&L was not identified in the NOVs, civil complaints or state actions.

On March 1, 2000, the United States Department of Justice filed a complaint against Cinergy Corporation and two subsidiaries (USA v. Cinergy Corp. et al) for alleged violations of the CAA at various generation units operated by PSI Energy, Inc. and CG&E. The complaint was amended June 24, 2004 and includes generation units operated by CG&E and co-owned by DP&L (Beckjord 6 and Miami Fort 7). The suit seeks (1) injunctive relief to require installation of pollution control technology on various generating units atCG&E’s W.C. Beckjord and Miami Fort Stations, and PSI’s Cayuga, Gallagher, Wabash River, and Gibson Stations, and (2) civil penalties in amounts of up to $27,500 per day for each violation. In addition, three northeast states and two environmental groups have intervened in the case. In August 2005, the district court issued a ruling regarding the emissions test that it will apply to Cinergy at the trial of the case. Contrary to Cinergy’s argument, the district court ruled that in determining whether a project was projected to increase annual emissions, it would not hold hours of operation constant. However, the district court subsequently certified the matter for interlocutory appeal to the Seventh Circuit Court of Appeals, which has the discretion to accept the appeal at this time. Oral arguments have been scheduled for May 29, 2006.

In June 2000, the USEPA issued a NOV to DP&L-operated Stuart Generating Station (co-owned by DP&L, CG&E, and CSP) for alleged violations of the CAA. The NOV contained allegations consistent with NOVs and complaints that the USEPA had recently brought against numerous other coal-fired utilities

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in the Midwest. The NOV indicated EPA may (1) issue an order requiring compliance with the requirements of the Ohio SIP or (2) bring a civil action seeking injunctive relief and civil penalties of up to $27,500 per day for each violation. To date, neither action has been taken.

On September 21, 2004, the Sierra Club filed a lawsuit against the Company and the other owners of the Stuart Generating Station in the United States District Court for the Southern District of Ohio for alleged violations of the CAA. The case is currently in discovery; a trial date has not been set.

On July 27, 2004, various residents of the Village of Moscow, Ohio notified CG&E, as the operator of Zimmer (co-owned by CG&E, DP&L and CSP), of their intent to sue for alleged violations of the CAA and air pollution nuisances. On November 17, 2004, a citizens’ suit was filed against CG&E (Freeman v. CG&E). DP&L believes the allegations are meritless and believes CG&E, on behalf of all co-owners, will vigorously defend the matter. The plaintiffs have filed a number of additional notices of intent to sue and two lawsuits raising claims similar to those in the original claim. One lawsuit was dismissed on procedural grounds and the remaining two have been consolidated. The plaintiffs have filed for class action status; a decision has not yet been reached on this matter.

On November 18, 2004, the State of New York and seven other states filed suit against the American Electric Power Corporation (AEP) and various subsidiaries, alleging various CAA violations at a number of AEP electric generating facilities, including Conesville Unit 4 (co-owned by CG&E, DP&L and CSP). DP&L believes the allegations are without merit and that AEP, on behalf of all co-owners, will vigorously defend the matter. On January 6, 2006, the court ordered the consolidation of this case with another similar suit; a trial date for the remedy phase of the consolidated cases has not yet been set.

On October 27, 2003, the USEPA published its final rules regarding the equipment replacement provision (ERP) of the routine maintenance, repair and replacement (RMRR) exclusion of the CAA. Subsequently, on December 24, 2003, the United States Court of Appeals for the D.C. Circuit stayed the effective date of the rule pending its decision on the merits of the lawsuits filed by numerous states and environmental organizations challenging the final rules.  As a result of the stay, the Ohio Environmental Protection Agency (Ohio EPA) delayed its previously announced intent to adopt the RMRR rule.  On October 20, 2005, USEPA proposed to revise the emissions test for existing electric generating units.  At this time, we are unable to determine the impact of the ERP appeal or the outcome of the proposed emission test.

In September 1998, the USEPA issued a final rule requiring states to modify their State Implementation Plans (SIPs) under the CAA. On July 18, 2002, the Ohio EPA adopted rules that constitute Ohio’s NOx SIP, which is substantially similar to the federal CAA Section 126 rulemaking and federal NOx SIP. On August 5, 2003, the USEPA published its conditional approval of Ohio’s nitrogen oxide (NOx) SIP, with an effective date of September 4, 2003. Ohio’s SIP requires NOx reductions at coal-fired generating units effective May 31, 2004. On May 31, 2004, DP&L began operation of its Selective Catalytic Reduction equipment (SCRs). DP&L’s NOx reduction strategy and incurred expenditures to meet the federal reduction requirements should satisfy the Ohio SIP NOx reduction requirements.

On December 17, 2003, the USEPA proposed the Interstate Air Quality Rule (IAQR) designed to reduce and permanently cap sulfur dioxide (SO₂) and NOx emissions from electric utilities. The proposed IAQR focused on states, including Ohio, whose power plant emissions are believed to be significantly contributing to fine particle and ozone pollution in other downwind states in the eastern United States. On June 10, 2004, the USEPA issued a supplemental proposal to the IAQR, now renamed as the Clean Air Interstate Rule (CAIR). The final rules were signed on March 10, 2005 and were published on May 12, 2005. On August 24, 2005, the USEPA proposed additional revisions to the CAIR and initiated reconsideration on one issue. Although we cannot predict the outcome of the

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reconsideration proceedings, the petitions or pending litigation, CAIR has had and will have a material effect on our operations. We anticipate that Phase I of CAIR will require the installation of flue gas desulphurization (FGD) equipment and continual operation of the currently-installed SCR. As a result, DP&L is proceeding with the installation of FGD equipment at various generating units.

On January 30, 2004, the USEPA published its proposal to restrict mercury and other air toxics from coal-fired and oil-fired utility plants. The final Clean Air Mercury Rule (CAM-R) was signed March 15, 2005 and was published on May 18, 2005. The final rules will have a material effect on our operations. We anticipate that the FGD being planned to meet the requirements of CAIR may be adequate to meet the Phase I requirements of CAM-R. We expect that additional controls will be needed to meet the Phase II requirements of CAM-R that go into effect January 1, 2018. On March 29, 2005, nine states sued USEPA, opposing the regulatory approach taken by USEPA. On March 31, 2005, various groups requested that USEPA stay implementation of CAM-R. On August 4, 2005, the United States Court of Appeals for the District of Columbia denied the motion for stay. EPA is expected to initiate reconsideration proceedings on one or more issues. We cannot predict the outcome of the reconsideration proceedings or pending litigation.

Under the CAIR and CAM-R cap and trade programs for SO_2, NOx and mercury, we estimate we will spend more than $453 million from 2006 through 2008 to install the necessary pollution controls. If CAM-R litigation results in plant specific mercury controls, our costs may be higher. Due to the ongoing uncertainties associated with the litigation of the CAM-R, we cannot project the final costs at this time.

On July 15, 2003, the Ohio EPA submitted to the USEPA its recommendations for eight-hour ozone nonattainment boundaries for the metropolitan areas within Ohio. On April 15, 2004, the USEPA issued its list of ozone nonattainment designations. DP&L owns and/or operates a number of facilities in counties designated as nonattainment with the ozone national ambient air quality standard. DP&L does not know at this time what future regulations may be imposed on its facilities and will closely monitor the regulatory process. Ohio EPA will have until April 15, 2007 to develop regulations to attain and maintain compliance with the eight-hour ozone national ambient air quality standard. Numerous parties have filed petitions for review. DP&L cannot predict the outcome of USEPA’s reconsideration petitions.

On January 5, 2005, the USEPA published its final nonattainment designations for the national ambient air quality standard for Fine Particulate Matter 2.5 (PM 2.5) designations. These designations included counties and partial counties in which DP&L operates and/or owns generating facilities. On March 4, 2005, DP&L and other Ohio electric utilities and electric generators filed a petition for review in the D.C. Circuit Court of Appeals, challenging the final rule creating these designations. On November 30, 2005, the court ordered USEPA to decide on all petitions for reconsideration by January 20, 2006. On January 20, 2006, USEPA denied the petitions for reconsideration. The Ohio EPA will have three years to develop regulations to attain and maintain compliance with the PM 2.5 national ambient air quality standard. DP&L cannot determine the outcome of the petition for review or the effect such Ohio EPA regulations will have on its operations.

In April 2002, the USEPA issued proposed rules governing existing facilities that have cooling water intake structures. Final rules were published in the Federal Register on July 9, 2004. A number of parties appealed the rules to the federal Court of Appeals for the Second Circuit in New York. The Company anticipates that future studies may be needed at certain generating facilities. We cannot predict the impact such studies may have on future operations or the outcome of litigation proceedings.

On May 5, 2004, the USEPA issued its proposed regional haze rule, which addresses how states should determine the best available retrofit technology (BART) for sources covered under the regional haze rule. Final rules were published July 6, 2005, providing States with several options for determining whether sources in the State should be subject to BART. In the final rule, USEPA made

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the determination that CAIR achieves greater progress than BART and may be used by States as a BART substitute. Numerous units owned and operated by us will be impacted by BART. We cannot determine the extent of the impact until Ohio determines how BART will be implemented.

On May 4, 2004, the Ohio EPA issued a final National Pollutant Discharge Elimination System permit for J.M. Stuart Station that continues the station’s 316(a) variance. During the three-year term of the draft permit, DP&L will conduct a thermal discharge study to evaluate the technical feasibility and economic reasonableness of water cooling methods other than cooling towers.

On October 13, 2005, the USEPA issued a proposed rule concerning the test for measuring whether modifications to electric generating units should trigger application of New Source Review (NSR) standards under the CAA. The proposed rule seeks comments on two different hourly emissions test options as well as the USEPA’s current method of measuring previous actual emission levels to projected actual emission levels after the modification. A third option that tests emissions increase based upon emissions per unit of energy output is also available for comment. We cannot predict the outcome of this rulemaking or its impact on current environmental litigation.

Land Use

In September 2002, DP&L and other parties received a special notice that the USEPA considers us to be PRPs for the clean-up of hazardous substances at the South Dayton Dump landfill site. On August 4, 2005, DP&L and other parties received a general notice regarding the performance of a Remedial Investigation and Feasibility Study (RI/FS) under a Superfund Alternative approach. On October 5, 2005, DP&L received a special notice letter inviting it to enter into negotiations with USEPA to conduct the RI/FS. Although the information available to DP&L does not demonstrate that it contributed hazardous substances to the site, DP&L will seek from USEPA a de minimis settlement at the site. Should USEPA pursue a civil action, DP&L will vigorously challenge it.

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DPL INC.

OPERATING STATISTICS

ELECTRIC OPERATIONS

	Years Ended December 31,
	2005		2004		2003
Electric Sales (millions of kWh)
Residential	5,520		5,140		5,071
Commercial	3,901		3,777		3,699
Industrial	4,332		4,393		4,330
Other retail	1,437		1,407		1,409
Total retail	15,190		14,717		14,509
Wholesale	2,716		3,748		4,836
Total	17,906		18,465		19,345
Operating Revenues ($ in thousands)
Residential	$	478,226	$	449,411	$	442,239
Commercial	276,157		267,831		264,067
Industrial	220,453		223,335		221,961
Other retail	81,716		80,370		80,583
Other miscellaneous revenues	10,069		15,863		12,895
Total retail	1,066,621		1,036,810		1,021,745
Wholesale	133,283		135,129		159,250
RTO ancillary revenues	74,419		17,905		—
Other revenues, net of fuel costs	10,586		10,054		9,970
Total	$	1,284,909	$	1,199,898	$	1,190,965
Electric Customers at End of Period
Residential	456,146		453,653		450,958
Commercial	48,853		48,172		47,253
Industrial	1,837		1,851		1,863
Other	6,304		6,337		6,322
Total	513,140		510,013		506,396

Item 1a – Risk Factors

This annual report and other documents that we file with the SEC and other regulatory agencies, as well as other oral or written statements we may make from time to time, contain information based on management’s beliefs and include forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) that involve a number of known and unknown risks, uncertainties and assumptions. These forward-looking statements are not guarantees of future performance, and there are a number of factors including, but not limited to, those listed below, which could cause actual outcomes and results to differ materially from the results contemplated by such forward-looking statements. We do not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These forward-looking statements are identified by terms and phrases such as “anticipate”, “believe”, “intend”, “estimate”, “expect”, “continue”, “should”, “could”, “may”, “plan”, “project”, “predict”, “will”, and similar expressions.

The following is a listing of risk factors that we consider to be the most significant to your decision to invest in our stock.  If any of these events occurs, our business, financial position or results of operation could be materially affected.

Our stock price may fluctuate

The market price of our common stock has fluctuated over a wide range. In addition, the stock market in recent years has experienced significant price and volume variations that have often been unrelated to our operating performance. Over the past three years, the market price of our common stock has fluctuated with a low of $11.95 and a high of $28.12. The market price of our common stock may continue to fluctuate in the future and may be affected adversely by factors such as actual or anticipated changes in our operating results, acquisition activity, changes in financial estimates by securities analysts, general market conditions, rumors and other factors.

The electric industry in Ohio is partially deregulated

Before 2001, electric utilities provided electric generation, transmission and distribution services as a single product to retail customers at prices set by The Public Utilities Commission of Ohio (PUCO). But in 1999, Ohio enacted legislation, effective January 1, 2001, that partially deregulated utility service, making retail generation service a competitive service. Customers may choose to take generation service from competitive retail electric service (CRES) providers that register with the PUCO but are otherwise unregulated. In connection with this partial deregulation of the electric

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industry in Ohio, electric utilities have had to restructure their service and their rates to accommodate competition.

Many of the requirements of the Ohio deregulation law were premised on the assumption that the wholesale generation market and, in turn, the retail generation market, would fully develop by the end of 2005, and that the price for generation for even those customers who choose to continue to purchase the service from the regulated utility would be set purely by the market. But that did not occur. As a result, the Commission and the utilities, including DP&L, have worked out plans to provide market-based pricing for generation service, but also to stabilize those rates for several years. What DP&L may propose, and what the PUCO will approve, in the future regarding pricing and cost recovery will depend on the degree to which the wholesale and retail electric generation markets have developed.

Moreover, the uncertainty of the future of the wholesale and retail markets could cause the Ohio General Assembly to revisit the issue of competition and customer choice.

Although there has not yet been significant switching by DP&L’s customers to CRES providers, that could occur in the future.

Although retail generation service has been a competitive service since January 1, 2001, the competitive generation market has not developed in DP&L’s service territory to any significant degree. But there are factors that could result in increased switching by customers to CRES providers in the future:

•Voluntary Enrollment Procedure

As part of a settlement in a PUCO proceeding, DP&L initiated, in November 2004, a voluntary enrollment procedure (VEP) to encourage customers to change electric suppliers. Although the VEP did not result in a significant increase in the number of customers switching to CRES providers, the VEP will be initiated again in 2006 and 2007 and could produce different results.

•CRES Supplier Initiatives

Even without the VEP, customers can elect to take generation service from a competitive retail electric service (CRES) provider. As of December 31, 2005, five CRES providers have been certified by the PUCO to provide generation service in DP&L’s service territory. One of those five, DPL Energy Resources, Inc. (DPLER), is an affiliate of DP&L. Although DPLER has accounted for nearly all of the load served by CRES providers in DP&L’s service territory since retail competition began in 2001, that could change. Depending on the development of the wholesale market and the level of wholesale prices, CRES providers could become more active in DP&L’s service territory and could begin to offer better prices than they do now. This could result in more switching by DP&L’s customers and a further loss by DP&L of its generation business.

•Governmental Aggregation Programs

Another possible way in which DP&L could lose generation customers is through “governmental aggregation,” which was permitted in the restructuring legislation. Under this program, municipalities may contract with a CRES provider to provide generation service to the customers located within the municipal boundaries. Several communities in DP&L’s service territory have passed ordinances allowing them to become government aggregators. Although none has yet implemented an aggregation program, that too, could change if CRES providers are able to make lower-priced offers as a result of decreasing prices in the wholesale market.

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DP&L’s ability to increase its rate to recover increased costs is limited.

As a result of the failure of the market to develop as anticipated, DP&L has proposed to stabilize its market-based generation rates rather than subject customers to the volatile rates that would otherwise be applicable in the absence of the rate stabilization plan. DP&L’s distribution rates will be unchanged through December 31, 2008 and its generation rates will be maintained through December 31, 2008. Although the PUCO has approved several riders that will permit DP&L to offset increases in fuel and environmental costs, the environmental rider is not payable by customers that take generation service from a CRES provider. Thus, a significant migration of customers from DP&L’s generation service to CRES providers could affect DP&L’s ability to recover those costs. Moreover, DP&L will not be able to adjust its rates during the rate stabilization period for increases in other expenses or to recover capital expenditures.

DP&L has agreed to provide service at pre-determined rates through December 31, 2010, which limits its ability to pass through its costs to customers.

DP&L has provided service at rates governed by the PUCO-approved transition, market development, and rate stabilization plans. Those rates have included a statutorily-required 5% residential rate reduction in the generation component of its rates, a further 2.5% reduction to the residential generation rate, with its generation rates frozen through December 31, 2010, and guaranteed distribution rates through December 31, 2008. The protection afforded by retail fuel clause recovery mechanisms was eliminated effective January 1, 2001 by the implementation of customer choice in Ohio. The RSS Stipulation (as defined above), although subject to judicial review, extends DP&L’s commitment to maintain pre-determined rates for distribution through December 31, 2008, with limited ability to recover certain costs after December 31, 2005. Likewise, through the RSS Stipulation, DP&L extended its commitment to maintain pre-determined rates for generation through December 31, 2010, and in exchange is permitted to charge two new rate riders to offset increases in fuel and environmental costs. Beginning January 1, 2006 a new Rate Stabilization Surcharge was implemented that should recover approximately $60 to $65 million additional revenue in 2006, net of customer discounts and considering less than a full twelve months recovery due to the timing of the PUCO order. The new environmental investment rider could result in approximately $35 million additional revenue in 2007, net of customer discounts and assuming no customer switching. The PUCO ruled this rider will be bypassable by all customers who take service from alternative generation suppliers. Accordingly, the rates DP&L is allowed to charge may or may not match its expenses at any given time. Therefore, during this period (or possibly earlier by order of the PUCO), and, thereafter, while DP&L will be subject to prevailing market prices for electricity, it would not necessarily be able to charge rates that produce timely or full recovery of its expenses. DP&L has historically maintained its rates at consistent levels since 1994, when the last phase of DP&L’s last traditional rate case was implemented. However, as DP&L operates under its PUCO-approved RSS Stipulation, there can be no assurance that DP&L would be able to timely or fully recover unanticipated levels of expenses, including but not limited to those relating to fuel, coal and purchased power, compliance with environmental regulation, reliability initiatives, and capital expenditures for the maintenance or repair of its plants or other properties.

There are uncertainties relating to the ultimate development of Regional Transmission Organizations (RTOs), including the PJM to which DP&L has given control of its transmission functions.

On October 1, 2004, DP&L gave PJM control of its transmission functions and fully integrated into PJM. Problems or delays that may arise in the operation of RTOs may restrict DP&L’s ability to sell power produced by its generating capacity to certain markets if there is insufficient transmission capacity otherwise available. The rules governing the various regional power markets may also change from time to time which could affect DP&L’s costs and revenues. While RTO rates are designed to be revenue neutral, DP&L’s revenues from customers to whom they currently provide transmission services could decrease. DP&L will incur fees and increased costs to participate in an RTO, it may be limited with respect to the price at which power may be offered for sale from certain generating units, and it may be required to expand its transmission system according to decisions

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made by an RTO rather than its internal planning process. Because the RTO market rules are continuing to evolve, we cannot fully assess the impact that these power markets or other ongoing RTO developments may have on DP&L and us.

We rely principally on coal as the fuel to operate virtually all of the power plants that serve our customers daily. We are dependant on our coal suppliers to continually supply our power plants to avoid an interruption in our generation of electricity.

Some of our coal suppliers have not performed their contracts as promised and have failed to timely deliver all coal as specified under their contracts. Such failure could significantly reduce DP&L’s inventory of coal and may cause DP&L to purchase higher priced coal on the spot market. When the failure is for a short period of time, DP&L can absorb the irregularity due to existing inventory levels. If we are required to purchase coal on the spot market, it may affect our cost of operations.

There are additional factors, including, but not limited to, regulation and competition, economic conditions, reliance on third parties, operating results fluctuations, regulatory uncertainties and litigation, warrant exercise, internal controls and environmental compliance, that may affect our future results.

Regulation/Competition

We operate in a rapidly changing industry with evolving industry standards and regulations. In recent years a number of federal and state developments aimed at promoting competition triggered industry restructuring. Regulatory factors, such as changes in the policies and procedures that set rates; changes in tax laws, tax rates, and environmental laws and regulations; changes in DP&L’s ability to recover expenditures for environmental compliance, fuel and purchased power costs and investments made under traditional regulation through rates; and changes to the frequency and timing of rate increases can affect our results of operations and financial condition. Changes in our customer base, including municipal customer aggregation, could lead to the entrance of competitors in our marketplace, affecting our results of operations and financial condition. Additionally, financial or regulatory accounting principles or policies imposed by governing bodies can increase our operational and monitoring costs affecting our results of operations and financial condition.

Economic Conditions

Economic pressures, as well as changing market conditions and other factors related to physical energy and financial trading activities, which include price, credit, liquidity, volatility, capacity, transmission, and interest rates can have a significant effect on our operations and the operations of our retail, industrial and commercial customers.

On October 8, 2005, Delphi Corporation filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York. Delphi represents approximately 1% of our annual revenues.

During the past few years, the merchant energy industry in many parts of the United States has suffered from oversupply of merchant generation and a decline in trading and marketing activity. These market conditions are expected to continue for several years. As a result of these market conditions, we continue to evaluate the carrying values of certain long-lived generation assets.

Reliance on Third Parties

We rely on many suppliers for the purchase and delivery of inventory, including coal, and equipment components to operate our energy production, transmission and distribution functions. Unanticipated changes in our purchasing processes, delays and supplier availability may affect our business and operating results. In addition, we rely on others to provide professional services, such as, but not limited to, actuarial calculations, internal audit services, payroll processing and various consulting services.

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Operating Results Fluctuations

Future operating results are subject to fluctuations based on a variety of factors, including but not limited to: unusual weather conditions; catastrophic weather-related damage; unscheduled generation outages; unusual maintenance or repairs; changes in coal costs, gas supply costs, emissions allowance costs, or availability constraints; environmental compliance; and electric transmission system constraints.

Regulatory Uncertainties and Litigation

In the normal course of business, we are subject to various lawsuits, actions, proceedings, claims and other matters asserted under laws and regulations. Additionally, we are subject to diverse and complex laws and regulations, including those relating to corporate governance, public disclosure and reporting, and taxation, which are rapidly changing and subject to additional changes in the future. As further described in Item 3 - "Legal Proceedings," we are also currently involved in various pieces of litigation in which the outcome is uncertain. Compliance with these rapid changes may substantially increase costs to our organization and could affect our future operating results.

Warrant Exercise

Our warrant holders could exercise their 31,560,000 warrants at their discretion until March 12, 2012.  As a result, we could be required to issue up to 31,560,000 common shares in exchange for the receipt of the exercise price of $21.00 per share or pursuant to a cashless exercise process.  The exercise of all warrants could have a significant dilutive effect on us and would increase our common share dividend cost and may affect any existing guidance on basic earnings per share.

Internal Controls

Our internal controls, accounting policies and practices, and internal information systems are designed to enable us to capture and process transactions in a timely and accurate manner in compliance with accounting principles generally accepted in the United States of America (GAAP), laws and regulations, taxation requirements, and federal securities laws and regulations. We implemented corporate governance, internal control and accounting rules issued in connection with the Sarbanes-Oxley Act of 2002. Our internal controls and policies have been and continue to be closely monitored by management and our Board of Directors to ensure continued compliance with Section 404 of the Act. While we believe these controls, policies, practices and systems are adequate to verify data integrity, unanticipated and unauthorized actions of employees, temporary lapses in internal controls due to shortfalls in oversight or resource constraints could lead to improprieties and undetected errors that could impact our financial condition, cash flows or results of operations.

Environmental Compliance

Our generating facilities (both wholly-owned and co-owned with others) are subject to continuing federal and state environmental laws and regulations. We believe that we currently comply with all existing federal and state environmental laws and regulations. We own a non-controlling, minority interest in several generating stations operated by The Cincinnati Gas & Electric Company (CG&E) or its affiliate, Union Heat, Light & Power, and Columbus Southern Power Company (CSP). Either or both of these parties are likely to take steps to ensure that these stations remain in compliance with applicable environmental laws and regulations. As non-controlling owners in these generating stations, we will be responsible for our pro rata share of these expenditures based upon our ownership interest.

Item 1b – Unresolved Staff Comments

None

Item 2 - Properties

Electric

Information relating to our properties is contained in Item 1 – CONSTRUCTION ADDITIONS, and ELECTRIC OPERATIONS AND FUEL SUPPLY, and Note 10 of Notes to Consolidated Financial Statements.

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Substantially all property and plant of DP&L is subject to the lien of the mortgage securing DP&L’s First and Refunding Mortgage, dated as of October 1, 1935 with the Bank of New York, as Trustee (Mortgage).

Item 3 - Legal Proceedings

In the normal course of business, we are subject to various lawsuits, actions, proceedings, claims and other matters asserted under laws and regulations. We believe the amounts provided in our consolidated financial statements, as prescribed by GAAP, for these matters are adequate in light of the probable and estimable contingencies. However, there can be no assurances that the actual amounts may be required to satisfy alleged liabilities from various legal proceedings, claims, and other matters discussed below, and to comply with applicable laws and regulations will not exceed the amounts reflected in our Consolidated Financial Statements. As such, costs, if any, that may be incurred in excess of those amounts provided as of December 31, 2005, cannot be reasonably determined.

On August 24, 2004, we, and our subsidiaries DP&L and MVE, filed a Complaint against Mr. Forster, Ms. Muhlenkamp and Mr. Koziar (the Defendants) 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 deferred compensation plans and to the employment and consulting agreements with the Defendants, and the propriety of the distributions from the plans to the Defendants, and alleging that the Defendants breached their fiduciary duties and breached their consulting and employment contracts. We, DP&L and MVE seek, among other things, damages in excess of $25,000, disgorgement of all amounts improperly withdrawn by the Defendants from the plans and a court order declaring that we, DP&L and MVE have no further obligations under the consulting and employment contracts due to those breaches.

The Defendants filed motions to dismiss the Complaint, which the Court subsequently denied. On June 15, 2005, Defendants filed their answers denying liability and filed counterclaims against us, DP&L, MVE, various compensation plans (the Plans), and against the then-current members of our Board of Directors and two of our former Board members. These counterclaims allege generally that DPL, DP&L, MVE, the Plans and the individual defendants breached the terms of the employment and consulting contracts of the Defendants, and the terms of the Plans. They further allege theories of breach of fiduciary duty, breach of contract, promissory estoppel, tortious interference, conversion, replevin and violations of ERISA under which they seek distribution of deferred compensation balances, conversion of stock incentive units, exercise of options and payment of amounts allegedly owed under the contracts and the Plans. Defendants’ counterclaims also demand payment of attorneys’ fees. Motions to dismiss certain of the counterclaims were denied on February 23, 2006.

On March 15, 2005, Mr. Forster and Ms. Muhlenkamp filed a lawsuit in New York state court against the purchasers of the private equity investments in the financial asset portfolio and against outside counsel to us and DP&L concerning purported entitlements in connection with the purchase of those investments. We, DP&L and MVE are not defendants in that case; however, the three of us are parties to an indemnification agreement with respect to the purchaser defendants.

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We, DP&L and MVE filed a Motion for Preliminary Injunction in the Ohio case, requesting that the court issue a preliminary injunction against Mr. Forster and Ms. Muhlenkamp regarding the New York lawsuit. On August 18, 2005, the Ohio court issued a preliminary injunction against Mr. Forster and Ms. Muhlenkamp that precludes them from pursuing certain key issues raised by Mr. Forster and Ms. Muhlenkamp in their New York lawsuit that are identical to the issues raised in the pending Ohio lawsuit in the New York court or any other forum other than the Ohio litigation. In addition, the New York court has stayed the New York litigation pending the outcome of the Ohio litigation. Mr. Forster and Ms. Muhlenkamp have appealed the preliminary injunction and the appeal is pending at the Ohio Supreme Court.

The parties continue to proceed with the discovery phase of the litigation, and a number of motions have been filed and briefed with respect to document discovery and depositions. The trial court granted some and overruled some of these pending motions on February 23, 2006.

We continue to evaluate all of the matters relevant to this litigation and are considering other claims against Defendants, Forster, Muhlenkamp and Koziar that include, but are not limited to, breach of fiduciary duty or other claims relating to personal and DPL investments, the calculation of benefits under the Supplemental Executive Retirement Program (SERP) and financial reporting with respect to such benefits, and with respect to Mr. Koziar, the fulfillment of duties owed to us as our legal counsel. Cumulatively through December 31, 2005, we have accrued for accounting purposes, obligations of approximately $52 million to reflect claims regarding deferred compensation, estimated MVE incentives and/or legal fees that Defendants assert are payable per contracts. We dispute Defendants’ entitlement to any of those sums and, as noted above, are pursuing litigation against them contesting all such claims.

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On or about June 24, 2004, the SEC commenced a formal investigation into the issues raised by the Memorandum. We are cooperating with the investigation.

On April 7, 2004, the Company received notice that the staff of the PUCO was conducting an investigation into the financial condition of DP&L as a result of the issues raised by the Memorandum. 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 was required to file this plan by March 2, 2005. On February 4, 2005, DP&L filed its protection plan with the PUCO. On June 29, 2005, the PUCO closed its investigation, citing significant positive actions we had taken including changes in the Board of Directors as well as the executive management of DP&L, and that no apparent diminution of service quality had occurred because of the events that initiated the investigation.

On May 20, 2004, the staff of the SEC notified us that it was conducting an inquiry covering our exempt status under the Public Utility Holding Company Act of 1935 (the ‘35 Act). The staff of the SEC requested we provide certain documents and information on a voluntary basis. On October 8, 2004, we 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. On November 5, 2004, we filed a good faith application seeking an order of exemption from the SEC. In light of the repeal of the ‘35 Act, effective February 8, 2006, and based upon the information previously provided to the staff of the SEC, this inquiry is moot.

On May 28, 2004, the U.S. Attorney’s Office for the Southern District of Ohio, assisted by the Federal Bureau of Investigation, notified us that it has initiated an inquiry involving the subject matters covered by our internal investigation. We are cooperating with this investigation.

On June 24, 2004, the Internal Revenue Service (IRS) began an audit of tax years 1998 through 2003 and issued a series of data requests to us including issues raised in the Memorandum. The staff of the IRS has requested that we provide certain documents, including but not limited to, matters concerning executive/director deferred compensation plans, management stock incentive plans and MVE financial statements. On September 1, 2005, the IRS issued an audit report for tax years 1998 through 2003 that shows proposed changes to our federal income tax liability for each of those years. The proposed changes result in a total tax deficiency, penalties and interest of approximately $23.9 million as of December 31, 2005. On November 4, 2005, we filed a written protest to one of the proposed changes. We believe we are adequately reserved for any tax deficiency, penalties and interest resulting from the proposed changes and as a result, the proposed changes did not adversely affect our results from operations.

We are also under audit review by various state agencies for tax years 2002 through 2004. We have also filed an appeal to the Ohio Board of Tax Appeals for tax years 1998 through 2001. Depending upon the outcome of these audits and the appeal, we may be required to increase our tax provision if actual amounts ultimately determined exceed recorded reserves. We believe we have adequate reserves in each tax jurisdiction but cannot predict the outcome of these audits.

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On February 13, 2006, we received correspondence from the Ohio Department of Taxation (ODT) notifying us that ODT has completed their examination and review of our Ohio Corporation Franchise Tax Returns for tax years 2002 through 2004 and that the final proposed audit adjustments result in a balance due of $90.8 million before interest and penalties. We have reviewed the proposed audit adjustments and plan to vigorously contest the ODT findings and forthcoming notice of assessment through all administrative and judicial means available. We believe we have recorded adequate tax reserves related to the proposed adjustments; however, we cannot predict the outcome which could be material to our results of operations and cash flows.

On December 12, 2003, the Office of Federal Contract Compliance Programs (OFCCP) notified DP&L by letter alleging it had discriminated in the hiring of meter readers during 2000-2001 by utilizing credit checks to determine if applicants had paid their electric bills. On February 12, 2004, DP&L and the OFCCP entered into a Conciliation Agreement whereby DP&L agreed to distribute approximately $0.2 million in compensation to certain affected applicants. DP&L has completed these payments to the affected applicants and supplied to the OFCCP all follow-up reports required under the Conciliation Agreement.

In June 2002, a contractor’s employee received a verdict against DP&L for injuries he sustained while working at a DP&L power station. The Adams County Court of Common Pleas awarded the contractor’s employee compensatory damages of approximately $0.8 million and prejudgment interest of approximately $0.6 million. On April 28, 2004, the 4th District Court of Appeals upheld this verdict except the award for prejudgment interest. On September 1, 2004, the Ohio Supreme Court refused to hear the case, so the matter was remanded to the Adams County Court of Common Pleas for a re-determination of the amount of prejudgment interest that should be awarded. The trial court heard this matter on October 15, 2004. On November 1, 2004, DP&L paid approximately $976,000 to the contractor’s employee to satisfy the judgment and post-judgment interest. On December 6, 2004, the Adams County Court of Common Pleas ruled that the prejudgment interest should be reduced to approximately $30 thousand. Both parties appealed this decision. On January 25, 2006, the Fourth District Court of Appeals ruled in DP&L’s favor, finding it owed no prejudgment interest to the Plaintiff.

Additional information relating to legal proceedings involving DPL is contained in Item 1 – ENVIRONMENTAL CONSIDERATIONS, and Item 8 – Note 14 of Notes to Consolidated Financial Statements.

In November 2005, AMP-Ohio, a wholesale supplier of electricity to its thirteen member municipalities, requested arbitration of its power supply agreement with DP&L. AMP-Ohio alleges it has a right to receive certain capacity credits. DP&L disagrees with this position and has agreed to arbitrate the dispute. The arbitration is pending. We are unable at this time to determine whether this will have any material impact on our results of operations, cash flows or financial position.

Item 4 - Submission of Matters to a Vote of Security Holders

NONE

PART II

Item 5 - Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

As of December 31, 2005, there were 26,061 holders of record of our common equity, excluding individual participants in security position listings. The following table presents the high and low per

25

share sales prices for DPL common stock as reported by the New York Stock Exchange for each quarter of 2005 and 2004.

	2005		2004
	High	Low	High	Low
First Quarter	$ 26.77	$ 24.27	$ 20.77	$ 17.60
Second Quarter	$ 27.67	$ 24.08	$ 19.77	$ 17.21
Third Quarter	$ 28.12	$ 26.70	$ 20.64	$ 19.02
Fourth Quarter	$ 28.01	$ 24.55	$ 25.36	$ 20.30

As long as DP&L 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 $1.2 million. As of year-end, all earnings reinvested in the business of DP&L were available for DP&L common stock dividends. We expect all 2006 earnings reinvested in the business of DP&L to be available for DP&L common stock dividends, payable to DPL.

Issuer Purchases of Equity Securities
	(a)	(b)	(c)	(d)
Period	Total Number of Shares (or Units) Purchased	Average Price Paid per Share (or Unit)	Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
December 1-31, 2005	406,000	$26.10	406,000	$389.4 million

(1)  Our Board announced the common share repurchase program in a press release dated July 28, 2005.  In this announcement our Board authorized up to $400 million to be spent on the repurchase program without a specified expiration date.  During December 2005, a total of 406,000 shares at a cost of $10.6 million were repurchased and settled in January 2006.  These common shares are currently held as treasury shares.  There were no other repurchases during 2005 and 2004.

On April 30, 2004, we and DP&L announced that we suspended our quarterly dividend payments. On December 1, 2004, we and DP&L resumed our regular quarterly dividends, including payments normally made in June and September.

On February 1, 2006, our Board of Directors authorized a 4% dividend increase on our common stock, raising the annual dividend on common shares from $0.96 per share to $1.00 per share.

On July 27, 2005, our Board authorized the repurchase up to $400 million of stock from time to time in the open market, through private transactions. During December 2005 a total of 406,000 shares at a cost of $10.6 million were repurchased and settled in January 2006. These shares are currently held as treasury shares. There were no other repurchases during 2005 and 2004.

Additional information concerning dividends paid on DPL common stock is set forth under Selected Quarterly Information in Item 8 – Financial Statements and Supplementary Data.

Information regarding our equity compensation plans as of December 31, 2005, is disclosed in Item 12 — Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, which incorporates such information by reference to our proxy statement for the 2006 Annual Meeting of Shareholders.

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Item 6 - Selected Financial Data

		2005			2004		2003		2002		2001
	For the years ended December 31,
DPL Inc.:	Basic earnings (loss) per share of common stock:
	Continuing operations	$	1.03		1.01		0.96		1.48		1.87
	Discontinued operations	$	0.44		0.80		0.14		(0.72	)	(0.26	)
	Cumulative effect of accounting change (a)	$	(0.03	)	—		0.14		—		0.01
	Total basic earnings per common share	$	1.44		1.81		1.24		0.76		1.62
	Diluted earnings (loss) per share of common stock:
	Continuing operations	$	0.97		1.00		0.94		1.42		1.75
	Discontinued operations	$	0.41		0.78		0.14		(0.69	)	(0.24	)
	Cumulative effect of accounting change (a)	$	(0.03	)	—		0.14		—		0.01
	Total diluted earnings per common share	$	1.35		1.78		1.22		0.73		1.52
	Dividends paid per share	$	0.96		0.96		0.94		0.94		0.94
	Dividend payout ratio	66.7		%	53.0	%	75.8	%	123.7	%	58.0	%
	Earnings from continuing operations, net of tax	$	124.7		121.5		114.9		177.6		227.0
	Earnings (loss) from discontinued operations, net of taxes	$	52.9		95.8		16.6		(86.5	)	(31.2	)
	Cumulative effect of accounting change, net of taxes (a)	$	(3.2	)	—		17.0		—		1.0
	Net income	$	174.4		217.3		148.5		91.1		196.8
	Revenues (millions)	$	1,284.9		1,199.9		1,191.0		1,186.4		1,201.8
	Total construction additions (millions)	$	179.7		98.0		102.2		165.9		338.9
	Market value per share at December 31	$	26.01		25.11		20.88		15.34		24.08
DPL Inc.:	Electric sales (millions of kWh)
	Residential	5,520			5,140		5,071		5,302		4,909
	Commercial	3,901			3,777		3,699		3,710		3,618
	Industrial	4,332			4,393		4,330		4,472		4,568
	Other retail	1,437			1,407		1,409		1,405		1,369
	Total retail	15,190			14,717		14,509		14,889		14,464
	Wholesale	2,716			3,748		4,836		4,358		3,591
	Total	17,906			18,465		19,345		19,247		18,055
	At December 31,
DPL Inc.:	Book value per share	$	8.53		8.67		7.52		6.89		7.13
	Total assets (millions)	$	3,791.7		4,165.5		4,444.7		4,277.7		4,370.8
	Long-term debt (millions) (b)	$	1,677.1		2,117.3		1,954.7		2,142.3		2,150.8
	Trust preferred securities (b)	$	—		—		—		292.6		292.4
	At December 31,
DPL Inc.:	Senior unsecured debt ratings —
	Fitch Ratings	BBB-			BB		BBB		BBB		A-
	Moody’s Investors Service	Ba1			Ba3		Ba1		Baa2		Baa1
	Standard & Poor’s Corporation	BB			BB-		BB-		BBB-		BBB
DP&L:	Senior secured debt ratings —
	Fitch Ratings	A-			BBB		A		A		AA
	Moody’s Investors Service	Baa1			Baa3		Baa1		A2		A2
	Standard & Poor’s Corporation	BB			BB-		BBB-		BBB		BBB+
	Number of Shareholders
DPL Inc.:	Common	26,061			28,079		30,366		31,856		33,729
DP&L:	Preferred	329			357		402		426		476

(a)In 2003, we recorded a cumulative effect of an accounting change related to the adoption of SFAS 143 “Accounting for Asset Retirement Obligations”. In 2005, we recorded an additional obligation in response to FASB Interpretation Number (FIN) 47, “Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143.”  See Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(b)Excludes current maturities of long-term debt. Upon adoption of FASB Interpretation Number 46R “Consolidation of Variable

Interest Entities (Revised December 2003)—an interpretation of ARB No. 51” at December 31, 2003, DPL deconsolidated the DPL Capital Trust II.

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Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain statements contained in this discussion are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Matters discussed in this report that relate to events or developments that are expected to occur in the future, including management’s expectations, strategic objectives, business prospects, anticipated economic performance and financial condition and other similar matters constitute forward-looking statements.  Forward-looking statements are based on management’s beliefs, assumptions and expectations of our future economic performance, taking into account the information currently available to management.  These statements are not statements of historical fact.  Such forward-looking statements are subject to risks and uncertainties and investors are cautioned that outcomes and results may vary materially from those projected due to various factors beyond our control, including but not limited to:  abnormal or severe weather; unusual maintenance or repair requirements; changes in fuel costs and purchased power, coal, environmental emissions, gas and other commodity prices; increased competition; regulatory changes and decisions; changes in accounting rules; financial market conditions; and general economic conditions.

Forward-looking statements speak only as of the date of the document in which they are made.  We disclaim any obligation or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in our expectations or any change in events, conditions or circumstances on which the forward-looking statement is based. (See FACTORS THAT MAY AFFECT FUTURE RESULTS.)

GENERAL OVERVIEW

The electric utility industry has historically operated in a regulated environment.  However, in recent years, there have been a number of federal and state regulatory and legislative decisions aimed at promoting competition and providing customer choice.  Market participants have therefore created new business models to exploit opportunities.  The marketplace is now comprised of independent power producers, energy marketers and traders, energy merchants, transmission and distribution providers and retail energy suppliers.  There have also been new market entrants and activity among the traditional participants, such as mergers, acquisitions, asset sales and spin-offs of lines of business.  In addition, transmission systems are being operated by Regional Transmission Organizations (RTOs).

As part of Ohio’s electric deregulation law, all of the state’s investor-owned utilities were required to join an RTO.  DP&L successfully integrated its 1,000 miles of high-voltage transmission into the PJM Interconnection, L.L.C. (PJM) RTO in October 2004.  As an RTO, PJM’s role is to administer an electric marketplace and ensure the reliability of the high-voltage electric power system serving 51 million people in all or parts of Delaware, Indiana, Illinois, Kentucky, Maryland, Michigan, New Jersey, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia.  PJM coordinates and directs the operation of the region’s transmission grid; administers a competitive wholesale electricity market, the world’s largest; and plans regional transmission expansion improvements to maintain grid reliability and relieve congestion.

On December 28, 2005, the PUCO approved DP&L’s Rate Stabilization Plan with certain modifications.  The new Rate Stabilization Plan will phase into rates two new rate riders related to increasing fuel and environmental costs over a five-year period that runs from January 1, 2006 through December 31, 2010.  The environmental portion of the increase, which goes into effect in 2007 and runs through 2010, will be avoidable for customers who switch generation providers.  This Plan provides customers with price protection through capped generation prices through 2010 and provides some level of revenue stability for DP&L.

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Fuel costs are impacted by changes in volume and price and are driven by a number of variables including weather, reliability of coal deliveries, scheduled outages and generation plant mix.  Based on weather normalized sales, fuel costs are forecasted to be flat in 2006 compared to 2005 and are forecasted to increase approximately 5% in 2007 compared to 2006.  This forecast assumes coal prices will increase approximately 10% in 2006 as compared to 2005 and remain flat in 2007 as compared to 2006.

On February 13, 2005, our subsidiaries, MVE and MVIC, entered into an agreement to sell their respective interests in forty-six private equity funds to AlpInvest/Lexington 2005, LLC, a joint venture of AlpInvest Partners and Lexington Partners, Inc.  Sales proceeds and any related gains or losses were recognized as the sale of each fund closed.  Among other closing conditions, each fund required the transaction to be approved by the respective general partner.  During 2005, MVE and MVIC completed the sale of their interests in forty-three and a portion of one private equity funds resulting in a $46.6 million pre-tax gain ($53.1 million less $6.5 million professional fees) from discontinued operations and providing approximately $796 million in net proceeds, including approximately $52 million in net distributions from funds while held for sale.  As part of this pre-tax gain, we realized $30 million that was previously recorded as an unrealized gain in other comprehensive income.

During this same period, MVE entered into alternative closing arrangements with AlpInvest/Lexington 2005, LLC for funds where legal title to said funds could not be transferred until a later time.  Pursuant to these arrangements, MVE transferred the economic aspects of the remaining private equity funds, consisting of two funds and a portion of another fund, to AlpInvest/Lexington 2005, LLC without a change in ownership of the interests.  The terms of the alternative arrangements do not meet the criteria for recording a sale.  We are obligated to remit to AlpInvest/Lexington 2005, LLC any distributions MVE receives from these funds, and AlpInvest/Lexington 2005, LLC is obligated to provide funds to us to pay any contribution notice, capital call or other payment notice or bill for which MVE receives notice with respect to such funds.  The alternative arrangements resulted in a deferred gain of $27.1 million until such terms of a sale can be completed (contingent upon receipt of general partner approvals of the transfer) and providing approximately $72 million in net proceeds on these funds.  We recorded an impairment loss of $5.6 million to write down to estimated fair value the assets transferred pursuant to the alternative arrangements.  Ownership of these funds will transfer after the general partner of each fund consents to the transfer.  It is anticipated that ownership of these funds will transfer no later than the first quarter of 2007.

EARNINGS OVERVIEW

	Earnings Per Share (Basic)
	2005			2004		2003
Earnings from Continuing Operations	$	1.03		$	1.01	$	0.96
Earnings from Discontinued Operations	0.44			0.80		0.14
Cumulative Effect of Accounting Change	(0.03		)	—		0.14
Net Income	$	1.44		$	1.81	$	1.24

2005 Compared to 2004

In 2005, basic earnings per share were $0.37 lower than 2004.  The decline was primarily due to a $0.36 per share decrease in Earnings from Discontinued Operations (represented by the private equity funds that we agreed to sell in February 2005).  Basic earnings per share for Earnings from Continuing Operations were $0.02 higher in 2005 compared to 2004.  Our operating income increased $2.6 million as a result of lower operating expenses, excluding fuel and purchased power, of $11.6 million that were offset by lower net margin of $9.0 million.  Net margin is revenues less fuel and purchased power costs.  The decrease in net margin of $9.0 million was the result of higher revenues of $85.0 million reflecting increased retail sales and ancillary revenues associated with participation in PJM that were more than offset by significantly higher fuel and purchased power costs of $94.0 million.  The lower operating expenses, excluding fuel and purchased power, of $11.6 million was primarily due to lower operation and maintenance expense of $18.1 million that primarily resulted from lower

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corporate costs.  Also contributing to higher basic earnings per share in 2005 were higher investment income of $42.5 million (resulting from the sale of public securities and from interest on invested proceeds from the private equity funds sale) and lower interest expense of $22.5 million as a result of the refinancing of debt in 2004 and the early redemption and refinancing of debt in 2005, offset by a $61.2 million charge for the early redemption of debt.

Basic earnings per share for Income from Discontinued Operations decreased by $0.36 primarily due to lower investment income as a result of the sale of the private equity funds, offset by the related gains on the sale.  In February of 2005,we agreed to sell our respective interests in forty-six private equity funds.  Accordingly, investment income and related expenses for these funds have been recorded in 2005 as Discontinued Operations in the Consolidated Statements of Results of Operations, with prior period results for the private equity funds reclassified to Discontinued Operations.

For 2005, basic earnings per share includes a $0.03 after-tax charge related to the cumulative effect of a change in accounting for asset retirement obligations at certain power generating stations.

2004 Compared to 2003

In 2004, basic earnings per share were $0.57 higher than 2003.  The increase was primarily due to a $0.66 per share increase in Earnings from Discontinued Operations (represented by the private equity funds that we agreed to sell in February 2005).  Basic earnings per share for Earnings from Continuing Operations were $0.05 higher in 2004 compared to 2003.  Our operating income declined $35.4 million as a result of relatively flat revenues and increased fuel, purchased power, and operation and maintenance expenses.  Net electric margins declined $44.8 million and operation and maintenance expense increased $37.3 million, primarily due to higher corporate costs and increased electric production, transmission and distribution expenses, partially offset by lower amortization of regulatory assets of $48.3 million due to the completion of the three-year regulatory transition cost recovery period.  The lower operating income of $35.4 million was offset by improved non-operating income and expense of $33.7 million which was due to the 2003 settlement of the shareholder litigation lawsuits and lower interest expense as a result of refinanced debt, partially offset by the 2003 release of an insurance claims reserve and lower investment income resulting from the 2003 gain on interest rate hedges that did not recur in 2004.  A lower effective income tax rate related to the recognition in 2004 of state coal tax credits also contributed to higher net income in 2004 as compared to 2003.

Basic earnings per share for Earnings from Discontinued Operations increased by $0.66 due to improved investment performance in 2004 of the private equity funds.  In February 2005, we agreed to sell our respective interests in forty-six private equity funds.  Accordingly, 2004 and 2003 investment income and related expenses for these funds have been reclassified in 2005 as Discontinued Operations in the Consolidated Statements of Results of Operations.

Basic earnings per share for 2003 includes a credit of $0.14 related to the cumulative effect of a change in accounting for asset retirement obligations at certain power generating stations.

See Item 8 - Notes to Financial Statements and the Management’s Discussion and Analysis section “FACTORS THAT MAY AFFECT FUTURE RESULTS.”

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RESULTS OF OPERATIONS

Income Statement Highlights

$ in millions	2005			2004			2003
Revenues:
Retail	1,066.6			1,036.8			1,021.7
Wholesale	133.3			135.1			159.3
RTO ancillary (a)	74.4			17.9			—
Other revenues, net of fuel costs	10.6			10.1			10.0
Total Revenues	$	1,284.9		$	1,199.9		$	1,191.0
Less: Fuel	336.9			263.1			234.6
Purchased power (b)	133.3			113.1			87.9
Net margins (c)	$	814.7		$	823.7		$	868.5
Net margins as a percentage of revenues	63.4		%	68.6		%	72.9		%
Operating income	$	339.1		$	336.5		$	371.9

(a)Revenues includes PJM revenues, discussed as ‘RTO ancillary revenues’ in the detail provided in Item 1 – Business.

(b)Purchased power includes charges from PJM of $48.5 million, $12.3 million and zero for 2005, 2004 and 2003 respectively.

(c)For purposes of discussing operating results, we present and discuss net margins. This format is

useful to investors because it allows analysis and comparability of operating trends and includes the same information that is used by management to make decisions regarding our financial performance.

Revenues

Revenues increased 7% to $1,284.9 million for 2005 compared to $1,199.9 million for 2004, reflecting an increase of $85.0 million.  This increase was primarily the result of increased retail sales volume, higher average rates for wholesale revenues, and ancillary revenues associated with participation in PJM that was partially offset by lower wholesale sales volume.  Retail revenues increased $29.8 million, primarily resulting from increased sales volume of $32.8 million and $2.8 million in higher average rates, partially offset by $5.8 million in lower miscellaneous retail revenues reflecting transmission services provided in 2004 that are now provided through PJM.  Residential customers comprised the bulk of the increase in sales volume reflecting greater weather extremes experienced in 2005 compared to 2004 as cooling degree days were up 39% to 1,075 in 2005 compared to 771 in 2004 and heating degree days were up 4% to 5,702 in 2005 compared to 5,500 in 2004.  Wholesale revenue decreased $1.8 million, primarily related to a $37.2 million decline in sales volume that was nearly offset by a $35.4 million increase related to higher average market rates.  For 2005, ancillary revenues from RTOs were $74.4 million compared to $17.9 million for 2004, as we did not participate in PJM until October 2004.  RTO ancillary revenues primarily consist of compensation for use of DP&L’s transmission assets, regulation services, reactive supply and operating reserves.

Revenues increased $8.9 million to $1,199.9 million in 2004 compared to $1,191.0 million in 2003.  Retail revenues increased $15.1 million or 2% in 2004 resulting from higher retail sales volume.  Wholesale revenues decreased $24.2 million or 15% in 2004 primarily relating to lower wholesale sales volume that was partially offset by higher average market rates.  Ancillary revenues from PJM increased $17.9 million as we did not participate in PJM in 2003.  Cooling degree-days increased 12% to 771 in 2004 compared to 687 in 2003.

Margins, Fuel and Purchased Power

For 2005, net margin of $814.7 million decreased by $9.0 million from $823.7 million for 2004.  As a percentage of total revenues, net margin decreased by 5.2 percentage points to 63.6% from 68.4%.  This decline is primarily the result of increased fuel and purchased power costs, partially offset by an

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increase in revenues, principally from RTO ancillary revenues and higher average wholesale rates.  Fuel costs, which include coal, gas, oil and emission allowance costs, increased by $73.8 million or 28% for 2005 compared to the same period in 2004 primarily resulting from higher average fuel prices of $64.1 million as well as increased generation of $9.7 million.  Purchased power costs increased by $20.2 million for 2005 compared to 2004 primarily resulting from increased charges of $36.2 million associated with operating in PJM (we did not participate in PJM until October 2004) and $28.2 million related to higher average market prices, partially offset by $44.2 million related to lower purchased power volume.

The net margin of $823.7 million in 2004 decreased by $44.8 million from $868.5 million in 2003.  This decline in net margin was primarily the result of a lower volume of wholesale sales and increased fuel and purchased power costs, partially offset by a slight increase in retail sales and ancillary PJM revenues.  As a percentage of total revenues, net margin decreased by 4.3 percentage points to 68.6% in 2004 from 72.9% in 2003.  This decrease in net margin rate was primarily attributable to higher fuel and purchased power costs per kWh.  Fuel costs increased by $28.5 million or 12% in 2004 compared to 2003 primarily related to rising prices in the coal market.  Purchased power costs including PJM costs increased by $25.2 million or 29% in 2004 compared to 2003, primarily resulting from higher average market prices.

Operation and Maintenance

$ in millions	2005 vs. 2004 change			2004 vs. 2003 change
Electric production, transmission and distribution costs	$	4.5		$	13.1
Pension and benefits	(0.7		)	7.8
Low Income Payment Program costs	(2.3		)	1.8
Sarbanes-Oxley compliance and external/internal audit fees	(3.5		)	6.4
Executive and management compensation	(5.8		)	(13.6		)
Legal and special investigations	(5.8		)	12.5
Directors’ & Officers’ liability insurance	(8.3		)	5.3
Other – net increase	3.8			4.0
Total	$	(18.1	)	$	37.3

Operation and maintenance expense decreased $18.1 million or 8% in 2005 compared to 2004 as a result of lower corporate costs that was partially offset by increased electric production, transmission and distribution expenses.  Corporate costs declined from the prior year primarily resulting from a decrease of $8.3 million in Directors’ and Officers’ liability insurance premiums; approximately $5.8 million related to the decreased level of activity regarding various internal and governmental investigations as well as the securities litigation; $5.8 million in lower executive and management compensation costs; $3.5 million in reduced Sarbanes-Oxley 404 compliance costs and external/internal audit fees; $2.3 million in decreased Low Income Payment Program costs; and $0.7 million of lower benefits costs (a decrease of $2.8 million for a 2004 adjustment in disability reserves was nearly offset by an increase in pension costs of $2.1 million).  These decreases were partially offset by a $4.5 million increase in electric production, transmission, and distribution costs, primarily related to generation operations costs for lime used for pollution control and electric production boiler maintenance costs as well as higher costs related to electric distribution operation and maintenance.

Operation and maintenance expense increased $37.3 million or 19% in 2004 compared to 2003 as a result of higher corporate costs and increased electric production, transmission, and distribution expenses.  Corporate costs exceeded the prior year primarily resulting from an increase of approximately $12.5 million related to various internal and governmental investigations, litigation with

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the Company’s former executives and securities litigation.  In addition, pension and benefits costs increased by $7.8 million; Sarbanes-Oxley 404 compliance costs and external/internal audit fees increased $6.4 million; Directors’ and Officers’ liability insurance premiums increased $5.3 million and Low Income Payment Program costs increased $1.8 million.  These increases to corporate costs were partially offset by a $13.6 million decrease in executive and management compensation.  Electric production, transmission and distribution expenses increased $13.1 million, primarily related to planned maintenance during scheduled outages, ash disposal and other maintenance charges.

Depreciation and Amortization

Depreciation and amortization expense was $3.2 million higher in 2005 as compared to 2004 primarily as a result of completed projects in the distribution area (including new services, line transformers, poles, station equipment and, overhead and underground conductor) and in the production area (mainly due to the SCRs for Stuart, Killen and Zimmer) that were put into service in the second quarter of 2004.

Depreciation and amortization expense was $5.2 million or 4% higher in 2004 compared to 2003, as a result of completed construction projects and a full year of depreciation on environmental compliance equipment installations completed in 2003.

General Taxes

$ in millions	2005		2004		2005 vs. 2004 change			2003		2004 vs. 2003 change
kWh excise	$	52.9	$	50.5	$	2.4		$	49.6	$	0.9
Property	45.6		47.0		(1.4		)	47.3		(0.3		)
Other	8.8		7.8		1.0			6.6		1.2
Excise	—		—		—			5.4		(5.4		)
Total	$	107.3	$	105.3	$	2.0		$	108.9	$	(3.6	)

General taxes increased $2.0 million or 2% in 2005 compared to 2004.  The increase is primarily from $2.4 million increased expense for the kWh excise tax resulting from higher sales volumes from electric retail customers.  The increase in other taxes of $1.0 million includes higher payroll taxes, PUCO maintenance and the new State of Ohio Commercial Activities Tax.  These increases were partially offset by lower property tax expense.

General taxes declined $3.6 million or 3% in 2004 compared to 2003 primarily as a result of a 2003 excise tax of $5.4 million related to the three year regulatory transition period that ended in 2003.

Amortization of Regulatory Assets

Amortization of regulatory assets increased $1.3 million to $2.0 million in 2005 as compared to the prior year primarily resulting from PJM start-up costs amortization of $1.1 million and PJM integration costs amortization of $0.2 million reflecting DP&L’s entrance into the PJM market on October 1, 2004.

Amortization of regulatory assets decreased $48.3 million in 2004 from 2003 primarily reflecting the completion in 2003 of the three-year regulatory transition cost recovery period granted by the Public Utilities Commission of Ohio.

Investment Income

Investment income increased by $42.5 million in 2005 compared to 2004 primarily resulting from a net gain on the disposal of public equity investments of $23.5 million and from $18.5 million in interest income, principally from new short-term investments.

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Investment income decreased by $25.5 million in 2004 compared to 2003.  This decrease is primarily the result of a 2003 realized gain on interest rate hedges of $21.2 million that did not recur in 2004, as well as gains on investments of $4.6 million and investment income of $4.2 million recognized in 2003 for equity securities not related to discontinued operations.  These decreases were partially offset by a $3.4 million gain on investments denominated in Euros that occurred in 2004.

The portion of investment income related to the private equity funds sold in 2005 has been classified as discontinued operations.  (See Note 11 of Notes to Consolidated Financial Statements.)

Interest Expense

Interest expense decreased $22.5 million or 14% compared to 2004 due to the debt reduction of $462.6 million and a full year impact of the $500 million debt retirement completed in 2004 (partially financed with a $175 million note).

Interest expense decreased $21.5 million or 12% in 2004 compared to 2003 primarily resulting from the refinancing of debt in 2004 and 2003 for which interest expense was lower by $25.1 million, despite $3.1 million of additional interest incurred in 2004 relating to the failure to file exchange offer registration statements and the failure to timely file the 2003 Form 10-K.  This decrease in interest expense was partially offset by lower capitalized interest in 2004 compared to 2003 of $6.6 million.

Shareholder Litigation

In 2003, we recorded a $76.7 million charge for the settlement of shareholder lawsuits.

Charge for Early Redemption of Debt

In 2005, we recorded $61.2 million in charges resulting from premiums paid for the early redemption of debt, including write-offs of unamortized debt expense and debt discounts.  (See Note 8 of Notes to Consolidated Financial Statements.)

Other Income

Other income was $10.2 million greater than 2004 primarily reflecting $3.5 million of additional gains realized in 2005 over 2004 resulting from sales of pollution control emission allowances; $1.6 million of lower fees resulting from the 2004 cancellation and replacement of DP&L’s revolving credit facility and our term loan termination and $1.5 million from the 2004 write-off of the remaining term loan debt expense resulting from our term loan termination.

Other income decreased $39.0 million in 2004 compared to 2003 primarily resulting from the $39.7 million release of the insurance claims reserve in 2003 relating to the termination of DP&L’s business interruption risk insurance policy.  This expense increase was partially offset by a $8.4 million gain on the sale of pollution control emission allowances.

Income Tax Expense

Income tax expense from continuing operations for 2005 increased $13.4 million compared to prior year resulting from higher income, increased accrual for open tax years and lower state tax coal credits.

On June 30, 2005, Governor Taft signed House Bill 66 into law which significantly changed the tax structure in Ohio.  The major provisions of the bill included phasing-out the Ohio Franchise Tax, phasing-out the Ohio Personal Property Tax for non-utility taxpayers and phasing-in a Commercial Activities Tax.  The Ohio Franchise Tax phase-out required second quarter 2005 adjustments to income tax expense.  Income taxes from continuing operations were reduced by $1.5 million while income taxes from discontinued operations were increased by $1.3 million as a result of the tax law change.  Other applicable provisions of House Bill 66 have been reflected in the consolidated financial statements.

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For 2004, income tax expense from continuing operations decreased $8.3 million compared to 2003 primarily reflecting the recognition of $11.7 million of available state tax credits related to the consumption of coal mined in Ohio and a 2003 adjustment for non-deductible compensation.

Discontinued Operations, Net of Tax

On February 13, 2005, our subsidiaries, MVE and MVIC, entered into an agreement to sell their respective interests in forty-six private equity funds to AlpInvest/Lexington 2005, LLC, a joint venture of AlpInvest Partners and Lexington Partners, Inc.  Sales proceeds and any related gains or losses were recognized as the sale of each fund closed.  Among other closing conditions, each fund required the transaction to be approved by the respective general partner.  During 2005, MVE and MVIC completed the sale of their interests in forty-three and a portion of one private equity funds resulting in a $46.6 million pre-tax gain ($53.1 million less $6.5 million professional fees) from discontinued operations and providing approximately $796 million in net proceeds, including approximately $52 million in net distributions from funds while held for sale.  As part of this pre-tax gain, we realized $30 million that was previously recorded as an unrealized gain in other comprehensive income.

During this same period, MVE entered into alternative closing arrangements with AlpInvest/Lexington 2005, LLC for funds where legal title to said funds could not be transferred until a later time.  Pursuant to these arrangements, MVE transferred the economic aspects of the remaining private equity funds, consisting of two funds and a portion of another fund, to AlpInvest/Lexington 2005, LLC without a change in ownership of the interests.  The terms of the alternative arrangements do not meet the criteria for recording a sale.  We are obligated to remit to AlpInvest/Lexington 2005, LLC any distributions MVE receives from these funds, and AlpInvest/Lexington 2005, LLC is obligated to provide funds to us to pay any contribution notice, capital call or other payment notice or bill for which MVE receives notice with respect to such funds.  The alternative arrangements resulted in a deferred gain of $27.1 million until such terms of a sale can be completed (contingent upon receipt of general partner approvals of the transfer) and provided approximately $72 million in net proceeds on these funds.  We recorded an impairment loss of $5.6 million to write down to estimated fair value the assets transferred pursuant to the alternative arrangements.  Ownership of these funds will transfer after the general partners of each of the separate funds consent to the transfer.  It is anticipated that ownership of these funds will transfer no later than the first quarter of 2007.

	For the years ended December 31,
$ in millions	2005			2004			2003
Earnings from discontinued operations:
Investment income	$	41.3		$	178.5		$	43.8
Investment expenses	(9.5		)	(23.6		)	(18.5		)
Income from discontinued operations	31.8			154.9			25.3
Gain realized from sale	53.1			—			—
Broker fees and other expenses	(6.5		)	—			—
Loss recorded	(5.6		)	—			—
Net gain on sale	41.0			—			—
Earnings before income taxes	72.8			154.9			25.3
Income tax expense	(19.9		)	(59.1		)	(8.7		)
Earnings from discontinued operations, net	$	52.9		$	95.8		$	16.6
Cash Flow:
Net proceeds from sale of portfolio	$	744.2		$	—		$	—
Net proceeds from transfer	72.3			—			—
Net distributions from funds	51.9			203.9			83.1
Total cash flow from discontinued operations	$	868.4		$	203.9		$	83.1

Income from discontinued operations (pre-tax) for the year ended December 31, 2005 of $31.8 million is comprised of $41.3 million of investment income less $9.5 million of associated management fees

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and other expenses.  Income from discontinued operations (pre-tax) for the year ended December 31, 2004 of $154.9 million is comprised of $178.5 million of investment income less $23.6 million of associated management fees and other expenses.

For the year ended December 31, 2005, we recognized a $46.6 million pre-tax gain ($53.1 million less $6.5 million of professional fees), recorded a $5.6 million impairment loss, deferred gains of $27.1 million on transferred funds from discontinued operations, and provided approximately $868 million in net proceeds, including approximately $52 million in net distributions from funds held for sale.  We will continue to incur minor amounts of fees in the near term.

(See Note 11 of Notes to Consolidated Financial Statements.)

Cumulative Effect of Accounting Change, Net of Tax

In 2005, the cumulative effect of an accounting change resulted in a charge of $3.2 million related to the adoption of the provisions of FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations an interpretation of FASB Statement No. 143” (FIN 47).  (See Note 1 of Notes to Consolidated Financial Statements.)

The cumulative effect of an accounting change in 2003 resulted in a credit of $17.0 million reflecting the adoption of the provisions of FASB Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations” (SFAS 143).  (See Note 1 of Notes to Consolidated Financial Statements.)

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL REQUIREMENTS

Our cash and cash equivalents totaled $595.8 million at December 31, 2005, compared to $202.1 million at December 31, 2004.  In addition, we had $125.8 million of short-term investments available for resale at December 31, 2005.  The increase in cash and short-term investments of $519.5 million was primarily attributed to $868.4 million of net proceeds received from the sale of the financial asset portfolio and $314.1 million from operating activities.  These proceeds were used for the early retirement of a portion of long-term debt of $446.6 million, capital expenditures of $180.1 million, and dividends paid to common shareholders of $115.3 million.

During the third quarter of 2005, we began investing in Auction Rate Securities (ARS).  ARS are variable rate state and municipal bonds that trade at par value.  Interest rates on ARS are reset every seven, twenty-eight or thirty-five days through a modified Dutch auction.  We have the option to hold at market, re-bid or sell each ARS on the interest reset date.  Although ARS are issued and rated as long-term bonds, they are priced and traded as short-term securities available for resale because of the market liquidity provided through the interest rate reset mechanism.  Each ARS purchased by us is tax-exempt, AAA rated and insured by a third-party insurance company.

We generated net cash from operating activities of $314.1 million, $132.7 million, and $350.2 million in 2005, 2004 and 2003, respectively.  The net cash provided by operating activities for 2005 was primarily the result of operating profitability, partially offset by cash used for working capital, specifically for interest payments, accounts payable, and accounts receivable.  The net cash provided by operating activities in 2004 was primarily the result of operating profitability, partially offset by cash used for the shareholder litigation settlement and cash used for working capital, specifically payments for taxes and inventories.  The net cash provided by operating activities in 2003 was primarily the result of operating profitability and working capital, specifically the timing of tax payments.  The tariff-based revenue from our energy business continues to be the principal source of cash from operating activities.  Management believes that the diversified retail customer mix of residential, commercial, and industrial classes coupled with the rate relief approved by the PUCO for 2006 and beyond provides us with a reasonably predictable gross cash flow from utility operations.

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Net cash flows provided by for investing activities were $689.6 million, $182.3 million, and $65.5 million in 2005, 2004, and 2003, respectively.  Net cash flows provided by investing activities in 2003 were primarily due to capital expenditures and purchases of short-term investments and securities unrelated to discontinued operations, largely offset by the sale of short-term investments and securities unrelated to discontinued operations as well as the settlement of interest rate hedges. Net cash flows used for investing activities for 2005 were primarily due to capital expenditures and purchases of short-term investments and securities, partially offset by the sale of short-term investments and securities, all of which were unrelated to discontinued operations.  Our capital expenditures increased in 2005 as compared to 2004 in response to more stringent environmental regulations.  These increased capital expenditures are expected to continue for the next three years.  Net cash flows used for investing activities for 2004 were primarily due to capital expenditures and purchases of short-term investments and securities unrelated to discontinued operations, largely offset by the sale of short-term investments and securities unrelated to discontinued operations as well as proceeds from the sale of property. 

Net cash flows used for financing activities were $610.0 million, $450.5 million, and $118.9 million in 2005, 2004 and 2003, respectively.  Net cash flows used for financing activities for 2005 were primarily the result of cash used to retire $462.6 million of long-term debt, pay premiums on the early redemption of debt of $54.7 million and pay dividends to common stockholders of $115.3 million.  These uses of cash were partially offset by cash received relating to the exercise of stock options of $22.7 million.  Net cash flows used for financing activities for 2004 were primarily the result of funds used for the retirement of $500 million of the 6.82% Series Senior Notes and dividends paid to common stockholders, partially offset by the issuance of $175 million unsecured 8% Series Senior Notes used to provide partial funding for the retirement of the $500 million 6.82% Series Senior Notes.  Annual dividends declared increased to $0.96 per share in 2004 from $0.94 per share in 2003.  Net cash flows used for financing activities in 2003 primarily related to dividends paid to common stockholders and the early retirement of long-term debt.  These uses were largely offset by the net proceeds related to the issuance of lower-interest long-term debt.

On February 1, 2006, our Board of Directors announced that it had raised the quarterly dividend to $0.25 per share payable March 1, 2006 to common shareholders of record on February 14, 2006.  This increase results in an annualized dividend rate of $1.00 per share, or a 4% increase.

We have obligations to make future payments for capital expenditures, debt agreements, lease agreements, capital calls and other long-term purchase obligations, and have certain contingent commitments such as guarantees. We believe our cash flows from operations, the remaining proceeds from the financial asset portfolio sale in 2005, the credit facilities (existing or future arrangements), the senior notes, and other short- and long-term debt financing, will be sufficient to satisfy our future working capital, capital expenditures and other financing requirements for the foreseeable future.  Our ability to generate positive cash flows from operations is dependent on general economic conditions, competitive pressures, and other business and risk factors described in “Risk Factors” and “Factors That May Affect Future Results.”  If we are unable to generate sufficient cash flows from operations, or otherwise comply with the terms of our credit facilities and the senior notes, we may be required to refinance all or a portion of our existing debt or seek additional financing alternatives.  A discussion of each of our critical liquidity commitments is outlined below.

Capital Requirements

Construction additions were $180 million, $98 million and $102 million in 2005, 2004 and 2003, respectively, and are expected to approximate $365 million in 2006.  Planned construction additions for 2006 relate to our environmental compliance program, power plant equipment, and our transmission and distribution system. During the last three years, capital expenditures of $144.0 million have been incurred to meet DPL’s state and federal standards for Nitrogen Oxide (NOx), Sulfur Dioxide (SO2) and mercury emissions from power plants.

Capital projects are subject to continuing review and are revised in light of changes in financial and economic conditions, load forecasts, legislative and regulatory developments and changing

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environmental standards, among other factors.  Over the next three years, we are projecting to spend an estimated $750 million in capital projects, approximately 60% of which is to meet changing environmental standards.  Our ability to complete our capital projects and the reliability of future service will be affected by our financial condition, the availability of internal and external funds at reasonable cost, and adequate and timely return on these capital investments.  We expect to finance our construction additions in 2006 with a combination of cash and short-term investments on hand, tax-exempt debt and internally-generated funds.

Debt and Debt Covenants

At December 31, 2005, our scheduled maturities of long-term debt, including capital lease obligations, over the next five years are $0.9 million in 2006, $225.9 million in 2007, $100.7 million in 2008, $175.7 million in 2009 and $0.6 million in 2010.  Substantially all property of DP&L is subject to the mortgage lien securing the first mortgage bonds.  Debt maturities in 2006 are expected to be financed with a combination of internal funds and tax-exempt financing.  Certain debt agreements contain reporting and financial covenants for which we are in compliance as of December 31, 2005 and expect to be in compliance during the near term.

On September 29, 2003, DP&L issued $470 million principal amount of First Mortgage Bonds, 5.125% Series due 2013.  The net proceeds from the sale of the bonds, after expenses, were used on October 30, 2003, to (i) redeem $226 million principal amount of DP&L’s First Mortgage Bonds, 8.15% Series due 2026, at a redemption price of 104.075% of the principal amount plus accrued interest to the redemption date and (ii) redeem $220 million principal amount of DP&L’s First Mortgage Bonds, 7.875% Series due 2024, at a redemption price of 103.765% of the principal amount plus accrued interest to the redemption date.  The 5.125% Series due 2013 were not registered under the Securities Act of 1933, but were offered and sold through a private placement in compliance with Rule 144A under the Securities Act of 1933.  The bonds include step-up interest provisions requiring DP&L to pay additional interest if (i) DP&L’s registration statement was not declared effective by the SEC within 180 days from issuance of new bonds or (ii) the exchange offer was not completed within 210 days from the issuance of the new bonds.  The registration statement was not declared effective and the exchange offer was not timely completed and, as a result, DP&L was required to pay additional interest of 0.50% until a registration statement was declared effective, at which point the additional interest was reduced by 0.25%.  The remaining additional interest of 0.25% continued until the exchange offer was completed.  The exchange offer registration statement for these securities was filed and declared effective on May 20, 2005 and the exchange was completed on June 23, 2005.

Issuance of additional amounts of first mortgage bonds by DP&L is limited by the provisions of its mortgage; however, management believes that DP&L continues to have sufficient capacity to issue first mortgage bonds to satisfy its requirements in connection with its current refinancing and construction programs.  The amounts and timing of future financings will depend upon market and other conditions, rate increases, levels of sales and construction plans.

On March 25, 2004, we completed a $175 million private placement of unsecured 8% series Senior Notes due March 2009.  The Senior Notes will not be redeemable prior to maturity except that we have the right to redeem the notes for a make-whole payment at the adjusted treasury rate plus 0.25%.  The proceeds from these notes were used to provide partial funding for the retirement of $500 million of the 6.82% series Senior Notes redeemed on April 6, 2004.  The proceeds from these notes, combined with $202 million of internal funds provided by the financial asset portfolio and $123 million from core operations, were used to fund the retirement of $500 million of the 6.82% series Senior Notes retired April 6, 2004.

The 8% series Senior Notes were issued pursuant to our indenture dated as of March 1, 2000, and pursuant to authority granted in our Board resolutions dated March 25, 2004.  The notes impose a limitation on the incurrence of liens on the capital stock of any of our significant subsidiaries and require we and our subsidiaries to meet a consolidated coverage ratio of 2 to 1 prior to incurring additional indebtedness.  The limitation on the incurrence of additional indebtedness does not apply to

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(i) indebtedness incurred to refinance existing indebtedness, (ii) subordinated indebtedness and (iii) up to $150 million of additional indebtedness.  In addition to the events of default specified in the indenture, an event of default under the notes includes a payment default or acceleration of indebtedness under any other indebtedness of ours or any of our subsidiaries which aggregates $25 million or more.  The purchasers of the Senior Notes were granted registration rights in connection with the private placement under an Exchange and Registration Rights Agreement.  Pursuant to this agreement, we were obligated to file an exchange offer registration statement by July 22, 2004, have the registration statement declared effective by September 20, 2004 and consummate the exchange offer by October 20, 2004.  We failed to have a registration statement declared effective and to complete the exchange offer according to this timeline.  As a result, we are accruing additional interest at a rate of 0.5% per annum per violation, up to an additional interest rate not to exceed in the aggregate 1.0% per annum.  As each violation is cured, the additional interest rate will decrease by 0.5%. The exchange offer registration statement for these securities is expected to be filed with the SEC during the first quarter of 2006.

In May 2005, DP&L obtained a $100 million unsecured revolving credit agreement that extended and replaced its previous revolving credit agreement of $100 million.  The new agreement, renewable annually, expires on May 30, 2010 and provides credit support for DP&L’s business requirements during this period.  This may be increased up to $150 million.  The facility contains one financial covenant: DP&L total debt to total capitalization ratio is not to exceed 0.65 to 1.00.  This covenant is currently met.  DP&L had no outstanding borrowings under this credit facility at December 31, 2005.  Fees associated with this credit facility are approximately $0.2 million per year.  Changes in credit ratings, however, may affect the applicable interest rate for DP&L’s revolving credit agreement.

On August 11, 2005, we repurchased approximately $207.6 million principal amount of our notes listed below pursuant to offers to purchase that commenced on July 14, 2005 and expired on August 10, 2005.

$ in millions Title of Security; CUSIP Number	Principal Amount Outstanding	Aggregate Principal Amount of Tendered Notes Accepted for Purchase
8.125% Capital Securities due 2031; 23330AAC4	$ 300.0	$ 105.0
6.875% Senior Notes due 2011; 233293AH2	$ 400.0	$ 102.6

The total consideration paid for these notes totaled $252.9 million, which includes accrued and unpaid interest.

In addition, on August 29, 2005, we redeemed $200 million of our 8.25% Senior Notes due 2007, leaving $225 million of our 8.25% Senior Notes outstanding.

We used a portion of the proceeds from the sale of the private equity funds in our financial asset portfolio to fund these repurchases and redemptions.

On May 15, 2005, we redeemed all of the outstanding 7.83% Senior Notes due 2007 in the amount of $39 million.  A premium of 5.38% was paid on the 7.83% Senior Notes that were redeemed.

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On August 17, 2005, DP&L completed the refinancing of $214.4 million of pollution control bonds.  The specific issues refinanced consisted of:

•$41.3 million of Ohio Water Development Authority (OWDA) bonds;

•$137.8 million of Ohio Air Quality Development Authority (OAQDA) bonds; and

•$35.3 million of Boone County, Kentucky (Boone County) bonds.

On August 17, 2005, DP&L entered into a separate loan agreement with the OWDA, OAQDA and Boone County for new pollution control bonds with a weighted average interest rate of 4.78%.  The proceeds of the bonds were used to repay the previously existing pollution control bonds with a weighted average interest rate of 6.26% on September 16, 2005.  To secure the repayment of its obligations to the OWDA, OAQDA and Boone County, DP&L entered into a 43^rd Supplemental Indenture to its First and Refunding Mortgage for a like amount ($214.4 million) of First Mortgage Bonds with The Bank of New York serving as Trustee.

On February 17, 2006, DP&L renewed its $10 million Master Letter of Credit Agreement with a financial lending institution.  This agreement supports performance assurance needs in the ordinary course of business.  DP&L has certain contractual agreements for the sale and purchase of power, fuel and related energy services that contain credit rating related clauses allowing the counter parties to seek additional surety under certain conditions.  As of December 31, 2005, DP&L had two outstanding letters of credit for a total of $2.2 million.

There are no inter-company debt collateralizations or debt guarantees between us and our subsidiaries.  None of the debt obligations of DPL or DP&L are guaranteed or secured by affiliates and no cross-collateralization exists between any subsidiaries.

Credit Ratings

Currently, our senior unsecured and DP&L’s senior secured debt credit ratings are as follows:

	DPL Inc.	DP&L	Outlook	Effective
Fitch Ratings	BBB-	A-	Stable	July 2005
Moody’s Investors Service	Ba1	Baa1	Positive	July 2005
Standard & Poor’s Corp.	BB	BB	Positive	April 2005

Transfer of Assets to MVIC

On August 2, 2004, in order to strengthen MVIC’s financial position, the Vermont Department of Banking, Insurance, Securities and Health Care Administration notified MVIC of MVIC’s requirement to reduce its intercompany receivable to a maximum no greater than MVIC’s total capital and surplus plus $250,000 minimum capital.  As a result, we transferred $5 million from our operating cash to our subsidiary, MVIC, in satisfaction of this requirement during the fourth quarter of 2004.  In January 2005, MVE transferred a private equity financial asset valued in excess of $31.5 million to MVIC to further strengthen MVIC’s financial position.  During 2005 the private equity financial assets owned by MVIC were sold along with the rest of the private equity funds.  MVIC distributed dividends to DPL from the proceeds of these sales.  During the review of the second quarter financial statements, we noted that these transactions inadvertently caused the shareholder equity of MVIC to fall below the required level.  In discussions with the Vermont Department of Banking, Insurance, Securities and Health Care Administration it was decided that we would maintain a loss reserve to shareholder equity ratio of 3:1 in MVIC.  As a result, during the third quarter of 2005 we transferred $12.3 million from our operating cash to MVIC in satisfaction of this new requirement.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

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Contractual Obligations and Commercial Commitments

We enter into various contractual obligations and other commercial commitments that may affect the liquidity of our operations.  At December 31, 2005, these include:

	Payment Year
Contractual Obligations ($ in millions)	Total		Less Than 1 Year		2 – 3 Years		4 – 5 Years		More Than 5 Years
Long-term debt	$	1,674.1	$	—	$	324.9	$	175.0	$	1,174.2
Interest payments	1,068.8		109.9		180.9		144.8		633.2
Pension and postretirement payments	240.3		22.8		46.3		47.4		123.8
Capital leases	3.9		0.9		1.7		1.3		—
Operating leases	0.9		0.5		0.4		—		—
Coal contracts (a)	795.1		390.1		273.0		87.0		45.0
Other contractual obligations	506.3		358.5		147.8		—		—
Total contractual obligations	$	4,289.4	$	882.7	$	975.0	$	455.5	$	1,976.2

(a) DP&L-operated units

Long-term debt:

Long-term debt as of December 31, 2005, consists of DP&L's first mortgage bonds, tax-exempt pollution control bonds, DPL unsecured notes and includes current maturities and unamortized debt discounts.  During 2005, we redeemed $446.6 million of long-term debt earlier than termed.  (See Note 8 of Notes to Consolidated Financial Statements.)

Interest payments:

Interest payments associated with the Long-term debt described above.

Pension and postretirement payments:

As of December 31, 2005, we had estimated future benefit payments as outlined in Note 5 of Notes to Consolidated Financial Statements.  These estimated future benefit payments are projected through 2015.

Capital leases:

As of December 31, 2005, we had two capital leases that expire in November 2007 and September 2010.

Operating leases:

As of December 31, 2005, we had several operating leases with various terms and expiration dates.  Not included in this total is approximately $88,000 per year related to right of way agreements that are assumed to have no definite expiration dates.

Coal contracts:

DP&L has entered into various long-term coal contracts to supply portions of its coal requirements for its generating plants.  Contract prices are subject to periodic adjustment, and have features that limit price escalation in any given year.

Other contractual obligations:

In January 2006, DP&L entered into a contract for limestone that is expected to generate an obligation of $6.0 million in 2006 through 2008, $10.5 million in 2009 through 2010 and $42.2 million thereafter.  As of December 31, 2005, we had various other contractual obligations including non-cancelable contracts to purchase goods and services with various terms and expiration dates.

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DPL enters into various commercial commitments, which may affect the liquidity of its operations.  At December 31, 2005, these include:

Credit facilities:

In May 2005, DP&L replaced its previous $100 million revolving credit agreement with a $100 million, 364-day unsecured credit facility that is renewable annually and expires on May 30, 2010.  At December 31, 2005, there were no borrowings outstanding under this credit agreement.  The new facility may be increased up to $150 million.

Guarantees:

DP&L owns a 4.9% equity ownership interest in an electric generation company.  As of December 31, 2005, DP&L could be responsible for the repayment of 4.9%, or $14.9 million, of a $305 million debt obligation and also 4.9%, or $2.9 million, of a separate $60 million debt obligation.  Both obligations mature in 2006.

Other:

We completed the sale of or entered into alternative closing arrangements for all private equity funds in our financial asset portfolio as of June 20, 2005.  We have an obligation to fund any cash calls or other commitments in which the purchaser of the private equity funds defaults with respect to the funds for which we entered into an alternative closing arrangement.  This obligation is estimated not to exceed $8.0 million.

MARKET RISK

As a result of its operating, investing and financing activities, we are subject to certain market risks, including changes in commodity prices for electricity, coal, environmental emissions and gas; and fluctuations in interest rates.  Commodity pricing exposure includes the impacts of weather, market demand, increased competition and other economic conditions.  For purposes of potential risk analysis, we use sensitivity analysis to quantify potential impacts of market rate changes on the results of operations. The sensitivity analysis represents hypothetical changes in market values that may or may not occur in the future.

Commodity Pricing Risk

Approximately 10 percent of our 2005 electric revenues were from sales of excess energy and capacity in the wholesale market.  Energy and capacity in excess of the needs of existing retail customers are sold in the wholesale market when we can identify opportunities with positive margins. As of December 31, 2005, a hypothetical increase or decrease of 10% in annual wholesale revenues could result in approximately an $8 million increase or decrease to net income, assuming no increases in fuel and purchased power costs.

Fuel (including coal, gas, oil and emission allowances) and purchased power costs as a percent of total operating costs in 2005 and 2004 were 50% and 44%, respectively.   We have approximately 95% of the total expected coal volume needed for 2006 under contract.  The percentage of coal under contract at our individual facilities is as low as 80%.  Contracted coal volumes at certain facilities exceed 100% of the expected need.  Due to the differences in contracted volumes at various facilities, it is expected we will be in the spot market for more than 5% of our 2006 coal volume at some facilities while we may make no spot purchases at other facilities.  We may have excess coal volumes to meet 2007 needs at some facilities.  The majority of our contracted coal is purchased at fixed prices.  Some contracts provide for periodic adjustment and some are priced based on market indices.  Substantially all contracts have features that limit price escalations in any given year.  Our 2006 emission allowance (SO2) consumption is expected to be similar to 2005.  Our holdings of 2006 SO2 allowances are approximately equal to its expected needs.  There may be small exchanges of allowances between 2006 and future years to balance our 2006 position.  We do not expect to purchase allowances outright for 2006.  The exact consumption of SO2 allowances will depend on market prices for power, availability of our generating units and the actual sulfur content of the coal burned.  Fuel costs are impacted by changes in volume and price and are driven by a number of variables including weather, reliability of coal deliveries, scheduled outages and generation plant mix.  Based on weather normalized sales, fuel costs are forecasted to be flat in 2006 compared to 2005 and are forecasted to increase approximately 5% in 2007 compared to 2006.  This forecast assumes coal prices will increase approximately 10% in 2006 as compared to 2005 and remain flat in 2007 as compared to 2006.

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Purchased power costs depend, in part, upon the timing and extent of planned and unplanned outages of our generating capacity.  We will purchase power on a discretionary basis when wholesale market conditions provide opportunities to obtain power at a cost below our internal production costs. As of December 31, 2005, a hypothetical increase or decrease of 10% in annual fuel and purchased power costs could result in approximately a $29 million increase or decrease to net income.

Interest Rate Risk

As a result of our normal borrowing and leasing activities, our results are exposed to fluctuations in interest rates, which we manage through our regular financing activities.  We maintain both cash on deposit and investments in cash equivalents that may be affected by adverse interest rate fluctuations.  Our long-term debt represents publicly and privately held secured and unsecured notes and debentures with fixed interest rates.  At December 31, 2005, we had no short-term borrowings.

The carrying value of our debt was $1,678 million at December 31, 2005, consisting of DP&L’s first mortgage bonds, DP&L’s tax-exempt pollution control bonds, our unsecured notes and DP&L’s capital leases.  The fair value of this debt was $1,717.5 million, based on current market prices or discounted cash flows using current rates for similar issues with similar terms and remaining maturities.  The principal cash repayments and related weighted average interest rates by maturity date for long-term, fixed-rate debt at December 31, 2005, are as follows:

	Long-term Debt
Expected Maturity	Amount
Date	($ in millions)			Average Rate
2006	$		0.9	5.3%
2007	225.9			8.2%
2008	100.7			6.3%
2009	175.7			8.0%
2010	0.6			5.8%
Thereafter	1,174.2			6.0%
Total	$	1,678.0		6.6%
Fair Value	$	1,717.5

Debt maturities in 2006 are expected to be financed with internal funds.

Debt retirements occurring in 2005 are discussed under FINANCIAL CONDITION, LIQUIDITY AND CAPITAL REQUIREMENTS, DEBT AND DEBT COVENANTS.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our consolidated financial statements are prepared in accordance with GAAP. In connection with the preparation of these financial statements, our management is required to make assumptions, estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and the related disclosure of contingent liabilities. These assumptions, estimates and judgments are based on our historical experience and assumptions that we believed to be reasonable at the time. However, because future events and their effects cannot be determined with certainty, the determination of estimates requires the exercise of judgment. Our critical accounting estimates are those which require assumptions to be made about matters that are highly uncertain.

Different estimates could have a material effect on our financial results. Judgments and uncertainties affecting the application of these policies and estimates may result in materially different amounts being reported under different conditions or circumstances.  Significant items subject to such judgments include: the carrying value of property, plant and equipment; unbilled revenues; the valuation of derivative instruments; the valuation of insurance and claims costs; valuation allowances for receivables and deferred income taxes; the valuation of reserves related to current litigation; and assets and liabilities related to employee benefits.

Long-Lived Assets:  In accordance with Statement of Financial Accounting Standards No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets” (SFAS 144), long-lived assets to be held and used are reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. When required, impairment losses on assets to be held and used are recognized based on the fair value of the asset. We determine the fair value of these assets based upon estimates of future cash flows, market value of similar assets, if available or independent appraisals, if required. In analyzing the fair value and recoverability using future cash flows, we make projections based on a number of assumptions and estimates of growth rates, future economic conditions, assignment of discount rates and estimates of terminal values. An impairment loss is recognized, if the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows. The measurement of impairment loss is the difference between the carrying amount and fair value of the asset. Long-lived assets to be disposed of and/or held for sale are reported at the lower of carrying amount or fair value less cost to sell. We determine the fair value of these assets in the same manner as described for assets held and used.

Revenue Recognition:  We consider revenue realized, or realizable, and earned when persuasive evidence of an arrangement exists, the products or services have been provided to the customer, the sales price is fixed or determinable, and collectibility is reasonably assured.  Werecord electric revenues when delivered to customers.  Customers are billed throughout the month as electric meters are read.  We recognize revenues for retail energy sales that have not yet been billed, but where electricity has been consumed.  This is termed “unbilled revenues” and is a widely recognized and accepted practice for utilities.  Our estimates of unbilled revenues use systems that consider various factors to calculate retail customer consumption at the end of each month.  Given the use of these systems and the fact that customers are billed monthly, we believe it is unlikely that materially different results will occur in future periods when these amounts are subsequently billed.

Additionally, DP&L is subject to regulatory orders addressing the justness and reasonableness of the PJM and Midwest Independent Transmission System Operator (MISO) rates and related revenue

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distribution protocols.  DP&L’s management is required to make assumptions, estimates and judgments relating to the possibility of refund of these revenues.  These assumptions, estimates and judgments are based on management’s experience and are believed to be reasonable at the time.  As a result of these assumptions, estimates and judgments, DP&L is deferring a portion of these revenues for which management believes is subject to refund.  The deferred amount recorded was $20.5 million for 2005.  The above amount collected under the Seams Elimination Charge Adjustment (SECA) rates are subject to refund, and the ultimate outcome of the proceeding establishing SECA rates is uncertain at this time.  However, based on the amount of reserves established for this item, the results of this proceeding are not expected to have a material adverse effect on our financial condition, results of operations or cash flows.

Income Taxes:  We apply the provisions of FASB Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (SFAS 109). SFAS 109 requires an asset and liability approach for financial accounting and reporting of income taxes with tax effects of differences, based on currently enacted income tax rates between the financial reporting and tax basis of accounting reported as Deferred Taxes in the Consolidated Balance Sheets.  Deferred Tax Assets are recognized for deductible temporary differences. Valuation reserves are provided unless it is more likely than not that the asset will be realized.

Investment tax credits, which have been used to reduce federal income taxes payable, have been deferred for financial reporting purposes.  These deferred investment tax credits are amortized over the useful lives of the property to which they are related.  For rate-regulated operations, 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.

We file a consolidated U.S. federal income tax return in conjunction with our subsidiaries.  The consolidated tax liability is allocated to each subsidiary as specified in our tax allocation agreement which provides a consistent, systematic and rational approach. (See Note 4 of Notes to Consolidated Financial Statements.)

Depreciation and Amortization:  Depreciation expense is calculated using the straight-line method, which depreciates the cost of property over its estimated useful life.  For generation, transmission and distribution assets, straight-line depreciation is applied on an average annual composite basis using group rates that approximated 3.3% in 2005 and 3.4% in 2004 and 2003.

Regulatory Assets and Liabilities:  Application of FASB Statement of Financial Accounting Standards No. 71, “Accounting for the Effects of Certain Types of Regulation”(SFAS 71) depends on our ability to collect cost-based rates from customers.  The recognition of regulatory assets requires a continued assessment of the recovery of the costs based on actions of the regulators.  We capitalize incurred costs as deferred regulatory assets when there is a probable expectation that the costs incurred will be recovered in future revenues as a result of the regulatory process. Regulatory liabilities represent current recovery of expected future costs. When applicable we apply judgment in the use of these principles and these estimates are based on expected usage by a customer class over the designated recovery period. See Note 3 of Notes to Consolidated Financial Statements for further disclosure of regulatory amounts.

Asset Retirement Obligations:  In accordance with FASB Statement of Financial Accounting Standards No.143, “Accounting for Asset Retirement Obligations” (SFAS 143) and FASB Interpretation No. 47 (FIN No. 47), “Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143,” legal obligations associated with the retirement of long-lived assets are required to be recognized at their fair value at the time those obligations are incurred.  Upon initial recognition of a legal liability, costs are capitalized as part of the related long-lived asset and allocated to expense over the useful life of the asset.  SFAS 143 also requires that components of previously recorded depreciation related to the cost of removal of assets upon retirement, whether legal asset retirement obligations or not, must be removed from a company’s accumulated

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depreciation reserve.  We make assumptions, estimates and judgments that affect the reported amounts of assets, liabilities and expenses as they relate to asset retirement obligations. These assumptions and estimates are based on historical experience and assumptions that we believed to be reasonable at the time.

Unbilled Revenues:  We record revenue for retail and other energy sales under the accrual method.  For retail customers, revenues are recognized when the services are provided on the basis of periodic cycle meter readings and include an estimated accrual for the value of electricity provided from the meter reading date to the end of the reporting period. These estimates are based on the volume of energy delivered, historical usage and growth by customer class, and the effect of weather variations on usage patterns.

Financial Instruments:  We apply the provisions of FASB Statement of Financial Accounting Standards No. 115, “Accounting for Certain Investments in Debt and Equity Securities”(SFAS 115), for our investments in debt and equity financial instruments of publicly traded entities and classify the securities into different categories: held-to-maturity and available-for-sale.  Available-for-sale securities are carried at fair value and unrealized gains and losses on those securities, net of deferred income taxes, are presented as a separate component of shareholders’ equity.  Declines in value that are other than temporary are recognized currently in earnings.  Financial instruments classified as held-to-maturity are carried at amortized cost.  The valuation of public equity security investments is based upon market quotations.  The cost basis for public equity security and fixed maturity investments is average cost and amortized cost, respectively.

Insurance and Claims Costs: In addition to insurance provided through third-party providers,a wholly-owned captive subsidiary (MVIC) of ours provides insurance coverage solely to us and to our subsidiaries.  Insurance and Claims Costs on the Consolidated Balance Sheets includes insurance reserves of approximately $24 million and $25 million for 2005 and 2004, respectively, based on actuarial methods and loss experience data.  Such reserves are actuarially determined, in the aggregate, based on a reasonable estimation of insured events occurring.  There is uncertainty associated with the loss estimates, and actual results may differ from the estimates.  Modification of these loss estimates based on experience and changed circumstances is reflected in the period in which the estimate is re-evaluated.

During the three-year regulatory transition period ending December 31, 2003, business interruption policy payments from the captive subsidiary to DP&L and/or the release of the appropriate reserves occurred and were reflected in income. In June 2003, the ultimate value of the business interruption risk coverage was settled between MVIC and DP&L.  The total settlement resulted in a $76 million reduction to insurance reserves of MVIC and a release from the business interruption policy reserve of $39.7 million, which is reported as Other Income in 2003.

In 2003, we submitted a claim for $10 million to MVIC to recover legal expenses related to the shareholder litigation. This claim was settled in December 2003.

Pension and Postretirement Benefits:  We account for our pension and postretirement benefit obligations in accordance with the provisions of Statement of Financial Accounting Standards No. 87, “Employers’ Accounting for Pensions” and No. 106 “Employers’ Accounting for Postretirement Benefits Other than Pensions.”  These standards require the use of assumptions, such as the discount rate and long-term rate of return on assets, in determining the obligations, annual cost, and funding requirements of the plans.  We disclose our pension and postretirement benefit plans as prescribed by Statement of Financial Accounting Standards No. 132, “Employers’ Disclosures about Pensions and Other Postretirement Benefits, an amendment of FASB Statements No. 87, 88, and 106.”

In 2006, we maintained our long-term rate of return assumptions of 8.50% for pension and 6.75% for other postretirement benefits assets that reflect the effect of recent trends on our long-term view.  We

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also maintained our assumed discount rate of 5.75% for pension and postretirement benefits expense to reflect current interest rate conditions.  Changes in other components used in the determination of pension and postretirement benefits costs will result in an overall increase of approximately $2 million in such costs in 2006 compared to 2005.

In future periods, differences in the actual return on pension plan assets and assumed return, or changes in the discount rate, will affect the timing of contributions to the pension plan, if any.  We provide postretirement healthcare benefits to employees who retired prior to 1987.  A one percentage point change in the assumed healthcare trend rate would affect postretirement benefit costs by approximately $0.1 million.

LEGAL AND OTHER MATTERS

A discussion of LEGAL AND OTHER MATTERS is described in Note 14 of Notes to Consolidated Financial Statements and in Item 3 - LEGAL PROCEEDINGS.  Such discussions are incorporated by reference in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and made a part hereof.

Recently Issued Accounting Pronouncements

A discussion of recently issued accounting pronouncements is described in Note 1 of Notes to Consolidated Financial Statements and such discussion is incorporated by reference in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and made a part hereof.

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 under Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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Item 8 – Financial Statements and Supplementary Data

DPL Inc.

Consolidated Statements of Results of Operations

	For the years ended December 31,
$ in millions except per share amounts	2005			2004 (a)			2003 (a)
Revenues	$	1,284.9		$	1,199.9		$	1,191.0
Operating expenses:
Fuel	336.9			263.1			234.6
Purchased power	133.3			113.1			87.9
Operation and maintenance	219.0			237.1			199.8
Depreciation and amortization	147.3			144.1			138.9
General taxes	107.3			105.3			108.9
Amortization of regulatory assets, net	2.0			0.7			49.0
Total operating expenses	945.8			863.4			819.1
Operating income	339.1			336.5			371.9
Investment income	49.0			6.5			32.0
Interest expense	(137.7		)	(160.2		)	(181.7		)
Shareholder litigation expense	—			—			(76.7		)
Charge for early redemption of debt	(61.2		)	—			—
Other income	15.4			5.2			44.2
Earnings from continuing operations before income taxes	204.6			188.0			189.7
Income tax expense	79.9			66.5			74.8
Earnings from continuing operations	124.7			121.5			114.9
Earnings from discontinued operations, net of tax	52.9			95.8			16.6
Cumulative effect of accounting change, net of tax	(3.2		)	—			17.0
Net Income	$	174.4		$	217.3		$	148.5
Average number of common shares outstanding (millions):
Basic	121.0			120.1			119.8
Diluted	129.1			122.1			121.7
Basic earnings per share of common stock:
Continuing operations	$	1.03		$	1.01		$	0.96
Discontinued operations	0.44			0.80			0.14
Cumulative effect of accounting change	(0.03		)	—			0.14
Net income per basic common share	$	1.44		$	1.81		$	1.24
Diluted earnings per share of common stock:
Continuing operations	$	0.97		$	1.00		$	0.94
Discontinued operations	0.41			0.78			0.14
Cumulative effect of accounting change	(0.03		)	—			0.14
Net income per diluted common share	$	1.35		$	1.78		$	1.22
Dividends paid per share of common stock	$	0.96		$	0.96		$	0.94

(a)  Revised – See Note 11.

See Notes to Consolidated Financial Statements.

48

DPL Inc.

Consolidated Statements of Cash Flows

	For the years ended December 31,
$ in millions	2005			2004 (a)			2003 (a)
Cash Flows From Operating Activities:
Net income	$	174.4		$	217.3		$	148.5
Less: Earnings from discontinued operations	(52.9		)	(95.8		)	(16.6		)
Earnings from continuing operations and cumulative effect of accounting change	121.5			121.5			131.9
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	147.3			144.1			138.9
Amortization of regulatory assets, net	2.0			0.7			49.0
Charge for early redemption of debt	61.2			—			—
Cumulative effect of accounting change, net of tax	3.2			—			(17.0		)
Shareholder litigation	—			(70.0		)	66.6
Deferred income taxes	(7.1		)	22.2			(4.8		)
Captive insurance provision	(0.6		)	(1.1		)	(46.8		)
Income from interest rate hedges	—			—			(21.2		)
Gain on sale of other investments	(28.8		)	(3.3		)	(3.9		)
Gain on sale of property	—			(1.8		)	—
Changes in certain assets and liabilities:
Accounts receivable	(12.5		)	7.1			(3.7		)
Accounts payable	(11.7		)	(12.9		)	(8.1		)
Accrued taxes payable	15.0			(62.8		)	70.4
Accrued interest payable	(13.2		)	(8.0		)	(9.1		)
Prepayments	2.2			0.4			(7.4		)
Inventories	(8.0		)	(20.0		)	4.0
Deferred compensation assets	2.9			12.6			49.0
Deferred compensation obligations	6.7			5.2			(47.0		)
Other	34.0			(1.2		)	9.4
Net cash provided by operating activities	314.1			132.7			350.2
Cash Flows From Investing Activities:
Capital expenditures	(180.1		)	(87.7		)	(120.9		)
Purchases of short-term investments and securities	(641.2		)	(26.1		)	(75.8		)
Sales of short-term investments and securities	642.5			89.9			127.7
Settlement of interest rate hedges	—			—			51.4
Proceeds from the sale of property	—			2.3			—
Cash flow from discontinued operations	868.4			203.9			83.1
Net cash provided by investing activities	689.6			182.3			65.5
Cash Flows From Financing Activities:
Issuance of long-term debt, net of issue costs	211.2			174.7			465.1
Exercise of stock options	22.7			—			—
Retirement of long-term debt	(673.8		)	(510.4		)	(471.9		)
Premiums paid for early redemption of debt	(54.7		)	—			—
Retirement of preferred securities	(0.1		)	—			—
Dividends paid on common stock	(115.3		)	(114.8		)	(112.1		)
Net cash used for financing activities	(610.0		)	(450.5		)	(118.9		)
Cash and Cash Equivalents:
Net change	393.7			(135.5		)	296.8
Balance at beginning of year	202.1			337.6			40.8
Cash and cash equivalents at end of year	$	595.8		$	202.1		$	337.6
Supplemental cash flow information:
Interest paid, net of amounts capitalized	$	146.1		$	162.1		$	184.0
Income taxes paid, net	$	71.2		$	107.9		$	15.2

(a) Revised – See Note 11.

See Notes to Consolidated Financial Statement.

49

DPL Inc.

Consolidated Balance Sheets

	At December 31,
$ in millions	2005			2004
Assets
Property:
Property, plant and equipment	$	4,667.7		$	4,495.0
Less: Accumulated depreciation and amortization	(2,094.8		)	(1,964.9		)
Net property	2,572.9			2,530.1
Current assets:
Cash and cash equivalents	595.8			202.1
Short-term investments available for sale	125.8			—
Accounts receivable, less provision for uncollectible accounts of $1.0 and $1.1, respectively	194.9			175.7
Inventories, at average cost	80.2			72.1
Prepaid taxes	45.9			46.4
Other current assets	20.2			34.3
Total current assets	1,062.8			530.6
Other assets:
Financial assets:
Public securities	—			86.3
Private securities under the equity method	—			304.0
Private securities under the cost method	—			522.3
Total financial assets	—			912.6
Regulatory assets	83.8			74.0
Other deferred assets	72.2			118.2
Total other assets	156.0			1,104.8
Total Assets	$	3,791.7		$	4,165.5

See Notes to Consolidated Financial Statements.

50

DPL Inc.

Consolidated Balance Sheets

	At December 31,
$ in millions	2005			2004
Capitalization and Liabilities
Capitalization:
Common shareholders’ equity:
Common stock: par value $0.01 per share, 250,000,000 shares authorized and 163,724,211 shares issued at December 31, 2005 and 2004; 127,526,404 shares and 126,501,404 shares outstanding at December 31, 2005 and 2004, respectively	$	1.3		$	1.3
Other paid-in capital, net of treasury stock	25.1			15.8
Warrants	50.0			50.0
Common stock held by employee plans	(86.1		)	(85.7		)
Accumulated other comprehensive income	(14.2		)	65.5
Earnings reinvested in the business	1,062.0			997.1
Total common shareholders’ equity	1,038.1			1,044.0
Preferred stock	22.9			23.0
Long-term debt	1,677.1			2,117.3
Total capitalization	2,738.1			3,184.3
Current Liabilities:
Current portion – long-term debt	0.9			13.5
Accounts payable	130.2			113.4
Accrued taxes	178.5			137.2
Accrued interest	28.9			42.1
Other current liabilities	31.1			20.7
Total current liabilities	369.6			326.9
Deferred Credits:
Deferred taxes	327.0			384.8
Unamortized investment tax credit	46.4			49.3
Insurance and claims costs	24.3			24.9
Other deferred credits	286.3			195.3
Total deferred credits	684.0			654.3
Commitments and Contingencies (Note 14)
Total Capitalization and Liabilities	$	3,791.7		$	4,165.5

See Notes to Consolidated Financial Statements.

51

DPL Inc.

Consolidated Statements of Shareholders’ Equity

									Common
									Stock			Accumulated			Earnings
	Common Stock (a)			Other					Held by			Other			Reinvested
	Outstanding			Paid-in					Employee			Comprehensive			In the
$ in millions	Shares	Amount		Capital			Warrants		Plans			Income			Business			Total
Beginning balance	126,501,404	$	1.3	$	8.4		$	50.0	$	(89.6	)	$	(2.2	)	$	856.9		$	824.8
2003:
Net income															148.5
Net change in unrealized gains (losses) on financial instruments, net of reclassification adjustments												10.0
Net change in unrealized gains (losses) on foreign currency translation adjustments												37.3
Net change in deferred gains on cash flow hedges												29.4
Minimum pension liability												(0.2		)
Deferred income taxes related to unrealized gains (losses)												(16.6		)
Total comprehensive income																		208.4
Common stock dividends (b)															(140.8		)	(140.8		)
Employee / Director stock plans				0.2					5.2						1.1			6.5
Other				3.4														3.4
Ending balance	126,501,404	$	1.3	$	12.0		$	50.0	$	(84.4	)	$	57.7		$	865.7		$	902.3
2004:
Net income															217.3
Net change in unrealized gains (losses) on financial instruments, net of reclassification adjustments												9.3
Net change in unrealized gains (losses) on foreign currency translation adjustments												6.2
Net change in deferred gains on cash flow hedges												(1.5		)
Minimum pension liability												(0.4		)
Deferred income taxes related to unrealized gains (losses)												(5.8		)
Total comprehensive income																		225.1
Common stock dividends (b)															(86.2		)	(86.2		)
Employee / Director stock plans				4.1					(1.3		)				0.4			3.2
Other				(0.3		)									(0.1		)	(0.4		)
Ending balance	126,501,404	$	1.3	$	15.8		$	50.0	$	(85.7	)	$	65.5		$	997.1		$	1,044.0
2005:
Net income															174.4
Net change in unrealized gains (losses) on financial instruments, net of reclassification adjustments												(15.3		)
Net change in unrealized gains (losses) on foreign currency translation adjustments												(46.3		)
Net change in deferred gains on cash flow hedges												(3.4		)
Minimum pension liability												(63.0		)
Deferred income taxes related to unrealized gains (losses)												48.2
Total comprehensive income																		94.6
Common stock dividends (b)															(115.3		)	(115.3		)
Treasury shares purchased (c)				(10.6		)												(10.6		)
Treasury stock reissued	1,025,000			16.9											5.8			22.7
Employee / Director stock plans				3.0					(0.4		)							2.6
Other												0.1						0.1
Ending balance	127,526,404	$	1.3	$	25.1		$	50.0	$	(86.1	)	$	(14.2	)	$	1,062.0		$	1,038.1

(a)$0.01 par value, 250,000,000 shares authorized.

(b)Common stock dividends were $0.94 per share in 2003 and $0.96 per share in 2004 and 2005.

(c)Number of shares outstanding at December 31, 2005 not affected by a transaction to purchase 406,000 shares began December 30^th for which the share repurchase was settled in early January 2006. See Note 6 of Notes to Consolidated Financial Statements.

See Notes to Consolidated Financial Statements.

52

DPL Inc.

Notes to Consolidated Financial Statements

1.Summary of Significant Accounting Policies and Overview

Description of Business

DPL Inc. (DPL, the Company, we, our, or ours unless the context indicates otherwise) is a diversified, regional energy company organized in 1985 under the laws of Ohio.  We conduct our principal business in one business segment - Electric.

Our principal subsidiary is The Dayton Power and Light Company (DP&L).  DP&L is a public utility incorporated in 1911 under the laws of Ohio.  DP&L sells electricity to residential, commercial, industrial and governmental customers in a 6,000 square mile area of West Central Ohio.  Electricity for DP&L’s 24 county service area is primarily generated at eight coal-fired power plants and is distributed to more than 500,000 retail customers.  DP&L also purchases retail peak load requirements from DPL Energy LLC (DPLE).  Principal industries served include automotive, food processing, paper, plastic manufacturing, and defense.  DP&L’s sales reflect the general economic conditions and seasonal weather patterns of the area.  DP&L sells any excess energy and capacity into the wholesale market.

Our other significant subsidiaries (all of which are wholly-owned) include DPLE, which engages in the operation of peaking generating facilities; DPL Energy Resources, Inc. (DPLER), which sells retail electric energy under contract to major industrial and commercial customers in West Central Ohio; MVE, Inc. (MVE), which was primarily responsible for the management of our financial asset portfolio;  DPL Finance Company, which provides financing to us and our subsidiaries; and Miami Valley Insurance Company (MVIC), a captive insurance company for us and our subsidiaries.

Basis of Consolidation

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP).  The consolidated financial statements include the accounts of DPL and its majority-owned subsidiaries.  Investments that are not majority owned are accounted for using the equity method when our investment allows us the ability to exert significant influence, as defined by GAAP.  Undivided interests in jointly-owned generation facilities are consolidated on a pro rata basis.  All material intercompany accounts and transactions are eliminated in consolidation.

Estimates, Judgments and Reclassifications

The preparation of financial statements in conformity with GAAP requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the revenue and expenses of the period reported.  Different estimates could have a material effect on our financial results. Judgments and uncertainties affecting the application of these policies and estimates may result in materially different amounts being reported under different conditions or circumstances.  Significant items subject to such estimates and judgments include the carrying value of property, plant and equipment; unbilled revenues; the valuation of derivative instruments; the valuation of insurance and claims costs; valuation allowances for receivables and deferred income taxes; reserves recorded for income tax exposures; litigation; and assets and liabilities related to employee benefits.  Actual results may differ from those estimates.  Certain amounts from prior periods have been reclassified to conform to the current reporting presentation.  In 2005, we have separately disclosed the earnings from discontinued operations, net of income taxes, which in prior periods were reported with elements of continued operations.  In 2005, we have separately disclosed the investing portions of the cash flows attributable to its discontinued operations (there was no impact on the operating or investing portions of the cash flows), which in prior periods were reported on a combined basis as a single amount.

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Revenues

We record revenue for services provided but not yet billed to more closely match revenues with expenses.  Accounts receivable on the Consolidated Balance Sheets include unbilled revenue of $63.6 million and $60.5 million in 2005 and 2004, respectively.  Also included in revenues are amounts charged to customers through a surcharge for recovery of uncollected amounts from certain eligible low-income households.  These charges were $6.2 million for 2005, $8.3 million for 2004 and $6.3 million for 2003.

Allowance for Uncollectible Accounts

We establish provisions for uncollectible accounts using both historical average credit loss percentages of accounts receivable balances to project future losses and specific provisions for known credit issues.

Property, Plant and Equipment

We record our ownership share of our undivided interest in jointly-held plants as an asset in property, plant and equipment.  Property, plant and equipment are stated at cost.  For regulated property, cost includes direct labor and material, allocable overhead costs and an allowance for funds used during construction (AFUDC).  AFUDC represents the cost of borrowed funds and equity used to finance regulated construction projects.  Capitalization of AFUDC ceases at either project completion or as of the date specified by regulators.  AFUDC capitalized related to borrowed funds was zero in 2005 and 2004 and $0.1 million in 2003.  AFUDC capitalized for equity funds was zero in 2005, $0.5 million in 2004 and $0.6 million in 2003.

For unregulated property, cost includes direct labor, material and overhead costs and interest capitalized during construction.  Capitalized interest was $2.6 million in 2005, $1.8 million in 2004 and $8.3 million in 2003.

For substantially all depreciable property, when a unit of property is retired, the original cost of that property less any salvage value is charged to Accumulated Depreciation and Amortization.

Property is evaluated for impairment when events or changes in circumstances indicate that its carrying amount may not be recoverable.

Depreciation

Depreciation expense is calculated using the straight-line method, which depreciates the cost of property over its estimated useful life.  For generation, transmission and distribution assets, straight-line depreciation is applied on an average annual composite basis using group rates that approximated 3.3% in 2005 and 3.4% in both 2004 and 2003.  Depreciation expense was $147.3 million in 2005, $144.1 million in 2004 and $138.9 million in 2003.

The following is a summary of property, plant and equipment with corresponding composite depreciation rates at December 31, 2005 and 2004:

$ in millions	2005		Composite Rate	2004		Composite Rate
Regulated:
Transmission	$	341.8	2.6%	$	337.8	2.6%
Distribution	968.9		3.4%	929.6		3.6%
General	63.1		9.5%	58.9		8.7%
Non-depreciable	54.0		0.0%	54.4		0.0%
Total regulated	$	1,427.8		$	1,380.7
Unregulated:
Production	$	3,008.3	3.2%	$	2,975.3	3.2%
Other	45.2		7.6%	43.4		7.2%
Non-depreciable	18.4		0.0%	18.2		0.0%
Total unregulated	$	3,071.9		$	3,036.9
Total property in service	$	4,499.7	3.3%	$	4,417.6	3.4%
Construction work in process	168.0		0.0%	77.4		0.0%
Total property, plant and equipment	$	4,667.7		$	4,495.0

54

Asset Retirement Obligations

We adopted the provisions of the Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations” (SFAS 143) during 2003.  SFAS 143 requires legal obligations associated with the retirement of long-lived assets to be recognized at their fair value at the time those obligations are incurred.  Upon initial recognition of a legal liability, costs are capitalized as part of the related long-lived asset and allocated to expense over the useful life of the asset.  SFAS 143 also requires that components of previously recorded depreciation related to the cost of removal of assets upon retirement, whether legal asset retirement obligations or not, must be removed from a company’s accumulated depreciation reserve.  Our legal obligations associated with the retirement of our long-lived assets under SFAS 143 consisted primarily of river intake and discharge structures, coal unloading facilities, loading docks, ice breakers and ash disposal facilities.  Application of SFAS 143 in 2003 resulted in an increase in net property, plant and equipment of $0.8 million, the recognition of an asset retirement obligation of $4.6 million and reduced our accumulated depreciation reserve by $32.1 million due to cost of removal related to the non-regulated generation assets. Beginning in January 2003, depreciation rates were reduced to reflect the discontinuation of the cost of removal accrual for applicable non-regulated generation assets. In addition, costs for the removal of retired assets are charged to operation and maintenance when incurred.  Since the generation assets are not subject to Ohio regulation, we recorded the net effect of adopting this standard in our Consolidated Statement of Results of Operations.  The total cumulative effect of the adoption of SFAS 143 increased net income and shareholders’ equity by $28.3 million before tax in 2003.

In March of 2005, the FASB issued FASB Interpretation No. 47 (FIN No. 47), “Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143.” We implemented FIN No. 47 in the fourth quarter of 2005 effective January 1, 2005 for certain asset retirement obligations, primarily the removal of asbestos, at some of our generation stations.  Application of FIN No. 47 resulted in an increase in our net property, plant and equipment of $1.8 million and an increase in our asset retirement obligation of $7.2 million.  The difference of $5.3 million represents the before tax ($3.2 million after tax) cumulative effect of the adoption of FIN No. 47, as of January 1, 2005 on 2005 net income. The before tax impact on 2005 net income was $0.9 million ($0.5 million after tax) which consisted of $0.6 million of accretion expense and $0.3 million depreciation expense. The following table sets forth the effect of the accounting change on net income as previously reported for 2004 and 2003 as adjusted, if FIN No. 47 had been applied effective January 1, 2003. Application of FIN No. 47 would have had no impact on reported basic or dilluted earnings per share in 2004 and 2003.

($ in millions)	2004			2003
Reported net income	$	217.3		$	148.5
Earnings effect of adopting FIN No. 47	(0.5		)	(0.4		)
Adjusted net income	$	216.8		$	148.1

If FIN No. 47 had been applied as of January 1, 2003, our asset retirement obligation would have increased by $9.4 million and $10.3  million at January 1, 2004 and December 31, 2004, respectively. Our asset retirement obligation was $13.2 million at December 31, 2005, which consisted of $5.4  million related to the adoption of SFAS 143 in 2003 and $7.8 million related to the adoption of FIN No. 47 in 2005.

We continue to record cost of removal for our regulated transmission and distribution assets through our depreciation rates and recover those amounts in rates charged to our customers.  There are no

55

known legal asset retirement obligations associated with these assets.  We have recorded $81.7 million and $77.5 million in estimated costs of removal at December 31, 2005 and 2004, respectively, as regulatory liabilities for our transmission and distribution property. (See Note 3 of Notes to Consolidated Financial Statements.)

Regulatory Accounting

We apply the provisions of FASB Statement of Financial Accounting Standards No. 71 (SFAS 71), “Accounting for the Effects of Certain Types of Regulation.”  In accordance with SFAS 71, regulatory assets and liabilities are recorded in the Consolidated Balance Sheets.  Regulatory assets are the deferral of costs expected to be recovered in future customer rates and regulatory liabilities represent current recovery of expected future costs.

We evaluate our regulatory assets each period and believe recovery of these assets is probable.  We have received or requested a return on certain regulatory assets for which we are currently recovering or seeking recovery through rates.  (See Note 3 of Notes to Consolidated Financial Statements).

If we were required to terminate application of SFAS 71 for all of our regulated operations, we would have to record the amounts of all regulatory assets and liabilities in the Consolidated Statement of Results of Operations at that time.  (See Note 3 of Notes to Consolidated Financial Statements.)

Accounts Receivable

Our accounts receivable includes utility customer receivables, amounts due from our partners for jointly-owned property, wholesale and subsidiary customer receivables and electric unbilled revenue.  We also include miscellaneous accounts receivables such as refundable Franchise taxes.  The amount is presented net of a provision for uncollectible accounts on the accompanying balance sheets.

Inventory

Inventories, carried at average cost, include coal, emission allowances, oil and gas used for electric generation and materials and supplies for utility operations.

Emission Allowances

We account for our emission allowances as inventory, and record emission allowance inventory at historical cost.  We calculate the weighted average cost by each vintage (year) for which emission allowances can be used, and charge to fuel costs the weighted average cost of emission allowances used each quarter.  Emission allowances are added to inventory when the EPA issues us emission allowances at no cost or when we purchase emission allowances.  Purchased emission allowances are recorded in inventory at the purchase price, including any related transaction fees.  Emission allowances are deducted from inventory when used in the production of electricity or when we sell excess emission allowances.  Emission allowances used during the production of electricity are charged to fuel costs at the weighted average cost for that vintage.  The excess/(shortfall) of the sales price over the weighted average cost for any emission allowances sold, less related fees, is recorded as a gain/(loss) in other income.  Emission allowances received as part of an exchange of emission allowances are recorded at the carrying cost of the emission allowances given up, with no gain or loss recorded.

Repairs and Maintenance

Costs associated with all planned work and maintenance activities, primarily power plant outages, are recognized at the time the work is performed.  These costs, which include labor, materials and supplies and outside services required to maintain equipment and facilities, are either capitalized or expensed based on defined units of property as required by the Federal Energy Regulatory Commission (FERC).

56

Income Taxes

We apply the provisions of FASB Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (SFAS 109). SFAS 109 requires an asset and liability approach for financial accounting and reporting of income taxes with tax effects of differences, based on currently enacted income tax rates between the financial reporting and tax basis of accounting reported as Deferred Taxes in the Consolidated Balance Sheet.  Deferred tax assets are recognized for deductible temporary differences. Valuation reserves are provided unless it is more likely than not that the asset will be realized.

Investment tax credits, which have been used to reduce federal income taxes payable, have been deferred for financial reporting purposes.  These deferred investment tax credits are amortized over the useful lives of the property to which they are related.  For rate-regulated operations, 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.

We file a consolidated U.S. federal income tax return in conjunction with our subsidiaries.  The consolidated tax liability is allocated to each subsidiary as specified in our tax allocation agreement which provides a consistent, systematic and rational approach. (See Note 4 of Notes to Consolidated Financial Statements.)

Cash and Cash Equivalents

Cash and cash equivalents are stated at cost, which approximates fair value. All highly liquid short-term investments with original maturities of three months or less are considered cash equivalents.  Cash and cash equivalents were $595.8 million at December 31, 2005 and $202.1 million at December 31, 2004.

Short-term Investments Available for Sale

As of December 31, 2005, we owned Auction Rate Securities (ARS) with a total par value of $125.8 million, which equals fair value.  ARS are variable rate state and municipal bonds that trade at par value.  Interest rates on ARS are reset every seven, twenty-eight or thirty-five days through a modified Dutch auction.  We have the option to hold at market, re-bid or sell each ARS on the interest reset date.  Although ARS are issued and rated as long-term bonds, they are priced and traded as short-term securities held for resale because of the market liquidity provided through the interest rate reset mechanism.  Each ARS owned by us at year end was tax-exempt, AAA rated and insured by a third-party insurance company.  Interest earned but not received is accrued at the end of each reporting period.

Captive Insurance Subsidiary

In addition to insurance provided through third-party providers, a wholly-owned captive subsidiary of ours provides insurance coverage solely to us and to our subsidiaries,  Insurance and Claims Costs on the Consolidated Balance Sheets includes insurance reserves of approximately $24 million and $25 million for 2005 and 2004, respectively, based on actuarial methods and loss experience data.  Such reserves are actuarially determined, in the aggregate, based on a reasonable estimation of insured events occurring.  There is uncertainty associated with the loss estimates, and actual results may differ from the estimates.  Modification of these loss estimates based on experience and changed circumstances is reflected in the period in which the estimate is re-evaluated.

During the three-year regulatory transition period ending December 31, 2003, business interruption policy payments from MVIC to DP&L or the release of the appropriate reserves occurred and was reflected in income. In June 2003, the ultimate value of the business interruption risk coverage was settled between MVIC and DP&L.  The total settlement resulted in a $76 million reduction to insurance reserves of MVIC and a release from the business interruption policy reserve of $39.7 million, which was reported as Other Income in 2003.

57

In 2003, we submitted a claim for $10 million to MVIC to recover legal expenses related to the shareholder litigation. This claim was settled in December 2003.

Financial Derivatives

We follow FASB Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activity” (SFAS 133), as amended.  SFAS 133 requires that all derivatives be recognized as either assets or liabilities in the Consolidated Balance Sheets and be measured at fair value, and changes in the fair value be recorded in earnings, unless they are designated as a cash flow hedge of a forecasted transaction.

The FASB issued Statement of Financial Accounting Standards No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” (SFAS 149).  SFAS 149 amends and clarifies financial accounting and reporting for derivative instruments, including those embedded in other contracts, and for hedging activities and is effective for contracts entered into or modified after June 30, 2003.  This standard did not have a material effect on us.

We use forward contracts and options to reduce our exposure to changes in energy and commodity prices and as a hedge against the risk of changes in cash flows associated with expected electricity purchases.  These purchases are required to meet full load requirements during times of peak demand or during planned and unplanned generation facility outages.  We also hold forward sales contracts that hedge against the risk of changes in cash flows associated with power sales during periods of projected generation facility availability.  The FASB concluded that electric utilities could apply the normal purchases and sales exception for option-type contracts and forward contracts in electricity subject to specific criteria for the power buyers and sellers under capacity contracts.  Accordingly, we apply the normal purchases and sales exception as defined in SFAS 133 and account for these contracts upon settlement.

In May 2003, DP&L entered into 60-day interest rate swaps designed to capture existing favorable interest rates in anticipation of future financings of $750 million first mortgage bonds.  These hedges were settled in July 2003, at a fair value of $51.4 million, reflecting increasing U.S. Treasury interest rates, and as a result, DP&L received this amount.  During 2003, the ultimate effectiveness of the hedges resulted in a gain of $30.2 million and was recorded in Accumulated Other Comprehensive Income on the Consolidated Balance Sheets.  This amount is amortized into income as a reduction to interest expense over the ten- and fifteen-year lives of the hedges.  The ineffective portion of the hedge of $21.2 million was recognized as Other Income on the Consolidated Statement of Results of Operations during 2003.

We held emission allowance options, which were in effect until December 31, 2004, that were classified as derivatives not subject to hedge accounting.  The fair value of these contracts is reflected as Other Current Assets or Other Current Liabilities on the Consolidated Balance Sheets and changes in fair value are recorded as Other Income on the Consolidated Statements of Results of Operations.  The effect was not material to results of operations during 2003 through 2004.  We did not hold any emission allowance options in 2005.

Financial Instruments

We apply the provision of FASB Statement of Financial Accounting Standards No. 115, “Accounting for Certain Investments in Debt and Equity Securities”(SFAS 115), for our investments in debt and equity financial instruments of publicly traded entities and classify the securities into different categories: held-to-maturity and available-for-sale.  Available-for-sale securities are carried at fair value and unrealized gains and losses on those securities, net of deferred income taxes, are presented as a separate component of shareholders’ equity.  Other-than-temporary declines in value are recognized currently in earnings.  Financial instruments classified as held-to-maturity are carried at amortized cost.  The valuation of public equity security investments is based upon market quotations.  The cost basis for public equity security and fixed maturity investments is average cost and amortized cost, respectively.

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Prior to the sale of the financial asset portfolio, we accounted for our investments in private financial instruments under either the cost or equity method of accounting.  The equity method of accounting was applied to those investments in limited partnership interests when our ownership was 5% or more of the private equity fund.  Under the cost method, our private investments were carried at cost unless an other-than-temporary decline in value was recognized, and income was recognized as distributed by the private equity fund.  Under the equity method, private investments were carried at our share of the capital of the private equity fund, and we recognized our share of the income reported by the private equity fund, which included unrealized gains and losses.  Other-than-temporary declines in value were recognized currently in earnings.

Investment Income

Investment income included in the Consolidated Financial Statements is comprised of realized investment income from the following sources:

($ in millions)	2005		2004		2003
Public securities	$	23.9	$	1.1	$	9.2
Other	25.1		5.4		22.8
Total investment income	$	49.0	$	6.5	$	32.0

Investment income increased by $42.5 million in 2005 compared to 2004 primarily resulting from a net gain on the sale of public securities of $23.5 million and $18.5 million in interest income, principally on short-term investments and tax-exempt investments of public securities.

Investment income decreased by $25.5 million in 2004 compared to 2003.  This decrease is primarily the result of a 2003 realized gain on interest rate hedges of $21.2 million that did not recur in 2004, as well as gains on investments of $4.6 million and investment income of $4.2 million recognized in 2003 for equity securities not related to discontinued operations.  These decreases were partially offset by a $3.4 million gain on investments denominated in Euros that occurred in 2004.

The portion of investment income related to the private equity funds sold in 2005 has been classified as discontinued operations.  At December 31, 2005, we held no beneficial interests in limited partnerships.  (See Note 11 of Notes to Consolidated Financial Statements).

Pension and Postretirement Benefits

We account for our pension and postretirement benefit obligations in accordance with the provisions of Statement of Financial Accounting Standards No. 87, “Employers’ Accounting for Pensions” and No. 106 “Employers’ Accounting for Postretirement Benefits Other than Pensions.”  These standards require the use of assumptions, such as the discount rate and long-term rate of return on assets, in determining the obligations, annual cost, and funding requirements of the plans.  We disclose our pension and postretirement benefit plans as prescribed by Statement of Financial Accounting Standards No. 132, “Employers’ Disclosures about Pensions and Other Postretirement Benefits, an amendment of FASB Statements No. 87, 88, and 106.”

Legal, Environmental and Regulatory Contingencies

In the normal course of business, we are subject to various lawsuits, actions, proceedings, claims and other matters asserted under laws and regulations.  We believe the amounts provided in our consolidated financial statements, as prescribed by GAAP, adequately reflect probable and estimable contingencies.  However, there can be no assurances that the actual amounts required to satisfy alleged liabilities from various legal proceedings, claims, and other matters, and to comply with applicable laws and regulations, will not exceed the amounts reflected in our consolidated financial statements or will not have a material adverse effect on our consolidated results of operations, financial condition or cash flows.  As such, costs, if any, that may be incurred in excess of those amounts provided as of December 31, 2005, cannot currently be reasonably determined.

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Recently Issued Accounting Standards

Stock-Based Compensation

In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No.123 (revised 2004), “Share-Based Payment” (SFAS 123R). SFAS 123R replaces SFAS 123, “Accounting for Stock-Based Compensation”, and supersedes Accounting Principles Board Opinion No. 25 (Opinion 25), “Accounting for Stock Issued to Employees”.  SFAS 123R requires a public entity to measure the cost of employee services received and paid for by equity instruments to be based on the fair-value of such equity on the grant date.  This cost is recognized in results of operations over the period in which employees are required to provide service.  Liabilities initially incurred will be based on the fair-value of equity instruments and then be re-measured at each subsequent reporting date until the liability is ultimately settled.  The fair-value for employee share options and other similar instruments at the grant date will be estimated using option-pricing models and excess tax benefits will be recognized as an addition to paid-in capital.  Cash retained from the excess tax benefits will be presented in the statement of cash flows as financing cash inflows.  The provisions of this Statement shall be effective for fiscal periods beginning after December 31, 2005.  We are currently accounting for such share-based transactions granted after January 1, 2003, using SFAS 123, “Accounting for Stock-Based Compensation.”

We use the Black-Scholes option-pricing model to determine the fair value of each option as of the date of grant for expense incurred.  In applying the Black-Scholes option-pricing model, the following assumptions were used:

Dividend yield - 3.8%
Risk-free interest rate - 3.6%
Expected option terms ranging from 0.5 to 4.5 years
Volatility factors ranging from 14% to 28%
Share price as of December 31, 2005 - $26.01
Option strike prices ranging from $14.95 to $29.63

SFAS 123R permits public companies to adopt its requirements using one of two methods; “modified prospective” method and “modified retrospective” method.   Under the “modified prospective” method, compensation cost is recognized beginning with the effective date (a) based on the requirements of SFAS 123R for all new awards and for awards modified, repurchased, or canceled after the effective date, and (b) for all awards granted to employees prior to the effective date of SFAS 123R that remain unvested on the effective date.  The “modified retrospective” method includes the requirements of the modified prospective method described above, but also permits entities to restate based on the amounts previously recognized under SFAS 123 for purposes of pro forma disclosures for either (a) all prior periods presented or (b) prior interim periods of the year of adoption.  We plan to adopt SFAS 123R using the modified prospective method.  The adoption of SFAS 123R’s fair value method is expected to have an immaterial impact on our operating expenses for fiscal year 2006.

The Stock Incentive Units (SIUs) that meet the requirements of a liability will be marked to market each quarter.  The SIUs that are fully vested will continue to be marked to market on a quarterly basis.  Under SFAS123, these SIU’s were valued at the quarter end market price for our common shares.  If SFAS 123R had been adopted at December 31, 2005, then a credit of $0.2 million would have been booked to comply with the new valuation method. The first quarter financials for 2006 will reflect the new valuation method and we are anticipating that a credit to compensation expense of approximately $0.2 million will be needed to comply with SFAS 123R.

Inventory Costs

In November 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4”. The amendments made by SFAS 151 clarify that abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) should be recognized as current-period

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charges and require the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. The guidance is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Earlier application is permitted for inventory costs incurred during fiscal years beginning after November 23, 2004. The adoption of SFAS 151 had no impact on our results of operations, cash flows and financial position.

Exchange of Nonmonetary Assets

In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 153, “Exchange of Nonmonetary Assets, an amendment of APB Opinion No. 29” (SFAS 153).  The guidance in APB Opinion No. 29, “Accounting for Nonmonetary Transactions”, is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. The guidance in that Opinion, however, included certain exceptions to that principle. SFAS 153 amends Opinion 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The provisions of SFAS 153 shall be effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005.  The adoption of SFAS 153 had no impact on our results of operations, cash flows and financial position.

The American Jobs Creation Act of 2004

On October 22, 2004, the President signed the American Jobs Creation Act of 2004 (the Act).  On December 21, 2004, the FASB issued two FASB Staff Positions (FSP) regarding the accounting implications of the Act related to (1) the deduction for qualified domestic production activities (FSP FAS 109-1) and (2) the one-time tax benefit for the repatriation of foreign earnings (FSP FAS 109-2).  The guidance in the FSPs applies to financial statements for periods ending after the date the Act was enacted.  The Act provides a deduction up to 9 percent (when fully phased-in) of the lesser of (a) qualified production activities income (as defined by the Act) or (b) taxable income (after the deduction for the utilization of any net operating loss carryforwards).  This tax deduction is limited to 50 percent of W-2 wages paid by the taxpayer.  The Act also creates a temporary incentive for U.S. corporations to repatriate accumulated income earned abroad by providing an 85 percent dividends received deduction for certain dividends from controlled foreign corporations.  We have incorporated all applicable provisions of the Act in our 2005 financial statements.  The incorporation of these ‘Section 199’ provisions generated a tax benefit of $1.6 million during 2005.

Ohio House Bill 66

On June 30, 2005, Governor Taft signed House Bill 66 into law which significantly changed how we are taxed in Ohio.  The major provisions of the bill included phasing-out the Ohio Franchise Tax, phasing-out the Ohio Personal Property Tax for non-utility taxpayers and phasing-in a Commercial Activities Tax.  The Ohio Franchise Tax phase-out required second quarter 2005 adjustments to income tax expense.  Income taxes from continuing operations were reduced by $1.5 million while income taxes from discontinued operations were increased by $1.3 million as a result of the tax law change.  Other applicable provisions of House Bill 66 have been reflected in our consolidated financial statements.

Discontinued Operations

In November, 2004, the Emerging Issues Task Force (EITF) issued EITF 03-13, “Applying the Conditions in Paragraph 42 of FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, in Determining Whether to Report Discontinued Operations” (SFAS No. 144).  This guidance should be applied to a component of an enterprise that is either disposed of or classified as held for sale in fiscal periods beginning after December 15, 2004.  We have accounted for the sale of the private equity investments in the financial asset portfolio according to SFAS No. 144; and EITF 03-13 does not affect our results of operations, cash flows or financial position.

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Accounting Changes and Error Corrections

In June 2005, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 154 (SFAS 154), “Accounting Changes and Error Corrections - a replacement of APB Opinion No. 20 and FASB Statement No. 3”. This Statement replaces APB Opinion No. 20, “Accounting Changes,” and FASB Statement No. 3, “Reporting Accounting Changes in Interim Financial Statements,” and changes the requirements for the accounting for and reporting of a change in accounting principle.  This Statement applies to all voluntary changes in accounting principle.  It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions.  When a pronouncement includes specific transition provisions, those provisions should be followed.  This Statement shall be effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005.

Accounting for Conditional Asset Retirement Obligations

In March 2005, the Financial Accounting Standards Board issued FASB Interpretation No. 47 (FIN No. 47), “Accounting for Conditional Asset Retirement Obligations”.  This Interpretation clarifies that the term ‘conditional asset retirement obligation’ as used in FASB Statement No. 143 (SFAS 143), “Accounting for Asset Retirement Obligations”, refers to a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity.  The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and (or) method of settlement.  Thus, the timing and (or) method of settlement may be conditional on a future event.  Accordingly, an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated.  The fair value of a liability for the conditional asset retirement obligation should be recognized when incurred–generally upon acquisition, construction, or development and (or) through the normal operation of the asset.  Uncertainty about the timing and (or) method of settlement of a conditional asset retirement obligation should be factored into the measurement of the liability when sufficient information exists.  SFAS 143 acknowledges that in some cases, sufficient information may not be available to reasonably estimate the fair value of an asset retirement obligation.  This Interpretation also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation.  We adopted FIN No. 47 during the fourth quarter 2005, effective January 1, 2005.  (See Asset Retirement Obligations in Note 1 to Notes to Consolidated Financial Statements).

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2. Supplemental Financial Information

	At December 31,
$ in millions	2005			2004
Accounts receivable, net
Utility customers	$	71.1		$	62.7
Unbilled revenue	63.6			60.6
Partners in commonly-owned plants	37.7			29.5
Refundable franchise tax	14.3			7.7
Wholesale and subsidiary customers	6.6			10.0
Other	2.6			6.3
Provision for uncollectible accounts	(1.0		)	(1.1		)
Total accounts receivable, net	$	194.9		$	175.7
Inventories, at average cost:
Fuel and emission allowances	$	48.6		$	40.1
Plant materials and supplies	31.4			31.4
Other	0.2			0.6
Total inventories, at average cost	80.2			$	72.1
Other current assets:
Deposits and other advances	$	9.2		$	6.6
Current deferred income taxes	5.4			6.8
Prepayments	5.0			16.3
Other	0.6			4.6
Total other current assets	$	20.2		$	34.3
Other deferred assets:
Prepaid pension	$	—		$	38.2
Master Trust assets	32.0			34.8
Unamortized loss on reacquired debt	22.0			23.8
Unamortized debt expense	10.2			9.7
Investment in Capital Trust	6.8			10.0
Other	1.2			1.7
Total other deferred assets	$	72.2		$	118.2
Other current liabilities:
Customer security deposits and other advances	$	19.2		$	17.3
Payroll taxes payable	2.2			—
Other	9.7			3.4
Total other current liabilities	$	31.1		$	20.7
Other deferred credits:
Asset retirement obligations – regulated property	$	81.7		$	77.5
Trust obligations	74.5			68.2
Retirees health and life benefits	32.9			32.4
Deferred gain on sale of portfolio	27.1			—
Pension liability	23.5			—
SECA net revenue subject to refund	20.5			—
Asset retirement obligations-generation	13.2			5.1
Legal reserves	3.0			3.3
Environmental reserves	0.1			0.1
Other	9.8			8.7
Total other deferred credits	$	286.3		$	195.3

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3.  Regulatory Matters

We apply the provisions of SFAS 71 to our regulated operations.  This accounting standard defines regulatory assets as the deferral of costs expected to be recovered in future customer rates and regulatory liabilities as current cost recovery of expected future expenditures.

Regulatory liabilities are reflected on the Consolidated Balance Sheets under the caption entitled “Deferred Credits and Other – Other”.  Regulatory assets and liabilities on the Consolidated Balance Sheets include:

	At December 31,
$ in millions	2005		2004
Regulatory Assets:
Deferred recoverable income taxes	$	28.8	$	32.5
Electric Choice systems costs	19.8		19.8
Regional transmission organization costs	12.9		13.6
PJM administrative costs	5.6		—
PJM integration costs	1.9		—
Deferred storm costs	6.5		1.0
Power plant emission fees	3.8		3.6
Other costs	4.5		3.5
Total regulatory assets	$	83.8	$	74.0
Regulatory Liabilities:
Asset retirement obligations-regulated property	81.7		77.5
SECA net revenue subject to refund	20.5		—
Total regulatory liabilities	$	102.2	$	77.5

Regulatory Assets

We evaluate our regulatory assets each period and believe recovery of these assets is probable.  We have received or requested a return on certain regulatory assets for which we are currently recovering or seeking recovery through rates.

Deferred recoverable income taxes represent deferred income tax assets recognized from the normalization of flow-through items as the result of amounts previously provided to customers.  Since currently existing temporary differences between the financial statements and the related tax basis of assets will reverse in subsequent periods, deferred recoverable income taxes are amortized.

Electric Choice systems costs represent costs incurred to modify the customer billing system for unbundled rates and electric choice bills relative to other generation suppliers, supplier energy settlements, and information reports provided to the state administrator of the low-income electric program.  In February 2005, the PUCO approved a stipulation allowing DP&L to recover certain costs incurred for modifications to its billing system from all customers in its service territory.  The case was appealed to the Ohio Supreme Court, and is still pending.  DP&L filed a subsequent case to implement the PUCO’s order to begin charging customers for billing costs.  A hearing took place on January 23, 2006 in this case.  A PUCO order is still pending.

Regional transmission organization costs represent costs incurred to join a Regional Transmission Organization that controls the receipts and delivery of bulk power within the service area and are being recovered over a 10-year period that commenced in October 2004.

PJM administration costs contain the administrative fees billed by PJM to DP&L as a member of the PJM Interconnection, LLC Regional Transmission Organization (RTO).  Pursuant to a PUCO order issued on January 25, 2006, these deferred costs will be recovered over a 3-year period from retail ratepayers beginning February 2006.

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PJM integration costs include infrastructure costs and other related expenses incurred by PJM to integrate DP&L into the RTO.  Pursuant to a FERC order, the costs are being recovered over a 10-year period beginning May 2005 from wholesale customers within PJM.

Deferred storm costs (2004 and 2005) include costs incurred by DP&L to repair damage from the December 2004 and the January 2005 ice storms.  DP&L filed to recover these costs from retail ratepayers over a two year period.  A PUCO order is pending.

Power plant emission fees represent costs paid to the State of Ohio for environmental oversight that are or will be recovered over various periods under a PUCO rate rider from customers.

Other costs include consumer education advertising regarding electric deregulation and costs pertaining to the recent rate case and are or will be recovered over various periods.

Regulatory Liabilities

Asset retirement obligations reflect an estimate of amounts recovered in rates that are expected to be expended to remove existing regulated transmission and distribution property from service upon retirement.

SECA (Seams Elimination Charge Adjustment) net revenue subject to refund represents DP&L’s estimate of probable refunds for net revenue collected in 2005. SECA revenue and expenses represent FERC-ordered transitional payments for the use of transmission lines within PJM. These transitional payments are subject to refund, depending on the results of a FERC hearing in mid 2006. DP&L began receiving and paying these transitional payments in May of 2005. DP&L received $23 million net SECA revenue in 2005.

4.Income Taxes

	For the years ended December 31,
$ in millions	2005			2004			2003
Computation of Tax Expense
Federal income tax (a)	$	71.9		$	66.3		$	66.8
Increases (decreases) in tax resulting from-
State income taxes, net of federal effect (b)	1.2			1.2			(2.5		)
Depreciation	(1.3		)	(4.0		)	(2.3		)
Investment tax credit amortized	(2.9		)	(2.9		)	(2.9		)
Non-deductible compensation	0.2			—			13.4
Section 199 – domestic production deduction	(1.6		)	—			—
Accrual for open tax years (c)	11.2			5.3			4.6
Other, net	1.2			0.6			(2.3		)
Total tax expense (d)	$	79.9		$	66.5		$	74.8
Components of Tax Expense
Taxes currently payable (b)	$	85.0		$	44.3		$	79.7
Deferred taxes—
Regulatory assets	—			—			(17.3		)
Depreciation and amortization	(11.7		)	(3.3		)	(2.2		)
Insurance and claims costs	(0.2		)	(0.7		)	27.6
Shareholder litigation	—			23.2			(23.2		)
Other	9.7			5.9			13.1
Deferred investment tax credit, net	(2.9		)	(2.9		)	(2.9		)
Total tax expense (d)	$	79.9		$	66.5		$	74.8

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Components of Deferred Tax Assets and Liabilities

	At December 31,
$ in millions	2005			2004
Net Non-Current Assets (Liabilities)
Depreciation/property basis	$	(402.2	)	$	(415.2	)
Income taxes recoverable	(10.1		)	(11.4		)
Regulatory assets	(9.4		)	(6.5		)
Investment tax credit	16.3			17.3
Investment loss	9.6			13.9
Compensation and employee benefits	38.7			34.9
Insurance	1.8			2.1
Other (e)	28.3			(19.9		)
Net non-current (liabilities)	$	(327.0	)	$	(384.8	)
Net Current Asset
Other	$	5.4		$	6.8
Net Current Asset	$	5.4		$	6.8

(a)The statutory tax rate of 35% was applied to pre-tax income from continuing operations before preferred dividends.

(b)We have recorded ($2.1) million, $11.7 million and $1.8 million in 2005, 2004 and 2003, respectively, for state tax credits available related to the consumption of coal mined in Ohio.

(c)We have recorded $11.2 million, $5.3 million and $4.6 million in 2005, 2004 and 2003, respectively, of tax provision for tax deduction or income positions taken in prior tax returns that we believe were properly treated on such tax returns but for which it is possible that these positions may be contested.  The Internal Revenue Service has issued an examination report for tax years 1998 through 2003 that shows proposed changes to our federal income tax liability for each of  those years. (See Note 15 of Notes to Consolidated Financial Statements.)

(d)Excludes $(2.1) million in 2005 and $11.3 million in 2003 of income taxes reported as cumulative effect of accounting change, net of income taxes.  Also excludes $19.9 million in 2005, $59.1 million in 2004 and $8.7 million in 2003 of income taxes reported as discontinued operations.

(e)The Other non-current liabilities caption includes deferred tax assets related to state tax net operating loss carryforwards, net of  related valuation allowances of $6.8 million in 2005 and $5.3 million in 2004.  The majority of these net operating losses are Ohio franchise tax loss carryforwards that expire after the phase-out of the Ohio franchise tax is completed in 2008.  Remaining Ohio franchise tax loss carryforwards after 2008 can be used to offset the Ohio Commercial Activity Tax liability and do not expire until after 2029.

5.   Pension and Postretirement Benefits

DP&L sponsors a defined benefit plan for substantially all employees.  For collective bargaining employees, the defined benefits are based on a specific dollar amount per year of service.  For all other employees, the defined benefit plan is based primarily on compensation and years of service. We fund pension plan benefits as accrued in accordance with the minimum funding requirements of the Employee Retirement Income Security Act of 1974 (ERISA).  In addition, DP&L has a Supplemental Executive Retirement Plan (SERP) for certain active and retired key executives.  Benefits under this SERP have been frozen and no additional benefits can be earned.

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.

We use a December 31 measurement date for the majority of our plans.

The following tables set forth our pension and postretirement benefit plans obligations, assets and amounts recorded on the Consolidated Balance Sheets as of December 31.  The amounts presented in the following tables for pension include both the defined benefit pension plan and the Supplemental Executive Retirement Plan in the aggregate.

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Change in Projected Benefit Obligation	Pension						Postretirement
($ in millions)	2005			2004			2005			2004
Projected benefit obligation at January 1	$	280.5		$	264.5		$	32.0		$	33.5
Service cost	3.9			3.5			—			—
Interest cost	15.7			16.0			1.8			1.9
Plan amendments	9.3			—			—			—
Actuarial (gain) loss	8.2			15.0			0.4			(0.3		)
Benefits paid	(18.5		)	(18.5		)	(3.1		)	(3.1		)
Projected benefit obligation at December 31	$	299.1		$	280.5		$	31.1		$	32.0
Change in Plan Assets ($ in millions)
Fair value of plan assets at January 1	$	265.9		$	258.9		$	8.9		$	9.7
Actual return on plan assets	12.2			25.1			0.1			0.2
Contributions to plan assets	0.4			0.4			2.0			2.1
Benefits paid	(18.5		)	(18.5		)	(3.1		)	(3.1		)
Fair value of plan assets at December 31	$	260.0		$	265.9		$	7.9		$	8.9
Reconciliation to the Consolidated Balance Sheets ($ in millions)
Funded status of the plan	$	(39.1	)	$	(14.6	)	$	(23.2	)	$	(23.1	)
Unrecognized transition (asset) liability	—			—			0.4			0.5
Unrecognized prior service cost	17.1			10.2			—			—
Unrecognized net (gain) loss	78.4			64.9			(9.6		)	(11.2		)
Net amount recognized	$	56.4		$	60.5		$	(32.4	)	$	(33.8	)
Total Amounts Recognized in the Consolidated Balance Sheets ($ in millions)
Other deferred assets	$	—		$	56.6		$	—		$	—
Accumulated other comprehensive income	66.9			3.9			—			—
Other deferred credits	(10.5		)	—			(32.4		)	(33.8		)
Net amount recognized	$	56.4		$	60.5		$	(32.4	)	$	(33.8	)

The accumulated benefit obligation for DP&L’s defined benefit plans was $287.6 million and $269.4 million at December 31, 2005, and 2004, respectively.

The net periodic benefit cost (income) of the pension and postretirement benefit plans at December 31 were:

Net Periodic Benefit (Income) Cost	Pension									Postretirement
($ in millions)	2005			2004			2003			2005			2004			2003
Service cost	$	3.9		$	3.5		$	3.3		$	—		$	—		$	—
Interest cost	15.7			16.0			16.3			1.8			1.9			2.1
Expected return on assets (a)	(21.5		)	(21.7		)	(25.1		)	(0.5		)	(0.6		)	(0.7		)
Amortization of unrecognized:
Actuarial (gain) loss	3.8			2.0			0.1			(0.8		)	(1.1		)	(1.3		)
Prior service cost	2.3			2.7			2.8			—			—			—
Transition obligation	—			—			—			0.2			0.2			0.2
Net pension benefit cost (income) before adjustments	4.2			2.5			(2.6		)	0.7			0.4			0.3
Special termination benefit cost (b)	0.2			—			—			—			—			—
Curtailment cost (c)	0.1			—			—			—			—			—
Net pension benefit cost (income) after adjustments	$	4.5		$	2.5		$	(2.6	)	$	0.7		$	0.4		$	0.3

(a)The market-related value of assets is equal to the fair value of assets at implementation with subsequent asset gains and losses recognized in the market-related value systematically over a three-year period.

(b)In 2005, a special termination benefit cost was recognized as a result of 16 employees who participated in a voluntary early retirement program and retired at various dates during 2005.

(c)In 2005, a curtailment cost was recognized as a result of a freeze in benefits for the remaining active employee participating in the Supplemental Executive Retirement Plan.

DP&L’s pension and postretirement plan assets were comprised of the following asset categories at December 31:

	Pension				Postretirement
Asset Category	2005		2004		2005		2004
Common stocks	9	%	9	%	—		—
Mutual funds	87	%	84	%	—		—
Cash and cash equivalents	1	%	3	%	—		4	%
Fixed income government securities	—		—		100	%	96	%
Alternative investments	3	%	4		—		—
Total	100	%	100	%	100	%	100	%

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Plan assets are invested using a total return investment approach whereby a mix of equity securities, mutual funds, fixed income investments, alternative investments, and cash and cash equivalents are used to preserve asset values, diversify risk and achieve our target investment return benchmark.  Investment strategies and asset allocations are based on careful consideration of plan liabilities, the plan’s funded status and our financial condition.  Investment performance and asset allocation are measured and monitored on an ongoing basis.  At December 31, 2005, $23.4 million of our common stock was held as plan assets.

DP&L’s expected return on plan asset assumptions, used to determine benefit obligations, are based on historical long-term rates of return on investment, which uses the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run.  Current market factors, such as inflation and interest rates, as well as asset diversification and portfolio rebalancing, are evaluated when long-term capital market assumptions are determined.  Peer data and historical returns are reviewed to verify reasonability and appropriateness.

DP&L’s overall expected long-term rate of return on assets is approximately 8.50% for pension plan assets and approximately 6.75% for retiree welfare plan assets.  This expected return is based exclusively on historical returns, without adjustments.  There can be no assurance of DP&L’s ability to generate that rate of return in the future.

DP&L’s overall discount rate was evaluated in relation to the December 31, 2005 Hewitt Yield Curve.  The Hewitt Yield Curve represents a portfolio of top-quartile AA-rated bonds used to settle pension obligations and supported a weighted average discount rate of 5.75% at December 31, 2005.  Peer data and historical returns were also reviewed to verify the reasonability and appropriateness of DP&L’s discount rate used in the calculation of benefit obligations and expense.

The weighted average assumptions used to determine benefit obligations for the years ended December 31 were:

	Pension		Postretirement
Benefit Obligation Assumptions	2005	2004	2005	2004
Discount rate for obligations	5.75%	5.75%	5.75%	5.75%
Rate of compensation increases	4.00%	4.00%	—	—

The weighted-average assumptions used to determine net periodic benefit cost (income) for the years ended December 31 were:

Net Periodic Benefit (Income)	Pension			Postretirement
Cost Assumptions	2005	2004	2003	2005	2004	2003
Discount rate	5.75%	6.25%	6.75%	5.75%	6.25%	6.75%
Expected rate of return on plan assets	8.50%	8.50%	8.75%	6.75%	6.75%	6.75%
Rate of compensation increases	4.00%	4.00%	4.00%	—	—	—

The assumed health care cost trend rates at December 31 are as follows:

	Expense				Benefit Obligations
Health Care Cost Assumptions	2005		2004		2005		2004
Current health care cost trend rate	10.00	%	10.00	%	10.00	%	10.00	%
Ultimate health care cost trend rate	5.00	%	5.00	%	5.00	%	5.00	%
Ultimate health care cost trend rate – year	2010		2009		2011		2010

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The assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans.  A one-percentage point change in assumed health care cost trend rates would have the following effects on the net periodic postretirement benefit cost and the accumulated postretirement benefit obligation:

Effect of Change in Health
Care Cost Trend Rate ($ in millions)	Increase 1%	Decrease 1%
Service cost plus interest cost	$ 0.1	$ (0.1)
Benefit obligation	$ 1.7	$ (1.6)

The following benefit payments, which reflect future service, are expected to be paid as follows:

Estimated Future Benefit Payments
($ in millions)	Pension		Postretirement
2006	$	19.8	$	3.0
2007	$	20.0	$	3.1
2008	$	20.2	$	3.0
2009	$	20.5	$	3.0
2010	$	21.0	$	2.9
2011 – 2015	$	112.1	$	11.7

DP&L expects to contribute $0.4 million to its pension plan and $3.0 million to its other postretirement benefit plan in 2006.

6.  Common Shareholders’ Equity

We have 250,000,000 authorized common shares, of which 127,526,404 are outstanding at December 31, 2005.  We had 902,490 authorized but unissued shares reserved for its dividend reinvestment plan at December 31, 2005.  The plan provides that either original issue shares or shares purchased on the open market may be used to satisfy plan requirements.

On July 27, 2005, our Board authorized the repurchase up to $400 million of stock from time to time in the open market, through private transactions.  During December 2005 a total of 406,000 shares at a cost of $10.6 million were repurchased and settled as 203,000 shares on January 4, 2006 and 203,000 shares on January 5, 2006.  These shares are currently held as treasury shares.  There were no other repurchases during 2005 and 2004.

In September 2001, our Board of Directors renewed our Shareholder Rights Plan, attaching one right to each common share outstanding at the close of business on December 13, 2001.  The rights separate from the common shares and become exercisable at the exercise price of $130 per right in the event of certain attempted business combinations.  The renewed plan expires on December 31, 2011.

In February 2000, we 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).  As part of this recapitalization transaction, 31.6 million warrants were issued.  These warrants were sold for an aggregate purchase price of $50 million. The warrants are exercisable, in whole or in part, for common shares at any time during the twelve-year period commencing on March 13, 2000.  Each warrant is exercisable for one common share, subject to anti-dilution adjustments.  The exercise price of the warrants is $21.00 per common share, subject to anti-dilution adjustments.

In addition, in the event of a declaration, issuance or consummation of any dividend, spin-off or other distribution or similar transaction by us of the capital stock of any of our subsidiaries, additional warrants of such subsidiary will be issued to the warrant holder so that after the transaction, the

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warrant holder will have the same interest in the fully diluted number of common shares of such subsidiary the warrant holder had in us immediately prior to such transaction.

Pursuant to the warrant agreement, we have reserved authorized common shares sufficient to provide for the exercise in full of all outstanding warrants.

During December 2004 and January 2005, Dayton Ventures, LLC requested that we transfer all of Dayton Ventures, LLC’s warrants to Lehman Brothers, Inc. (Lehman) in four transactions.  Lehman has subsequently transferred a large number of these warrants to unaffiliated third parties.  During one of these transactions in 2005, Dayton Ventures, LLC agreed to sell back to us at par all of the outstanding 6,600,000 voting preferred shares.  As a result of the reduction of Dayton Ventures, Inc.’s warrant ownership below 12,640,000, Dayton Ventures, LLC was no longer eligible to receive an annual $1 million management, consulting and financial services fee and it no longer had the right to designate one person to serve as a director of the DPL and DP&L and no longer had the right to designate one person to serve as a non-voting observer of DPL and DP&L.  Currently, Dayton Ventures, LLC does not have any ownership interest in us or DP&L.

We have 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 3.8 million unallocated shares held by the trust and for 2.7 million shares related to other employee plans, of which a total of 6.5 million shares reduce the number of common shares used in the calculation of earnings per share.

Dividends received by the ESOP for unallocated shares were used to repay the principal and interest on an ESOP loan to us.  As debt service payments were made on the loan, shares are released on a pro-rata basis.  Dividends on the allocated shares are charged to retained earnings.

ESOP cumulative shares allocated to employees and outstanding for the calculation of earnings per share were 3.2 million in 2005, 3.0 million in 2004 and 2.8 million in 2003.  Compensation expense associated with the ESOP, which is based on the fair value of the shares allocated, amounted to $3.1 million in 2005, $2.5 million in 2004 and $2.8 million in 2003.

7.Preferred Stock

DPL:Series B, no par value, 8,000,000 shares authorized; no shares outstanding as of December 31, 2005 and 6,600,000 shares outstanding as of December 31, 2004.  As part of our 2000 recapitalization, 6.8 million shares of voting preferred securities, redeemable par value of $0.01 per share, were issued at an aggregate purchase price of $68,000.  During 2001, we redeemed 200,000 shares.  These preferred securities carried voting rights for up to 4.9% of our total voting rights and the nomination of one Board seat and one non-voting observer.  See Note 15 of Notes to Consolidated Financial Statements.  On January 12, 2005, we repurchased all of the outstanding voting preferred shares at par for an aggregate purchase price of $66,000.

DP&L:$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.

Preferred Stock Rate		Current Redemption Price		Current Shares Outstanding at December 31, 2005	Par Value At December 31, 2005 ($ in millions) (a)		Par Value At December 31, 2004 ($ in millions)
DPL Series B	0.00%	$	0.01	—	$	—	$	0.1
DP&L Series A	3.75%	$	102.50	93,280	9.3		9.3
DP&L Series B	3.75%	$	103.00	69,398	7.0		7.0
DP&L Series C	3.90%	$	101.00	65,830	6.6		6.6
Total					$	22.9	$	23.0

(a)DPL purchased all of its outstanding Series B shares during 2005.

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In February 2000, we 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 KKR.  As part of our 2000 recapitalization transaction, trust preferred securities sold to KKR had an aggregate face amount of $550 million, and were issued at an initial discounted aggregate price of $500 million, with a maturity of 30 years (subject to acceleration six months after the exercise of the warrants), and distributions at a rate of 8.5% of the aggregate face amount per year.  We recognized the entire trust preferred securities original issue discount of $50 million upon issuance.

In August 2001, we issued $300 million of trust preferred securities to institutional investors at 8.125% and $400 million of senior unsecured notes at 6.875%.  The August 2001 trust preferred securities have a term of 30 years and the senior unsecured notes have a term of 10 years.  In the fourth quarter of 2003, we adopted FIN46R and deconsolidated the DPL Capital Trust II, which resulted in transferring the August 2001 trust preferred securities to the DPL Capital Trust II and establishing a note to Capital Trust II for $300 million at 8.125%.

The voting preferred shares (DPL Series B) were not redeemable, except at the option of the holder.  We agreed to redeem such number so that at no time would the holder and its affiliates maintain an ownership interest of greater than 4.9% of the voting rights of DPL.  Our Series B preferred shares may only be transferred or otherwise disposed of together with a corresponding number of warrants, unless the holder and its affiliates hold a greater number of warrants than our Series B preferred shares, in which case the holder may transfer any such excess warrants without transferring our Series B preferred shares.  If the holder of a warrant wishes to exercise warrants that are not excess warrants, we will redeem simultaneously with the exercise of such warrants an equal number of our Series B preferred shares held by such holder. We repurchased 6,600,000 DPL Series B preferred shares on January 12, 2005 at par for an aggregate purchase price of $66,000.  There are currently no Series B preferred shares outstanding.

The DP&L preferred stock may be redeemed at our option at the per-share prices indicated, plus cumulative accrued dividends.

As long as any DP&L 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 $1.2 million.  As of year-end, all earnings reinvested in the business of DP&L were available for Common Stock dividends.  DPL records dividends on preferred stock of DP&L as part of interest expense. We expect all 2006 earnings reinvested in the business of DP&L to be available for DP&L common stock dividends, payable to DPL.

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8.Long-term Debt and Notes Payable

	At December 31,
$ in millions	2005			2004
First mortgage bonds maturing:
2013 - 5.125%	$	470.0		$	470.0
Pollution control series maturing through 2027 - 6.43% (a)	—			104.4
Pollution control series maturing through 2034 – 4.78% (a)	214.4			—
	684.4			574.4
Note to Capital Trust II 8.125% due 2031	195.0			300.0
Guarantee of Air Quality Development Obligations 6.10% Series due 2030	—			110.0
Senior Notes 6.875% Series due 2011	297.4			400.0
Senior Notes 6.25% Series due 2008	100.0			100.0
Senior Notes 8.25% Series due 2007	225.0			425.0
Senior Notes 8.00% Series due 2009	175.0			175.0
Notes maturing through 2007 - 7.83%	—			33.0
Obligations for capital leases	3.0			3.8
Unamortized debt discount and premium (net)	(2.7		)	(3.9		)
Total	$	1,677.1		$	2,117.3

(a)Weighted average interest rates for 2005 and 2004.

The amounts of maturities and mandatory redemptions for first mortgage bonds, notes and the capital leases are $0.9 million in 2006, $225.9 million in 2007, $100.7 million in 2008, $175.7 million in 2009 and $0.6 million in 2010.  Substantially all property of DP&L is subject to the mortgage lien securing the first mortgage bonds.

On September 29, 2003, DP&L issued $470 million principal amount of First Mortgage Bonds, 5.125% Series due 2013.  The net proceeds from the sale of the bonds, after expenses, were used on October 30, 2003, to (i) redeem $226 million principal amount of DP&L’s First Mortgage Bonds, 8.15% Series due 2026, at a redemption price of 104.075% of the principal amount plus accrued interest to the redemption date and (ii) redeem $220 million principal amount of DP&L’s First Mortgage Bonds, 7.875% Series due 2024, at a redemption price of 103.765% of the principal amount plus accrued interest to the redemption date.  The 5.125% Series due 2013 were not registered under the Securities Act of 1933, but were offered and sold through a private placement in compliance with Rule 144A under the Securities Act of 1933.  The bonds include step-up interest provisions requiring DP&L to pay additional interest if (i) DP&L’s registration statement was not declared effective by the SEC within 180 days from issuance of new bonds or (ii) the exchange offer was not completed within 210 days from the issuance of the new bonds.   The registration statement was not declared effective and the exchange offer was not timely completed and, as a result, DP&L was required to pay additional interest of 0.50% until a registration statement was declared effective, at which point the additional interest was reduced by 0.25%.  The remaining additional interest of 0.25% continued until the exchange offer was completed.  The exchange offer registration for these securities was filed and declared effective on May 20, 2005 and the exchange was completed on June 23, 2005.

In May 2005, DP&L obtained a $100 million unsecured revolving credit agreement that extended and replaced its previous revolving credit agreement, of $100 million.  The new agreement, renewable annually, expires on May 30, 2010 and provides credit support of DP&L’s business requirements during this period.  This may be increased up to $150 million.  The facility contains one financial covenant: DP&L total debt to total capitalization ratio is not to exceed 0.65 to 1.00.  This covenant is currently met.  DP&L had no outstanding borrowings under this credit facility at December 31, 2005.  Fees associated with this credit facility are approximately $0.2 million per year.  Changes in credit ratings, however, may affect the applicable interest rate for DP&L’s revolving credit agreement.

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In February 2004, DP&L entered into a $20 million Master Letter of Credit Agreement with a financial lending institution.  On February 24, 2005, DP&L entered into an amendment to extend the term of this Agreement for one year and reduce the maximum dollar volume of letters of credit to $10 million.  On February 17, 2006, the company entered into a second amendment to extend the terms of this agreement another year.  This agreement supports performance assurance needs in the ordinary course of business.  DP&L has certain contractual agreements for the sale and purchase of power, fuel and related energy services that contain credit rating related clauses allowing the counterparties to seek additional surety under certain conditions.  As of December 31, 2005, DP&L had two outstanding letters of credit for a total of $2.2 million.

In March 2004, we completed a $175 million private placement of unsecured 8% series Senior Notes due March 2009.  The Senior Notes will not be redeemable prior to maturity except for a make-whole payment at the adjusted treasury rate plus 0.25%.  The proceeds from these notes were used to provide partial funding for the retirement of $500 million of the 6.82% Senior Notes due April 2004.  The 6.82% Senior Notes were retired on April 6, 2004.  We are in the process of registering these senior notes with the SEC.  We expect this registration to be completed in the second quarter of 2006.

The 8% series Senior Notes were issued pursuant to our indenture dated as of March 1, 2000, and pursuant to authority granted in our Board resolutions dated March 25, 2004.  The notes impose a limitation on the incurrence of liens on the capital stock of any of our significant subsidiaries and require us and our subsidiaries to meet a consolidated coverage ratio of 2 to 1 prior to incurring additional indebtedness.  The limitation on the incurrence of additional indebtedness does not apply to (i) indebtedness incurred to refinance existing indebtedness, (ii) subordinated indebtedness and (iii) up to $150 million of additional indebtedness.  In addition to the events of default specified in the indenture, an event of default under the notes includes a payment default or acceleration of indebtedness under any other indebtedness of ours or any of our subsidiaries which aggregates $25 million or more.  The purchasers were granted registration rights in connection with the private placement under an Exchange and Registration Rights Agreement.  Pursuant to this agreement, we were obligated to file an exchange offer registration statement by July 22, 2004, have the registration statement declared effective by September 20, 2004 and consummate the exchange offer by October 20, 2004.  We failed to have a registration statement declared effective and to complete the exchange offer according to this timeline.  As a result, we are accruing additional interest at a rate of 0.5% per annum per violation, up to an additional interest rate not to exceed in the aggregate 1.0% per annum.  As each violation is cured, the additional interest rate may decrease by 0.5%. The exchange offer registration for these securities is expected to be filed during the first quarter of 2006.

The terms of the private placement also required us to file our 2003 Form 10-K by July 30, 2004.  Because we failed to meet this deadline, we were required to pay additional liquidated damages in the form of additional interest at a rate of 1.0% until November 5, 2004, the date the 2003 Form 10-K was filed with the SEC.

On August 11, 2005, we repurchased approximately $207.6 million principal amount of its notes listed below pursuant to offers to purchase that commenced on July 14, 2005 and expired on August 10, 2005.

$ in millions Title of Security; CUSIP Number	Principal Amount Outstanding	Aggregate Principal Amount of Tendered Notes Accepted for Purchase
8.125% Capital Securities due 2031; 23330AAC4	$ 300.0	$ 105.0
6.875% Senior Notes due 2011; 233293AH2	$ 400.0	$ 102.6

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The total consideration paid for these notes totaled $252.9 million, which includes accrued and unpaid interest.

In addition, on August 29, 2005, we redeemed $200 million of the 8.25% Senior Notes due 2007, leaving $225 million of the 8.25% Senior Notes outstanding.

We used a portion of the proceeds from the sale of the private equity funds in our financial asset portfolio to fund these repurchases and redemptions.

On May 15, 2005 we redeemed all of the outstanding 7.83% Senior Notes due 2007 in the amount of $39 million.  A premium of 5.38% was paid on the 7.83% Senior Notes that were redeemed.

On August 17, 2005, DP&L completed the refinancing of $214.4 million of pollution control bonds.  The specific issues refinanced consisted of:

•$41.3 million of Ohio Water Development Authority (OWDA) bonds;

•$137.8 million of Ohio Air Quality Development Authority (OAQDA) bonds; and

•$35.3 million of Boone County, Kentucky (Boone County) bonds.

On August 17, 2005, DP&L entered into a separate loan agreement with the OWDA, OAQDA and Boone County for new pollution control bonds with a weighted average interest rate of 4.78%.  The proceeds of the bonds were used to repay the previously existing pollution control bonds with a weighted average interest rate of 6.26% on September 16, 2005.  To secure the repayment of its obligations to the OWDA, OAQDA and Boone County, DP&L entered into a 43^rd Supplemental Indenture to its First and Refunding Mortgage for a like amount ($214.4 million) of First Mortgage Bonds with The Bank of New York serving as Trustee.

In 2005, DPL recorded $61.2 million of charges resulting from premiums paid for the early redemption of debt, including write-offs of unamortized debt expense.

There are no inter-company debt collateralizations or debt guarantees between us and our subsidiaries.  None of the debt obligations of DPL or DP&L are guaranteed or secured by affiliates and no cross-collateralization exists between any subsidiaries.

9.Stock-Based Compensation

In 2000, our Board of Directors adopted and our shareholders approved The DPL Inc. Stock Option Plan.  The plan provides that “no single Participant shall receive Options with respect to more than 2,500,000 shares.”  The exercise price of options granted approximates the market price of the stock on the date of grant.  Options granted in 2000 and 2001 represent three-year awards, which vested over five years from the grant date, and expire ten years from the grant date.  Options granted in 2002 vested over three years and expire ten years from the grant date.  Options granted in 2003 vest over five years and expire ten years from the grant date.  In 2004, 200,000 options were granted that vest over nineteen months and expire approximately 6.5 years from the grant date; 20,000 options were

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granted that vest in five months and expire ten years from the grant date and 30,000 options were granted that vest over three years and expire ten years from the grant date.  In 2005, 350,000 options were granted that vest in June 2006 and expire three years from the grant date.  At December 31, 2005, there were 1,488,500 options available for grant.

Summarized stock option activity was as follows:

	2005			2004			2003
Options:
Outstanding at beginning of year	6,165,500			6,895,500			7,143,500
Granted	350,000			250,000			100,000
Exercised	(1,025,000		)	—			—
Forfeited	(4,000		)	(980,000		)	(348,000		)
Outstanding at year-end (a)	5,486,500			6,165,500			6,895,500
Exercisable at year-end	4,100,000			—			—
Weighted average option prices per share:
Outstanding at beginning of year	$	21.39		$	21.19		$	21.47
Granted	$	26.82		$	21.86		$	15.88
Exercised	$	21.18		—			—
Forfeited	$	29.63		$	20.07		$	24.99
Outstanding at year-end	$	21.86		$	21.39		$	21.19
Exercisable at year-end	$	20.98		—			—

(a)We originally granted 300,000 options during 2002 to Mr. Peter H. Forster, formerly DPL’s Chairman, that caused the number of options to be held by Mr. Forster to exceed the maximum number allowed to be held by one participant under the option plan approved by the shareholders.  Therefore, 200,000 options representing the excess over the allowable maximum have been revoked.  The number of options forfeited has been increased by 980,000 in 2004 and 64,668 in 2003 to reflect additional forfeitures.  The 980,000 options forfeited in 2004 and 3,620,000 options outstanding are in dispute due to our ongoing litigation with Mr. Forster, Mr. Koziar and Ms. Muhlenkamp.

The weighted-average fair value of options granted was $3.80, $4.23 and $2.68 per share in 2005, 2004 and 2003, respectively.  The fair values of the options were estimated as of the dates of grant using a Black-Scholes option pricing model utilizing the following assumptions:

	2005		2004		2003
Volatility	25.6	%	28.5	%	24.0	%
Expected life (years)	2.2		6.4		8.0
Dividend yield rate	3.7	%	4.8	%	4.5	%
Risk-free interest rate	3.8	%	3.9	%	3.7	%

The following table reflects information about stock options outstanding at December 31, 2005:

		Options Outstanding			Options Exercisable
Range of Exercise Prices	Outstanding	Weighted- Average Contractual Life	Weighted- Average Exercise Price		Exercisable	Weighted- Average Exercise Price
$14.95-$21.00	4,700,000	4.5 years	$	20.44	4,060,000	$	20.94
$21.01-$29.63	786,500	3.7 years	$	28.01	40,000	$	24.48

We account for stock options granted on or after January 1, 2003, under the fair-value method set forth in FASB Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (SFAS 123).  This standard requires the recognition of compensation expense for stock-based awards to reflect the fair value of the award on the date of grant.  We follow Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (Opinion 25) and related Accounting Principles Board and FASB interpretations in accounting for stock-based

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compensation granted before January 1, 2003.  If we had used the fair-value method of accounting for stock-based compensation granted prior to 2003, net income and earnings per share would have been reported as follows:

	Year Ended December 31,
$ in millions	2005			2004			2003
Net income, as reported	$	174.4		$	217.3		$	148.5
Adjustments:
Total stock-based compensation expense determined under APB 25, net of related tax effects	(0.5		)	—			—
Total stock-based compensation expense determined under FAS 123, net of related tax effects	2.0			(3.0		)	(2.7		)
Pro-forma net income	$	175.9		$	214.3		$	145.8
Earnings per share:
Basic – as reported	$	1.44		$	1.81		$	1.24
Basic – pro-forma	$	1.45		$	1.78		$	1.22
Diluted – as reported	$	1.35		$	1.78		$	1.22
Diluted – pro-forma	$	1.36		$	1.75		$	1.20

10.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, 2005, DP&L had $119 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 Sheets.

DP&L’s undivided ownership interest in such facilities at December 31, 2005, is as follows:

			DP&L
	DP&L Share		Investment
		Production	Gross Plant
	Ownership	Capacity	In Service
	(%)	(MW)	($ in millions)
Production Units:
Beckjord Unit 6	50.0	207	$	62
Conesville Unit 4	16.5	129	33
East Bend Station	31.0	186	195
Killen Station	67.0	412	421
Miami Fort Units 7&8	36.0	360	194
Stuart Station	35.0	832	365
Zimmer Station	28.1	365	1,041
Transmission (at varying percentages)			88

11.Discontinued Operations

	For the years ended December 31,
$ in millions	2005			2004			2003
Investment income	$	41.3		$	178.5		$	43.8
Investment expenses	(9.5		)	(23.6		)	(18.5		)
Income from discontinued operations	31.8			154.9			25.3
Gain realized from sale	53.1			—			—
Broker fees and other expenses	(6.5		)	—			—
Loss recorded	(5.6		)	—			—
Net gain on sale	41.0			—			—
Earnings before income taxes	72.8			154.9			25.3
Income tax expense	(19.9		)	(59.1		)	(8.7		)
Earnings from discontinued operations, net	$	52.9		$	95.8		$	16.6

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On February 13, 2005, our subsidiaries, MVE and MVIC, entered into an agreement to sell their respective interests in forty-six private equity funds to AlpInvest/Lexington 2005, LLC, a joint venture of AlpInvest Partners and Lexington Partners, Inc.  Sales proceeds and any related gains or losses were recognized as the sale of each fund closed.  Among other closing conditions, each fund required the transaction to be approved by the respective general partner.  During 2005, MVE and MVIC completed the sale of their interests in forty-three and a portion of one private equity funds resulting in a $46.6 million pre-tax gain ($53.1 million less $6.5 million professional fees) from discontinued operations and providing approximately $796 million in net proceeds, including approximately $52 million in net distributions from funds while held for sale.  As part of this pre-tax gain, we realized $30 million that was previously recorded as an unrealized gain in other comprehensive income.

During this same period, MVE entered into alternative closing arrangements with AlpInvest/Lexington 2005, LLC for funds where legal title to said funds could not be transferred until a later time.  Pursuant to these arrangements, MVE transferred the economic aspects of the remaining private equity funds, consisting of two funds and a portion of one fund, to AlpInvest/Lexington 2005, LLC without a change in ownership of the interests.  The terms of the alternative arrangements do not meet the criteria for recording a sale.  We are obligated to remit to AlpInvest/Lexington 2005, LLC any distributions MVE receives from these funds, and AlpInvest/Lexington 2005, LLC is obligated to provide funds to us to pay any contribution notice, capital call or other payment notice or bill for which MVE receives notice with respect to such funds.  The alternative arrangements resulted in a deferred gain of $27.1 million until such terms of a sale can be completed (contingent upon receipt of general partner approvals of the transfer) and provided approximately $72.3 million in net proceeds on these funds.  We recorded an impairment loss of $5.6 million to write down assets transferred pursuant to the alternative arrangements to estimated fair value.  Ownership of these funds will transfer after the general partners of each of the separate funds consent to the transfer.  It is anticipated that this will conclude no later than the first quarter of 2007.

Income from discontinued operations (pre-tax) for the year ended December 31, 2005 of $31.8 million is comprised of $41.3 million of investment income less $9.5 million of associated management fees and other expenses.  Income from discontinued operations (pre-tax) for the year ended December 31, 2004 of $154.9 million is comprised of $178.5 million of investment income less $23.6 million of associated management fees and other expenses.  Income from discontinued operations (pre-tax) for the year ended December 31, 2003 of $25.3 million is comprised of $43.8 million of investment income less $18.5 million of associated management fees and other expenses.

For the year ended December 31, 2005, we recognized a $46.6 million pre-tax gain ($53.1 million less $6.5 million of professional fees), recorded a $5.6 million impairment loss, deferred gains of $27.1 million on transferred funds from discontinued operations, and provided approximately $868 million in net proceeds, including approximately $52 million in net distributions from funds held for sale.  We will continue to incur minor amounts of fees in the near term.

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In 2005, we have separately disclosed the earnings from discontinued operations, net of income taxes, which in prior periods were reported with elements of continued operations.  Also in 2005 we have separately disclosed the investing portions of the cash flows attributable to its discontinued operations (there was no impact on the operating or investing portions of the cash flows), which in prior periods were reported on a combined basis as a single amount.

Other assets and liabilities of the discontinued operation were as follows:

	2005		2004
Assets	$	16.0	$	23.8
Liabilities	$	42.4	$	8.3

Other assets in 2004 consist of prepaid management fees.  Other liabilities consist primarily of legal and professional fees and a reserve for estimated obligations under certain consulting and employment agreements that are currently being challenged as described in Legal Proceedings.

12. Financial Instruments

The fair value of our financial instruments is based on current public market prices, discounted cash flows using current rates for similar issues with similar terms and remaining maturities or independent party valuations, which are believed to approximate market.  The basis on which the cost of a security sold or the amount reclassified out of accumulated other comprehensive income was determined by specific identification.  The table below presents the fair value, unrealized gains and losses, and cost of these instruments at December 31, 2005 and 2004.

	At December 31,
	2005											2004
			Gross Unrealized											Gross Unrealized
			Gains		Losses									Gains		Losses
$ in millions	Fair Value				less than 12 months			more than 12 months		Cost		Fair Value				less than 12 months			more than 12 months			Cost
Assets
Public Securities
Available-for-sale Securities	$	24.8	$	3.5	$	(3.1	)	$	—	$	24.4	$	107.0	$	18.4	$	—		$	(2.8	)	$	91.4
Other	—		—		—			—		—		0.8		0.8		—			—			—
Held-to-maturity Debt securities (a)	7.9		—		(0.3		)	—		8.2		14.7		—		(0.1		)	—			14.8
Private Securities
Cost method	—		—		—			—		—		522.3		27.8		—			—			494.5
Equity method	—		—		—			—		—		304.0		19.5		—			(0.9		)	285.4
Total assets	$	32.7	$	3.5	$	(3.4	)	$	—	$	32.6	$	948.8	$	66.5	$	(0.1	)	$	(3.7	)	$	886.1
Liabilities
Long-term debt (b)	$	1,717.5								$	1,678.0	$	2,266.7									$	2,130.8
Capitalization
Unallocated shares In ESOP	$	100.1								$	49.1	$	101.9									$	51.7

(a)Maturities range from 2006 to 2035.

(b)Includes current maturities.

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In the normal course of business, we enter into various financial instruments, including derivative financial instruments.  These instruments consist of forward contracts and options that are used to reduce our exposure to changes in energy and commodity prices.  These financial instruments are designated at inception as highly effective cash-flow hedges and are measured for effectiveness both at inception and on an ongoing basis, with gains or losses deferred in Accumulated Other Comprehensive Income until the underlying hedged transaction is realized, canceled or otherwise terminated.  The forward contracts and options generally mature within twelve months.

13.Earnings per Share

Basic earnings per share (EPS) 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, except in periods where the inclusion of such common equivalent shares is anti-dilutive.  Excluded from outstanding shares for this weighted average computation are shares held by the Master Trust Plan for deferred compensation and by the ESOP.

For the years 2005, 2004, and 2003, respectively, approximately 0.5 million, 28.0 million, and 37.8 million warrants and stock options were excluded from the computation of diluted earnings per share because they were anti-dilutive.  These warrants and stock options could be dilutive in the future.

The following illustrates the reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for income after discontinued operations and cumulative effect of accounting change:

$ in millions except per share amounts	2005					2004					2003
	(a) Income		Shares	Per Share		Income		Shares	Per Share		(a) Income		Shares	Per Share
Basic EPS	$	174.4	121.0	$	1.44	$	217.3	120.1	$	1.81	$	148.5	119.8	$	1.24
Effect of Dilutive Securities:
Stock Incentive Units			1.2					1.2					1.8
Warrants			6.1					0.6					—
Stock options			0.8					0.2					0.1
Diluted EPS	$	174.4	129.1	$	1.35	$	217.3	122.1	$	1.78	$	148.5	121.7	$	1.22

(a) Income after discontinued operations and cumulative effect of accounting change.

14.Commitments and Contingencies

Contingencies

In the normal course of business, we are subject to various lawsuits, actions, proceedings, claims and other matters asserted under laws and regulations.  We believe the amounts provided in our consolidated financial statements, as prescribed by GAAP, are adequate in light of the probable and estimable contingencies.  (See Note 1 of Notes to Consolidated Financial Statements.)  However, there can be no assurances that the actual amounts required to satisfy alleged liabilities from various legal proceedings, claims, tax examinations and other matters discussed below, and to comply with applicable laws and regulations, will not exceed the amounts reflected in our Consolidated Financial Statements.  As such, costs, if any, that may be incurred in excess of those amounts provided as of December 31, 2005, cannot be reasonably determined.

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Environmental Matters

We and our subsidiaries’ facilities and operations are subject to a wide range of environmental regulations and law.  In the normal course of business, DP&L has investigatory and remedial activities underway at these facilities to comply, or to determine compliance, with such regulations.  DP&L has been identified, either by a government agency or by a private party seeking contribution to site clean-up costs, as a potentially responsible party (PRP) at two sites pursuant to state and federal laws.  DP&L records liabilities for probable estimated loss in accordance with Statement of Financial Accounting Standards No. 5 (SFAS 5), “Accounting for Contingencies.”  To the extent a probable loss can only be estimated by reference to a range of equally probable outcomes, and no amount within the range appears to be a better estimate than any other amount, DP&L accrues for the low end of the range.  Because of uncertainties related to these matters accruals are based on the best information available at the time.  DP&L evaluates the potential liability related to probable losses quarterly and may revise its estimates.  Such revisions in the estimates of the potential liabilities could have a material effect on the Company’s results of operations and financial position.

Legal Matters

On August 24, 2004, we, and our subsidiaries DP&L and MVE, filed a Complaint against Mr. Forster, Ms. Muhlenkamp and Mr. Koziar (the Defendants) 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 deferred compensation plans and to the employment and consulting agreements with the Defendants, and the propriety of the distributions from the plans to the Defendants, and alleging that the Defendants breached their fiduciary duties and breached their consulting and employment contracts. We, DP&L and MVE seek, among other things, damages in excess of $25,000, disgorgement of all amounts improperly withdrawn by the Defendants from the plans and a court order declaring that we, DP&L and MVE have no further obligations under the consulting and employment contracts due to those breaches.

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The Defendants filed motions to dismiss the Complaint, which the Court subsequently denied. On June 15, 2005, Defendants filed their answers denying liability and filed counterclaims against us, DP&L, MVE, various compensation plans (the Plans), and against the then-current members of our Board of Directors and two of our former Board members. These counterclaims allege generally that DPL, DP&L, MVE, the Plans and the individual defendants breached the terms of the employment and consulting contracts of the Defendants, and the terms of the Plans. They further allege theories of breach of fiduciary duty, breach of contract, promissory estoppel, tortious interference, conversion, replevin and violations of ERISA under which they seek distribution of deferred compensation balances, conversion of stock incentive units, exercise of options and payment of amounts allegedly owed under the contracts and the Plans. Defendants’ counterclaims also demand payment of attorneys’ fees. Motions to dismiss certain of the counterclaims were denied on February 23, 2006.

On March 15, 2005, Mr. Forster and Ms. Muhlenkamp filed a lawsuit in New York state court against the purchasers of the private equity investments in the financial asset portfolio and against outside counsel to us and DP&L concerning purported entitlements in connection with the purchase of those investments. We, DP&L and MVE are not defendants in that case; however, the three of us are parties to an indemnification agreement with respect to the purchaser defendants.  We, DP&L and MVE filed a Motion for Preliminary Injunction in the Ohio case, requesting that the court issue a preliminary injunction against Mr. Forster and Ms. Muhlenkamp regarding the New York lawsuit.  On August 18, 2005, the Ohio court issued a preliminary injunction against Mr. Forster and Ms. Muhlenkamp that precludes them from pursuing certain key issues raised by Mr. Forster and Ms. Muhlenkamp in their New York lawsuit that are identical to the issues raised in the pending Ohio lawsuit in the New York court or any other forum other than the Ohio litigation. In addition, the New York court has stayed the New York litigation pending the outcome of the Ohio litigation. Mr. Forster and Ms. Muhlenkamp have appealed the preliminary injunction and the appeal is pending at the Ohio Supreme Court.

The parties continue to proceed with the discovery phase of the litigation, and a number of motions have been filed and briefed with respect to document discovery and depositions. The trial court granted some and overruled some of these pending motions on February 23, 2006.

We continue to evaluate all of the matters relevant to this litigation and are considering other claims against Defendants, Forster, Muhlenkamp and Koziar that include, but are not limited to, breach of fiduciary duty or other claims relating to personal and DPL investments, the calculation of benefits under the Supplemental Executive Retirement Program (SERP) and financial reporting with respect to such benefits, and with respect to Mr. Koziar, the fulfillment of duties owed to us as our legal counsel. Cumulatively through December 31, 2005, we have accrued for accounting purposes, obligations of approximately $52 million to reflect claims regarding deferred compensation, estimated MVE incentives and/or legal fees that Defendants assert are payable per contracts. We dispute Defendants’ entitlement to any of those sums and, as noted above, we are pursuing litigation against them contesting all such claims.

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On or about June 24, 2004, the SEC commenced a formal investigation into the issues raised by the Memorandum.  We are 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 issues raised by the Memorandum.  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 was required to file this plan by March 2, 2005.  On February 4, 2005, DP&L filed its protection plan with the PUCO.  On June 29, 2005, the PUCO closed its investigation, citing significant positive actions we had taken including changes in the Board of Directors as well as the executive management of DP&L, and that no apparent diminution of service quality had occurred because of the events that initiated the investigation.

On May 20, 2004, the staff of the SEC notified us that it was conducting an inquiry covering our exempt status under the Public Utility Holding Company Act of 1935 (the ‘35 Act).  The staff of the SEC requested we provide certain documents and information on a voluntary basis.  On October 8, 2004, we 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.  On November 5, 2004, we filed a good faith application seeking an order of exemption from the SEC.  In light of the repeal of the ‘35 Act, effective February 8, 2006, and based upon the information previously provided to the staff of the SEC, this inquiry is moot.

On May 28, 2004, the U.S. Attorney’s Office for the Southern District of Ohio, assisted by the Federal Bureau of Investigation, notified us that it has initiated an inquiry involving the subject matters covered by our internal investigation.  We are cooperating with this investigation.

On June 24, 2004, the Internal Revenue Service (IRS) began an audit of tax years 1998 through 2003 and issued a series of data requests to us including issues raised in the Memorandum.  The staff of the IRS has requested that we provide certain documents, including but not limited to, matters concerning executive/director deferred compensation plans, management stock incentive plans and MVE financial statements.  On September 1, 2005, the IRS issued an audit report for tax years 1998 through 2003 that shows proposed changes to our federal income tax liability for each of those years.  The proposed changes result in a total tax deficiency, penalties and interest of approximately $23.9 million as of December 31, 2005.  On November 4, 2005, we filed a written protest to one of the proposed changes.  We believe we are adequately reserved for any tax deficiency, penalties and interest resulting from the proposed changes and as a result, the proposed changes did not adversely affect our results from operations.

We are also under audit review by various state agencies for tax years 2002 through 2004.  We have also filed an appeal to the Ohio Board of Tax Appeals for tax years 1998 through 2001.  Depending upon the outcome of these audits and the appeal, we may be required to increase our tax provision if actual amounts ultimately determined exceed recorded reserves.  We believe we have adequate reserves in each tax jurisdiction but cannot predict the outcome of these audits.

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On February 13, 2006, we received correspondence from the Ohio Department of Taxation (ODT) notifying us that ODT has completed their examination and review of our Ohio Corporation Franchise Tax Returns for tax years 2002 through 2004 and that the final proposed audit adjustments result in a balance due of $90.8 million before interest and penalties.  We have reviewed the proposed audit adjustments and plan to vigorously contest the ODT findings and forthcoming notice of assessment through all administrative and judicial means available.  We believe we have recorded adequate tax reserves related to the proposed adjustments; however, we cannot predict the outcome, which could be material to our results of operations and cash flows.

On December 12, 2003, the Office of Federal Contract Compliance Programs (OFCCP) notified DP&L by letter, alleging it had discriminated in the hiring of meter readers during 2000-2001 by utilizing credit checks to determine if applicants had paid their electric bills.  On February 12, 2004 DP&L and the OFCCP entered into a Conciliation Agreement whereby DP&L agreed to distribute approximately $0.2 million in compensation to certain affected applicants.  DP&L has completed these payments to the affected applicants and supplied to the OFCCP all follow-up reports required under the Conciliation Agreement.

In June 2002, a contractor’s employee received a verdict against DP&L for injuries he sustained while working at a DP&L power station.  The Adams County Court of Common Pleas awarded the contractor’s employee compensatory damages of approximately $0.8 million and prejudgment interest of approximately $0.6 million.  On April 28, 2004, the 4th District Court of Appeals upheld this verdict except the award for prejudgment interest.  On September 1, 2004, the Ohio Supreme Court refused to hear the case, so the matter was remanded to the Adams County Court of Common Pleas for a re-determination of the amount of prejudgment interest that should be awarded.  The trial court heard this matter on October 15, 2004.  On November 1, 2004, DP&L paid approximately $976 thousand to the contractor’s employee to satisfy the judgment and post-judgment interest.  On December 6, 2004, the Adams County Court of Common Pleas ruled that prejudgment interest should be reduced to approximately $30 thousand.  Both parties appealed this decision.    On January 25, 2006, the Fourth District Court of Appeals ruled in DP&L’s favor, finding it owed no prejudgment interest to Plaintiff.

Contractual Obligations and Commercial Commitments

We enter into various contractual obligations and other commercial commitments that may affect the liquidity of our operations.  At December 31, 2005, these include:

			Payment Year
Contractual Obligations ($ in millions)	Total		Less Than 1 Year		2 – 3 Years		4 – 5Years		More Than 5 Years
Long-term debt	$	1,674.1	$	—	$	324.9	$	175.0	$	1,174.2
Interest payments	1,068.8		109.9		180.9		144.8		633.2
Pension and postretirement payments	240.3		22.8		46.3		47.4		123.8
Capital leases	3.9		0.9		1.7		1.3		—
Operating leases	.9		0.5		0.4		—		—
Coal contracts (a)	795.1		390.1		273.0		87.0		45.0
Other contractual obligations	506.3		358.5		147.8		—		—
Total contractual obligations	$	4,289.4	$	882.7	$	975.0	$	455.5	$	1,976.2

(a) DP&L-operated units

Long-term debt:

Long-term debt as of December 31, 2005, consists of DP&L first mortgage bonds, tax-exempt pollution control bonds, DPL unsecured notes and includes current maturities and unamortized debt

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discounts.  As of December 31, 2005, we have redeemed $446.6 million of long-term debt earlier than termed.  (See Note 8 of Notes to Consolidated Financial Statements.)

Interest payments:

Interest payments associated with the Long-term debt described above.

Pension and Postretirement payments:

As of December 31, 2005, we had estimated future benefit payments as outlined in Note 5 of Notes to Consolidated Financial Statements.  These estimated future benefit payments are projected through 2015.

Capital leases:

As of December 31, 2005, we had two capital leases that expire in November 2007 and September 2010.

Operating leases:

As of December 31, 2005, we had several operating leases with various terms and expiration dates.  Not included in this total is approximately $88,000 per year related to right of way agreements that are assumed to have no definite expiration dates.

Coal contracts:

DP&L has entered into various long-term coal contracts to supply portions of its coal requirements for its generating plants.  Contract prices are subject to periodic adjustment, and have features that limit price escalation in any given year.

Other contractual obligations:

In January 2006, DP&L entered a contract for limestone that is expected to generate an obligation of $6.0 million in 2006 through 2008, $10.5 million in 2009 through 2010 and $42.2 million thereafter.  As of December 31, 2005, we had various other contractual obligations including non-cancelable contracts to purchase goods and services with various terms and expiration dates.

We enter into various commercial commitments, which may affect the liquidity of our operations.  At December 31, 2005, these include:

Credit facilities:

In May 2005, DP&L replaced its previous $100 million revolving credit agreement with a $100 million, 364-day unsecured credit facility that is renewable annually and expires on May 30, 2010.  At December 31, 2005, there were no borrowings outstanding under this credit agreement.  The new facility may be increased up to $150 million.

Guarantees:

DP&L owns a 4.9% equity ownership interest in an electric generation company.  As of December 31, 2005, DP&L could be responsible for the repayment of 4.9%, or $14.9 million, of a $305 million debt obligation and also 4.9%, or $2.9 million, of a separate $60 million debt obligation.  Both obligations mature in 2006.

Other:

We completed the sale of or entered into alternative closing arrangements for all private equity funds in our financial asset portfolio as of June 20, 2005.  We have an obligation to fund any cash calls or other commitments in which the purchaser of the private equity funds defaults with respect to the funds for which we entered into an alternative closing arrangement.  This obligation is estimated not to exceed $8.0 million.

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15.Certain Relationships and Related Transactions

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 us, our voting preferred shares and warrants to purchase our common shares 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 our 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 our 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, we and KKR also entered into an agreement under which we paid KKR an annual management, consulting and financial services fee of $1.0 million. The agreement also stated that we 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.  We 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.  We 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 a large portion of the warrants to multiple unrelated third parties.  In January 2005, as part of one of these transfers, KKR sold back to us all of the outstanding Series B voting preferred shares at par of $0.01 per share for $66 thousand.

Under the Securityholders and Registration Rights Agreement among us, 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 of our common shares, 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 owned any warrants or common stock.  Accordingly, KKR no longer had the right to appoint one member and one observer to both DPL and DP&L Boards of Directors and the Securityholders and Registration Rights Agreement was amended to delete these, and other, rights.

In 1996, we 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 DPL, DP&L and MVE, and as Chairman of the Executive Committee of our Board of Directors and (ii) provide advisory and strategic planning consulting services.  That contract became the subject of litigation after Mr. Forster resigned on May 16, 2004.  (See Note 14 of Notes to Consolidated Financial Statements.)

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In June 2001, our 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.

In October 2001, we 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.  Upon a change of control of DPL or DP&L, Messrs. Chernesky, Broock and Caspar would become the sole trustees of the master trusts for an annual fee of $500,000 and would succeed to all of the duties of our Compensation Committee under the compensation plans funded through the master trusts.

The MSAs, ASA and TFA (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.  Copies of the Valley Partners Agreements were filed as exhibits to our 2003 Form 10-K.

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On April 26, 2004, we 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 DPL 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.  A copy of the New TFA was filed as an exhibit to our 2003 Form 10-K.  On October 14, 2004, at the request of DPL and DP&L, Messrs. Chernesky, Broock and Caspar submitted their resignations to us and DP&L.

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 our Compensation Committee.  Mr. Forster and Ms. Muhlenkamp resigned and Mr. Koziar retired on May 16, 2004.

We have initiated legal proceedings asserting breach of fiduciary duty and breach of contract by Messrs. Forster and Koziar and Ms. Muhlenkamp, and challenging the propriety and/or validity of certain contract terminations, purported amendments and agreements.  (See Note 14 of Notes to Consolidated Financial Statements.)

16.Other Matters

Audit Committee Investigation and Related Matters

On March 10, 2004, our Corporate Controller, sent a memorandum (the Memorandum) to the Chairman of the Audit Committee of our Board of Directors (the Audit Committee).  The Memorandum expressed the Corporate Controller's “concerns, perspectives and viewpoints” regarding financial reporting and governance issues within the Company. 

On March 15, 2004, our Audit Committee retained the law firm of Taft, Stettinius & Hollister LLP (TS&H) to represent the Audit Committee in an independent review of each of the matters raised by the Memorandum.  TS&H subsequently retained an accounting firm as a forensic accountant to assist in this review.  On April 27, 2004, TS&H submitted a written report of its findings to the members of the Audit Committee (the Report).  A copy of the Report was filed as an exhibit to our 2003 Form 10-K.  While TS&H stated that it did not uncover and no person had indicated to it any uncorrected material inaccuracies in our books and records, it did, however, recommend further follow-up by the Audit Committee and improvements relating to disclosures, communication, access to information, internal controls and the culture of the Company in certain areas.  Based upon information received after issuing the Report, TS&H revised its analysis and prepared a supplement to the Report, dated May 25, 2004 (the Supplement). A copy of the Supplement was filed as an exhibit to our 2003 Form 10-K.

Our Audit Committee considered the Report and Supplement at a meeting held on May 16, 2004.  After its review and consideration, the Audit Committee recommended that the full Board of Directors accept the Report and the Supplement.  At a meeting held on May 16, 2004, our Board of Directors accepted the Report and Supplement, including the findings and recommendations set forth therein.  Mr. Forster and Ms. Muhlenkamp resigned and Mr. Koziar retired on May 16, 2004, and subsequently the Company has been involved in litigation with them  (See Note 14 of Notes to Consolidated Financial Statements.)  In addition, in 2004 corrective action was taken with regard to internal controls, process issues and tone at the top as identified in the Report.

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Governmental and Regulatory Inquiries

On April 7, 2004, we received notice that the staff of the PUCO was conducting an investigation into the financial condition of DP&L as a result of previously disclosed matters raised by one of our executives during the 2003 year-end financial closing process (the Memorandum).  On May 27, 2004, the PUCO ordered DP&L to file a plan of utility financial integrity that outlines the actions we have taken or would take to insulate DP&L utility operations and customers from our unregulated activities.  DP&L was required to file this plan by March 2, 2005.  On February 4, 2005, DP&L filed its protection plan with the PUCO and expressed its intention to continue to cooperate with the PUCO in their investigation.  On March 29, 2005, the Ohio Consumers Counsel (OCC) filed comments with the PUCO on DP&L’s financial plan of integrity, requesting the PUCO continue the investigation and monitor DP&L’s progress toward implementation of its financial plan of integrity.  On June 29, 2005, the PUCO closed its investigation, citing significant positive actions taken by DP&L including changes in our Board of Directors as well as executive management of DP&L, and that no apparent diminution of service quality has occurred because of the events that initiated the investigation.

On May 20, 2004, the staff of the SEC notified us that it was conducting an inquiry covering our exempt status under the Public Utility Holding Company Act of 1935 (the ‘35 Act).  The staff of the SEC requested we provide certain documents and information on a voluntary basis.  On October 8, 2004, we received a notice from the SEC that a question existed as to whether such exemption from the Public Utility Holding Company Act was detrimental to the public interest or the interests of investors or consumers.  On November 5, 2004, we filed a good faith application seeking an order of

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exemption from the SEC.  In light of the repeal of the ‘35 Act, effective February 8, 2006, and based upon the information previously provided to the staff of the SEC, this inquiry is moot.

On May 28, 2004, the U.S. Attorney’s Office for the Southern District of Ohio, assisted by the Federal Bureau of Investigation, notified us that it had initiated an inquiry involving matters connected to our internal investigation.  We are cooperating with this investigation.

On or about June 24, 2004, the SEC commenced a formal investigation into the issues raised by the Memorandum.  We are cooperating with the investigation.

On March 3, 2005, DP&L received a notice that the FERC had instituted an operational audit of DP&L regarding our compliance with our Code of Conduct within the transmission and generation areas.    On October 7, 2005, the FERC issued its Findings and Conclusions, stating that we “generally complied with the [FERC] Standard of Conduct” except for three (3) areas, all of which were corrected to the satisfaction of the FERC prior to the issuance of these Findings and Conclusions.

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Report of Independent Registered Public Accounting Firm

The Board of Directors
DPL Inc.:

We have audited the accompanying consolidated balance sheets of DPL Inc. and subsidiaries (the Company) as of December 31, 2005 and 2004, and the related consolidated statement of results of operations, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2005. In connection with our audits of the consolidated financial statements, we have audited the consolidated financial statement schedule, “Schedule II - Valuation and Qualifying Accounts” for each of the years in the three-year period ended December 31, 2005. These consolidated financial statements and the financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2005 and 2004, and the consolidated results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2005, in conformity with United States generally accepted accounting principles. Also, in our opinion, the related financial statement schedules when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all materials respects, the information set forth therein.

As discussed in Note 1 to the consolidated financial statements, effective January 1, 2005, the Company adopted FASB Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations, an interpretation of Statement of Financial Accounting Standards No. 143".

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal controls over financial reporting as of December 31, 2005, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 27, 2006 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

/s/ KPMG LLP

KPMG LLP

Kansas City, Missouri

February 27, 2006

90

Report of Independent Registered Public Accounting Firm on Internal Controls

The Board of Directors
DPL Inc.:

We have audited management’s assessment, included in the Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A, that DPL Inc. and subsidiaries (the Company) maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control - Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission (COSO).The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on

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criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  Also, in our opinion, the company maintained, in all material respects, effective internal controls over financial reporting as of December 31, 2005, based on criteria established in Internal Control - Integrated Framework issued by the Committee Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of December 31, 2005 and 2004, and the related consolidated statements of results of operations, shareholders’ equity, and cash flows for the three-year period ended December 31, 2005, and our report dated February 27, 2006, expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

KPMG LLP

Kansas City, Missouri

February 27, 2006

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S e l e c t e d   Q u a r t e r l y   I n f o r m a t i o n   (Unaudited)

	For the three months ended
	March 31,				June 30,				September 30,				December 31,
	2005		2004		2005		2004		2005		2004		2005(b)			2004
Revenues	$	307.1	$	302.4	$	293.4	$	284.8	$	357.4	$	312.2	$	327.0		$	300.5
Operating Income	81.9		98.9		62.3		81.2		99.6		95.1		95.3			61.3
Earnings from continuing operations (a)	36.1		38.9		16.7		25.8		25.7		33.7		46.2			23.1
Earnings from discontinued operations, net of taxes	37.6		10.8		5.2		30.6		0.2		50.0		9.9			4.4
Cumulative effect of accounting change, net of taxes	—		—		—		—		—		—		(3.2		)	—
Net Income	$	73.7	$	49.7	$	21.9	$	56.4	$	25.9	$	83.7	$	52.9		$	27.5
Basic earnings per share of common stock:
Continuing operations	$	0.30	$	0.32	$	0.14	$	0.22	$	0.21	$	0.28	$	0.38		$	0.19
Discontinued operations	0.31		0.09		0.04		0.25		—		0.42		0.09			0.04
Cumulative effect of accounting change	—		—		—		—		—		—		(0.03		)	—
Total basic earnings per common share	$	0.61	$	0.41	$	0.18	$	0.47	$	0.21	$	0.70	$	0.44		$	0.23
Diluted earnings per share of common stock:
Continuing operations	$	0.28	$	0.32	$	0.13	$	0.21	$	0.20	$	0.28	$	0.36		$	0.19
Discontinued operations	0.30		0.09		0.04		0.25		—		0.41		0.08			0.03
Cumulative effect of accounting change	—		—		—		—		—		—		(0.03		)	—
Total diluted earnings per common share	$	0.58	$	0.41	$	0.17	$	0.46	$	0.20	$	0.69	$	0.41		$	0.22
Dividends paid per share	$	0.24	$	0.24	$	0.24	$	—	$	0.24	$	—	$	0.24		$	0.72
Common stock market price -High	$	26.77	$	20.77	$	27.67	$	19.77	$	28.12	$	20.64	$	28.01		$	25.36
-Low	$	24.27	$	17.60	$	24.08	$	17.21	$	26.70	$	19.02	$	24.55		$	20.30

(a) Earnings from continuing operations in the second and third quarter of 2005 include charges of $2.1 million and $59.1 million, respectively, for the early redemption of debt.

(b) Earnings from continuing operations in the fourth quarter of 2005 were $23.1 million more than the fourth quarter of 2004 primarily due to a $12.9 million reduction of interest expense, due largely to lower current year interest associated with the early redemption of debt, a $4.1 million increase in investment income, principally on short-term and tax-exempt investments, lower net margins of $13.5 million (higher revenues of $26.5 million offset by higher fuel and purchased power costs of $13.0 million), lower O&M expense of $17.1 million as a result of lower corporate costs, offset by higher taxes (the fourth quarter tax expense was reduced by state and tax credits of $11.5 million).

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Item 9 -Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None

Item 9A – Controls and Procedures

Disclosure Controls and Procedures

Our Chief Executive Officer (CEO) and Chief Financial Officer (CFO) are responsible for establishing and maintaining our disclosure controls and procedures.  These controls and procedures were designed to ensure that material information relating to us and our subsidiaries are communicated to the CEO and CFO.  We evaluated these disclosure controls and procedures as of the end of the period covered by this report with the participation of our CEO and CFO.  Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be included in our periodic reports filed with the SEC.

There was no change in our internal control over financial reporting during the most recently completed fiscal period that has materially affected, or is reasonably likely to materially affect, internal control over reporting.

The following report is our report on internal control over financial reporting as of December 31, 2005.

Management’s Report on Internal Control Over Financial Reporting

We are responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f).  Under the supervision and with the participation of management, including the CEO and CFO, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Based on an evaluation under the framework in Internal Control - Integrated Framework, we concluded that our internal control over financial reporting was effective as of December 31, 2005.

Our assessment of the effectiveness of our internal control over financial reporting as of December 31, 2005, has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Item 9B – Other Information

None.

PART III

Item 10 - Directors and Executive Officers of the Registrant (Company)

The information required to be furnished pursuant to this item with respect to Directors of the Company will be set forth under captioned “Election of Directors” in the registrant’s proxy statement (the Proxy Statement) to be furnished to shareholders in connection with the solicitation of proxies by our Board of Directors for use at the 2006 Annual Meeting of Shareholders to be held on April 26, 2006 and is incorporated herein by reference.

The information required to be furnished pursuant to this item with respect to the identification of the Audit Committee, the Audit Committee financial expert and the registrant’s code of ethics will be set forth under the caption “Corporate Governance” in the Proxy Statement and is incorporated herein by reference.

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Item 11 - Executive Compensation

The information required to be furnished pursuant to this item will be set forth under the caption “Executive Compensation” in the Proxy Statement and is incorporated herein by reference.

Item 12 - Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

The information required to be furnished pursuant to this item will be set forth under the captions “Security Ownership of Certain Beneficial Owners,” “Security Ownership of Management” and “Equity Compensation Plan Information” in the Proxy Statement and is incorporated herein by reference.

Item 13 – Certain Relationships and Related Transactions

The information required to be furnished pursuant to this item will be set forth under the caption “Certain Relationships and Related Transactions” in the Proxy Statement and is incorporated herein by reference.

Item 14 – Principal Accountant Fees and Services

The information required to be furnished pursuant to this item will be set forth under the caption “Audit and Non-Audit Fees” in the Proxy Statement and is incorporated herein by reference.

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PART IV

Item 15 - Exhibits and Financial Statement Schedules

				Page No.
(a)	The following documents are filed as part of this report:
1.			Financial Statements
Consolidated Statements of Results of Operations for each of the three years in the period ended December 31, 2005				48
Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2005				49
Consolidated Balance Sheets at December 31, 2005 and 2004				50
Consolidated Statement of Shareholders’ Equity for each of the three years in the period ended December 31, 2005				52
Notes to Consolidated Financial Statements				53
Report of Independent Registered Public Accounting Firm				90
Report of Independent Registered Public Accounting Firm on Internal Controls				91
2.		Financial Statement Schedule
For each of the three years in the period ended December 31, 2005:
Schedule II – Valuation and Qualifying Accounts				105

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.

3.     Exhibits

Exhibits are incorporated by reference as described unless otherwise filed as set forth herein.

The exhibits filed as a part of this Annual Report on Form 10-K are:

		Location
2(a)	Copy of Asset Purchase Agreement, dated December 14, 1999, between The Dayton Power and Light Company, Indiana Energy, Inc., and Number-3CHK, Inc.		Exhibit 2 to Report on Form 10-Q for the quarter ended September 30, 2000 (File No. 1-9052)
3(a)	Copy of Amended Articles of Incorporation of DPL Inc. dated September 25, 2001		Exhibit 3 to Report on Form 10-K/A for the year ended December 31, 2001 (File No. 1-2385)
3(b)	Regulations of DPL Inc.		Exhibit 3(b) to Form 8-K filed on May 3, 2004 (File No. 1-9052)

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4(a)	Copy of Composite Indenture dated as of October 1, 1935, between DP&L and The Bank of New York, Trustee with all amendments through the Twenty-Ninth Supplemental Indenture	Exhibit 4(a) to Report on Form 10-K for the year ended December 31, 1985 (File No. 1-2385)
4(b)	Copy of Forty-First Supplemental Indenture dated as of February 1, 1999, between DP&L and The Bank of New York, Trustee	Exhibit 4(m) to Report on Form 10-K for the year ended December 31, 1998 (File No. 1-2385)
4(c)	Copy of Forty-Second Supplemental Indenture dated as of September 1, 2003, between DP&L and The Bank of New York, Trustee	Exhibit 4(r) to Report on Form 10-K for the year ended December 31, 2003 (File No. 1-2385)
4(d)	Copy of Forty-Third Supplemental Indenture dated as of August 1, 2005, between DP&L and The Bank of New York, Trustee	Exhibit 4.4 to Report on Form 8-K filed on August 24, 2005 (File No. 1-2385)
4(e)	Copy of Rights Agreement between DPL Inc. and Equiserve Trust Company, N.A.	Exhibit 4 to Report on Form 8-K dated September 25, 2001 (File No. 1-9052)
4(f)	Copy of Securities Purchase Agreement dated as of February 1, 2000 by and among DPL Inc. and DPL Capital Trust I, Dayton Ventures LLC and Dayton Ventures Inc. and certain exhibits thereto	Exhibit 99(b) to Schedule TO-I dated February 4, 2000 (File No. 1-9052)
4(g)	Amendment to Securities Purchase Agreement dated as of February 24, 2000 among DPL Inc., DPL Capital Trust I, Dayton Ventures LLC and Dayton Ventures, Inc.	Filed herewith as Exhibit 4(g)
4(h)	Copy of Warrant Form initially issued as of February 1, 2000	Filed herewith as Exhibit 4(h)
4(i)	Securityholders and Registration Rights Agreement dated as of February 1, 2000 among DPL Inc., DPL Capital Trust I, Dayton Ventures LLC and Dayton Ventures, Inc.	Filed herewith as Exhibit 4(i)
4(j)	Amendment to Securityholders and Registration Rights Agreement, dated August 24, 2001 among DPL Inc., DPL Capital Trust I, Dayton Ventures LLC and Dayton Ventures, Inc.	Filed herewith as Exhibit 4(j)
4(k)	Amendment to Securityholders and Registration Rights Agreement, dated December 6, 2004 among DPL Inc., DPL Capital Trust I, Dayton Ventures LLC and Dayton Ventures, Inc.	Filed herewith as Exhibit 4(k)

97

4(l)	Amendment to Securityholders and Registration Rights Agreement, dated January 12, 2005 among DPL Inc., DPL Capital Trust I, Dayton Ventures LLC and Dayton Ventures, Inc.	Filed herewith as Exhibit 4(l)
4(m)	Copy of Credit Agreement dated as of June 1, 2004 between The Dayton Power and Light Company, KeyBank National Association (as administrative agent and lead arranger) and the lending institutions named therein	Exhibit 4(ee) to Report on Form 10-K for the year ended December 31, 2003 (File No. 1-2385)
4 (n)	Copy of Credit Agreement dated as of May 31, 2005 between The Dayton Power and Light Company, KeyBank National Association (as administrative agent and lead arranger) and the lending institutions named therein	Exhibit 10.1 to Form 8-K filed on June 28, 2005 (File No. 1-9052)
4(o)	Officer’s Certificate of DPL Inc. establishing $175 million Senior Note due 2009, dated March 25, 2004	Exhibit 4.1 to Form 8-K, filed on March 29, 2004 (File No. 1-9052)
4(p)	Exchange and Registration Rights Agreement dated March 25, 2004 between DPL Inc. and the purchasers	Exhibit 4.2 to Form 8-K, filed on March 29, 2004 (File No. 1-9052)
4(q)	Indenture dated as of March 1, 2000 between DPL Inc. and Bank One Trust Company, National Association	Exhibit 4(b) to Registration Statement No. 333-37972
4(r)	Officer’s Certificate of DPL Inc. establishing exchange notes, dated March 1, 2000	Exhibit 4(c) to Registration Statement No. 333-37972
4(s)	Exchange and Registration Rights Agreement dated as of August 24, 2001 between DPL Inc., Morgan Stanley & Co., Incorporated, Bank One Capital Markets, Inc., Fleet Securities, Inc. and NatCity Investments, Inc.	Exhibit 4(a) to Registration Statement No. 333-74568
4(t)	Officer’s Certificate of DPL Inc. establishing exchange notes, dated August 31, 2001	Exhibit 4(c) to Registration Statement No. 333-74568
4(u)	Indenture dated as of August 31, 2001 between DPL Inc. and The Bank of New York, Trustee	Exhibit 4(a) to Registration Statement No. 333-74630
4(v)	First Supplemental Indenture dated as of August 31, 2001 relating to the subordinated debentures between DPL Inc. and The Bank of New York	Exhibit 4(b) to Registration Statement No. 333-74630
4(w)	Amended and Restated Trust Agreement dated as of August 31, 2001 relating to DPL Capital Trust II, the Capital Securities and the Common Securities among DPL Inc., the depositor, The Bank of New York, as property trustee, The Bank of New York (Delaware), as Delaware trustee, and Allen M. Hill and Stephen F. Koziar, Jr., as administrative trustees, and the holders, from time	Exhibit 4(c) to Registration Statement No. 333-74630

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	to time of undivided beneficial interests in DPL Capital Trust II
4(x)	Exchange and Registration Rights Agreement dated as of August 24, 2001 among DPL Inc., DPL Capital Trust II and Morgan Stanley & Co., Incorporated	Exhibit 4(d) to Registration Statement No. 333-74630
10(a)*	Copy of Directors’ Deferred Stock Compensation Plan amended December 31, 2000	Exhibit 10(a) to Report on Form 10-K for the year ended December 31, 2000 (File No. 1-9052)
10(b)*	Copy of Directors’ 1991 Amended Deferred Compensation Plan as amended through December 31, 2000	Exhibit 10(b) to Report on Form 10-K for the year ended December 31, 2000 (File No. 1-9052)
10(c)*	Amendment No. 1 dated as of December 7, 2004 to Directors’ 1991 Amended Deferred Compensation Plan as amended through December 31, 2000	Filed herewith as Exhibit 10(c)
10(d)*	Copy of Management Stock Incentive Plan amended December 31, 2000	Exhibit 10(c) to Report on Form 10-K for the year ended December 31, 2000 (File No. 1-9052)
10(e)*	Amendment No. 1 dated as of December 7, 2004 to Management Stock Incentive Plan amended December 31, 2000	Filed herewith as Exhibit 10(e)
10(f)*	Copy of Key Employees Deferred Compensation Plan amended December 31, 2000	Exhibit 10(d) to Report on Form 10-K for the year ended December 31, 2000 (File No. 1-9052)
10(g)*	Amendment No. 1 dated as of December 7, 2004 to Key Employees Deferred Compensation Plan amended December 31, 2000	Filed herewith as Exhibit 10(g)
10(h)*	Copy of Supplemental Executive Retirement Plan amended February 1, 2000	Exhibit 10(e) to Report on Form 10-K for the year ended December 31, 2003 (File No. 1-2385)
10(i)*	Amendment No. 1 dated as of December 7, 2004 to Supplemental Executive Retirement Plan amended February 1, 2000	Filed herewith as Exhibit 10(i)
10(j)*	Copy of Stock Option Plan	Exhibit 10(f) to Report on Form 10-K for the year ended December 31, 2000 (File No. 1-9052)

99

10(k)*	2003 Long-Term Incentive Plan of DPL Inc. dated as of January 20, 2003	Exhibit 10(aa) to Report on Form 10-K for the year ended December 31,2003  (File No. 1-9052)
10(l)*	Summary of Executive Life Insurance Plan	Filed herewith as Exhibit 10(l)
10(m)*	Summary of Executive Medical Insurance Plan	Filed herewith as Exhibit 10(m)
10(n)*	Amended and Restated Employment Agreement dated as of August 31, 2005 effective as of January 1, 2005 between DPL Inc., The Dayton Power and Light Company and Robert D. Biggs	Exhibit 10.1 to Report on Form 8-K filed on September 2, 2005 (File No. 1-9052
10(o)*	Letter Agreement dated as of September 20, 2004 and Management Stock Option Agreement, as amended, dated as of October 5, 2004, between DPL Inc. and Robert D. Biggs	Exhibits 10.2 and 10.3 to Report on Form 8-K filed on October 8, 2004 (File No. 1-9052)
10(p)*	Management Stock Option Agreement dated as of August 31, 2005 between DPL Inc. and Robert D. Biggs	Exhibit 10.2 to Report on Form 8-K filed on September 2, 2005 (File No. 1-9052)
10(q) *	Employment agreement dated as of December 21, 2004 between DPL Inc., The Dayton Power and Light Company and James V. Mahoney	Exhibit 10.1 to Form 8-K filed on December 28, 2004 (File No. 1-9052)
10(r)*	Employment agreement dated as of January 3, 2003, between DPL Inc., The Dayton Power and Light Company and James V. Mahoney	Exhibit 10(j) to Report on Form 10-K for the year ended December 31, 2003 (File No. 1-9052)
10(s)*	Change of Control Agreement dated as of January 3, 2003, between DPL Inc., The Dayton Power and Light Company and James V. Mahoney and Management Stock Option Agreement dated January 3, 2003 between DPL Inc. and James V. Mahoney	Exhibit 10(o) to Report on Form 10-K for the year ended December 31, 2003 (File No.1-9052)
10 (t)*	Employment agreement dated as of December 14, 2004 between DPL Inc., The Dayton Power and Light Company and John J. Gillen	Exhibit 10.2 to Form 8-K filed on December 28, 2004 (File No. 1-9052)
10(u)*	Management Stock Option Agreement dated as of December 29, 2004 between DPL Inc. and John J. Gillen	Filed herewith as Exhibit 10(u)
10(v)*	Employment agreement dated as of September 17, 2003, between DPL Inc. and W. Steven Wolff	Exhibit 10(k) to Report on Form 10-K for the year ended December 31, 2003 (File No.1-9052)
10(w)*	Change of Control Agreement dated as of September 10, 2004, between DPL Inc., The Dayton Power and Light Company and W. Steven Wolff	Exhibit 10(dd) to Report on Form 8-K filed September 23, 2004 (File No. 1-9052)
10(x)*	Employment agreement dated as of December 17, 2003,	Exhibit 10(l) to Report on

100

	between DPL Inc. and Patricia K. Swanke	Form 10-K for the year ended December 31, 2003 (File No.1-9052)
10(y)*	Change of Control Agreement dated as of July 1, 2004 between DPL Inc., The Dayton Power and Light Company and Patricia K. Swanke and Management Stock Option Agreement dated as of January 1, 2001 between DPL Inc. and Patricia K. Swanke	Exhibit 10(s) to Report on Form 10-K for the year ended December 31, 2004 (File No. 1-9052)
10(z)*	Employment Agreement and Change of Control Agreement dated as of September 17, 2004 between DPL Inc., The Dayton Power and Light Company and Gary Stephenson	Exhibit 10(ee) to Report on Form 8-K filed on September 23, 2004 (File No. 1-9052)
10(aa)*	Employment agreement dated as of June 9, 2003, as amended by attached letter dated October 18, 2004, between DPL Inc., The Dayton Power and Light Company and Miggie E. Cramblit	Exhibit 10(gg) to Report on Form 10-K for the year ended December 31, 2003 (File No. 1-9052)
10(bb)*	Change of Control Agreement dated as of December 15, 2000 between DPL Inc., The Dayton Power and Light Company and Arthur G. Meyer	Filed herewith as Exhibit 10(bb)
10(cc)*	Management Stock Option Agreement dated as of January 1, 2001 between DPL Inc. and Arthur G. Meyer	Filed herewith as Exhibit 10(cc)
10(dd)*	Letter dated October 28, 1998 from DPL Inc. awarding lifetime medical benefits to Arthur G. Meyer	Filed herewith as Exhibit 10(dd)
10(ee)*	Letter dated November 26, 1997 from DPL Inc. awarding executive life insurance benefits to Arthur G. Meyer	Filed herewith as Exhibit 10(ee)
10(ff)	Purchase and Sale Agreement dated as of February 13, 2005 between MVE, Inc., Miami Valley Insurance Company and AlpInvest/Lexington 2005, LLC	Exhibit 10.1 to Form 8-K filed on February 18, 2005 (File No. 1-9052)
18	Copy of preferability letter relating to change in accounting for unbilled revenues from Price Waterhouse LLP	Exhibit 18 to Report on Form 10-K for the year ended December 31, 1987 (File No. 1-9052)
21	List of Subsidiaries of DPL Inc.	Filed herewith as Exhibit 21
23	Consent of KPMG LLP	Filed herewith as Exhibit 23
31(a)	Certification of Chief Executive Officer pursuant to Rule 13a–14(a)/15d-14(a) of the Securities Exchange Act of 1934	Filed herewith as Exhibit 31(a)
31(b)	Certification of Chief Financial Officer pursuant to Rule 13a–14(a)/15d–14(a) of the Securities Exchange Act of 1934	Filed herewith as Exhibit 31(b)
32(a)	Certification of Chief Executive Officer pursuant to	Filed herewith as

101

	18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Exhibit 32(a)
32(b)	Certification of Chief Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith as Exhibit 32(b)
99(a)	Report of Taft, Stettinius & Hollister LLP, dated April 26, 2004	Exhibit 99(a) to Report on Form 10-K for the year ended December 31, 2003 (File No. 1-9052)
99(b)	Supplement to the April 26, 2004 Report of Taft, Stettinius & Hollister LLP, dated May 15, 2004	Exhibit 99(b) to Report on Form 10-K for the year ended December 31, 2003 (File No. 1-9052)
99(c)	Complaint filed in Montgomery County Court of Common Pleas, Montgomery County, Ohio – DPL Inc., The Dayton Power and Light Company and MVE, Inc. v. Peter H. Forster, Caroline E. Muhlenkamp and Stephen F. Koziar, Jr.	Exhibit 99(d) to Report on Form 10-K for the year ended December 31, 2003 (File No. 1-9052)

*Management contract or compensatory plan.

Pursuant to paragraph (b) (4) (iii) (A) of Item 601 of Regulation S-K, we have 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 us and our subsidiaries on a consolidated basis, but we hereby agrees to furnish to the SEC on request any such instruments.

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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.
February 27, 2006
By:	/s/ James V. Mahoney
	James V. Mahoney   President and Chief Executive Officer   (principal executive officer)

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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/ R. D. Biggs	Director and Executive Chairman	February 27, 2006
(R. D. Biggs)
/s/ P. R. Bishop	Director	February 27, 2006
(P. R. Bishop)
/s/ B. S. Graham	Director	February 27, 2006
(B. S. Graham)
/s/ E. Green	Director	February 27, 2006
(E. Green)
/s/ G.E. Harder	Director	February 27, 2006
(G. E. Harder)
/s/ W A. Hillenbrand	Director and Vice-Chairman	February 27, 2006
(W A. Hillenbrand)
/s/ L.L. Lyles
(L. L. Lyles)	Director	February 27, 2006
/s/ J. V. Mahoney	Director, President and Chief	February 27, 2006
(J. V. Mahoney)	Executive Officer (principal executive officer)
/s/ N.J. Sifferlen
(N.J. Sifferlen)	Director	February 27, 2006
/s/ J. J. Gillen	Senior Vice President and	February 27, 2006
(J. J. Gillen)	Chief Financial Officer (principal financial and principal accounting officer)
/s/ D. L. Thobe	Corporate Controller	February 27, 2006
(D. L. Thobe)

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Schedule II

DPL Inc.

VALUATION AND QUALIFYING ACCOUNTS

For the years ended December 31, 2003-2005

$ in thousands

Description	Balance at Beginning of Period		Additions		Deductions (1)		Balance at End of Period
2005:
Deducted from accounts receivable—
Provision for uncollectible accounts	$	1,085	$	3,582	$	3,623	$	1,044
2004:
Deducted from accounts receivable—
Provision for uncollectible accounts	$	6,003	$	3,371	$	8,289	$	1,085
2003:
Deducted from accounts receivable—
Provision for uncollectible accounts	$	11,094	$	3,672	$	8,763	$	6,003

(1)Amounts written off, net of recoveries of accounts previously written off.

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EX-4.G

Exhibit 4(g)

AMENDMENT, dated as of February 24, 2000, among DPL INC., an Ohio corporation (the “Company”), DPL CAPITAL TRUST I, a Delaware business trust (the “Trust”), DAYTON VENTURES LLC, a Delaware limited liability company, together with such of its Affiliates as it shall designate as provided for in the Purchase Agreement (as defined below) (the “Equity Purchaser”), and DAYTON VENTURES, INC., a Cayman Islands company, together with such of its Affiliates as it shall designate as provided for in the Purchase Agreement (the “Trust Preferred Purchaser”).

WHEREAS, the parties hereto have entered into a Securities Purchase Agreement dated as of February 1, 2000 (the “Purchase Agreement”); and

WHEREAS, the parties hereto wish to amend certain provisions of the Purchase Agreement.

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements herein contained, and intending to be legally bound hereby, the parties hereto hereby agree as follows:

1.     Terms not specifically defined herein shall have the meanings set forth in the Purchase Agreement.

2.     Clause (i) in the second sentence of Section 4.4(a) of the Purchase Agreement is hereby amended by replacing the number 158,682,304 with the number 157,801,404.

3.     The first paragraph of the Recitals to the Purchase Agreement is hereby amended by replacing clause (ii) in its entirety with the following:

31,560,000 warrants to purchase 31,560,000 of its common shares, par value $0.01 per share (the “Common Stock”), at an exercise price of $21.00 per share, as provided herein and in the form of warrant attached hereto as Exhibit B (the “Warrants”);

4.     Clauses (ii) and (iii) of Section 1.1 of the Purchase Agreement are hereby amended by replacing clauses (ii) and (iii) in their entirety with the following:

(ii) the sale and issuance to the Equity Purchaser of 31,560,000 Warrants and (iii) the issuance of 31,560,000 shares of Common Stock to be issued upon exercise of the Warrants (the “Warrant Shares” and, together with the Voting Preferred Shares and the Warrants, the “Securities”).

5.     Exhibit G to the Purchase Agreement is hereby amended by replacing clause (i)(B) of the Recitals of Exhibit G in its entirety with the following:

31,560,000 warrants to purchase 31,560,000 (the “Warrant Shares”) of its Common Shares, at an exercise price of $21 per share, as provided in the Securities Purchase Agreement and in the form of warrant attached as Exhibit B to the Securities Purchase Agreement (the “Warrants”) and

6.     This Amendment may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

IN WITNESS WHEREOF, the Company, the Trust, the Equity Purchaser and the Trust Preferred Purchaser have caused this Amendment to be executed as of the date first written above by their respective officers thereunto duly authorized.

DPL INC
By:
Name:		S.F. Koziar
Title:		Group Vice President
DPL CAPITAL TRUST I
By:
Name:		S.F. Koziar
Title:		Administrative Trustee
DAYTON VENTURES LLC
By:	KKR 1996 Fund L.P.
By:	KKR Associates 1996 L.P., its General Partner
By:	KKR 1996 GP LLC, its General Partner
By:
Name:		Scott M. Stuart
Title:
DAYTON VENTURES, INC.
By:
Name:		Scott M. Stuart
Title:

EX-4.H

Exhibit 4(h)

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND THEY MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT OR LAWS, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT.

THIS WARRANT IS SUBJECT TO SECTION 3.3 OF A SECURITYHOLDERS AND REGISTRATION RIGHTS AGREEMENT (A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY).  NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THIS WARRANT MAY BE MADE EXCEPT IN ACCORDANCE WITH SECTION 3.3 OF SUCH SECURITYHOLDERS AGREEMENT.  THE HOLDER OF THIS WARRANT AGREES TO BE BOUND BY SECTION 3.3 OF SUCH SECURITYHOLDERS AGREEMENT.

No. of Common Shares: __________

WARRANT

To Purchase Common Shares of

DPL INC.

THIS IS TO CERTIFY THAT __________, or its registered assigns, is entitled at any time prior to the Expiration Date (as hereinafter defined), to purchase from DPL INC., an Ohio corporation (the “Company”), _____ shares of Common Stock (as hereinafter defined and subject to adjustment as provided herein), in whole or in part, including fractional parts, at a purchase price of $21.00 per share (subject to adjustment as set forth herein), all on the terms and conditions and pursuant to the provisions hereinafter set forth.

ARTICLE 1.

Defined Terms

SECTION 1.1  Definitions.  Capitalized terms used and not defined herein shall have the meanings assigned to them in the Securities Purchase Agreement As used herein, the following terms shall have the following meanings:

“Affiliate” means, with respect to any Person, any other Person that directly or indirectly through one or more intermediaries, controls, is controlled by or is under common

control with, such specified Person, for so long as such Person remains so associated to the specified Person.

“Board” means the Board of Directors of the Company.

“Business Day” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by law to be closed in the City of New York or Dayton, Ohio.

“Cashless Exercise Ratio” means a fraction, the numerator of which is the excess of the Market Value per share of Common Stock on the date of exercise over the Exercise Price per share as of the date of exercise and the denominator of which is the Market Value per share of the Common Stock on the date of exercise.

“Common Stock” means the common shares, par value $0.01 per share, of the Company and any securities issued in respect thereof, or in substitution therefor, in connection with any stock split, dividend, spin-off or combination, or any reclassification, recapitalization, merger, consolidation, exchange or other similar reorganization or business combination.

“control” (including the terms “controlled by” and “under common control with”), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, as trustee or executor, by contract or otherwise.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Exercise Price” means, at any date herein, the price at which a share of Common Stock may be purchased pursuant to this Warrant.  On the date of the original issuance of this Warrant, the Exercise Price is $21.00 per share of Common Stock.

“Expiration Date” means the twelfth anniversary of the Closing Date.

“Group” shall have the meaning assigned to it in Section 13(d)(3) of the Exchange Act.

“Holder” means the duly registered holder of this Warrant under the terms hereof, including assignees thereof.

“Independent Investment Banking Firm” means an investment banking firm of nationally recognized standing that is, in the reasonable judgment of the Person engaging such firm, qualified to perform the task for which it has been engaged.

“Market Value” means, as of any determination date, with respect to capital stock or other equity securities, the last reported sales price on the date of determination or, in case no such sale takes place on such day, the average of the closing bid and asked prices regular way for such day, in each case (i) on the principal national securities exchange on which the shares of such capital stock or other equity interest are listed or to which such shares are admitted for

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trading, (ii) if such capital stock or other equity interest is not listed or admitted for trading on a national securities exchange, in the over-the-counter market as reported by the National Association of Securities Dealers, Inc. National Market System (“NASDAQ”) or any comparable system or (iii) if such capital stock or other equity interest is not listed on NASDAQ or a comparable system, as furnished by two members of the National Association of Securities Dealers, Inc. (“NASD”) selected from time to time in good faith by the Board for that purpose.  In the absence of all of the foregoing, or if for any other reason the Market Value per share cannot be determined pursuant to the foregoing provisions or if the consideration to be received by the holders of Common Stock consists of evidences of indebtedness, other property, warrants, options or subscription of purchase rights, the Market Value shall be the fair market value thereof as determined by an Independent Investment Banking Firm selected by the Company and reasonably acceptable to the Holder.  Subject to Section 3.10, the Company shall bear the fees and expenses of any Independent Investment Banking Firm involved in the determination of Market Value.

“Person” means any individual, corporation, limited liability company, limited or general partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivisions thereof or any Group comprised of two or more of the foregoing.

“SEC” means the U.S. Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Securities Purchase Agreement” means the Securities Purchase Agreement, dated as of February 1, 2000, among the Company, DPL Capital Trust I, Dayton Ventures LLC, and Dayton Ventures, Inc.

“Securityholders Agreement” means the Securityholders and Registration Rights Agreement, dated as of March 13, 2000, by and among the Company, DPL Capital Trust I, Dayton Ventures LLC, and Dayton Ventures, Inc.

“Warrant Shares” means the shares of Common Stock of the Company received, or issued, as the case may be, upon exercise of the Warrants.

“Warrants” means this Warrant and all warrants issued upon transfer, division or combination of, or in substitution for, any thereof.  All Warrants shall at all times be identical as to terms and conditions and date, except as to the number of shares of Common Stock for which they may be exercised.

ARTICLE 2.

Exercise Terms

SECTION 2.1  Exercise Periods.  At any time from and after the date of this Warrant and until 5:00 p.m., New York City time, on the Expiration Date, the Holder may exercise this Warrant, subject to required regulatory approval (other than in connection with any

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such exercise and contemporaneous sale by the Holder of the applicable shares of Common Stock issued upon exercise of the Warrant), if any, on any Business Day, for all or any part of the number of shares of Common Stock purchasable hereunder.

SECTION 2.2  Expiration.  This Warrant shall terminate and become void as of the earlier of (i) 5:00 p.m., New York City time, on the Expiration Date and (ii) the time and date this Warrant is exercised.

SECTION 2.3  Manner of Exercise.  (a)  In order to exercise this Warrant, in whole or in part, Holder shall deliver to the Company at its principal office at MacGregor Park, 1065 Woodman Drive, Dayton, Ohio 45432 or at the office or agency designated by the Company pursuant to Article 6 (i) a written notice of Holder’s election to exercise this Warrant, which notice shall specify the number of Warrant Shares to be purchased and shall be substantially in the form of the subscription form appearing at the end of this Warrant as Exhibit A, (ii) subject to the succeeding paragraph, payment of the Exercise Price for the number of Warrant Shares in respect of which such Warrant is then exercised and (iii) this Warrant.  Payment of the Exercise Price may be made (i) in cash or by certified or official bank check payable to the order of the Company or by wire transfer of funds to an account designated by the Company for such purpose, (ii) by surrender of Warrants as set forth in subsection (b) below or (iii) by any combination of the methods specified in clauses (i) or (ii) above.  The rights represented by this Warrant shall be exercisable at the election of the Holder hereof either in full at any time or in part from time to time and, in the event that this Warrant is surrendered for exercise in respect of less than all the Warrant Shares purchasable on such exercise at any time prior to the Expiration Date, the Company shall, at the time of delivery of the certificate or certificates representing the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased shares of Common Stock called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

(b)In lieu of payment of the Exercise Price in cash, at the option of the Holder, as indicated on the subscription form appearing at the end of this Warrant as Exhibit A, the Holder may demand that the Company reduce the number of shares of common Stock to be delivered to such Holder upon exercise of the Warrants then being exercised so that the Holder receives a number of shares of Common Stock equal to the product of (i) the number of shares of Common Stock for which such Warrant would otherwise then be nominally exercised if payment of the Exercise Price as of the date of exercise were being made in cash and (ii) the Cashless Exercise Ratio.  An exercise of a Warrant in accordance with this clause (b) is herein called a “Cashless Exercise.”  The Holder may use the Cashless Exercise option whether or not this Warrant is being exercised in full or in part and whether or not the Holder elects to pay any portion of the aggregate Exercise Price in cash.

SECTION 2.4  Issuance of Warrant Shares.  Subject to Section 2.5, upon the surrender of this Warrant and payment of the per share Exercise Price (or in accordance with Section 2.3(b)), as set forth in Section 2.3, the Company shall, as promptly as practicable, and in any event within five (5) Business Days thereafter, issue or cause there to be issued and deliver or cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate in the notice provided pursuant to Section 2.3, a certificate or certificates for the number of full Warrant Shares so purchased upon the exercise of such

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Warrants or other securities or property to which it is entitled, registered or otherwise to the Person or Persons entitled to receive the same, together with cash as provided in Section 2.5 in respect of any fractional Warrant Shares otherwise issuable upon such exercise.  Such certificate or certificates shall be deemed to have been issued and any Person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares as of the date of the delivery of the notice provided pursuant to Section 2.3, the surrender of this Warrant and, subject to Section 2.3(b), payment of the per share Exercise Price.

SECTION 2.5  Fractional Warrant Shares.  The Company shall not be required to issue fractional Warrant Shares on the exercise of Warrants.  If any fraction of a Warrant Share would, except for the provisions of this Section 2.5, be issuable on the exercise of this Warrant (or specified portion thereof), the Company shall pay an amount in cash equal to the Market Value for one Warrant Share on the Business Day immediately preceding the date the Warrant is exercised, multiplied by such fraction, computed to the nearest whole cent.  For purposes of determining the Market Value, is in accordance with such term, an Independent Investment Banking Firm would be required to be hired to determine the Market Value and but for this Section 2.5, an Independent Investment Banking Firm is not otherwise required to be retained to determine Market Value at such time, then Market Value shall be determined in good faith by the Board.

SECTION 2.6  Reservation of Warrant Shares.  (a) The Company shall at all times on and following the Closing Date keep reserved out of its authorized shares of Common Stock a number of shares of Common Stock sufficient to provide for the exercise in full of all outstanding Warrants.  The registrar for the Common Stock shall at all times on and following the Closing Date and until the Expiration Date, or the time at which all Warrants have been exercised or canceled, reserve such number of authorized shares of Common Stock as shall be required for such purpose.  All Warrant Shares which may be issued upon exercise of this Warrant shall be duly and validly authorized, validly issued, fully paid, nonassessable, free of preemptive rights and free from all Encumbrances (as defined in the Securities Purchase Agreement), other than Encumbrances created pursuant to the Transaction Agreements or created by the Holder.

(b)Before taking any action which would cause an adjustment pursuant to Article 3 to reduce the Exercise Price below the then par value (if any) of the Common Stock, the Company shall take any and all corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock at the Exercise Price as so adjusted.

SECTION 2.7  Compliance with Law.  If any shares of Common Stock required to be reserved for purposes of exercise of Warrants would require, under any other federal or state law or applicable governing rule or regulation of any national securities exchange, registration with or approval of any governmental authority, or listing on any such national securities exchange before such shares may be issued upon exercise, the Company will cause such shares to be duly registered or approved by such governmental authority or listed on the relevant national securities exchange, at its expense.

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SECTION 2.8  Payment of Taxes.  The Company shall pay all expenses in connection with, and all documentary, stamp or similar issue or transfer taxes, if any, and all other taxes and other governmental charges that may be imposed with respect to the issue or delivery of this Warrant and all shares of Common Stock issuable upon the exercise of this Warrant, and shall indemnify and hold the Holder and its Affiliates and the Company’s directors harmless from any taxes, interest and penalties which may become payable by the Holder or its Affiliates or any such directors as a result of the failure or delay by the Company to pay such taxes.  The Company shall not be required, however, to pay any tax or other charge imposed in connection with any transfer involved in (a) the transfer of the Warrant or (b) the issue of any certificate for shares of Common Stock issuable upon exercise of this Warrant in any name other than that of the Holder or its Affiliates, and in such case the Company shall not be required to issue or deliver any stock certificate until such tax or other charge has been paid or it has been established to the satisfaction of the Company that no such tax or other charge is due.

ARTICLE 3.

Adjustment Provisions

SECTION 3.1  Changes in Common Stock.  In the event that at any time or from time to time after the date hereof, the Company shall (i) pay a dividend or make a distribution on its Common Stock in shares of its Common Stock, (ii) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock or (iv) increase or decrease the number of shares of Common Stock outstanding by reclassification of its Common Stock (in each case, other than a transaction to which Section 3.4 is applicable), then the number of shares of Common Stock purchasable upon exercise of this Warrant immediately after the happening of such event shall be adjusted so that, after giving effect to such adjustment, the Holder of this Warrant shall be entitled to receive the number of shares of Common Stock upon exercise that such Holder would have owned or have been entitled to receive had this Warrant been exercised immediately prior to the happening of the events described above (or, in the case of a dividend or distribution of Common Stock, immediately prior to the record date therefor), and the Exercise Price shall be adjusted in inverse proportion.  An adjustment made pursuant to this Section 3.1 shall become effective immediately after the effective date, retroactive to the record date therefor in the case of a dividend or distribution in shares of Common Stock, and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification.

SECTION 3.2  Cash Dividends and Other Distributions.  In case at any time or from time to time after the date hereof, the Company shall distribute to all holders of Common Stock (i) any dividend or other distribution of cash (other than the regular quarterly cash dividend of the Company), evidences of its indebtedness, shares of its capital stock or any other properties or securities, or (ii) any options, warrants or other rights to subscribe for or purchase any of the foregoing (other than, in each case set forth in (i) and (ii), (x) any dividend or distribution described in Section 3.1, (y) any rights, options, warrants or securities described in Section 3.3 or (z) in connection with any transaction resulting in the issuance of additional warrants pursuant to Section 3.13), then (1) the number of shares of Common Stock purchasable

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upon the exercise of this Warrant shall be increased to a number determined by multiplying the number of shares of Common Stock purchasable upon the exercise of this Warrant immediately prior to the record date for any such dividend or distribution by a fraction, (A) the numerator of which shall be the Market Value per share of Common Stock on the record date for such distribution, and (B) the denominator of which shall be such Market Value per share of Common Stock less the sum of (x) any cash distributed per share of Common Stock and (y) the fair value (the “Fair Value”) (as determined in good faith by the Board, whose determination shall be evidenced by a board resolution, a certified copy of which will be sent to Holders) of the portion, if any, of the distribution applicable to one share of Common Stock consisting of evidences of indebtedness, shames of stock, securities, other property, options, warrants or subscription or purchase rights and (2) the Exercise Price shall be adjusted to a number determined by dividing the Exercise Price immediately prior to such record date by the above fraction.  Such adjustments shall be made whenever any distribution is made and shall become effective as of the date of distribution, retroactive to the record date for any such distribution; provided, however, that the Company is not required to make an adjustment pursuant to this Section 3.2 if at the time of such distribution the Company makes the same distribution to Holders of Warrants as it makes to holders of Common Stock pro rata based on the number of shares of Common Stock for which such Warrants are then exercisable.  No adjustment shall be made pursuant to this Section 3.2 which shall have the effect of decreasing the number of shares of Common Stock purchasable upon exercise of each Warrant or increasing the Exercise Price.

SECTION 3.3  Rights Issue.  In the event that at any time or from time to time after the date hereof, the Company shall issue, sell, distribute or otherwise grant any rights to subscribe for or to purchase, or any options or warrants for the purchase of, or any securities convertible or exchangeable into, Common Stock to all holders of Common Stock, entitling such holders to subscribe for or purchase shares of Common Stock or stock or securities convertible into Common Stock, whether or not immediately exercisable, convertible or exchangeable, as the case may be, and the subscription or purchase price per share of Common Stock or the price per share of Common Stock issuable upon exercise, conversion or exchange thereof is lower at the record date for such issuance than the then Market Value per share of Common Stock, the number of shares of Common Stock thereafter purchasable upon the exercise of this Warrant shall be determined by multiplying the number of shares of Common Stock purchasable upon the exercise of this Warrant prior to the record date by a fraction, (A) the numerator of which shall be the number of shares of Common Stock outstanding on the date of issuance of such rights, options, warrants or securities plus the number of additional shares of Common Stock offered for subscription or purchase or into or for which such securities are convertible or exchangeable, and (B) the denominator of which shall be the number of shares of Common Stock outstanding on the date of issuance of such rights, options, warrants or securities plus the total number of shares of Common Stock which could be purchased at the Market Value with the aggregate consideration received through the issuance of such rights, warrants, options, or convertible securities; provided, however, that to the extent any such issuance, sale, distribution or other grant is made to the holders of the Warrants, such holders shall not be entitled to the benefit of the adjustment provided for in this Section 3.3.  In the event of any such adjustment, the Exercise Price shall be adjusted to a number determined by dividing the Exercise Price immediately prior to such date of issuance by the above fraction.  Such adjustment shall be made whenever such rights, options or warrants are issued and shall become effective retroactively immediately after

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the record date for the determination of stockholders entitled to receive such rights, options, warrants or securities.

If the Company at any time shall issue two or more securities as a unit and one or more of such securities shall be rights, options or warrants for or securities convertible or exchangeable into, Common Stock subject to this Section 3.3, the consideration allocated to each such security shall be determined in good faith by a Board resolution, a certified copy of which shall be delivered to the Holder.

SECTION 3.4  Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets.  (a) In case the Company shall reorganize its capital or reclassify its capital stock (in each case, other than pursuant to a transaction to which Section 3.1 is applicable), consolidate or merge with or into another Person (where the Company is not the surviving entity or where there is a change in or distribution with respect to the Common Stock of the Company), or sell, transfer or otherwise dispose of all or substantially all its property, assets or business to another Person and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor or acquiring Person, or any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring Person (“Other Property”), are to be received by or distributed to the holders of Common Stock of the Company, then, each Holder shall have the right thereafter to receive, upon exercise of such Warrant, the number of shares of common stock of the successor or acquiring Person or of the Company, if it is the surviving entity, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event , except in the event that a Section 3.4(a) Required Regulatory Approval (as defined below) has not been obtained.

A “Section 3.4(a) Required Regulatory Approval” shall mean any approval of the Securities and Exchange Commission required under the Public Utility Holding Company Act of 1935, as amended (“PUHCA”), with respect to the exercise of the rights of the Holder under this Section 3.4(a) which is required as a result of the Holder or any of its affiliates being subject to regulation as a “holding company” or a “subsidiary company” or an “affiliate” of a holding company or a “public utility company” (as such terms are defined under PUHCA) owing to the ownership by the Holder and its affiliates of any securities other than the Warrants or Common Stock.

(b)In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring Person (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined by resolution of the Board) in order to provide for adjustments of shares of the Common Stock for which this Warrant is exercisable which shall be as nearly equivalent as practicable to the adjustments provided for in this Article 3.

8

For purposes of this Section 3.4 “common stock of the successor or acquiring Person” shall include stock of such Person of any class which is not preferred as to dividends or assets over any other class of stock of such Person and which is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock.  The foregoing provisions of this Section 3.4 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or dispositions of assets.

SECTION 3.5  Issuance of Additional Shares of Common Stock.  If at any time the Company shall issue or sell any additional shares of Common Stock for gross consideration in an amount per additional share of Common Stock less than the Market Value (other than shares issued in respect of stock options granted pursuant to a plan approved by the shareholders of the Company), then (i) the number of shares of Common Stock for which this Warrant is exercisable shall be adjusted to equal the product obtained by multiplying the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such issue or sale by a fraction, (A) the numerator of which shall be the number of shares of Common Stock outstanding immediately after such issue or sale, and (B) the denominator of which shall be the sum of (1) the number of shares of Common Stock outstanding immediately prior to such issue or sale, and (2) the number of shares of Common Stock which could be purchased at such Market Value with the aggregate consideration received from the issuance or sale of the additional shares of Common Stock, and (ii) the Exercise Price shall be adjusted to equal (A) the Exercise Price immediately prior to such issue or sale multiplied by the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such issue or sale divided by (B) the number of shares for which this Warrant is exercisable immediately after such adjustment.  For the purposes of this Section 3.5, the date as of which the Market Value per share of Common Stock shall be computed shall be the earlier of (i) the date immediately prior to the date on which the Company shall enter into a firm contract for the issuance of such additional shares of Common Stock or (ii) the date immediately prior to the date of actual issuance of such additional shares of Common Stock.  In the event the Company enters into a contract to acquire another Person in which transaction Common Stock is to be issued in exchange for such Person’s securities based upon a floating exchange ratio, then the Common Stock to be so issued shall be deemed to have been issued on the date immediately before the date such contract is entered into and the consideration to be received therefor shall be deemed to be the value for such Common Stock derived from such ratio on such date.

SECTION 3.6  Other Events.  If any event occurs as to which the foregoing provisions of this Article 3 are not strictly applicable or, if strictly applicable, would not, in the good faith judgment of the Board, fairly and adequately protect the purchase rights of the Warrants in accordance with the essential intent and principles of such provisions, then the Board shall make such adjustments in the application of such provisions, in accordance with such essential intent and principles, as shall be reasonably necessary, in the good faith opinion of the Board, to protect such purchase rights as aforesaid.

SECTION 3.7  Superseding Adjustment.  Upon the expiration of any rights, options, warrants or conversion or exchange privileges which resulted in the adjustments pursuant to this Article 3, if any thereof shall not have been exercised, the number of Warrant

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Shares purchasable upon the exercise of each Warrant shall be readjusted as if (i) the only shares of Common Stock issuable upon exercise of such rights, options, warrants, conversion or exchange privileges were the shares of Common Stock, if any, actually issued upon the exercise of such rights, options, warrants or conversion or exchange privileges and (ii) shares of Common Stock actually issued, if any, were issuable for the consideration actually received by the Company upon such exercise plus the aggregate consideration, if any, actually received by the Company for the issuance, sale or grant of all such rights, options, warrants or conversion or exchange privileges whether or not exercised and the Exercise Price shall be readjusted inversely; provided, however, that no such readjustment shall (except by reason of an intervening adjustment under Section 3.1 or, if applicable, Section 3.6) have the effect of decreasing the number of Warrant Shares purchasable upon the exercise of each Warrant or increasing the Exercise Price by an amount in excess of the amount of the adjustments to the number of Warrant Shares purchasable and the Exercise Price initially made in respect of the issuance, sale or grant of such rights, options, warrants or conversion or exchange privileges.

SECTION 3.8  Minimum Adjustment.  The adjustments required by the preceding Sections of this Article 3 shall be made whenever and as often as any specified event requiring an adjustment shall occur, except that no adjustment of the Exercise Price or the number of shares of Common Stock purchasable upon exercise of the Warrants that would otherwise be required shall be made (except in the case of a subdivision or combination of shares of Common Stock, as provided for in Section 3.1) unless and until such adjustment either by itself or with other adjustments not previously made increases or decreases by at least 1% the Exercise Price or the number of shares of Common Stock purchasable upon exercise of the Warrants immediately prior to the making of such adjustment.  Any adjustment representing a change of less than such minimum amount shall be carried forward and made as soon as such adjustment, together with other adjustments required by this Article 3 and not previously made, would result in a minimum adjustment.  For the purpose of any adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence.  In computing adjustments under this Article 3, fractional interests in Common Stock shall be taken into account to the nearest one-hundredth of a share.

SECTION 3.9  Other Provisions Regarding Adjustments.  In the event that at any time, as a result of an adjustment made pursuant to Section 3.l hereof, the holder of this Warrant shall become entitled to receive any shares of capital stock of the Company other than shares of Common Stock, thereafter the number of such other shares of capital stock so receivable upon exercise of this Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Article 3 and the provisions contained elsewhere herein with respect to Common Stock shall apply on like terms to any such other shares.

SECTION 3.10  Challenge to Good Faith Determination.  Whenever the Board shall be required to make a determination in good faith of the Fair Value of any item under this Article 3 or any determination is provided for in the last paragraph of Section 3.3, such determination may be challenged in good faith by the Holder, and any dispute shall be resolved by an independent Investment Banking Firm selected by the Company and reasonably acceptable to the Holder.  The expenses of any challenge made by the Holder hereunder shall be borne by

10

the Company only if challenge is successful, otherwise such expenses shall be borne by the Holder.

SECTION 3.11  Notice of Adjustment.  Whenever the Exercise Price or the number of shares of Common Stock and other property, if any, purchasable upon exercise of Warrants is adjusted, as herein provided, the Company shall deliver to the Holder a certificate of a firm of independent accountants (who may be the regular accountants employed by the Company) or the Chief Financial Officer of the Company setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated (including a description of the basis on which the Board determined the Fair Value of any evidences of indebtedness, other securities or property or warrants or other subscription or purchase rights), and specifying the Exercise Price and the number of shares of Common Stock or other securities or property purchasable upon exercise of Warrants after giving effect to such adjustment.

SECTION 3.12  Notice of Certain Transactions.  In the event that the Company shall resolve or agree (i) to pay any dividend payable in securities of any class to the holders of its Common Stock or to make any other distribution to the holders of its Common Stock, (ii) to offer the holders of its Common Stock rights to subscribe for or to purchase any securities convertible into shares of Common Stock or shares of Common Stock or shares of stock of any class or any other securities, rights or options, (iii) to effect any reclassification of its Common Stock, capital reorganization, merger, consolidation or disposition of all or substantially all of its assets, or (iv) to take any other action requiring any adjustment of the number of Warrant Shares subject to this Warrantor the Exercise Price, the Company shall within five (5) business days send to the Holder, a notice of such proposed action or offer, such notice to be mailed to the Holder, which shall specify the record date for the purposes of such dividend, distribution or rights, or the date such issuance or event is to take place and the date of participation therein by the holders of Common Stock, if any such date is to be fixed, and shall briefly indicate the effect of such action on the Common Stock and on the number and kind of any other shares of stock and on other property, if any, and the number of shares of Common Stock and other securities or property, if any, purchasable upon exercise of each Warrant and the Exercise Price after giving effect to any adjustment which will be required as a result of such action.

SECTION 3.13  Issuance of Additional Warrants.  Prior to the declaration, issuance or consummation of any dividend, spin-off or other distribution or similar transaction by the Company of the capital stock of any of its Subsidiaries, the Company shall cause (i) additional warrants of such Subsidiary with, subject to clause (iii) below, substantially similar terms as the Warrants to be issued to the Holder or one or more of its nominees so that after giving effect to such transaction the Warrants and such warrants of such Subsidiary each represent the same percentage interest in the fully diluted number of common shares of such entity as the Warrants represented in the Company immediately prior to such transaction, (ii) any such Subsidiary to enter into a securityholders and registration rights agreement with similar terms, conditions, covenants and governance provisions as are provided for in the Securityholders Agreement with the Holder and/or its nominees, as appropriate and (iii) (A) the exercise price of the Warrants to be reduced by an amount reasonably acceptable to the Holder to reflect the value of the capital stock of the Subsidiary to be dividended, spun-off or otherwise distributed and (B) the exercise price of the additional warrants of such Subsidiary to be fixed in

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a manner reasonably acceptable to such Holder to reflect the amount by which the exercise price of the Warrants was reduced pursuant to clause (iii)(A) above, as adjusted to reflect any differences in the fully-diluted number of the shares of common stock of the Company and such Subsidiary

ARTICLE 4.

Transfer, Division and Combination

SECTION 4.1  Transfer.  Subject to compliance with Section 4.5, transfer of this Warrant and all rights hereunder, in whole or in part, shall be registered on the books of the Company to be maintained for such purpose, upon surrender of this Warrant at the principal office of the Company referred to in Section 2.3(a) or the office or agency designated by the Company pursuant to Article 4, together with a written assignment of this Warrant substantially in the form of Exhibit B hereto duly executed by the Holder or its agent or attorney and, if required, funds sufficient to pay any transfer taxes payable upon the making of such transfer.  Upon such surrender and, if required, such payment, the Company shall, subject to Section 4.5, execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled.  A Warrant, if properly assigned in compliance with Section 4.5, maybe exercised by a new Holder for the purchase of shares of Common Stock without having a new Warrant issued.  If requested by the Company, a new Holder shall acknowledge in writing, in form reasonably satisfactory to the Company, such Holder’s continuing obligations under Section 4.5 and Article 8.

SECTION 4.2  Division and Combination.  Subject to Section 4.5, this Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office or agency of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney.  Subject to compliance with Section 4.1 and with Section 4.5, as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice.

SECTION 4.3  Expenses.  The Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new Warrant or Warrants under this Article 4.

SECTION 4.4  Maintenance of Books.  The Company agrees to maintain, at its aforesaid office or agency, books for the registration or transfer of the Warrants.

SECTION 4.5  Restriction on Transfer.  (a)  This Warrant is subject to Section 3.3 of the Securityholders and Registration Rights Agreement and, to the extent provided for pursuant to Section 3.1 of the Securityholders Agreement, to the other terms and conditions of the Securityholders Agreement.  No transfer, sale, assignment, hypothecation or other disposition of this Warrant maybe made except in accordance with the provisions of Section 3.3 of the Securityholders Agreement.  To the extent provided for pursuant to Section 3.1 of the

12

Securityholders Agreement and, in any case, with respect to Section 3.3, the Holder, by acceptance of this Warrant, agrees to be bound by the applicable provisions of the Securityholders Agreement and all applicable benefits of the Securityholders Agreement shall inure to such Holder.

(b)  (i) Except as otherwise provided in this Section 4.5, each certificate for Warrant Shares initially issued upon the exercise of this Warrant, and each certificate for Warrant Shares issued to any transferee of any such certificate, shall be stamped or otherwise imprinted with a legend in substantially the following form:

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT OR LAWS OR THE RULES AND REGULATIONS THEREUNDER.”

(ii) Except as otherwise provided in this Section 4.5, each Warrant shall be stamped or otherwise imprinted with a legend in substantially the following form:

“NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT OR LAWS, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT.”

“THIS WARRANT IS SUBJECT TO SECTION 3.3 AND, IF APPLICABLE, SECTION 3.1 OF A SECURITYHOLDERS AND REGISTRATION RIGHTS AGREEMENT (A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THIS WARRANT MAY BE MADE EXCEPT IN COMPLIANCE WITH SECTION 3.3 OF SUCH SECURITYHOLDERS AGREEMENT.  THE HOLDER OF THIS WARRANT AGREES TO BE BOUND BY SECTION 3.3 OF SUCH SECURITYHOLDERS AGREEMENT.”

(c)Notwithstanding the provisions of Section 4.5(b), (i) the Company shall deliver Warrants or certificates for Warrant Shares without the legend set forth in any such clause if the securities referred to in such clause shall have been registered under the Securities Act or if such legend is otherwise not required under the Securities Act, and if such legend has been set forth on any previously delivered certificates, such legend shall be removed from any certificates at the request of the Holder if the securities referred to in such clause have been registered under the Securities Act, or if such legend is not otherwise required under the Securities Act.

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ARTICLE 5.

Loss or Mutilation

Upon receipt by the Company from any Holder of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of this Warrant and indemnity reasonably satisfactory to it (it being understood that the written agreement of the Holder shall be sufficient indemnity in the case of the initial Holder of this Warrant) and in case of mutilation upon surrender and cancellation hereof, the Company will execute and deliver in lieu hereof a new Warrant of like tenor to such Holder (without expense to the Holder); provided, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation.

ARTICLE 6.

Office of the Company

As long as any of the Warrants remain outstanding, the Company shall maintain an office or agency (which may be the principal executive offices of the Company) where the Warrants may be presented for exercise, registration of transfer, division or combination as provided in this Warrant.

ARTICLE 7.

Limitation of Liability

No provision hereof, in the absence of affirmative action by the Holder hereof to purchase shares of Common Stock, and no enumeration herein of the rights or privileges of the Holder hereof, shall give rise to any liability of such Holder for the Exercise Price or purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

ARTICLE 8.

Miscellaneous

SECTION 8.1  Nonwaiver and Expenses.  No course of dealing or any delay or failure to exercise any right hereunder on the part of the Holder hereof shall operate as a waiver of such right or otherwise prejudice such Holder’s rights, powers or remedies.  If the Company fails to make, when due, any payments provided for hereunder, or fails to comply with any other provision of this Warrant, the Company shall pay to the Holder hereof such amounts as shall be sufficient to cover any reasonable costs and expenses, including reasonable attorneys’ fees, including those of appellate proceedings, incurred by such Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

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SECTION 8.2  Financial Information.  The Company will file on or before the required date (including any permitted extensions) all required regular or periodic reports (pursuant to the Exchange Act) with the SEC and the Company will deliver to each Holder of a Warrant promptly upon their becoming available one copy of each report, notice or proxy statement sent by the Company to its stockholders generally.

SECTION 8.3  Entire Agreement; No Third-Party Beneficiaries.  This Warrant and the agreements referred to herein constitute the entire agreement, and supersede all prior agreements and understandings, both written and oral, between the Holder and the Company with respect to the subject matter of this Warrant.  This Warrant is not intended to confer upon any Person other than the Holder and the Company any rights or remedies.

SECTION 8.4  Amendment.  This Warrant and all other Warrants may be amended with the written consent of the holders of 50% of the outstanding Warrants.

SECTION 8.5  Notices.  Any notice or communication shall be in writing and delivered in person or mailed by first-class mail to the addresses set forth in the Securities Purchase Agreement with respect to the Company and, if applicable, the Holder or to the Holder at its last known address appearing on the books of the Company maintained for such purposes.

The Company and any Holder by notice to the other may designate additional or different addresses for subsequent notices or communications.

SECTION 8.6  Remedies.  The Company and the Holder hereof each stipulates that the remedies at law of each party hereto in the event of any default or threatened default by the other party in the performance or compliance with any of the terms of this Warrant are not and will not be adequate and that, to the fullest extent permitted by law, such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise.

SECTION 8.7  Governing Law.  The laws of the State of New York shall govern this Warrant, except to the extent that the General Corporation Law of the State of Ohio is applicable.

SECTION 8.8  Successors.  Subject to Section 4.5 hereof, this Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors and assigns of the Company and the Holder hereof, and shall be enforceable by any such successors and assigns.

SECTION 8.9  Headings.  The headings of the Articles and Sections of this Warrant have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof.

SECTION 8.10  Severability.  The provisions of this Warrant are severable, and if any clause or provision shall be held invalid, illegal or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect in that jurisdiction only such clause or provision, or part thereof, and shall not in any manner affect such clause or provision in any other jurisdiction or any other clause or provision of this Warrant in any jurisdiction.

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SECTION 8.11  Government Approval Necessary.  In order to comply with the provisions of Section 3.4(a), the Company shall use commercially reasonably efforts to obtain any authorization, consent or approval of any governmental or regulatory authority, including a Section 3.4(a) Required Regulatory Approval, necessary in order for the provisions of Section 3.4(a) to be effected.  The Company agrees to comply with Section 2.8 of the Securityholders Agreement as if such provision was set forth herein.

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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and its corporate seal to be impressed hereon and attested by its Secretary or an Assistant Secretary.

		DPL INC.
		By:
		Name:	John J. Gillen
		Title:	Senior Vice President
			and Chief Financial Officer
Attest:
Name:	Miggie E. Cramblit
Title:	Vice President, General Counsel
	and Corporate Secretary

17

EXHIBIT A

SUBSCRIPTION FORM

[To be executed only upon exercise of Warrant]

The undersigned registered owner of this Warrant irrevocably exercises this Warrant for the purchase of [up to] __________ Common Shares of DPL Inc., and [herewith makes payment therefor] [requests that the Company withhold the number of shares from the Common Shares receivable by the undersigned in accordance with the Cashless Exercise option specified in Section 2.3 of this Warrant](1), all at the price and on the terms and conditions specified in this Warrant and requests that certificates for the Common Shares hereby purchased (and any securities or other property issuable upon such exercise) be issued in the name of and delivered to _______________ whose address is ______________________________ and, if such Common Shares shall not include all of the Common Shares issuable as provided in this Warrant, that a new Warrant of like tenor and date for the balance of the Common Shares issuable hereunder be delivered to the undersigned.

(Name of Registered Owner)
(Signature of Registered Owner)
(Street Address)
(City)	(State)	(Zip Code)

NOTICE:The signature on this subscription must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatsoever.

1To be inserted if Cashless Exercise is requested.

A-1

EXHIBIT B

ASSIGNMENT FORM

FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under this Warrant, with respect to the number of Common Shares set forth below:

	No. of
Name and Address of Assignee	Common Shares

and does hereby irrevocably constitute and appoint ________________________ attorney-in-fact to register such transfer on the books of DPL Inc. maintained for the purpose, with full power of substitution in the premises.

Dated:
Name:
	(Print)
Signature:
Witness:

NOTICE:The signature on this subscription must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatsoever.

B-1

EX-4.I

Exhibit 4 (i)

EXECUTION COPY

SECURITYHOLDERS AND REGISTRATION RIGHTS AGREEMENT

by and among

DPL INC.,

DPL CAPITAL TRUST I,

DAYTON VENTURES LLC

and

DAYTON VENTURES, INC.,

dated as of March 13, 2000

TABLE OF CONTENTS

		Page
RECITALS		1
ARTICLE I
DEFINITIONS		2
SECTION 1.1	Certain Defined Terms	2
SECTION 1.2	Other Definitional Provisions	7
ARTICLE II
CORPORATE GOVERNANCE OF THE COMPANY		8
SECTION 2.1	Board Representation	8
SECTION 2.2	Available Financial Information	8
SECTION 2.3	Access	9
SECTION 2.4	Consents Rights of the Equity Purchaser	10
SECTION 2.5	Loss of Board and Consent Rights	11
SECTION 2.6	Actions Affecting Certain Distributions	11
SECTION 2.7	Issuances of Additional Securities	11
SECTION 2.8	Pre-Approval of Certain Transactions	12
ARTICLE III
TRANSFERS		12
SECTION 3.1	Transferees	12
SECTION 3.2	Transfer Restrictions	13
SECTION 3.3	Transfer Restrictions	13
SECTION 3.4	Redemption of the Voting Preferred Shares	13
SECTION 3.5	Purchase of the Trust Preferred Securities	13
ARTICLE IV
REGISTRATION RIGHTS WITH RESPECT TO THE WARRANTS AND THE WARRANT SHARES		14
SECTION 4.1	Shelf Registration Statement	14
SECTION 4.2	Registration on Request	16
SECTION 4.3	Incidental Registrations	20
ARTICLE V
REGISTRATION RIGHTS WITH RESPECT TO THE TRUST PREFERRED SECURITIES		21
SECTION 5.1	Registration on Request	21
SECTION 5.2	Liquidation of the Trust	25

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ARTICLE VI
REGISTRATION PROCEDURES		25
SECTION 6.1	Registration Procedures	25
SECTION 6.2	Information Supplied	28
SECTION 6.3	Restrictions on Disposition	28
SECTION 6.4	Indemnification	28
SECTION 6.5	Required Reports	31
SECTION 6.6	Selection of Counsel	31
SECTION 6.7	Holdback Agreement	31
SECTION 6.8	No Inconsistent Agreement	32
ARTICLE VII
STANDSTILL		32
SECTION 7.1	Acquisition of Additional Voting Securities	32
ARTICLE VIII
MISCELLANEOUS		34
SECTION 8.1	Indemnification; Reimbursement of Expenses	34
SECTION 8.2	Termination	35
SECTION 8.3	Amendments and Waivers	35
SECTION 8.4	Successors, Assigns, Transferees and Third Party Beneficiaries	35
SECTION 8.5	Notices	36
SECTION 8.6	Further Assurances	36
SECTION 8.7	Entire Agreement	36
SECTION 8.8	Delays or Omissions	36
SECTION 8.9	Governing Law; Jurisdiction; Waiver of Jury Trial	37
SECTION 8.10	Severability	37
SECTION 8.11	Effective Date	37
SECTION 8.12	Enforcement	37
SECTION 8.13	Titles and Subtitles	37
SECTION 8.14	No Recourse	37
SECTION 8.15	Counterparts; Facsimile Signatures	38

ii

SECURITYHOLDERS AND REGISTRATION RIGHTS AGREEMENT

THIS SECURITYHOLDERS AND REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is entered into as of March 13, 2000, among DPL Inc., an Ohio corporation (the “Company”), DPL Capital Trust I, a Delaware business trust (the “Trust), Dayton Ventures LLC, a Delaware limited liability company, together with such of its Affiliates (as defined in Section 10.1) as it shall designate as provided for herein (the “Equity Purchaser”) and Dayton Ventures, Inc., a Cayman Islands corporation, together with such of its Affiliates as it shall designate as provided for herein (the “Trust Preferred Purchaser” and, together with the Equity Purchaser, the “Purchasers”).

RECITALS

WHEREAS, the Company, the Trust, the Equity Purchaser and the Trust Preferred Purchaser have entered into a Securities Purchase Agreement, dated as of February 1, 2000 (the “Securities Purchase Agreement”), pursuant to which (i) the Company has agreed to sell to the Equity Purchaser and the Equity Purchaser has agreed to purchase from the Company (A) up to 6,800,000 of its Series B Preferred Shares, no par value, liquidation preference of $0.01 per share (the “Voting Preferred Shares”), having the rights, preferences, privileges and restrictions set forth  in the Certificate of Amendment in the form attached as Exhibit A to the Securities Purchase Agreement (the “Certificate of Amendment”) and (B) 31,600,000 warrants to purchase 31,600,000 (the “Warrant Shares”) of its Common Shares, at an exercise price of $21 per share, as provided in the Securities Purchase Agreement and in the form of warrant attached as Exhibit B to the Securities Purchase Agreement (the “Warrants”) and (ii) the Company and the Trust have agreed to sell to the Trust Preferred Purchaser, and the Trust Preferred Purchaser has agreed to purchase from the Trust, an aggregate of $550 million liquidation preference of 8.5% Capital Securities (liquidation amount $25 per capital security) (the “Trust Preferred Securities”), representing undivided beneficial interests in the assets of the Trust, guaranteed by the Company as to the payment of distributions, and as to payments on liquidation or redemption, to the extent set forth in a guarantee agreement to be substantially in the form attached as Exhibit C to the Securities Purchase Agreement to be entered into between the Company and The Bank of New York (Delaware), as trustee. The proceeds of the sale of the Trust Preferred Securities and an aggregate of $17,010,325 liquidation amount of its Common Securities (liquidation amount $25 per common security) by the Trust are to be invested in Junior Subordinated Debentures, (the “Subordinated Debentures”) of the Company to be substantially in the form attached as Exhibit D to the Securities Purchase Agreement to be issued pursuant to an Indenture (the “Indenture”) to be substantially in the form attached as Exhibit E to the Securities Purchase Agreement to be entered into between the Company and The Bank of New York, as trustee; and

WHEREAS, the parties hereto desire to enter into certain arrangements relating to the Company, the Trust, the Purchasers, the Voting Preferred Shares, the Warrants, the Warrant Shares and the Trust Preferred Securities to be effective as of the Closing (as defined below).

NOW, THEREFORE, in consideration of the foregoing recitals and of the mutual promises hereinafter set forth, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1  Certain Defined Terms.  As used herein, the following terms shall have the following meanings:

“Acquisition” has the meaning assigned to such term in Section 7.1(a).

“Acquisition Restrictions” has the meaning assigned to such term in Section 7.1(a).

“Acquisition Effect” has the meaning ascribed to such term in Section 4.2(g).

“Affiliate” means, with respect to any Person, any other Person that directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with, such specified Person, for so long as such Person remains so associated to the specified Person.

“Applicable Boards” has the meaning assigned to such term in Section 2.1(a).

“Articles” means the Amended Articles of Incorporation of the Company as in effect on the date hereof and as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof and the terms of this Agreement.

“beneficial owners” or “beneficially own” has the meaning given such term in Rule 13d-3 under the Exchange Act and a Person’s beneficial ownership of either Common Stock or Preferred Stock or other voting securities of the Company or Trust Preferred Securities shall be calculated in accordance with the provisions of such Rule; provided, however, that for purposes of determining beneficial ownership, a Person shall be deemed to be the beneficial owner of any security which may be acquired by such Person whether within sixty (60) days or thereafter, upon the conversion, exchange or exercise of any warrants, options, rights or other securities, including the Warrants.

“Business Day” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by law to be closed in The City of New York or Dayton, Ohio.

“Capital Stock” means, with respect to any Person at any time, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of capital stock, partnership interests (whether general or limited) or equivalent ownership interests in or issued by such Person and, with respect to the Company, includes any and all shares of Common Stock and Preferred Stock and, with respect to the Trust, includes the Trust Preferred Securities.

“Certificate of Amendment” has the meaning assigned to such term in the Recitals.

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“Claims” has the meaning assigned to such term in Section 6.4(a).

“Closing” has the meaning assigned to such term in the Securities Purchase Agreement.

“Closing Date” has the meaning assigned to such term in the Securities Purchase Agreement.

“Common Stock” means the common shares, par value $0.01 per share, ofthe Company and any securities issued in respect thereof, or in substitution therefor, in connection with any stock split, dividend, spin-off or combination, or any reclassification, recapitalization, merger, consolidation, exchange or other similar reorganization or business combination.

“Company Board” means the Board ofDirectors of the Company.

“Company Offering” has the meaning assigned to such term in Section 4.2(h).

“Company Registrable Securities” means any Warrants or Common Stock (including the Warrant Shares) held by any Holder. As to any particular Company Registrable Securities, once issued, such Company Registrable Securities shall cease to be Company Registrable Securities when (i) a registration statement with respect to the sale by the Holder of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (ii) such securities shall have been distributed to the public pursuant to Rule 144 or (iii) such securities shall have ceased to be outstanding. For purposes of this Agreement, any required calculation of the amount of, or percentage of, Company Registrable Securities shall be based on the number of shares of Common Stock which are Company Registrable Securities, including shares issuable upon the conversion, exchange or exercise of any security convertible, exchangeable or exercisable into Common Stock (including the Warrants).

“Consent Rights” has the meaning assigned to such term in Section 2.5(b).

“control” (including the terms “controlled by” and ‘‘under common control with”), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, as trustee or executor, by contract or otherwise.

“Damages” has the meaning assigned to such term in Section 8.1.

“Demand Party” has the meaning assigned to such term in Section 4.2(a).

“Director” means any member of any of the Applicable Boards.

“DP&L” means The Dayton Power and Light Company, an Ohio corporation.

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“DP&L Board” means the Board of Directors of DP&L.

“Equity Securities” means (i) with respect to the Company, any and all shares of Capital Stock of the Company, securities of the Company convertible into, or exchangeable or exercisable for, such shares, and options, warrants or other rights to acquire such shares (including the Warrants), and (ii) with respect to the Trust, any and all shares of Capital Stock of the Trust, securities of the Trust convertible into, or exchangeable or exercisable for, such shares, and options, warrants or other rights to acquire such shares.

“Excess Warrants” has the meaning assigned to such term in Section 3.3.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Fully-Diluted Basis” with respect to Voting Securities means the number of shares of Voting Securities which are issued and outstanding or owned or held, as applicable, at the date of determination plus the number of shares of Voting Securities issuable pursuant to any securities (other than Voting Securities), warrants, rights or options then outstanding, convertible into or exchangeable or exercisable for (whether or not subject to contingencies or passage of time or otherwise), Voting Securities (including the Warrants).

“GAAP” means generally accepted accounting principles, as in effect in the United States of America from time to time.

“Group” has the meaning assigned to such term in Section 13(d)(3) of the Exchange Act.

“Holder” means the Equity Purchaser, the Trust Preferred Purchaser and any other holder of Registrable Securities (including Affiliates of the Equity Purchaser or the Trust Preferred Purchaser) as well as any direct or indirect Transferees of the Equity Purchaser, the Trust Preferred Purchaser or any of their respective Affiliates entitled to the rights, and bound by the obligations, under this Agreement in accordance with Section 3.1 (b).

“Incur” or “Incurrence” means to incur, create, assume, guarantee or otherwise become directly or indirectly liable with respect to.

“Indebtedness” has the meaning assigned to such term in the Indenture.

“Indebtedness Rating” has the meaning assigned to such term in Section 2.5(a)(vi).

“Indemnified Parties” has the meaning assigned to such term in Section 6.4(a).

“KKR Observer” has the meaning assigned to such term in Section 2.1 (a).

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“KKR Representative” means any Director designated by the senior member of the Equity Purchaser pursuant to Section 2.1 of this Agreement.

“Law” has the meaning assigned to such term in the Securities Purchase Agreement.

“NASD” means the National Association of Securities Dealers, Inc.

“NYSE” means The New York Stock Exchange, Inc.

“Ownership Percentage” means, at any time, the ratio, expressed as a percentage, (i) of the total shares of Voting Securities of the Company beneficially owned by the Equity Purchaser and its Affiliates to (ii) the total number of outstanding shares of Voting Securities of the Company on a Fully-Diluted Basis, in each case assuming exercise of the Warrants but excluding the Voting Preferred Shares.

“Person” means any individual, corporation, limited liability company, limited or general partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivisions thereof or any Group comprised of two or more of the foregoing.

“Preferred Stock” means, collectively, the Series A Preferred Shares (as defined in the Securities Purchase Agreement) and the Voting Preferred Shares.

“PUHCA” means the Public Utility Holding Company Act of 1935, as amended, or any successor thereto.

“Purchaser Indemnitee” has the meaning assigned to such term in Section 8.1.

“Purchasers” has the meaning assigned to such term in the introductory paragraph.

“Registering Party” has the meaning assigned to such term in Section 6.1.

“Registrable Securities” means the Company Registrable Securities and the Trust Registrable Securities, as appropriate.

“Registration Expenses” means any and all expenses incident to performance of or compliance with Articles IV, V and VI of this Agreement, including (i) all SEC and NYSE or other securities exchange or NASD registration and filing fees, (ii) all fees and expenses of complying with securities or blue sky laws (including the reasonable fees and disbursements of counsel for the underwriters in connection with blue sky qualifications of the Registrable Securities), (iii) all printing, messenger and delivery expenses, (iv) all fees and expenses incurred in connection with the listing of the Registrable Securities on the NYSE or any other securities exchange or the NASD pursuant to this Agreement and all rating agency fees, (v) the fees and disbursements of counsel for the Company and/or the Trust and of their respective independent public accountants, including the expenses of any special audits and/or “cold comfort” letters required by or incident to such

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performance and compliance, (vi) the reasonable fees and disbursements of counsel selected pursuant to Section 6.6, (vii) any reasonable fees and disbursements of underwriters and their counsel customarily paid by the issuers or sellers of securities, and the reasonable fees and expenses of special experts retained in connection with the requested registration, but excluding underwriting discounts and commissions and transfer taxes, if any, and (viii) half of all expenses incurred in connection with any road shows (including the reasonable out-of-pocket expenses of the Holder of the applicable Registrable Securities).

“Regulations” means the Regulations of the Company, as in effect on the date hereof and as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof, the terms of the Articles and the terms of this Agreement.

“Rights Agreement” means the Rights Agreement, dated as of December 3, 1991, between the Company and the First National Bank of Boston, as Rights Agent, as amended by the Rights Amendment (as defined in the Securities Purchase Agreement), and any successor agreement covering substantially the same subject matter as the Rights Agreement.

“Rule 144” means Rule 144 (or any successor provision) under the Securities Act.

“SEC” means the U.S. Securities and Exchange Commission or any other federal agency then administering the Securities Act or the Exchange Act and other federal securities laws.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Shelf Registration” has the meaning assigned to such term in Section 4.1.

“Standstill Period” means the period commencing on the Closing Date and continuing until the fifth anniversary of such date.

“Subordinated Debentures” has the meaning given to such term in the Recitals.

“Subsidiary” means (i) any corporation of which a majority of the securities entitled to vote generally in the election of directors thereof, at the time as of which any determination is being made, are owned by another entity, either directly or indirectly, and (ii) any joint venture, general or limited partnership, limited liability company or other legal entity in which an entity is the record or beneficial owner, directly or indirectly, of a majority of the voting interests or the general partner and, with respect to the Company, includes the Trust. .

“Third Party” has the meaning assigned to such term in Section 7.1 (b).

“Transaction Agreements” has the meaning assigned to such term in the Securities Purchase Agreement.

“Transaction Delay Notice” has the meaning assigned to such term in Section 4.2(h).

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“Transfer” means, “directly or indirectly, to sell, transfer, assign, pledge, encumber, hypothecate or similarly dispose of, either voluntarily or involuntarily, or to enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, assignment, pledge, encumbrance, hypothecation or similar disposition of, any shares of Equity Securities beneficially owned by a Person or any interest in any shares of Equity Securities beneficially owned by a Person.

“Transferee” means any Person to whom the Equity Purchaser and/or the Trust Preferred Purchaser or any of their respective Affiliates or any Transferee thereof transfers Equity Securities of the Company and/or the Trust, as appropriate.

“Trust Preferred Securities” has the meaning assigned to such term in the Recitals.

“Trust Registrable Securities” means any Trust Preferred Security and any securities issued in respect thereof, or in substitution therefor, in connection with any stock split, divided, spin- off or combination, or any reclassification, recapitalization, merger, consolidation, exchange or other  similar reorganization or business combination, held by any Holder including, if the Trust is for any reason liquidated or otherwise dissolved, whether voluntarily or involuntarily, the Subordinated Debentures). As to any particular Trust Registrable Securities, once issued, such Trust Registrable Securities shall cease to be Trust Registrable Securities when (i) a registration statement with respect to the sale by the Holder of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (ii) such securities shall have been distributed to the public pursuant to Rule 144 (or any successor provision) under the Securities Act, or (iii) such securities shall have ceased to be outstanding.

“Voting Preferred Shares” has the meaning assigned to such term in the Recitals.

“Voting Securities” means, at any time, shares of any class of Equity Securities which are then entitled to vote generally in the election of Directors.

“Waiting Period” has the meaning assigned to such term in Section 3.5.

“Warrants” has the meaning assigned to such term in the Recitals.

“Warrant Shares” has the meaning assigned to such term in the Recitals.

SECTION 1.2 Other Definitional Provisions. (a) The words “hereof’, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Article and Section references are to this Agreement unless otherwise specified.

(b) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

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ARTICLE II

CORPORATE GOVERNANCE OF THE COMPANY

SECTION 2.1 Board Representation. (a) Subject to Section 2.5, the senior member of the Equity Purchaser shall be entitled to designate one person for election to, and the shareholder of the Trust Preferred Purchaser shall be entitled to designate one person to attend as a non-voting observer at all meetings of (and to receive all materials and information that voting Directors receive) (the “KKR Observer”), (i) the Company Board, (ii) the DP&L Board and (iii) the board of directors of any separate entity or entities formed to hold DP&L’s electricity generation, transmission and/or distribution businesses or any material portion thereof (other than a wholly owned Subsidiary of the Company or DP&L or any of their respective wholly owned Subsidiaries) (collectively, the “Applicable Boards”), and the Company agrees, to the extent permitted by Law to take such action as may be required under applicable Law (A) so that, effective as of the Closing, the Company Board and the DP&L Board shall each consist of eleven members and shall include the KKR Representative, (B) to include in any slate of nominees recommended by the Applicable Boards for election by the shareholders the KKR Representative, (C) to take such action as may be required under applicable Law to cause the initial KKR Representative to be designated to be a member of the class of the Directors on each Applicable Board which is a classified board having the longest remaining term (which in the case of the Company Board shall be the term extending until the 2003 annual meeting of shareholders), (D) to use its reasonable best efforts to cause the election of the KKR Representative to the Applicable Boards, including nominating such individual, or causing its Subsidiaries to nominate such individual, as appropriate, to be elected as a Director of the Applicable Boards and (E) not to take any action that would cause the number of Directors constituting any Applicable Board to be less than eleven at anyone time; provided that any KKR Representative or KKR Observer (other than those initially designated hereunder) must be reasonably satisfactory to the Company at the time of their designation hereunder; and, provided, further, that any Person who shall have served as the KKR Observer shall be automatically deemed satisfactory to the Company for designation as the KKR Representative. The KKR Observer may be changed at any time by the shareholder of the Trust Preferred Purchaser. The initial KKR Representative shall be one of George Roberts or Scott M. Stuart, and the initial KKR Observer shall be the other.

(b) In the event that a vacancy is created on any Applicable Board at any time by the death, disability, retirement, resignation or removal (with or without cause) of any KKR Representative, the Company shall use its reasonable best efforts to cause the remaining Directors on such Applicable Board to fill the vacancy created thereby to be filled by a new designee of the senior member of the Equity Purchaser as soon as possible, who is designated in the manner specified in this Section 2.1, and the Company hereby agrees to take, or cause to be taken, at any time and from time to time, all actions necessary to accomplish the same. Neither the Company, DP&L nor any of the Company’s other Subsidiaries or Affiliates shall take any action to cause the removal of any KKR Representative without cause.

SECTION 2.2 Available Financial Information. The Company will deliver, or will cause to be delivered, to the Equity Purchaser, the senior member of the Equity Purchaser, the Trust Preferred Purchaser and the shareholder of the Trust Preferred Purchaser:

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(i) as soon as practicable after the end of each fiscal year of the Company, and in any event within ninety (90) days thereafter, an unaudited unconsolidated balance sheet of the Company as of the end of such fiscal year, and unaudited unconsolidated statements of income and cash flows of the Company for such year, prepared in accordance with GAAP and setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and certified by the principal financial or accounting officer of the Company, except that such financial statements need not contain the notes required by GAAP; and

(ii) as soon as practicable after the end of the first, second and third quarterly accounting periods in each fiscal year of the Company, and in any event within forty-five (45) days thereafter, an unaudited unconsolidated balance sheet of the Company as of the end of each such quarterly period, and unaudited unconsolidated statements of income and cash flows of the Company for such period and for the current fiscal year to date, prepared in accordance with GAAP and setting forth in comparative form the figures for the corresponding periods of the previous fiscal year, subject to changes resulting from normal year-end audit adjustments, all in reasonable detail and certified by the principal financial or accounting officer of the Company, except that such financial statements need not contain the notes required by GAAP.

If the Company ceases to be a public reporting company under the Exchange Act or shall fail to comply with its reporting obligations under Exchange Act, the Company will deliver, or will cause to be delivered, to the Equity Purchaser, the senior member of the Equity Purchaser, the Trust Preferred Purchaser and the shareholder of the Trust Preferred Purchaser:

(i) as soon as practicable after the end of each fiscal year of the Company, and in any event within ninety (90) days thereafter, a consolidated balance sheet of the Company and its Subsidiaries as of the end of such fiscal year, and consolidated statements of income and cash flows of the Company and its Subsidiaries for such year, prepared in accordance with GAAP and setting forth in each case in comparative form the figures for the previous fiscal year, allin reasonable detail and followed promptly thereafter (to the extent not available) by such financial statements accompanied by the report of independent public accountants of recognized national standing selected by the Company; and

(ii) as soon as practicable after the end of the first, second and third quarterly accounting periods in each fiscal year of the Company, and in any event within forty-five (45) days thereafter, a consolidated balance sheet of the Company and its Subsidiaries as of the end of each such quarterly period, and consolidated statements of income and cash flows of the Company and its Subsidiaries for such period and for the current fiscal year to date, prepared in accordance with GAAP and setting forth in comparative form the figures for the corresponding periods of the previous fiscal year, subject to changes resulting from normal year-end audit adjustments, all in reasonable detail and certified by the principal financial or accounting officer of the Company, except that such financial statements need not contain the notes required by GAAP.

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SECTION 2.3 Access. The Company shall, and shall cause its Subsidiaries, officers, directors, employees, auditors and other agents and representatives to (i) afford the Purchasers, the senior member of the Equity Purchaser and the shareholder of the Trust Preferred Purchaser, during normal business hours upon reasonable advance notice reasonable access at all reasonable times to its officers, employees, auditors, legal counsel, properties, offices, plants and other facilities and to all books and records, (ii) furnish the Purchasers, the senior member of the Equity Purchaser and the shareholder of the Trust Preferred Purchaser with all financial, operating and other data and information as either of the Purchasers, the senior member of the Equity Purchaser or the shareholder of the Trust Preferred Purchaser may from time to time reasonably request and (iii) afford the Purchasers, the senior member of the Equity Purchaser and the shareholder of the Trust Preferred Purchaser the opportunity to discuss the Company’s affairs, finances and accounts with the Company’s officers on a periodic basis; provided that the Purchasers, the senior member of the Equity Purchaser and the shareholder of the Trust Preferred Purchaser shall not avail themselves of this right to the extent that the KKR Representative, with respect to the Equity Purchaser and the senior member of the Equity Purchaser, and the KKR Observer, with respect to the Trust Preferred Purchaser and the shareholder of the Trust Preferred Purchaser, are able to obtain comparable access, information and opportunities through their rights as a Director and observer, respectively, of the Company Board and the DP&L Board. Notwithstanding the foregoing, nothing in this section shall give the Purchasers or their Affiliates any approval rights over the day-to-day activities of the Company.

SECTION 2.4 Consents Rights of the Equity Purchaser. (a) Subject to Section 2.5, in addition to any vote or consent of the Company Board and/or shareholders of the Company required by Law pr the Articles, the approval of the Equity Purchaser, not to be unreasonably withheld, shall be necessary for authorizing, effecting or validating the following actions by the Company:

(i) any amendment, alteration or change to the rights, preferences, privileges or powers of the Voting Preferred Shares;

(ii) the issuance of any other preferred stock of the Company (other than shares previously reserved in connection with the Rights Agreement) (A) of the same class as the Voting Preferred Shares or (B) ranking senior to the Voting Preferred Shares;

(iii) (A) any amendment, repeal or alteration of the Company’s Articles in a manner that adversely affects the holders of the Voting Preferred Shares; provided, however, that no increase in the number of authorized shares of Common Stock or Preferred Stock shall in itself be deemed to adversely affect such holders or (B) any amendment, repeal or alteration of the Company’s Regulations in a manner that adversely affects the holders of the Voting Preferred Shares, except for any such action taken solely by the shareholders of the Company;

(iv) any action by the Company that would result in the Equity Purchaser, together with any of its Affiliates, or any Transferee holding Voting Preferred Shares, holding in excess of 4.9% of the Voting Securities or becoming subject to regulation as a “holding

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company” or a “subsidiary company” or an “affiliate” of a “holding company” or a “public utility company” (as such terms are defined in PUHCA) (other than as a result of the exercise of the Warrants whether before or after any such action by the Company);

(v) any merger or consolidation with or into any other Person, or any acquisition of another Person, or any sale or transfer of all or a material portion of the assets of, or any other business combination transaction, in each case, involving the Company, DP&L or any other “significant subsidiary” (as defined in SEC Regulation S-X) of the Company whether in a single transaction or series of related transactions (a “Business Combination Transaction”) or any issuance of any Equity Securities of any of the Company’s Subsidiaries to any Third Party (other than the Company or any wholly owned Subsidiary of the Company) which would result (as determined pursuant to Section 2.4(b) below) in (A) any downgrade of the rating of any then existing Indebtedness of the Company or any its Subsidiaries or the rating assigned to the Trust Preferred Securities below an investment grade rating of Baa3 by Moody’s Investors Service or of BBB- by Standard & Poor’s Rating Services (collectively, the “Indebtedness Rating”), or (B) any new Indebtedness of the Company and/or its Subsidiaries to be Incurred in connection with any such transaction being assigned an initial rating below the Indebtedness Rating;

(vi) any spin-off or split-off, dividend or other distribution or any sale or other disposition of all or a material portion of any of the Company’s electricity generation, transmission or distribution businesses which would result (as determined pursuant to Section 2.4(b) below) in (A) any downgrade of the rating of any then existing Indebtedness of the Company or any its Subsidiaries or the rating assigned to the Trust Preferred Securities, below the Indebtedness Rating or (B) any new Indebtedness of the Company and/or its Subsidiaries to be Incurred in connection with any such transaction being assigned an initial rating below the Indebtedness Rating;

(vii) any Incurrence of Indebtedness which (A) would result (as determined pursuant to Section 2.4(b) below) in any downgrade of the rating of any then existing Indebtedness of the Company or any its Subsidiaries or the rating assigned to the Trust Preferred Securities, below the Indebtedness Rating or (B) would be assigned an initial rating below the Indebtedness Rating; or

(viii) any arrangement or contract to do any of the foregoing.

(b)   In connection with the exercise of the Equity Purchaser’s Consent Rights set forth in clauses (v), (vi) or (vii) of Section 2.4(a), the Company agrees that, prior to entering into or taking any of the transactions or actions specified in such clauses, it will seek and receive a confirmation of the rating of any of its then existing Indebtedness and the Trust Preferred Securities, and/or, as applicable, an initial rating of any new Indebtedness to be Incurred from each of Moody’s Investors Service and Standard & Poor’s Rating Service or any successors thereof.

SECTION 2.5 Loss of Board and Consent Rights. The board rights set forth in Section 2.1 and the consent rights set forth in Section 2.4(a) (the “Consent Rights”) shall continue

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only for so long as the Equity Purchaser and its Affiliates continue to beneficially own, in the aggregate, at least 12,640,000 shares of Common Stock (including the shares of Common Stock issuable upon exercise of the Warrants); provided, however, that the Equity Purchaser will be able to exercise the Consent Rights set forth in clause (iv) of Section 2.4(a) for so long as the Equity Purchaser or any of its Affiliates beneficially own at least two percent of the total outstanding shares of Capital Stock of the Company.

SECTION 2.6 Actions Affecting Certain Distributions. The Company will not, without the prior written consent of the Equity Purchaser, take any action which would reasonably be expected to directly restrict or limit the payment of distributions on the Subordinated Debentures or the Trust Preferred Securities.

SECTION 2.7 Issuances of Additional Securities. In connection with the declaration, issuance or consummation of any dividend, spin-off or other distribution or similar transaction by the Company of the capital stock of any of its Subsidiaries, the Company shall cause (i) to the extent that the Voting Preferred Shares and the Warrants remain outstanding, additional shares of voting preferred stock of such Subsidiary and additional warrants of such Subsidiary with substantially similar terms as the Voting Preferred Shares and the Warrants, respectively, to be issued to the Equity Purchaser or one or more of its nominees or its Transferees so that after giving effect to such transaction the Equity Purchaser and its nominees and Transferees have the same interest in voting preferred stock (and voting securities) and warrants in each of the Company and such Subsidiary as they had in the Voting Preferred Shares and the Warrants immediately prior to such transaction and (ii) any such Subsidiary to enter into a securityholders and registration rights agreement with substantially similar terms, conditions, covenants and governance provisions as are provided for in this Agreement with the Equity Purchaser and/or its nominees or any Transferees, as appropriate.

SECTION 2.8 Pre-Approval of Certain Transactions. In the event that the Company takes or plans to take any action that would or would reasonably be expected to cause it to lose its exemption from regulation as a “holding company” (as defined in PUHCA) under PUHCA, including any merger or other business combination with a “public-utility company” or a “holding company” thereof (as such terms are defined in PUHCA) if such combination results in the creation of a “holding company” registered under PUHCA Section 5, the Company and, if applicable, its successor shall use commercially reasonably efforts to obtain all prior approvals or exemptions, if any, from the SEC under PUHCA necessary for the consummation of all transactions contemplated by this Agreement and the other Transaction Agreements, including approval or exemption of (i) the issuance of securities by the Company or its successor in connection with the exercise of the Warrants, (ii) the capital structure of the Company or its successor both before and after the exercise of the Warrants, including approval or exemption of the continued existence of any minority interests in the Company or its successor and (iii) the repurchase or redemption of the Voting Preferred Shares, the Subordinated Debentures and the Trust Preferred Securities.

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ARTICLE III

TRANSFERS

SECTION 3.1 Transferees. (a) Subject to Section 3.1(b), no Transferee of the Equity Purchaser or the Trust Preferred Purchaser shall be obligated by, or entitled to rights under, this Agreement.

(b) No Transferee shall have any rights or obligations under this Agreement, except that:

(i) in the sole discretion of the Equity Purchaser, the Equity Purchaser may assign all or a portion of the rights and obligations of the Equity Purchaser under Sections 2.7 and 2.8 and Articles IV, VI and VIII (and such rights shall be further transferable to any further Transferee subject to this Section 3.1(b)(i));

(ii) in the sole discretion of the Trust Preferred Purchaser, the Trust Preferred Purchaser may assign all or a portion of the rights and obligations of the Trust Preferred Purchaser under Articles V, VI and VIII (and such rights shall be further transferable to any further Transferee subject to this Section 3. 1 (b)(ii)); and

(iii) any Transferee of Voting Preferred Shares and Warrants shall be obligated to comply with the provisions of Sections 3.2 and 3.3.

(c) Prior to the consummation of a Transfer from the Equity Purchaser or the Trust Preferred Purchaser, to the extent rights and obligations are to be assigned, and as a condition thereto, the applicable Transferee shall (i) agree in writing to be bound by the terms and conditions of this Agreement to the extent described in Section 3.1 (b) and (ii) provide the Company and the other parties to this Agreement at such time complete information for notices under this Agreement.

SECTION 3.2 Transfer Restrictions of the Voting Preferred Shares. Notwithstanding Section 3.1, the Equity Purchaser hereby agrees, and any Transferee of Voting Preferred Shares agrees, that neither it nor any of its Affiliates shall transfer any of their respective Voting Preferred Shares without transferring to the same Transferee an equal number of Warrants.

SECTION 3.3 Transfer Restrictions of the Warrants.  Notwithstanding Section 3.1, the Equity Purchaser hereby agrees, and any Transferee of Voting Preferred Shares agrees, that neither it nor any of its Affiliates shall transfer any of their respective Warrants without transferring to the same Transferee an equal number of Voting Preferred Shares; provided, however, to the extent that the Equity Purchaser or any of its Affiliates or any such Transferee holds a greater number of Warrants than Voting Preferred Shares (“Excess Warrants”), it may transfer any Excess Warrants without transferring Voting Preferred Shares.

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SECTION 3.4 Redemption of the Voting Preferred Shares. The Company hereby agrees that it shall not redeem any of the Voting Preferred Shares other than in accordance with the terms set forth in this Agreement and in the Certificate of Amendment.

SECTION 3.5 Purchase of the Trust Preferred Securities. The Company shall purchase, in each case on a date no less than six (6) months (the “Waiting Period”) after the date of exercise of all or any portion of the Warrants then held by the Equity Purchaser and/or its Affiliates (or by any Transferee of all or any portion of such Warrants if the exercise of such Warrants is substantially contemporaneous with the transfer of such Warrants to such Transferee, including, for example, a transfer to an underwriter in connection with its exercise of Warrants and the sale of shares of Common Stock issued upon such exercise), at the option of the Trust Preferred Purchaser, such option to be exercised during the period beginning on the expiration of the Waiting Period and ending on the date which is 60 days after the expiration date of the Waiting Period, such number of Trust Preferred Securities held by the Trust Preferred Purchaser for (i) a cash purchase price equal to the liquidation preference of such Trust Preferred Securities in an amount up to, at the election of the Trust Preferred Purchaser, the aggregate exercise price paid in cash, if any, upon the exercise of any such Warrants or (ii) at the Company’s option, a purchase price paid in cash or in shares of Common Stock (with each such share equal in value to the Fair Market Value (as defined in the Warrant) of one share of Common Stock on the trading date immediately prior to the exercise date of the applicable Warrants) in an amount up to, at the election of the Trust Preferred Purchaser, the aggregate exercise price paid through the surrender of Warrants pursuant to Section 2.3(b) of the Warrants, if any, upon the exercise of any such Warrants; provided that, in any case, upon the announcement or entering into of any agreement by the Company with respect to any Change of Control of the Company (as defined in the Securities Purchase Agreement), such right of the Trust Preferred Purchaser to have the Company purchase the Trust Preferred Securities, if exercised or entitled to be exercised, shall become effective immediately upon the earlier of (A) the expiration of the Waiting Period, (B) 30 days following any such announcement or entering into of any such agreement and (C) the consummation of any Change of Control of the Company and, in the case of clauses (B) and (C), the Waiting Period or any portion thereof shall no longer apply. If the Company suffers any adverse financial consequences by virtue of both the Equity Purchaser transferring Warrants which are then exercised by the Transferee and the Trust Preferred Purchaser then exercising its option (the “TPS Option”) to cause the Company to purchase Trust Preferred Securities all as contemplated above and such financial consequences are more adverse (whether by reason of increased taxes, reduced earnings or otherwise) to the Company than if both the Equity Purchaser had exercised rather than transferred such Warrants and the Trust Preferred Purchaser had then exercised the TPS Option, then the Equity Purchaser and the Trust Preferred Purchaser shall hold the Company harmless against the effects of such more adverse consequences if and then only to the extent such adverse consequences are more adverse than if both the Equity Purchaser had exercised rather than transferred such Warrants and the Trust Preferred Purchaser had then exercised the TPS Option.

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ARTICLE IV

REGISTRATION RIGHTS WITH RESPECT TO

THE WARRANTS AND THE WARRANT SHARES

SECTION 4.1 Shelf Registration Statement.

(a)  Filing; Effectiveness; Expenses.  Subject to Section 4.1(d), the Company shall:

(i) file on or before the one-hundred-eightieth (180^th) day following the Closing Date an “evergreen” shelf registration statement on Form S-3 pursuant to Rule 415 under the Securities Act(or any successor provisions), providing for an offering to be made on a continuous basis of the Company Registrable Securities (the “Shelf Registration”);

(ii) use commercially reasonable efforts to cause the Shelf Registration to become effective as soon as practicable after such filing;

(iii) use commercially reasonable efforts to maintain in effect, supplement and amend, if necessary, the Shelf Registration, as required by the instructions applicable to such registration form or by the Securities Act or as reasonably requested by the Holders of (or any underwriter for) more than 10% of the Warrants issued as of the Closing or the Warrant Shares subject thereto;

(iv) furnish to the Holders of the Company Registrable Securities to which the Shelf Registration relates copies of any supplement or amendment to such Shelf Registration prior to such supplement or amendment being used and/or filed with the SEC; and

(v) pay all Registration Expenses in connection with the Shelf Registration, whether or not it becomes effective, and whether all, some or none of the Company Registrable Securities to which it relates are sold pursuant to it.

(b) Inclusion of Additional Securities. In no event shall the Shelf Registration include securities other than the Company Registrable Securities set forth in Section 4.1(a)(i) unless Holders of more than 66²/₃% of such Company Registrable Securities consent to such inclusion.

(c) Effective Shelf Registration Statement. (i) If at any time, the Shelf Registration ceases to be effective, then the Company shall use its best efforts to file and use its commercially reasonable efforts to cause to become effective a new “evergreen” shelf registration statement providing for an offering to be made on a continuous basis of the Warrants and the Warrant Shares.

(ii) If, after the Shelf Registration has become effective, it is interfered with by any stop order, injunction or other order or requirement of the SEC or other governmental agency or authority, then the Company shall use its commercially reasonable efforts to prevent the issuance of any stop order suspending the effectiveness of the registration statement or of any order preventing

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or suspending the use of any preliminary prospectus and, if any such order is issued, to obtain the withdrawal of any such order at the earliest possible moment.

(d) Notwithstanding Section 4.1 (a), at such time as the Equity Purchaser and its Affiliates are permitted to sell in a single quarter pursuant to Rule 144 all Common Stock either held by or underlying the Warrants held by the Equity Purchaser and its Affiliates, the obligations of the Company set forth in this Section 4.1 shall terminate and be of no further force and effect.

(e) (i) If the Company shall at any time furnish to the Equity Purchaser and/or any of its Transferees, a certificate signed by its chairman of the board, chief executive officer, president or any other of its authorized officers stating that the Company has pending or in process a material transaction, the disclosure of which would, in the good faith judgment of the Company Board, after consultation with its outside securities counsel, materially and adversely affect the Company, the Company may postpone the filing (but not the preparation) of the Shelf Registration for up to sixty (60) days; provided, however, that the Company shall not be permitted to postpone registration pursuant to this Section 4.1(e)(i) more than once. The Company shall promptly give the Equity Purchaser and/or its Transferees, as appropriate, written notice of any postponement made in accordance with the preceding sentence.

(ii) If the Company shall at any time furnish to the Equity Purchaser and/or any of its Transferees, a certificate signed by its chairman of the board, chief executive officer, president or any other of its authorized officers (a “Suspension Notice”) stating that the Company has been advised in writing by a nationally recognized investment banking firm selected by the Company that, in such firm’s opinion, resales of the Company Registrable Securities pursuant to the Shelf Registration would adversely affect any Company Offering (as defined in Section 4.2(h)(i)) with respect to which the Company has commenced preparations for a registration prior to the receipt of a Confirmation Request (as defined in Section 4.1 (f), the Equity Purchaser or such Transferees may not effect any such resales until the earliest of (A) 30 days after the completion of such Company Offering, (B) promptly after the abandonment of such Company Offering or (C) 120 days after the delivery of such Suspension Notice.

(iii) If upon receipt of a Confirmation Request, the Company determines in its good faith judgment after consultation with its securities counsel that the filing of an amendment or supplement to the Shelf Registration is necessary in order to effect resales pursuant to the Shelf Registration and such filing would require disclosure of material information which the Company has a bona fide business purpose for preserving as confidential and the Company provides the Holders a Suspension Notice within 48 hours of such receipt of a Confirmation Request, the Company shall not be required to comply with its obligations under Section 4(a)(iii), and the Equity Purchaser and/or Transferee, as applicable, may not effect any resales, until the earlier of (A) the date upon which such material information is disclosed to the public or ceases to be material or (B) 90 days after such Confirmation Request was received by the Company.

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(iv) Notwithstanding the provisions of Sections 4.1(e)(ii) and (iii), the Company shall be entitled to serve only one Suspension Notice (A) within any period of 180 consecutive days or (B) with respect to any two consecutive resales for which the Equity Purchaser or its Transferees deliver Confirmation Requests.

(f) At least 48 hours prior to effecting any sale of Company Registrable Securities pursuant to the Shelf Registration, the Holder will request the Company to confirm whether the Company is then exercising its rights pursuant to Section 4.1( e)(a “Confirmation Request”).

(g)  Underwritten Offering.  At the election of any Holder or group of Holders, in each case, holding in excess of 10% of the aggregate of the outstanding Warrants and Warrant Shares then issued, any resale pursuant to the Shelf Registration may involve an underwritten offering, and, in such case, the investment banker(s), underwriter(s) and manager(s) for such registration shall be selected  by the Holders of a majority of the Company Registrable Securities which are the subject of any such request; provided, however, that such investment banker(s), underwriter(s) and manager(s) shall be reasonably satisfactory to the Company.

SECTION 4.2  Registration on Request.

(a) Request. If, at any time after the date hereof, the Shelf Registration is not then effective, the Equity Purchaser or any other Holder or group of Holders, in each case, holding in excess of 10% of the aggregate of the outstanding Warrants and Warrant Shares then issued (provided that no Transferee of the Equity Purchaser or any of its Affiliates or of any Transferee shall be permitted to request a registration pursuant to this Section 4.2 unless the right to make such a request was transferred to such Transferee pursuant to Section 3.1 (b )(i)) (individually or collectively, as the case may be, the “Demand Party”) may request in writing that the Company effect the registration under the Securities Act of all or part of such Demand Party’s Company Registrable Securities. Any such request will specify (i) the number of Company Registrable Securities proposed to be sold and (ii) the intended method of disposition thereof. Subject to the other provisions of this Section 4.2, the Company shall promptly give written notice of such requested registration to all other Holders, and thereupon will, as expeditiously as possible, use its commercially reasonable efforts to effect the registration under the Securities Act of:

(i) the Company Registrable Securities which the Company has been so requested to register by the Demand Party; and

(ii) all other Company Registrable Securities of the same class(es) or series as are to be registered at the request of a Demand Party and which the Company has been requested to register by any other Holder thereof by written request given to the Company within thirty (30) days after the giving of such written notice by the Company (which request shall specify the amount and intended method of disposition of such Company Registrable Securities), all to the extent necessary to permit the disposition (in accordance with the intended method thereof as aforesaid) of the Company Registrable Securities so to be registered.

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(b) Limits on Registration Requests. Notwithstanding Section 4.2(a), (i) in no event shall the Company be required to effect more than five registrations pursuant to this Section 4.2 and (ii) the Company shall not be obligated to file a registration statement relating to any registration request under this Section 4.2 (other than a registration statement on Form S-3 or any successor or similar short-form registration statement) within a period of ninety (90) days after the effective date of any other registration statement relating to any registration request under this Section 4.2 or to any registration effected under Section 4.3, in either case which was not effected on Form S-3 (or any successor or similar short-form registration statement). Nothing in this Section 4.2 shall operate to limit the right of any Holder to (i) request the registration of Common Stock issuable upon the exercise of any Warrants held by such Holder notwithstanding the fact that at the time of request such Holder does not hold the Common Stock underlying such Warrants, or (ii) request the registration at one time of both Warrants exercisable into Common Stock and the Common Stock underlying any such Warrants.

(c) Registration Statement Form. The Company shall select the registration statement form for any registration pursuant to this Section 4.2; provided, however, that if any registration requested pursuant to this Section 4.2 which is proposed by the Company to be effected by the filing of a registration statement on Form S-3 (or any successor or similar short-form registration statement) shall be in connection with an underwritten public offering, and if the managing underwriter shall advise the Company in writing that, in its opinion, the use of another form of registration statement is of material importance to the success of such proposed offering, then such registration shall be effected on such other form.

(d) Expenses. The Company will pay all Registration Expenses in connection with registrations pursuant to this Section 4.2.

(e) Effective Registration Statement. A registration requested pursuant to this Section 4.2 will not be deemed to have been effected:

(i) unless a registration statement with respect thereto has become effective and remained effective in compliance with the provisions of the Securities Act with respect to the disposition of all Company Registrable Securities covered by such registration statement until the earlier of (x) such time as all of such Company Registrable Securities have been disposed of in accordance with the intended methods of disposition thereof set forth in such registration statement or (y) one-hundred-eighty (180) days after the effective date of such registration statement, except with respect to any registration statement filed pursuant to Rule 415 under the Securities Act, in which case the Company shall use its commercially reasonable efforts to keep such registration statement effective until the such time as all of the Company Registrable Securities cease to be Company Registrable Securities; provided, that if the failure of any such registration statement to become or remain effective in compliance with this Section 4.2(e)(i) is due solely to acts or omissions of the applicable Holders, such registration requested pursuant to this Section 4.2 will be deemed to have been effected;

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(ii)  if after it has become effective, the registration statement is interfered with by any stop order, injunction or other order or requirement of the SEC or other governmental agency or authority and does not thereafter become effective; or

(iii) if the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such registration are not satisfied or waived, other than by reason of a failure on the part of the Demand Party or other Holders.

(t) Underwritten Offering. At the election of the Demand Party, a requested registration pursuant to this Section 4.2 may involve an underwritten offering, the investment banker(s), underwriter(s) and manager(s) for such registration shall be selected by and, in such case, the Holders of a majority of the Company Registrable Securities which the Company has been requested to register; provided, however, that such investment banker(s), underwriter(s) and manager(s) shall be reasonably satisfactory to the Company.

(g) Priority in Requested Registrations. If a requested registration pursuant to this Section 4.2 involves an underwritten offering and the managing underwriter advises the Company in writing that, in its opinion, the number of securities to be included in such registration would be likely to have an adverse effect on the price, timing or distribution of the securities to be offered in such offering as contemplated by the Holders (an “Adverse Effect”), then the Company shall include in such registration Company Registrable Securities requested to be included in such registration by the Demand Party and all other Holders of Company Registrable Securities pursuant to this Section 4.2 on a pro rata basis to the extent that the managing underwriter believes that such Company Registrable Securities can be sold in such offering without having an Adverse Effect. If the managing underwriter of any underwritten offering shall advise the Holders participating in a registration pursuant to this Section 4.2 that the Company Registrable Securities covered by the registration statement cannot be sold in such offering within a price range acceptable to the Demand Party, then the Demand Party shall have the right to notify the Company that it has determined that the registration statement be abandoned or withdrawn, in which event the Company shall abandon or withdraw such registration statement.

(h) Postponements in Requested Registrations. (i) If, upon receipt of a registration request pursuant to Section 4.2(a), the Company is advised in writing by a nationally recognized investment banking firm selected by the Company that, in such firm’s opinion, a registration at the time and on the terms requested would adversely affect any public offering of securities of the Company by the Company (other than in connection with employee benefit and similar plans) (a “Company Offering”) with respect to which the Company has commenced preparations for a registration prior to the receipt of a registration request pursuant to Section 4.2(a) and the Company furnishes the Holders with a certificate signed by the Chief Executive Officer or Chief Financial Officer of the Company to such effect (the “Transaction Delay Notice”) promptly after such request, the Company shall not be required to effect a registration pursuant to Section 4.2(a) until the earliest of (A) 30 days after the completion of such Company Offering, (B) promptly after the abandonment of such Company Offering or (C) 120 days after the date of the Transaction Delay Notice; provided, however, that in any event the Company shall not be required to effect any registration prior to the

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termination, waiver or reduction of any “blackout period” required by the underwriters to be applicable to the Holders or the Company, if any, in connection with any Company Offering.

(ii) If upon receipt of a registration request pursuant to Section 4.2(a) or while a registration request pursuant to Section 4.2(a) is pending, the Company determines in its good faith judgment after consultation with its securities counsel that the filing of a registration statement would require disclosure of material information which the Company has a bona fide business purpose for preserving as confidential and the Company provides the Holders written notice (the “Information Delay Notice” and, together with the Transaction Delay Notice, the “Delay Notice”) thereof promptly after the Company makes such determination, which shall be made promptly after the receipt of any request, the Company shall not be required to comply with its obligations under Section 4.2(a) until the earlier of (A) the date upon which such material information is disclosed to the public or ceases to be material or (B) 90 days after the Holders’ receipt of such notice.

(iii) Notwithstanding the foregoing provisions of this Section 4.2(h), the Company shall be entitled to serve only one Delay Notice (i) within any period of 180 consecutive days or (ii) with respect to any two consecutive registrations requested pursuant to Section 4.2(a).

(iv) At any time when a registration statement effected pursuant to Section 4.2(a) hereunder relating to Company Registrable Securities is effective and a prospectus relating thereto is required to be delivered under the Securities Act within the appropriate period mentioned in Section 6.1 (b) hereunder, that the Company becomes aware that the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, to the extent that the amendment or supplement to such prospectus necessary to correct such untrue statement of a material fact or omission to state a material fact would require disclosure of material information which the Company has a bona fide business purpose for preserving as confidential and the Company provides the Holders written notice thereof promptly after the Company makes such determination, the Holders shall suspend sales of Company Registrable Securities pursuant to such registration statement and the Company shall not be required to comply with its obligations under Section 6.1 (f) ’until the earlier of (A) the date upon which such material information is disclosed to the public or ceases to be material or (B) 90 days after the Holders’ receipt of such written notice. If the Holders’ disposition of Company Registrable Securities is discontinued pursuant to the foregoing sentence, unless the Company thereafter extends the effectiveness of the registration statement to permit dispositions of Company Registrable Securities by the Holders for an aggregate of 60 days, the registration statement shall not be counted for purposes of determining the number of registrations permitted under Section 4.2(b) hereof.

(i) Additional Rights. If the Company at any time grants to any other holders of Common Stock (or securities that are convertible, exchangeable or exercisable into Common Stock) any rights to request the Company to effect the registration under the Securities Act of any such shares of Common Stock (or any such securities) on terms more favorable to such holders than the terms set forth in this Section 4.2, the terms of this Section 4.2 shall be deemed amended or supplemented to the extent necessary to provide the Holders such more favorable rights and benefits.

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SECTION 4.3 Incidental Registrations. (a) If the Company at any time after the date hereof proposes to register Equity Securities under the Securities Act (other than a registration on Form S-4 or S-8, or any successor or other forms promulgated for similar purposes), whether or not for sale for its own account, in a manner which would permit registration of Company Registrable Securities for sale to the public under the Securities Act, it will, at each such time, give prompt written notice to all Holders of its intention to do so and of such Holders’ rights under this Agreement. Upon the written request of any such Holder made within thirty (30) days after the receipt of any such notice (which request shall specify the Registrable Securities intended to be disposed of by such Holder), the Company will use its commercially reasonable efforts to effect the registration under the Securities Act of all Company Registrable Securities which the Company has been so requested to register by the Holders thereof; provided, that (i) if, at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to proceed with the proposed registration of the securities to be sold by it, the Company may, at its election, give written notice of such determination to each Holder and, thereupon, shall be relieved of its obligation to register any Company Registrable Securities in connection with such registration (but not from its obligation to pay the Registration Expenses in connection therewith), and (ii) if such registration involves an underwritten offering, all Holders requesting to be included in the Company’s registration must sell their Company Registrable Securities to the underwriters selected by the Company on the same terms and conditions as apply to the Company, with such differences, including any with respect to indemnification and liability insurance, as may be customary or appropriate in combined primary and secondary offerings. If a registration requested pursuant to this Section involves an underwritten public offering, any Holder requesting to be included in such registration may elect, in writing prior to the effective date of the registration statement filed in connection with such registration, not to register all or any part of such securities in connection with such registration. Nothing in this Section shall operate to limit the right of any Holder to request the registration of Common Stock issuable upon conversion, exchange or exercise of securities, including Warrants, held by such Holder notwithstanding the fact that at the time of request such Holder does not hold the Common Stock underlying such securities. The registrations provided for in this Section 4.3 are in addition to, and not in lieu of, registrations made upon the request of the Equity Purchaser and any other Holder in accordance with Sections 4.1 and 4.2.

(b) Expenses. The Company will pay all Registration Expenses in connection with each registration of Company Registrable Securities requested pursuant to this Section 4.3.

(c) Priority in Incidental Registrations. If a registration pursuant to this Section 4.3 involves an underwritten offering and the managing underwriter advises the Company in writing that, in its opinion, the number of Company Registrable Securities requested to be included in such registration would be likely to have an adverse effect on the price, timing or distribution of the securities to be offered in such offering as contemplated by the Company (other than the Company Registrable Securities), then the Company shall include in such registration (a) first, 100% of the securities the Company proposes to sell and (b) second, to the extent of the amount of Company Registrable Securities requested to be included in such registration which, in the opinion of such managing underwriter, can be sold without having the adverse effect referred to above, the amount

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of Company Registrable Securities which the Holders have requested to be included in such registration, such amount to be allocated pro rata among all requesting Holders on the basis of the relative amount of Company Registrable Securities then held by each such Holder (provided, that any such amount thereby allocated to any such Holder that exceeds such Holder’s request shall be reallocated among the remaining requested Holders and Other Holders in like manner).

ARTICLE V

REGISTRATION RIGHTS WITH RESPECT TO THE

TRUST PREFERRED SECURITIES

SECTION 5.1  Registration on Request.

(a) Request. At any time after the date hereof, the Trust Preferred Purchaser or any other Holder of Trust Registrable Securities or group of Holders, in each case, holding in excess of 10% of the aggregate principal amount of the Trust Preferred Securities then outstanding (provided that no Transferee of the Trust Preferred Purchaser or any of its Affiliates or of any Transferee shall be permitted to request a registration pursuant to this Section 5.1 unless the right to make such a request was transferred to such Transferee pursuant to Section 3.1(b)(ii)), individually or collectively, as the case may be (the “Trust Demand Party”), may request in writing that the Company and the Trust effect the registration under the Securities Act of all or part of such Trust Demand Party’s Trust Registrable Securities. Any such request will specify (i) the number of Trust Registrable Securities proposed to be sold and (ii) the intended method of disposition thereof. Subject to the other provisions of this Section 5.1, the Trust shall, and the Company shall cause the Trust to, promptly give written notice of such requested registration to all other Holders of Trust Registrable Securities, and thereupon will, as expeditiously as possible, use its commercially reasonable efforts to effect the registration under the Securities Act of:

(i) the Trust Registrable Securities which the Company and the Trust have been so requested to register by the Trust Demand Party; and

(ii) all other Trust Registrable Securities of the same class(es) or series as are to be registered at the request of a Trust Demand Party and which the Trust has been requested to register by any other Holder of Trust Registrable Securities by written request given to the Company and the Trust within thirty (30) days after the giving of such written notice by the Trust (which request shall specify the amount and intended method of disposition of such Trust Registrable Securities), all to the extent necessary to permit the disposition (in accordance with the intended method thereof as aforesaid) of the Trust Registrable Securities so to be registered.

(b) Limits on Registration Requests. Notwithstanding Section 5.1(a), (i) in no event shall the Company and the Trust be required to effect more than five registrations pursuant to this Section 5.1 and (ii) the Company and the Trust shall not be obligated to file a registration statement relating to any registration request under this Section 5.1 (other than a registration statement on Form

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S-3 or any successor or similar short-form registration statement) within a period of ninety (90) days after the effective date of any other registration statement relating to any registration request under this Section 5.1 which was not effected on Form S-3 (or any successor or similar short-form registration statement).

(c) Registration Statement Form. The Company and the Trust shall select the registration statement form for any registration pursuant to this Section 5.1; provided, however, that if any registration requested pursuant to this Section 5.1 which is proposed by the Company and the Trust to be effected by the filing of a registration statement on Form S-3 (or any successor or similar short-form registration statement) shall be in connection, with an underwritten public offering, and if the managing underwriter shall advise the Company and the Trust in writing that, in its opinion, the use of another form of registration statement is of material importance to the success of such proposed offering, then such registration shall be effected on such other form.

(d) Expenses. The Company and the Trust will pay all Registration Expenses in connection with registrations pursuant to this Section 5.1.

(e) Effective Registration Statement. A registration requested pursuant to this Section 5.1 will not be deemed to have been effected:

(i) unless a registration statement with respect thereto has become effective and remained effective in compliance with the provisions of the Securities Act with respect to the disposition of all Trust Registrable Securities covered by such registration statement until the earlier of (x) such time as all of such Trust Registrable Securities have been disposed of in accordance with the intended methods of disposition thereof set forth in such registration statement or (y) one-hundred-eighty (180) days after the effective date of such registration statement, except with respect to any registration statement filed pursuant to Rule 415 under the Securities Act, in which case the Company and the Trust shall use its commercially reasonable efforts to keep such registration statement effective until the such time as all of the Trust Registrable Securities cease to be Trust Registrable Securities; provided, that if the failure of any such registration statement to become or remain effective in compliance with this Section 5.1(e)(i) is due solely to acts or omissions of the applicable Holders, such registration requested pursuant to this Section 5.1 will be deemed to have been effected;

(ii) if after it has become effective, the registration statement is interfered with by any stop order, injunction or other order or requirement of the SEC or other governmental agency or authority and does not thereafter become effective; or

(iii) if the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such registration are not satisfied or waived, other than by reason of a failure on the part of the Trust Demand Party or other Holders of Trust Registrable Securities.

(f) Selection of Underwriters. At the election of the Trust Demand Party, a requested registration pursuant to this Section 5.1 may involve an underwritten offering, and, in such case, the

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investment banker(s), underwriter(s) and manager(s) for such registration shall be selected by the Holders of a majority of the Trust Registrable Securities which the Company and the Trust have been requested to register; provided, however, that such investment banker(s), underwriter(s) and manager(s) shall be reasonably satisfactory to the Company.

(g) Priority in Requested Registrations. If a requested registration pursuant to this Section 5.1 involves an underwritten offering and the managing underwriter advises the Company and the Trust in writing that, in its opinion, the number of Trust Registrable Securities to be included in such registration would be likely to have an Adverse Effect, then the Company and the Trust shall include in such registration the Trust Registrable Securities requested to be included in such registration by the Trust Demand Party and all other Holders of Trust Registrable Securities pursuant to this Section 5.1 on a pro rata basis to the extent that the managing underwriter believes that such Trust Registrable Securities can be sold in such offering without having an Adverse Effect. If the managing underwriter of any underwritten offering shall advise the Holders participating in a registration pursuant to this Section 5.1 that the Trust Registrable Securities covered by the registration statement cannot be sold in such offering within a price range acceptable to the Trust Demand Party, then the Trust Demand Party shall have the right to notify the Company and the Trust that it has determined that the registration statement be abandoned or withdrawn, in which event the Company and the Trust shall abandon or withdraw such registration statement.

(h) Postponements in Requested Registrations. (i) If, upon receipt of a registration request pursuant to Section 5.1(a), the Company is advised in writing by a nationally recognized investment banking firm selected by the Company that, in such firm’s opinion, a registration at the time and on the terms requested would adversely affect any Company Offering with respect to which the Company has commenced preparations for a registration prior to the receipt of a registration request pursuant to Section 5.1 (a) and the Company furnishes the Holders with a Transaction Delay Notice promptly after such request, the Company shall not be required to effect a registration pursuant to Section 5.1 (a) until the earliest of (A) 30 days after the completion of such Company offering, (B) promptly after the abandonment of such Company Offering or (C) 120 days after the date of the Transaction Delay Notice; provided, however, that in any event the Company shall not be required to reflect any registration prior to the termination, waiver or reduction of any “blackout period” required by the underwriters to be applicable to the Holders or the Company, if any, in connection with any Company Offering.

(ii) If upon receipt of a registration request pursuant to Section 4.2(a) or while a registration request pursuant to Section 5.1(a) is pending, the Company determines in its good faith judgment after consultation with its securities counsel that the filing of a registration statement would require disclosure of material information which the Company has a bona fide business purpose for preserving as confidential and the Company provides the Holders an Information Delay Notice promptly after the Company makes such determination, which shall be made promptly after the receipt of any request, the Company shall not be required to comply with its obligations under Section 5.1 (a) until the earlier of (A) the date upon which such material information is disclosed to the public or ceases to be material or (B) 90 days after the Holders’ receipt of such notice.

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(iii) Notwithstanding the foregoing provisions of this Section 5.1 (h), the Company shall be entitled to serve only one Delay Notice (i) within any period of 180 consecutive days or (ii) with respect to any two consecutive registrations requested pursuant to Section 5.1 (a).

(iv) At any time when a registration statement effected pursuant to Section 5.l(a) hereunder relating to Trust Registrable Securities is effective and a prospectus relating thereto is required to be delivered under the Securities Act within the appropriate period mentioned in Section 6.1(b) hereunder, that the Company becomes aware that the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, to the extent that the amendment or supplement to such prospectus necessary to correct such untrue statement of a material fact or omission to state a material fact would require disclosure of material information which the Company has a bona fide business purpose for preserving as confidential and the Company provides the Holders written notice thereof promptly after the Company makes such determination, the Holders shall suspend sales of Trust Registrable Securities pursuant to such registration statement and the Company shall not be required to comply with its obligations under Section 6.1 (f) until the earlier of (A) the date upon which such material information s disclosed to the public or ceases to be material or (B) 90 days after the Holders’ receipt of such written notice. If the Holders’ disposition of Trust Registrable Securities is discontinued pursuant to the foregoing sentence, unless the Company thereafter extends the effectiveness of the registration statement to permit dispositions of Trust Registrable Securities by the Holders for an aggregate of 60 days, the registration statement shall not be counted for purposes of determining the number of registrations permitted under Section 5.1 (b) hereof.

(v) Additional Rights. If the Company or the Trust at any time grants to any other holders of any of its Equity Securities any rights to request the Company or the Trust to effect the registration under the Securities Act of any such Equity Securities on terms more favorable to such holders than the terms set forth in this Section 5.1, the terms of this Section 5.1 shall be deemed amended or supplemented to the extent necessary to provide the Holders such more favorable rights and benefits.

SECTION 5.2 Liquidation of the Trust. The parties hereto agree that if the Trust is for any reason liquidated or otherwise dissolved, whether voluntarily or involuntarily, then the provisions of Section 5.1 shall apply in their entirety to the Subordinated Debentures.

ARTICLE VI

REGISTRATION PROCEDURES

SECTION 6.1 Registration Procedures. If and whenever the Company or the Trust (the “Registering Party”) is required to use its commercially reasonable efforts to effect or cause the registration of any Registrable Securities under the Securities Act as provided in this Agreement, such Registering Party will, as expeditiously as possible:

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(a) prepare and, in any event within thirty (30) days after the end of the period within which a request for registration may be given to such Registering Party. file with the SEC a registration statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such registration statement to become effective within ninety (90) days of the initial filing;

(b) prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for a period not in excess of one-hundred-eighty (180) days (except in the case of a Shelf Registration which the Company shall keep continuously effective subject to Section 4.1 (d) hereof) and to comply with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement; provided, however, that before filing a registration statement or prospectus, or any amendments or supplements thereto in accordance with Sections 6.1 (a) or (b), such Registering Party will furnish to counsel selected pursuant to Section 6.6 hereof copies of all documents proposed to be filed, which documents will be subject to the review of such counsel;

(c) furnish to each seller of such Registrable Securities such number of copies of such registration statement and of each amendment and supplement thereto (in each case including all exhibits filed therewith, including any documents incorporated by reference), such number of copies of the prospectus included in such registration statement (including each preliminary prospectus and summary prospectus), in conformity with the requirements of the Securities Act, and such other documents as such seller may reasonably request in order to facilitate the disposition of the Registrable Securities by such seller;

(d) use its commercially reasonable efforts to register or qualify such Registrable Securities covered by such registration in such jurisdictions as each seller shall reasonably request, and do any and all other acts and things which may be reasonably necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by such seller, except that such Registering Party shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction where, but for the requirements of this subsection (d), it would not be obligated to be so qualified, to subject itself to taxation in any such jurisdiction or to consent to general service of process in any such jurisdiction;

(e) use its commercially reasonable efforts to cause such Registrable Securities covered by such registration statement to be registered with or approved bysuch other governmental authorities as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Registrable Securities;

(f) notify each seller of any such Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of such Registering Party’s becoming aware that the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to

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state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and at the request of any such seller, prepare and furnish to such seller a reasonable number of copies of an amended or supplemental prospectus as may be necessary so that, as thereafter delivered to the Sellers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing;

(g) otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable (but not more than eighteen (18) months) after the effective date of the registration statement, an earnings statement which shall satisfy the provisions of Section 11 (a) of the Securities Act;

(h) use its commercially reasonable efforts to list all Registrable Securities covered by such registration statement on the NYSE or any other national securities exchange on which Registrable Securities of the same class covered by such registration statement are then listed and, if no such Registrable Securities are so listed, on the NYSE or any national securities exchange on which the Common Stock is then listed;

(h) enter into such customary agreements (including an underwriting agreement in customary form), which may include indemnification provisions in favor of underwriters and other Persons in addition to, or in substitution for the provisions of Section 6.4 hereof, and take such other actions as sellers of a majority of shares of such Registrable Securities or the underwriters, if any, reasonably requested in order to expedite or facilitate the disposition of such Registrable Securities;

(i) obtain a “cold comfort” letter or letters from such Registering Party’s independent public accounts in customary form and covering matters of the type customarily covered by “cold comfort” letters as the seller or sellers of a majority of shares of such Registrable Securities shall reasonably request;

(j) make available for inspection by any seller of such Registrable Securities covered by such registration statement, by any underwriter participating in any disposition to be effected pursuant to such registration statement and by any attorney, accountant or other agent retained by any such seller or any such underwriter, all pertinent financial and other records, pertinent corporate documents and properties of such Registering Party, and cause all of such Registering Party’s officers, directors and employees to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement;

(k) notify counsel (selected pursuant to Section 6.6 hereof) for the Holders of Registrable Securities included in such registration statement and the managing underwriter or agent, immediately, and confirm the notice in writing (i) when the registration statement, or any post-effective amendment to the registration statement, shall have become effective, or any supplement to the prospectus or any amendment to the prospectus shall have been filed, (ii) of the receipt of any comments from the SEC, (iii) of any request of the SEC to amend the registration statement or

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amend or supplement the prospectus or for additional information, and (iv) of the issuance by the SEC of any stop order suspending the effectiveness of the registration statement or of any order preventing or suspending the use of any preliminary prospectus, or of the suspension of the qualification of the registration statement for offering or sale in any jurisdiction, or of the institution or threatening of any proceedings for any of such purposes;

(l) make every reasonable effort to prevent the issuance of any stop order suspending the effectiveness of the registration statement or of any order preventing or suspending the use of any preliminary prospectus and, if any such order is issued, to obtain the withdrawal of any such order at the earliest possible moment;

(m) if requested by the managing underwriter or agent or any Holder of Registrable Securities covered by the registration statement, promptly incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriter or agent or such Holder reasonably requests to be included therein, including, with respect to the number of Registrable Securities being sold by such Holder to such underwriter or agent, the purchase price being paid therefor by such underwriter or agent and with respect to any other terms of the underwritten offering of the Registrable Securities to be sold in such offering; and make all required filings of such prospectus supplement or post-effective amendment as soon as practicable after being notified of the matters incorporated in such prospectus supplement or post-effective amendment;

(n) cooperate with the Holders of Registrable Securities covered by the registration statement and the managing underwriter or agent, if any, to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legends) representing securities to be sold under the registration statement, and enable such securities to be in such denominations and registered in such names as the managing underwriter or agent, if any, or such Holders may request;

(o) use its commercially reasonable efforts to obtain for delivery to the Holders of Registrable Securities being registered and to the underwriter or agent an opinion or opinions from counsel for such Registering Party in customary form and in form, substance and scope reasonably satisfactory to such Holders, underwriters or agents and their counsel;

(p) cooperate with each seller of Registrable Securities and each underwriter or agent participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the NYSE or any other securities exchange and/or the NASD; and

(q) use its commercially reasonable efforts (taking into account the interests of the Company) to make available the executive officers of such Registering Party to participate with the Holders of Registrable Securities and any underwriters in any “road shows” or other selling efforts that may be reasonably requested by the Holders in connection with the methods of distribution for the Registrable Securities.

SECTION 6.2  Information Supplied. The Registering Party may require each seller of Registrable Securities as to which any registration is being effected to furnish such Registering

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Party with such information regarding such seller and pertinent to the disclosure requirements relating to the registration and the distribution of such securities as such Registering Party may from time to time reasonably request in writing.

SECTION 6.3  Restrictions on Disposition.  Each Holder agrees that, upon receipt of any notice from the Registering Party of the happening of any event of the kind described in Section 6.1(f), such Holder will forthwith discontinue disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 6.1(f), and, if so directed by such Registering Party, such Holder will deliver to such Registering Party (at the Registering Party’s expense) all copies, other than permanent file copies then in such Holder’s possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice. In the event such Registering Party shall give any such notice, the period mentioned in Section 6.1(b) shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to Section 6.1(f) and to and including the date when each seller of Registrable Securities covered by such registration statement shall have received the copies of the supplemented or amended prospectus contemplated by Section 6.1(f).

SECTION 6.4  Indemnification. (a) In the event of any registration of any securities of a Registering Party under the Securities Act pursuant to Articles IV or V, such Registering Party shall, and it hereby does, indemnify and hold harmless, to the extent permitted by law, the seller of any Registrable Securities covered by such registration statement, each Affiliate of such seller and their respective directors, officers, employees and stockholders or members or general and limited partners (and any director, officer, Affiliate, employee, stockholder and controlling Person of any of the foregoing), each Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such seller or any such underwriter within the meaning of the Securities Act (collectively, the “Indemnified Parties”), against any and all losses, claims, damages or liabilities, joint or several, actions or proceedings (whether commenced or threatened) in respect thereof (“Claims”) and expenses (including reasonable attorney’s fees and reasonable expenses of investigation) to which such Indemnified Party may become subject under the Securities Act, common law or otherwise, insofar as such Claims or expenses arise out of, relate to or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the Securities Act, any preliminary, final or summary prospectus contained therein, or any amendment or supplement thereto, or (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in light of the circumstances under which they were made) not misleading; provided, that such Registering Party shall not be liable to any Indemnified Party in any such case to the extent that any such Claim or expense arises out of, relates to or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement or amendment or supplement thereto or in any such preliminary, final or summary prospectus in reliance upon and in conformity with written information furnished to such Registering Party through an instrument duly executed by or on behalf of such seller specifically stating that it is for use in the preparation thereof; and, provided, further, that such Registering Party will not be liable in any such case to the extent, but only to the extent, that the foregoing indemnity with respect to any untrue statement

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contained in or omitted from a registration statement or the prospectus shall not inure to the benefit of any party (or any person controlling such party) who is obligated to deliver a prospectus in transactions in a security as to which a registration statement has been filed pursuant to the Securities Act and from whom the person asserting any such Damages purchased any of the Registrable Securities to the extent that it is finally judicially determined that such Damages resulted solely from the fact that such party sold Registrable Securities to a person to whom there was not sent or given, at or prior to the written confirmation of such sale, a copy of the registration statement or the prospectus, as amended or supplemented, and (x) such Registering Party shall have previously and timely furnished sufficient copies of the registration statement or prospectus, as so amended or supplemented, to such party in accordance with this Agreement and (y) the registration statement or prospectus, as so amended or supplemented, would have corrected such untrue statement or omission of a material fact.  Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of any Indemnified Party and shall survive the transfer of securities by any seller.

(b) A Registering Party may require, as a condition to including any Registrable Securities in any registration statement filed in accordance with Sections 4.2, 4.3 or 5.1 herein, that it shall have received an undertaking reasonably satisfactory to it from the prospective seller of such Registrable Securities or any underwriter to indemnify and hold harmless (in the same manner and to the same extent as set forth in Section 6.4(a)) such Registering Party and all other prospective sellers or any underwriter, as the case may be, with respect to any untrue statement or alleged untrue statement in or omission or alleged omission from such registration statement, any preliminary, final or summary prospectus contained therein, or any amendment or supplement thereto, if such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to such Registering Party through an instrument duly executed by or on behalf of such seller or underwriter specifically stating that it is for use in the preparation of such registration statement, preliminary, final or summary prospectus or amendment or supplement, or a document incorporated by reference into any of the foregoing. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Registering Party or any of the prospective sellers, or any of their respective Affiliates, directors, officers or controlling Persons and shall survive the transfer of securities by any seller. In no event shall the liability of any selling Holder of Registrable Securities hereunder be greater in amount than the dollar amount of the proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation.

(c) Promptly after receipt by an indemnified party hereunder of written notice of the commencement of any action or proceeding with respect to which a claim for indemnification may be made pursuant to this Section 6.4, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action or proceeding; provided, however, that the failure of the indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under Section 6.4, except to the extent that the indemnifying party is materially prejudiced by such failure to give notice. In case any such action or proceeding is brought against an indemnified party, unless in such indemnified party’s reasonable judgment (after consultation with legal counsel) a conflict of interest between such indemnified and indemnifying parties may exist in respect of such action or

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proceeding, the indemnifying party will be entitled to participate in and to assume the defense thereof (at its expense), jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation; provided that, in the event, however, that the indemnifying party declines or fails to assume the defense of the action or proceeding or to employ counsel reasonably satisfactory to the indemnified party, in either case within a 3D-day period, or if a court of competent jurisdiction determines that the indemnifying party is not vigorously defending such action or proceeding, then such indemnified party may employ counsel to represent or defend it in any such action or proceeding and the indemnifying party shall pay the reasonable fees and disbursements of such counsel or other representative as incurred; provided, however, that the indemnifying party shall not be required to pay the fees and disbursements of more than one counsel for all indemnified parties in any jurisdiction in any single action or proceeding. No indemnifying party will settle any such action or proceeding or consent to the entry of any judgment without the prior written consent of the indemnified party, unless such settlement or judgment (i) includes as an unconditional term thereof the giving by the claimant or plaintiff of a release to such indemnified party from all liability in respect of such action or proceeding and (ii) does not involve the imposition of equitable remedies or the imposition of any obligations on such indemnified party and does not otherwise adversely affect such indemnified party, other than as a result of the imposition of financial obligations for which such indemnified party will be indemnified hereunder. No indemnified party will settle any such action or proceeding or consent to the entry of any judgment without the prior written consent of the indemnifying party (such consent not to be unreasonably withheld).

(d) (i) If the indemnification provided for in this Section 6.4 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any Claim or expenses referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such Claim or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified party in connection with the actions which resulted in such Claim or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material factor omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party under this Section 6.4( d) as a result of the Claim and expenses referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with any action or proceeding.

(ii) The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 6.4(d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in Section 6.4(d)(i). No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of

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the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

(e) Indemnification similar to that specified in this Section 6.4 (with appropriate modifications) shall be given by the appropriate Registering Party and each seller of Registrable Securities with respect to any required registration or other qualification of securities under any Law or with any governmental authority other than as required by the Securities Act.

(f) The obligations of the parties under this Section 6.4 shall be in addition to any liability which any party may otherwise have to any other party.

SECTION 6.5 Required Reports. Each of the Registering Party covenants that it will file the reports required to be filed by it under the Securities Act and the Exchange Act (or, if such Registering Party is not required to file such reports, it will, upon the request of any Holder, make publicly available such information), and it will take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell shares of Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (i) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (ii) any similar rule or regulation hereafter adopted by the SEC. Upon the request of any Holder, appropriate Registering party will deliver to such Holder a written statement as to whether it has complied with such requirements.

SECTION 6.6 Selection of Counsel. In connection with any registration of Registrable Securities pursuant to Articles IV or V hereof, the Holders of a majority of the Registrable Securities covered by any such registration may select one counsel to represent all Holders of Registrable Securities covered by such registration; provided, however, that in the event that the counsel selected as provided above is also acting as counsel to either of the Registering Parties in connection with such registration, the remaining Holders shall be entitled to select one additional counsel to represent all such remaining Holders.

SECTION 6.7 Holdback Agreement. If any registration under Sections 4.2 or 4.3 hereof or any sale of securities in connection with a registration under Section 4.1 hereof shall be in connection with an underwritten public offering, each Holder agrees not to effect any public sale or distribution, including any sale pursuant to Rule 144 under the Securities Act, of any Equity Securities of the appropriate Registering Party (in each case, other than as part of such underwritten public offering), within seven (7) days before, or ninety (90) days (or such lesser period as the managing underwriters may permit) after, the effective date of any such registration pursuant to Sections 4.2 or 4.3 or the closing of any sale of securities in connection with a registration under Section 4.1 (except as part of any such registration or sale), and each of the Registering Parties hereby also so agrees and agrees to cause each other holder of any equity security of such Registering Party purchased from such Registering Party (at any time other than in a public offering) to so agree.

SECTION 6.8  No Inconsistent Agreement. Each of the Registering Parties represents and warrants that it will not enter into, or cause or permit any of its Subsidiaries to enter

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into, any agreement which conflicts with or limits or prohibits the exercise of the rights granted to the Holders of Registrable Securities in this Agreement.

ARTICLE VII

STANDSTILL

SECTION 7.1 Acquisition of Additional Voting Securities. (a) Subject to Section 7.1(b), during the Standstill Period, the Equity Purchaser hereby agrees that it shall not, and that it shall cause each of its Affiliates (including, without limitation, KKR) not to, without the prior approval of the Board of Directors of the Company (excluding, for purposes of such approval, the KKR Representative), directly or indirectly, (i) acquire, offer or propose to acquire or agree to acquire (whether by purchase, tender or exchange offer, through an acquisition of control of another Person (including by way of merger or consolidation), by joining a partnership, syndicate or other Group, or otherwise), the beneficial ownership of any additional Voting Securities of the Company or any of its Subsidiaries (or any warrants, options or other rights to purchase or acquire, or any securities convertible into, or exchangeable for, any Voting Securities of the Company or any of its Subsidiaries or any other Equity Securities of the Company or any of its Subsidiaries); provided, however, that the foregoing restrictions shall not apply to any acquisition or proposed acquisition (each, an “Acquisition”) of beneficial ownership of any additional Voting Securities of the Company: (x) if, after giving effect to such Acquisition, the aggregate number of Voting Securities of the Company beneficially owned on a Fully Diluted Basis by the Equity Purchaser (together with its Affiliates) would not exceed 25% of the total Voting Securities of the Company, (y) which is by way of stock dividends, stock reclassifications or other distributions or offerings made available and, if applicable, exercised on a pro rata basis, to holders of Equity Securities of the Company generally or (z) involves Equity Securities acquired from the Company (including the Warrant Shares) or otherwise in accordance with the provisions of the Agreement and the other Transaction Agreements; (ii) make any public announcement with respect to, or submit any proposal for, any merger, consolidation, sale of substantial assets or other business combination or extraordinary transaction involving the Company or any of its Subsidiaries; (iii) make, or in any way participate in, any “solicitation” of “proxies” (as such terms are defined or used In Regulation 14A under the Exchange Act) to vote any Voting Securities of the Company or any of its Subsidiaries or seek to advise or influence any Person with respect to the voting of any Voting Securities of the Company or any of its Subsidiaries, (iv) form, join or in any way participate in any Group (other than with respect to its Affiliates) with respect to any of the Voting Securities of the Company; (v) otherwise act, either alone or in concert with others, to seek control of the Company or any of its Subsidiaries; (vi) disclose any intention, proposal, plan or arrangement with respect to any of the foregoing; or (vii) make any demand, request or proposal to amend, waive or terminate any provision of this Section 7.1 (collectively, the “Acquisition Restrictions”).  Nothing contained in this Section 7.1 shall be construed to limit or restrict any action take in good faith by the KKR Representative or KKR Observer in his or her capacity as a director or observer at the Company Board, the DP&L Board or any other Applicable Board

(b) The foregoing Acquisition Restrictions will not apply if:

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(i) a third party who is not an Affiliate of the Equity Purchaser or any of its Affiliates (a “Third Party”, which term shall include any Group, other than a Group which includes the Equity Purchaser or any of its Affiliates as a member) commences or publicly announces its intention to commence a bona fide tender or exchange offer for more than 15% of the outstanding Voting Securities of the Company and the Company Board does not recommend against the tender or exchange offer within ten (10) Business Days after the commencement thereof (which, in the case of an exchange offer, shall be deemed to be the effective date of the registration statement relating to the securities offered in such exchange offer or, if permitted under the Exchange Act, such earlier date selected by the offer or for commencement of the exchange offer) or such longer period as shall then be permitted under SEC rules;

(ii) a Third Party acquires beneficial ownership of 15% of the Company’s outstanding Voting Securities (other than as a result of purchases of such securities from the Company made with the Equity Purchaser’s prior written consent);

(iii) a Third Party makes a bona fide proposal to acquire all or substantially all of the assets of the Company or DP&L that the Company Board is actively negotiating and the consummation of which would require approval of the shareholders of the Company pursuant to the General Corporation Law of the State of Ohio;

(iv) a Third Party makes a bona fide proposal to enter into any acquisition or other business combination transaction with the Company or DP&L that the Company Board is actively negotiating;

(v) the Company enters into (or publicly announces its intention to do so) a definitive agreement, or an agreement contemplating a definitive agreement, for any of the foregoing transactions described in clauses (i) to (iv) above; or

(vi) the Company or the Trust is in material breach of its obligations under this Agreement.

(c)  Upon a repurchase or redemption of Equity Securities by the Company or one or more of its Affiliates or any similar transaction that, by reducing the number of outstanding Equity Securities of the Company, increases the Ownership Percentage to an amount in excess 25%, neither the Equity Purchaser nor any of its Affiliates shall be required to dispose of any Equity Securities beneficially owned by them; provided, however, that in such event, neither the Equity Purchaser nor any of its Affiliates may purchase additional Equity Securities until such time as the Ownership Percentage is less than 25%.

(d)  Subject to Section 7.1(c), if at any time the Equity Purchaser or any of its Affiliates become aware that the Equity Purchaser and its Affiliates beneficially own in the aggregate more than 25% of the Voting Securities, then the Equity Purchaser shall, as soon as is reasonably practicable (but in no manner that would require it or any such Affiliate to incur liability under

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Section 16(b) of the Exchange Act) take all reasonable action to reduce the amount of Equity Securities beneficially owned by it and its Affiliates to an amount not greater than such percentage.

ARTICLE VIII

MISCELLANEOUS

SECTION 8.1 Indemnification: Reimbursement of Expenses. The Company agrees to indemnity and hold harmless the Equity Purchaser, the Trust Preferred Purchaser, their respective directors and officers and their respective Affiliates (including Kohlberg Kravis Roberts & Co., L.P. (“KKR”)) (and the directors, officers, partners, Affiliates and controlling persons thereof) (each, a “Purchaser Indemnitee”) from and against any and all liability, including obligations, costs, fines, penalties, claims, actions, injuries; demands, suits, judgments, proceedings, investigations, arbitrations (including stockholder claims, actions, injuries, demands, suits, judgments, proceedings, investigations or arbitrations) and expenses, including accountant’s and attorney’s fees and expenses (collectively, the “Damages”), incurred by any Purchaser Indemnitee before or after the date of this Agreement and arising out of, resulting from, or relating to (i) any Purchaser Indemnitee’s purchase and/or ownership of the Voting Preferred Shares, the Warrants, the Warrant Shares and/or Trust Preferred Securities, (ii) the transactions contemplated by the Transaction Agreements, or (iii) any litigation to which any Purchaser Indemnitee is made a party in its capacity as a stockholder or owner of securities (or a partner, director, officer, Affiliate or controlling person of the Equity Purchaser or the Trust Preferred Purchaser, as appropriate) of the Company; provided that (A) the foregoing indemnification rights in this Section 8.1 shall not be available to the extent that any such Damages are incurred as a result. of the Purchaser Indemnitee’s willful misconduct or gross negligence, (B) the indemnification rights set forth in this Section 8.1 shall not be available to the extent that any such Damages are included as a result of non-compliance by the Purchaser Indemnitee with all laws and regulations applicable to it and (C) the indemnification rights set forth in this Section 8.1 shall not be available to the extent any such Damages are incurred as a result of non-compliance by the Purchaser with its obligations under Transaction Documents. For purposes of this Section 8.1, each of the Purchasers and its representatives shall be deemed to have complied with all laws and regulations applicable to them and their obligations under the Transaction Documents and each Purchaser Indemnitee shall be deemed not to have engaged in willful misconduct or gross negligence absent a final non-appealable judgment of a court of competent jurisdiction to the contrary or to such effect, respectively. The Company also agrees to reimburse each Purchaser Indemnitee for any expenses incurred by such Purchaser Indemnitee in connection with the maintenance of its books and records, preparation of tax returns and delivery of tax information to its member or shareholders in connection with the Equity Purchaser’s investment in the Company and the Trust Preferred Purchaser’s investment in the Trust.

SECTION 8.2 Termination. Subject to Section 3.1(b), the provisions of this Agreement shall terminate as follows:

(i)  Sections 2.1 and 2.4 shall terminate as provided in Section 2.5;

35

(ii) Articles IV, V and VI of this Agreement (other than Section 6.4 thereof which shall not terminate) shall terminate at such time as there shall be no Registrable Securities outstanding or as otherwise provided therein;

(iii) Article VII shall terminate at the end of the Standstill Period or as otherwise provided in Section 7.1;

(iv) Sections 3.2, 3.3 and 3.4 shall terminate when no Voting Preferred Shares are outstanding;

(v) Section 8.1 of this Agreement shall not terminate; and

(vi) the remaining provisions of this Agreement shall terminate at such time as the Ownership Percentage of the Equity Purchaser shall be less than 1 %.

Nothing herein shall relieve any party from any liability for the breach of any of the agreements set forth in this Agreement.

SECTION 8.3 Amendments and Waivers.  Except as otherwise provided herein, no modification, amendment or waiver of any provision of this Agreement shall be effective against any party hereto unless such modification, amendment or waiver is approved in writing by such party. The failure of any party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms.

SECTION 8.4 Successors, Assigns. Transferees and Third Party Beneficiaries. This Agreement shall bind and inure to the benefit of and be enforceable by the parties hereto and their respective successors, permitted assigns and Transferees. Except as expressly provided herein, this Agreement may not be assigned without the prior written consent of the other party, except that either of the Purchasers and the senior member of the Equity Purchaser and the shareholder of the Trust Preferred Purchaser (to the extent third party beneficiaries hereunder) may assign their respective rights and obligations hereunder to any Affiliate or Affiliates. To the extent indicated herein, certain Persons, including the senior member of the Equity Purchaser, the shareholder of the Trust Preferred Purchaser and KKR are intended to be third party beneficiaries hereof. The Equity Purchaser and the Trust Preferred Purchaser shall inform the Company of, and the Company shall be entitled to rely upon, the names, addresses and other contact details of the senior member of the Equity Purchaser and the shareholder of the Trust Preferred Purchaser, respectively. Upon notice given to the Company, such senior member or shareholder may be replaced by one or more other members, partners or shareholders.

SECTION 8.5 Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient or, if not, then on the next Business Day, (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid or (iv) one (I) Business Day after deposit

36

with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent as follows:

(i) to the Company, the Equity Purchaser, the Trust and the Trust Preferred Purchaser, to their respective addresses specified in Section 10.8 of the Securities Purchase Agreement;

(ii) to any Transferee, to the address provided pursuant to Section 3.1 (c);

(iii) to any other Holder (if other than pursuant to clause (ii) above), to the address of such Holder as shown in the stock record books of the Company or the Trust, as appropriate; or

(iv) to such other address for any party as it may specify by like notice.

SECTION 8.6  Further Assurances. At any time or from time to time after the date hereof, the parties agree to cooperate with each other, and at the request of any other party, to execute and deliver any further instruments or documents and to take all such further action as the other party may reasonably request in order to evidence or effectuate the consummation of the transactions contemplated hereby and to otherwise carry out the intent of the parties hereunder.

SECTION 8.7  Entire Agreement. Except as otherwise expressly set forth herein, this document and the other Transaction Agreements embody the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, that may have related to the subject matter hereof in any way.

SECTION 8.8  Delays or Omissions. It is agreed that no delay or omission to exercise any right, power or remedy accruing to any party, upon any breach, default or noncompliance by another party under this Agreement, shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of or in any similar breach, default or noncompliance thereafter occurring.  t is further agreed that any waiver, permit, consent or approval of any kind or character on the part of any party hereto of any breach, default or noncompliance under this Agreement or any waiver on such party’s part of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement, by law, or otherwise afforded to any party, shall be cumulative and not alternative.

SECTION 8.9  Governing Law: Jurisdiction; Waiver of Jury Trial.  This Agreement shall be governed in all respects by the laws of the State of New York, except, in the case of the Company and with respect to Section 2.1, to the extent that the General Corporation Law of the State of Ohio is applicable.  Any suit, action or proceeding with respect to this Agreement may be brought in any court or before any similar authority in a court of competent jurisdiction in the State of New York, and the parties hereto hereby submit to the non-exclusive jurisdiction of such courts for the purpose of such suit, proceeding or judgment.  Each of the parties hereto hereby irrevocably and

37

unconditionally waives trial by jury in any legal action or proceeding in relation to this Agreement and for any counterclaim therein.

SECTION 8.10 Severability. In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

SECTION 8.11  Effective Date. This Agreement shall become effective immediately upon the Closing.

SECTION 8.12  Enforcement. Each party hereto acknowledges that money damages would not be an adequate remedy in the event that any of the covenants or agreements in this Agreement are not performed in accordance with its terms, and it is therefore agreed that in addition to and without limiting any other remedy or right it may have, the non-breaching party will have the right to an injunction, temporary restraining order or other equitable relief in any court of competent jurisdiction enjoining any such breach and enforcing specifically the terms and provisions hereof.

SECTION 8.13 Titles and Subtitles. The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

SECTION 8.14 No Recourse. Notwithstanding any other provision of this Agreement or any rights of the Company or the Trust at law or in equity, in the event of any default by the Purchasers under this Agreement or in the event of any claim in connection with the registration of Registrable Securities, the Company’s and the Trust’s remedies shall be restricted to enforcement of their respective rights against the property and assets of the Purchasers (including the Voting Preferred Shares, the Warrants, the Warrant Shares and the Trust Preferred Securities) and no resort shall be had to (i) any of the members of the Equity Purchaser or any of the stockholders of the Trust Preferred Purchaser personally, or (ii) any property or assets of the members of the Equity Purchaser or the stockholders of the Trust Preferred Purchaser (other than the property and assets of the Purchasers).

SECTION 8.15 Counterparts; Facsimile Signatures. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. This Agreement may be executed by facsimile signature(s).

38

IN WITNESS WHEREOF, the parties hereto have executed the SECURITY- HOLDERS AND REGISTRATION RIGHTS AGREEMENT as of the date set forth in the first paragraph hereof.

DPL INC.
By:
	Name:
	Title:
DPL CAPITAL TRUST I
By:
	Name:
	Title:
DAYTON VENTURES LLC
By:
	Name:
	Title:
DAYTON VENTURES, INC.
By:
	Name:
	Title:

EX-4.J

Exhibit 4(j)

Amendment to Securityholders Agreement

August 24, 2001

Reference is made to the Securityholders and Registration Rights Agreement dated as of March 13, 2000, by and among DPL Inc. (the “Company”), DPL Capital Trust I, Dayton Ventures LLC (the “Equity Purchaser”) and Dayton Ventures, Inc. (the “Trust Preferred Purchaser”) (the “Securityholders Agreement”) and to the Purchase Agreement, dated as of August 23, 2001, between the Company and the Trust Preferred Purchaser (the “Purchase Agreement”).

The undersigned hereby consent and agree that, effective upon the consummation of the Closing (as defined in the Purchase Agreement) under the Purchase Agreement, (a) Section 2.4 (a) of the Securityholders Agreement shall be amended to delete therefrom subparagraphs (v), (vi) and (vii) and which subparagraphs shall be of no further force or effect from and after the consummation of the Closing (as defined in the Purchase Agreement) of the Purchase Agreement and (b) without in any way diminishing or prejudicing the rights held by the Equity Purchaser, its affiliates (other than the Trust Preferred Purchaser), its Transferees (as defined in the Securityholders Agreement) and its permitted assignees, the Trust Preferred Purchaser shall have no further rights or obligations under the Securityholders Agreement.

This Agreement may be executed in two or more counterparts each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument.  This Agreement may be executed by facsimile signature(s).

This Agreement shall terminate upon any termination of the Purchase Agreement.

Except as expressly provided herein, the provisions of the Securityholders Agreement are hereby ratified and confirmed by the parties and shall remain in full force and effect.  All references in the Securityholders Agreement to “this Agreement” shall be read as references to the Securityholders Agreement, as modified by this letter.

[Signature page follows.]

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

DPL INC.
By:
	Name:
	Title:
DPL CAPITAL TRUST I
By:
	Name:
	Title:
DAYTON VENTURES LLC
By:
	Name:
	Title:
DAYTON VENTURES, INC.
By:
	Name:
	Title:

EX-4.K

Exhibit 4(k)

December 6, 2004

PERSONAL AND CONFIDENTIAL

DPL Capital Trust I

1065 Woodman Drive

Dayton, OH 45432

Dayton Ventures LLC

c/o Kohlberg, Kravis Roberts & Co. LP

9 W. 57^th Street

New York, NY 10019

Dayton Ventures, Inc.

c/o Kohlberg, Kravis Roberts & Co. LP

9 W. 57^th Street

New York, NY 10019

Lehman Brothers Inc.

745 Seventh Avenue

New York, NY 10019

Attention:  Jeremy Heckerling

GLG Neutral Market Fund

c/o GLG Partners LP

Attn:  Antonio Dos Santos

1 Curzon Street

London W1J5HB

England

Ladies and Gentlemen:

Reference is made to that certain Securityholders and Registrations Rights Agreement (the “Agreement”), by and among DPL Inc., DPL Capital Trust I, Dayton Ventures LLC and Dayton Ventures, Inc. dated March 13, 2000.  Capitalized terms used herein but not defined herein have the respective meanings given them in the Agreement.

This letter agreement will confirm that Section 8.3 of the Agreement shall be amended to read in full as follows:

SECTION 8.3  Amendments and Waivers.  Except as provided herein, no modification, amendment or waiver of any provision of this Agreement shall be effective against any party hereto unless such modification, amendment or waiver is approved in

writing by all Holders holding 10% or more of the Warrants and Warrant Shares then outstanding.  If there is no 10% Holder, then the modification, amendment or waiver must be approved in writing by a majority of the Holders of the Warrants and Warrant Shares then outstanding.  The failure of any party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms.

Very truly yours,

DPL INC.
By:
	Name: James V. Mahoney
	Title: President and Chief Executive Officer

Confirmed and Agreed to:

DPL CAPITAL TRUST I
By:
	Name: James V. Mahoney
	Title: Administrative Trustee
Dated: December 6, 2004

DAYTON VENTURES LLC
By:
	Name:
	Title:
Dated:

DAYTON VENTURES, INC.
By:
	Name:
	Title:
Dated:

LEHMAN BROTHERS INC.
By:
	Name:
	Title:
Dated:

GLG MARKET NEUTRAL FUND
By:
	Name:
	Title:
Dated:

EX-4.L

Exhibit 4(l)

AMENDMENT TO SECURITYHOLDERS AND REGISTRATION RIGHTS AGREEMENT

This AMENDMENT TO THE SECURITYHOLDERS AND REGISTRATION RIGHTS AGREEMENT (this “Amendment”) is made as of January 12, 2005, and is between Dayton Ventures LLC, DPL and Lehman Brothers, Inc.  Capitalized terms used and not otherwise defined herein have the meanings set forth in the Securityholders and Registration Rights Agreement, dated as of March 13, 2000, by and among the parties hereto, as amended by the amendments dated August 24, 2001 and December 6, 2004 (as amended, the “Agreement”).

BACKGROUND

1.Each of the parties hereto is a party to the Agreement.

2.Pursuant to Section 8.3 of the Agreement, the Agreement may be amended in writing by all Holders holding 10% or more of the Warrants and Warrant Shares then outstanding.

3.             The parties hereto desire to amend certain restrictions on transfers of the Warrants and Voting Preferred Shares under the Agreement.

NOW , THEREFORE, in consideration of the mutual promises and covenants contained herein and for other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties, intending legally to be bound, hereby agree as follows:

1.Amendment to Section 1.1.  Section 1.1 of the Agreement is hereby amended by deleting the definition of “Excess Warrants” in its entirety.

2.             Amendment to Article II.  Each of Sections 2.1, 2.2, 2.3, 2.4(a)(i), 2.4(a)(ii), 2.4(a)(iii), 2.5 and 2.6 of the Agreement is hereby deleted in its entirety.

3.             Amendment to Section 3.1.  Each of Sections 3.1(b)(ii) and 3.1(b)(iii) of the Agreement is hereby deleted in its entirety.

4.Amendment to Sections 3.2, 3.3, 3.4 and 3.5.  Each of Sections 3.2, 3.3, 3.4 and 3.5 of the Agreement is hereby deleted in its entirety.

5.Amendment to Article V.  Article V of the Agreement is hereby deleted in its entirety.

6.Amendment to Section 8.2.  Section 8.2(iv) of the Agreement is hereby deleted in its entirety.

7.No Other Amendments.  Except as so modified pursuant to this Amendment, the Agreement is ratified and confirmed in all respects. This Amendment shall be effective as of the date hereof.

[Signature Page Follows]

IN WITNESS WHEREOF, this Amendment has been duly executed and delivered by the individuals whose names appear below and by the duly authorized representatives of each party hereto as of the first date written.

DPL INC.
By:
	Name:
	Title:
DAYTON VENTURES LLC
By:
	Name:
	Title:
LEHMAN BROTHERS INC.
By:
	Name:
	Title:

EX-10.C

Exhibit 10(c)

AMENDMENT NO. 1

TO

THE DAYTON POWER AND LIGHT COMPANY

1991 AMENDED DIRECTORS’ DEFERRED COMPENSATION PLAN

(As Amended Through December 31, 2000)

WITH RESPECT TO

THE AMERICAN JOBS CREATION ACT OF 2004

WHEREAS, The Dayton Power and Light Company and DPL Inc. (collectively, the “Company”) adopted The Dayton Power and Light Company 1991 Amended Directors’ Deferred Compensation Plan (As Amended Through December 2, 2003) (the “Plan”); and

WHEREAS, the Plan is classified as a “nonqualified deferred compensation plan” under the Internal Revenue Code of 1986, as amended (the “Code”); and

WHEREAS, the American Jobs Creation Act of 2004, P.L. 108-357 (the “AJCA”) added a new Section 409A to the Code, which significantly changed the Federal tax law applicable to “amounts deferred” under the Plan after December 31, 2004; and

WHEREAS, pursuant to the AJCA, the Secretary of the Treasury and the Internal Revenue Service will issue proposed, temporary or final regulations and/or other guidance with respect to the provisions of new Section 409A of the Code (collectively, the “AJCA Guidance”); and

WHEREAS, the AJCA Guidance has not yet been issued; and

WHEREAS, all amounts credited to each Director’s Standard Deferral Account under the Plan are 100% vested; and

WHEREAS, to the fullest extent permitted by Code Section 409A and the AJCA Guidance, the Company wants to protect the “grandfathered” status of the amounts credited to each Director’s Standard Deferral Account that are deferred and vested prior to January 1, 2005;

NOW THEREFORE, the Company hereby adopts this Amendment No. 1 to the Plan, which amendment is intended to (1) allow amounts deferred and vested prior to January 1, 2005 to qualify for “grandfathered” status and continue to be governed by the law applicable to nonqualified deferred compensation prior to the addition of Code Section 409A (as specified in the Plan as in effect before the adoption of this Amendment No. 1) and (2) cause amounts deferred after December 31, 2004 to be deferred in compliance with the requirements of Code Section 409A.

Words and phrases used herein with initial capital letters that are defined in the Plan are used herein as so defined.

Section 1

Section 1 of the Plan is hereby amended by adding the following three paragraphs at the end thereof:

“It is intended that the Plan comply with the provisions of Section 409A of the Internal Revenue Code (the “Code”), as enacted by the American Jobs Creation Act (“AJCA”), so as to prevent the

inclusion in gross income of any amounts deferred hereunder in a taxable year that is prior to the taxable year or years in which such amounts would otherwise actually be distributed or made available to the Directors. It is intended that the Plan shall be administered in a manner that will comply with Section 409A of the Code, including any proposed, temporary or final regulations or any other guidance issued by the Secretary of the Treasury and the Internal Revenue Service with respect thereto (collectively with the AJCA, the “AJCA Guidance”) and the Plan is hereby deemed amended to the extent necessary to achieve such compliance. Any provisions of the Plan that would cause the Plan to fail to satisfy Section 409A of the Code shall have no force and effect.

It is intended that no action be taken with respect to the Plan that would violate any provision of Section 409A of the Code. It is intended that the Directors’ elections hereunder will comply with Code Section 409A and the AJCA Guidance. The Compensation Committee is authorized to adopt rules or regulations deemed necessary or appropriate in connection therewith to anticipate and/or comply with the requirements thereof (including any transition rules thereunder). In this regard, the Compensation Committee is authorized to permit the Directors to make elections with respect to amounts deferred after December 31, 2004 and is also permitted to give the Directors the right to amend or revoke such elections in accordance with the AJCA Guidance.

The Company, acting through the Compensation Committee, shall have the authority to adopt an amendment to the Plan that conforms the terms of the Plan to the requirements of Section 409A of the Code at such time as the Company determines that the AJCA Guidance provides sufficient clarity to permit such amendment. Notwithstanding Section 11 of the Plan, the Company shall not be required to obtain the consent of any person to such amendment, and such amendment shall apply to deferral elections made and other actions taken with respect to the Plan between the date of Amendment No. 1 to the Plan and the date of such amendment to the extent set forth in such amendment.”

EXECUTED this          day of                                , 2004.

By:

Title:

2

EX-10.E

Exhibit 10(e)

AMENDMENT NO. 1

TO
THE DAYTON POWER AND LIGHT COMPANY
MANAGEMENT STOCK INCENTIVE PLAN
(As Amended Through December 31, 2000)
WITH RESPECT TO
THE AMERICAN JOBS CREATION ACT OF 2004

WHEREAS, The Dayton Power and Light Company and DPL Inc. (collectively, the “Company”) adopted The Dayton Power and Light Company Management Stock Incentive Plan (As Amended Through December 2, 2003) (the “Plan”); and

WHEREAS, the Plan is classified as a “nonqualified deferred compensation plan” under the Internal Revenue Code of 1986, as amended (the “Code”); and

WHEREAS, the American Jobs Creation Act of 2004, P.L. 108-357 (the “AJCA”) added a new Section 409A to the Code, which significantly changed the Federal tax law applicable to “amounts deferred” under the Plan after December 31, 2004; and

WHEREAS, pursuant to the AJCA, the Secretary of the Treasury and the Internal Revenue Service will issue proposed, temporary or final regulations and/or other guidance with respect to the provisions of new Section 409A of the Code (collectively, the “AJCA Guidance”); and

WHEREAS, the AJCA Guidance has not yet been issued; and

WHEREAS, all Stock Incentive Awards granted under the Plan will vest in accordance with Section 6(d) thereof; and

WHEREAS, to the fullest extent permitted by Code Section 409A and the AJCA Guidance, the Company wants to protect the “grandfathered” status of the Stock Incentive Awards that are earned and vested prior to January 1, 2005;

NOW THEREFORE, the Company hereby adopts this Amendment No. 1 to the Plan, which amendment is intended to allow Stock Incentive Awards earned and vested prior to January 1, 2005 to qualify for “grandfathered” status and continue to be governed by the law applicable to nonqualified deferred compensation prior to the addition of Code Section 409A (as specified in the Plan as in effect before the adoption of this Amendment No. 1).

Words and phrases used herein with initial capital letters that are defined in the Plan are used herein as so defined.

Section 1

Section 1 of the Plan is hereby amended by adding the following three paragraphs at the end thereof:

“It is intended that the Plan comply with the provisions of Section 409A of the Internal Revenue Code (the “Code”), as enacted by the American Jobs Creation Act (“AJCA”), so as to prevent the inclusion in gross income of any amounts earned hereunder in a taxable

year that is prior to the taxable year or years in which such amounts would otherwise actually be distributed or made available to the Participants. It is intended that the Plan shall be administered in a manner that will comply with Section 409A of the Code, including any proposed, temporary or final regulations or any other guidance issued by the Secretary of the Treasury and the Internal Revenue Service with respect thereto (collectively with the AJCA, the “AJCA Guidance”) and the Plan is hereby deemed amended to the extent necessary to achieve such compliance. Any provisions of the Plan that would cause the Plan to fail to satisfy Section 409A of the Code shall have no force and effect.

It is intended that no action be taken with respect to the Plan that would violate any provision of Section 409A of the Code. The Compensation Committee is authorized to adopt rules or regulations deemed necessary or appropriate in connection therewith to anticipate and/or comply with the requirements thereof (including any transition rules thereunder).

The Company, acting through the Compensation Committee, shall have the authority to adopt an amendment to the Plan that conforms the terms of the Plan to the requirements of Section 409A of the Code at such time as the Company determines that the AJCA Guidance provides sufficient clarity to permit such amendment. Notwithstanding Section 18 of the Plan, the Company shall not be required to obtain the consent of any person to such amendment, and such amendment shall apply to actions taken with respect to the Plan between the date of Amendment No. 1 to the Plan and the date of such amendment to the extent set forth in such amendment.”

EXECUTED this       day of                                  , 2004.

By:

Title:

2

EX-10.G

Exhibit 10(g)

AMENDMENT NO. 1

TO
THE DAYTON POWER AND LIGHT COMPANY
KEY EMPLOYEES DEFERRED COMPENSATION PLAN
(As Amended Through December 31, 2000)
WITH RESPECT TO
THE AMERICAN JOBS CREATION ACT OF 2004

WHEREAS, The Dayton Power and Light Company and DPL Inc. (collectively, the “Company”) adopted The Dayton Power and Light Company Key Employees Deferred Compensation Plan (As Amended Through December 2, 2003) (the “Plan”); and

WHEREAS, the Plan is classified as a “nonqualified deferred compensation plan” under the Internal Revenue Code of 1986, as amended (the “Code”); and

WHEREAS, the American Jobs Creation Act of 2004, P.L. 108-357 (the “AJCA”) added a new Section 409A to the Code, which significantly changed the Federal tax law applicable to “amounts deferred” under the Plan after December 31, 2004; and

WHEREAS, pursuant to the AJCA, the Secretary of the Treasury and the Internal Revenue Service will issue proposed, temporary or final regulations and/or other guidance with respect to the provisions of new Section 409A of the Code (collectively, the “AJCA Guidance”); and

WHEREAS, the AJCA Guidance has not yet been issued; and

WHEREAS, all amounts credited to each Key Employee’s Standard Deferral Account under the Plan are 100% vested; and

WHEREAS, to the fullest extent permitted by Code Section 409A and the AJCA Guidance, the Company wants to protect the “grandfathered” status of the amounts credited to each Key Employee’s Standard Deferral Account that are deferred and vested prior to January 1, 2005;

NOW THEREFORE, the Company hereby adopts this Amendment No. 1 to the Plan, which amendment is intended to (1) allow amounts deferred and vested prior to January 1, 2005 to qualify for “grandfathered” status and continue to be governed by the law applicable to nonqualified deferred compensation prior to the addition of Code Section 409A (as specified in the Plan as in effect before the adoption of this Amendment No. 1) and (2) cause amounts deferred after December 31, 2004 to be deferred in compliance with the requirements of Code Section 409A.

Words and phrases used herein with initial capital letters that are defined in the Plan are used herein as so defined.

Section 1

Section 1 of the Plan is hereby amended by adding the following three paragraphs at the end thereof:

“It is intended that the Plan comply with the provisions of Section 409A of the Internal Revenue Code (the “Code”), as enacted by the American Jobs Creation Act (“AJCA”), so as to prevent the

inclusion in gross income of any amounts deferred hereunder in a taxable year that is prior to the taxable year or years in which such amounts would otherwise actually be distributed or made available to the Participants.  It is intended that the Plan shall be administered in a manner that will comply with Section 409A of the Code, including any proposed, temporary or final regulations or any other guidance issued by the Secretary of the Treasury and the Internal Revenue Service with respect thereto (collectively with the AJCA, the “AJCA Guidance”) and the Plan is hereby deemed amended to the extent necessary to achieve such compliance.  Any provisions of the Plan that would cause the Plan to fail to satisfy Section 409A of the Code shall have no force and effect.

It is intended that no action be taken with respect to the Plan that would violate any provision of Section 409A of the Code.  It is intended that the Participants’ elections hereunder will comply with Code Section 409A and the AJCA Guidance.  The Compensation Committee is authorized to adopt rules or regulations deemed necessary or appropriate in connection therewith to anticipate and/or comply with the requirements thereof (including any transition rules thereunder).  In this regard, the Compensation Committee is authorized to permit the Participants to make elections with respect to amounts deferred after December 31, 2004 and is also permitted to give the Participants the right to amend or revoke such elections in accordance with the AJCA Guidance.

The Company, acting through the Compensation Committee, shall have the authority to adopt an amendment to the Plan that conforms the terms of the Plan to the requirements of Section 409A of the Code at such time as the Company determines that the AJCA Guidance provides sufficient clarity to permit such amendment.  Notwithstanding Section 11 of the Plan, the Company shall not be required to obtain the consent of any person to such amendment, and such amendment shall apply to deferral elections made and other actions taken with respect to the Plan between the date of Amendment No. 1 to the Plan and the date of such amendment to the extent set forth in such amendment.”

EXECUTED this     day of                                      , 2004.

By:

Title:

2

EX-10.I

Exhibit 10(i)

AMENDMENT NO. 1

TO
THE DAYTON POWER AND LIGHT COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(As Amended Through February 1, 2000)
WITH RESPECT TO
THE AMERICAN JOBS CREATION ACT OF 2004

WHEREAS, The Dayton Power and Light Company and DPL Inc. (collectively, the “Company”) adopted The Dayton Power and Light Company Supplemental Executive Retirement Plan (As Amended Through December 31, 2000) (the “Plan”); and

WHEREAS, the Plan is classified as a “nonqualified deferred compensation plan” under the Internal Revenue Code of 1986, as amended (the “Code”); and

WHEREAS, the American Jobs Creation Act of 2004, P.L. 108-357 (the “AJCA”) added a new Section 409A to the Code, which significantly changed the Federal tax law applicable to “amounts deferred” under the Plan after December 31, 2004; and

WHEREAS, pursuant to the AJCA, the Secretary of the Treasury and the Internal Revenue Service will issue proposed, temporary or final regulations and/or other guidance with respect to the provisions of new Section 409A of the Code (collectively, the “AJCA Guidance”); and

WHEREAS, the AJCA Guidance has not yet been issued; and

WHEREAS, to the fullest extent permitted by Code Section 409A and the AJCA Guidance, the Company wants to protect the “grandfathered” status of the supplemental retirement benefits credited to each participant that are earned and vested prior to January 1, 2005;

NOW THEREFORE, the Company hereby adopts this Amendment No. 1 to the Plan, which amendment is intended to (1) allow supplemental retirement benefits earned and vested prior to January 1, 2005 to qualify for “grandfathered” status and continue to be governed by the law applicable to nonqualified deferred compensation prior to the addition of Code Section 409A (as specified in the Plan as in effect before the adoption of this Amendment No. 1) and (2) cause supplemental retirement benefits earned and/or vested after December 31, 2004 to be in compliance with the requirements of Code Section 409A.

Words and phrases used herein with initial capital letters that are defined in the Plan are used herein as so defined.

Section 1

Section 1 of the Plan is hereby amended by adding the following three paragraphs at the end thereof:

“It is intended that the Plan comply with the provisions of Section 409A of the Internal Revenue Code (the “Code”), as enacted by the American Jobs Creation Act (“AJCA”), so as to prevent the inclusion in gross income of any amounts deferred hereunder in a taxable year that is prior to the taxable year or years in which such amounts would otherwise actually be distributed or made available to the

Participants.  It is intended that the Plan shall be administered in a manner that will comply with Section 409A of the Code, including any proposed, temporary or final regulations or any other guidance issued by the Secretary of the Treasury and the Internal Revenue Service with respect thereto (collectively with the AJCA, the “AJCA Guidance”) and the Plan is hereby deemed amended to the extent necessary to achieve such compliance.  Any provisions of the Plan that would cause the Plan to fail to satisfy Section 409A of the Code shall have no force and effect.

It is intended that no action be taken with respect to the Plan that would violate any provision of Section 409A of the Code.  The Compensation Committee is authorized to adopt rules or regulations deemed necessary or appropriate in connection therewith to anticipate and/or comply with the requirements thereof (including any transition rules thereunder).

The Company, acting through the Compensation Committee, shall have the authority to adopt an amendment to the Plan that conforms the terms of the Plan to the requirements of Section 409A of the Code at such time as the Company determines that the AJCA Guidance provides sufficient clarity to permit such amendment.  Notwithstanding Section 10 of the Plan, the Company shall not be required to obtain the consent of any person to such amendment, and such amendment shall apply to actions taken with respect to the Plan between the date of Amendment No. 1 to the Plan and the date of such amendment to the extent set forth in such amendment.”

EXECUTED this      day of                                   , 2004.

By:

Title:

2

EX-10.L

Exhibit 10(l)

Life Coverage Highlights for Executives of Dayton Power & Light Company

Life and Accidental Death & Dismemberment (AD&D) Insurance

Standard Insurance Company has developed this document to provide you with information about the Life and AD&D coverage through your employer. Written in non-technical language, this is not intended as a complete description of the coverage. If you have additional questions, please refer to your human resources representative.

Employer Plan Effective Date

The Life and AD&D coverage is effective as of September 1, 2004 and the coverage is paid for by Dayton Power & Light Company.

Eligibility

To be eligible for this plan:

•You must be an active employee of Dayton Power & Light, excluding, temporary or seasonal employees, full time members of the armed forces, leased employees or independent contractors

•You must be regularly working at least 30 hours each week

Employee Coverage Amount

Basic Life coverage is 3 times annual earnings, to a maximum of 2 million

If you wish to become insured for an amount in excess of $500,000, the excess will be subject to medical underwriting approval. All late applications and requests for coverage increases are also subject to medical underwriting approval.

Accidental Death and Dismemberment Insurance from Standard Insurance Company is also included in this plan. The amount of AD&D is 3 times your Annual Earnings to a maximum of $1,000,000.

Employee Coverage Effective Date

For employees in an Please contact your human resources representative for more information regarding the following requirements that must be satisfied for your insurance to become effective. You must satisfy:

•Eligibility requirements

•An eligibility waiting period

•An evidence of insurability requirement

An active work requirement. This means that if you are not actively at work on the day before the scheduled effective date of insurance including Dependents Life Insurance, your insurance will not become effective until the day after you complete 30 days of active work as an eligible employee.

Suicide Exclusion

This plan includes an exclusion for death resulting from suicide or other intentionally self-inflicted injury. The amount payable will exclude amounts that have not been continuously in effect for at least two years on the date of death. This is subject to state variations.

1

Standard Insurance Company Life Coverage Highlights for Executives of
Dayton Power & Light Company

Portability

If your insurance ends because your employment terminates, you may be eligible to buy portable group insurance coverage. Please see your human resources representative for additional information. This is subject to state variations.

You may use the portability feature if:

•You are under age 65;

•You are not disabled; and

•You have worked for Dayton Power & Light Company as a full time employee for 12 consecutive months.

Conversion

If your insurance ends because your employment terminates, you may be eligible to convert the terminated coverage to an individual life insurance policy without providing evidence of insurability. Please see your human resources representative for additional information

If You Become Terminally III

Under the Accelerated Benefit provision, you may be eligible to receive up to 75% to $450,000 of your Basic Life insurance and Additional Life insurance if you become terminally ill, have a life expectancy of less than 21 months and meet other eligibility requirements. This benefit allows you to use the proceeds as you desire - whether to cover medical expenses or to maintain your quality of life. The amount paid under the Accelerated Benefit provision including an interest charge would reduce the amount of Basic Life insurance and Additional Life insurance payable upon your death.

2

EX-10.M

Exhibit 10(m)

Schedule of Benefits
Plan 843-003

Benefit Period	Calendar Year
Dependent Age	End of the calendar year of age 19, or to end of the calendar year in which the child attains age 25 if allowed as a federal tax exemption.
Pre-Existing Condition	None
Deductible Per Year Per Individual	$30.00
Co-Insurance	None, except as specified
Out-of-Pocket Limit
Individual		$1,000.00
Family		$2,000.00
Outpatient Services Surgery 100% Coverage
Routine Office Visits		100% Coverage after Deductible
Diagnostic X-Ray & Lab		100% Coverage
Prenatal Care		100% Coverage after Deductible
Well Baby Care		100% Coverage after Deductible
Child Immunizations		100% Coverage
Pap Smears (Annually)		100% Coverage
Therapy, Physical Rehabilitation, Speech, etc.		100% Coverage After Deductible
Allergy Testing		100% Coverage
Allergy Serum & Injections		100% Coverage
Emergency Room/Facilities		90% Coverage after Deductible
Emergency Room/Physician		90% Coverage after Deductible
Ambulance Service		90% Coverage
Urgent Care		100% Coverage
Inpatient Services
Semi-Private Room & Board		100% Coverage
Hospital Services (operating room, x-rays, lab, drugs. supplies. etc.)		100% Coverage
Surgery-Physician Charge		100% Coverage
Physician Visits in Hospital		100% Coverage
Maternity Benefits		100% Coverage
Mental Health Care and Substance Abuse
Outpatient Services		80% Coverage after Deductible
Inpatient Services	80% Coverage after Deductible
Miscellaneous
Prescription	$5.00 Co-Pay with Prescription Card at Participating Pharmacies
Eye Examinations	Not Covered
Medical Equipment & Supplies	80% Coverage
Home Health Care Services	100% Coverage
Skilled Nursing Facility/Hospice Care	100% Coverage

The Dayton Power and Light Company

Group Insurance Plan - Summary Plan Description

Plan #843-003

The Dayton Power and Light Company Group Insurance Plan is a comprehensive indemnity medical plan maintained by The Dayton Power and Light Company, P. O. Box 8825, Dayton, Ohio, 45401. The Company’s Employer Identification Number is 31-0258470. The plan’s number as filed with the United States Department of Labor is 501.

Any service of legal process about this plan should be made to Human Resource Administration, The Dayton Power and Light Company, 1065 Woodman Drive, Dayton, Ohio, 45432.

ELIGIBILITY

Active employees and their dependents who have not otherwise been enrolled in an insured plan offered during annual open enrollment.

Eligible dependents include:

•Your spouse.

•Your unmarried children under age 19.

•Your unmarried children under 25 years of age who are principally dependent upon you for maintenance and support, are not regularly employed on a full-time basis and are full-time students in a college or university.

•A dependent child who is physically or mentally incapable of self-support.

The term “children” includes your own child, stepchild, legally adopted child and any child who is principally dependent upon you for maintenance and support and living with you.

Dependents who are on active duty with the military are not covered.

PLAN BENEFITS

Plan 843-003 is a comprehensive medical plan that covers most medical expenses at 100% after the plan deductible of $30 is met. The deductible is an individual deductible that applies to each family member each calendar year. See the Schedule of Benefits for specific coverage levels.

This plan allows members to go to any licensed medical provider. However, the plan does require pre-approval for certain major procedures. Your medical provider should submit a request for pre-authorization to assure that medical expenses win be covered for major elective procedures.

Prescription Benefit

Your prescription benefit allows you to fill prescriptions at any participating Paid Prescriptions pharmacies. Simply show your DP&L HealthCare card to a participating pharmacy and it will be filled for a $5 co-pay. Generic drugs will be provided when available.

The Paid Prescriptions pharmacy network includes most major pharmacies throughout the United States. Locally, it includes locations such as Revco, Kroger, Meijers and Cub Foods.

Out-of-Pocket Maximum

Annual out-of-pocket costs for covered expenses are limited to $1,000 per person and $2,000 per family.

Plan Maximum

You and each of your covered dependents are eligible for up to $1,000,000 lifetime coverage.

PAYMENT OF MEDICAL CLAIMS

In order for your medical expenses (excluding prescriptions) to be paid, you and your medical provider must complete a claim form and submit it Klais & Company, Inc. at the address listed on the form. Claim forms are available through Human Resource Administration.

Most medical providers will accept a claim form for your medical benefits instead of requiring cash payment and submit the form on your behalf for payment directly from Klais & Company, Inc. If you have to pay for the claim yourself, submit the claim form along with copies of your paid receipt for reimbursement

When the claim has been processed, you wilt be notified of the benefits paid. If any benefits have been denied, you will receive a written explanation.

PLAN ADMINISTRATOR

The Dayton Power and Light Company Group Insurance Plan is administered by Klais & Company, Inc. Their address and telephone number are:

Klais & Company, Inc.

1867 West Market Street

Akron, OH 44313-6977

(800) 331-1096

COVERED EXPENSES

Most medical expenses are covered including hospital, surgical, and doctor’s charges; testing; treatment; and supplies.

The plan covers the following charges as specified by the plan Schedule Of Benefits for medically necessary services and supplies ordered by your doctor:

•Hospital room and board at the semi-private rate.

•Intensive care and cardiac care unit charges.

•Hospital services and supplies while confined in the hospital (Only medically necessary services and supplies are covered Items such as television, telephones and newspapers are not covered.)

•Hospital outpatient treatment, services and supplies for illness, injury or outpatient surgery. (Certain surgical procedures are performed on an outpatient basis.)

•Hospital outpatient pre-admission tests performed prior to inpatient admission.

•Medical treatment by a physician for an illness, diagnosis of an illness or accident.

•Surgery by a physician, including elective sterilization and abortion. (Certain surgical procedures require a second opinion.)

•Charges for pregnancy are covered the same as any other medical expense for you or your spouse.

•Active services of an assisting surgeon.

•Anesthetics and their administration by a physician or professional anesthetist.

•Services and supplies provided by an approved ambulatory surgical center.

•Doctor’s examination and reporting charges for second surgical opinions by a board-certified specialist are fully paid.

•Local professional ground ambulance service when emergency transportation is required. (Non-emergency transportation by taxicab, limousine, railroad, air ambulance or other non-emergency vehicle is not covered.)

•Drugs and medicine prescribed by a physician and dispensed by a pharmacist. Only drugs and medications that require a prescription are covered.

•Home health care services benefit is limited to 8 hours per 24-hour period.

•Skilled nursing facility/hospice care services benefit is limited to 180 days per calendar year.

•Insulin, hypodermic syringes and needles and other associated medically necessary supplies.

•Diagnostic x-rays and laboratory services; blood, blood plasma and its administration; oxygen and its administration; radium, radioactive isotopes and x-ray therapy.

•Surgical dressings, casts, splints, trusses, braces, orthopedic shoes attached to braces, crutches, support-type surgical stockings or sleeves, and colostomy supplies.

•Prosthetic devices to replace lost physical parts or organs, including artificial limbs, hands and eyes.

•Initial cost and fitting of external breast prosthesis after mastectomy.

•Rental of necessary durable medical equipment including (but not limited to) a wheelchair, hospital bed, glucose monitor, apnea monitor, iron lung or other equipment for administration of oxygen, and supplies necessary in use of durable medical equipment. Medical equipment is covered if medically necessary and cost effective. (The cost purchasing this equipment and the replacement and repair of equipment may be covered. Before purchasing equipment you must receive written pre-authorization for the purchase from the Plan administrator.)

•Initial cost of contact lens and its replacement when required after cataract surgery.

•Services of a registered physical therapist or occupational therapist who is not a close relative and does not live in your home.

•Speech therapy by a licensed speech therapist under the supervision of a physician for a condition resulting from injury, sickness, or congenital disorder (such as cleft lip or palate). Benefits are not paid for a speech condition resulting from developmental or learning disabilities or personality disorder.

•Non-surgical procedures of the spine including, but not limited to subluxations, manipulations, traction and adjustments are covered. Such charges must be performed by a licensed provider and be considered medically necessary in terms of generally accepted medical standards. Covered is limited to 20 visits in a calendar year unless the chiropractor can provide acceptable proof of the need for continued treatment.

•Certain procedures involving oral surgery are covered. Cutting procedures necessary for the care of teeth and gums and for repair of extractions will be covered, if the cause is accidental.

•Certain other cutting procedures such as the removal of bone impacted teeth, surgery of the bone structure (osseous), bone cavities (alveolectomy), roots (apicoetomy) and gum structure (gingivectomy) will be covered.

CHARGES THAT ARE NOT COVERED

Although the plan covers most medical expenses, some charges are not eligible. The Plan does not cover the following expenses:

•Any service or supplies that are not prescribed by a physician, that are not medically necessary, that do not meet generally accepted professional standards, or that are experimental or controversial in nature.

•Services or supplies that are for personal comfort or of a luxury nature (such as television, telephone, beauty or barber services, newspapers, guest cots, or guest meals).

•Dental work or oral appliances including but not limited to services, supplies, or appliances provided in connection with treatment to alter, correct, fix, improve, remove, replace, reposition, restore, or treat:

•the jaw, any jaw implant, or the joint of the jaw (the temporomandibular joint);

•teeth;

•the parts of the upper or lower jaw which contain the teeth (the alveolar process and ridges);

•the meeting of upper and lower teeth; or

•the chewing muscles.

[These services, supplies or appliances are not covered even if they are:

(1) needed because of symptoms, sicknesses or injuries which affect some other part or parts of the body; or

(2) provided in connection with any examination or treatment of the teeth, gums, jaw or chewing muscles because of pain, injury, decay, malformation, disease or infection.]

•Anycharges not reported to the insurance company within one year after which the charge was incurred. (A claim should be submitted within 90 days or as soon as reasonably possible.)

•Drugs, medicines or other pharmaceuticals that can lawfully be obtained without a prescription (such as patent medicines, dietary supplements or vitamins and sickroom supplies).

•Treatment of any injury or sickness that is covered by Workers’ Compensation or occupational disease law. Expenses incurred by a donor or potential donor of an organ or tissue for use in a transplant operation - whether you are the donor or recipient.

•Custodial care/rest cure.

•Expenses for weight control or treatment of obesity not caused by an organic condition.

•Travel or transportation expenses except as specifically explained in an earlier section.

•Radial keratotomy.

•Expenses for sex transformation, treatment of sexual dysfunction, reversal ofsterilization, or direct attempts to cause pregnancy such as hormone therapy, artificial insemination and in vitro fertilization. (Treatment to determine the cause of infertility - such as examinations, diagnostic testing and surgery - is covered in the same way as any other illness. If a medical condition is established, treatment of the condition is also covered. But treatment to cause pregnancy when no medical condition is established, or to reverse sterilization, is not covered.)

•Treatment of eye refractions, eye exercises or vision training, or the fitting or cost of eyeglasses or contact lenses. (Contact lenses are covered only when required as a result of cataract surgery.)

•Foot orthotics, orthopedic shoes, cervical collars (except as specifically provided), athletic equipment, or protective wear.                .

•Services provided or paid by the U.S. Government or any ofits agencies.

•Nonmedical equipment used in the home, such as sun or heat lamps, heating pads, whirlpool baths, exercise devices, ramps, handrails, air conditioners, purifiers or humidifiers.

•Cosmetic or reconstructive surgery except for repair of congenital birth defects in a newborn infant, repair of injuries received while covered by the plan, or repair of defects which result from surgery for which plan benefits were paid,

•Custodial care.

•Injury or sickness resulting from war or armed aggression, or incurred during active duty or training in the armed forces, National Guard, orReserves of any state or country.

•Expenses that would be payable in the absence ofthis coverage under the extension of benefits provision of a prior group health plan.

EX-10.U

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

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.

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

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

(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

EX-10.BB

Exhibit 10(bb)

December 15, 2000

Mr. Arthur G. Meyer

3325 Ridgeway Road

Kettering, OH 45429

Dear Art:

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 termination of employment subsequent to a Change of Control.

In order to effect the foregoing, this letter agreement sets forth the Company’s agreement to extend to you certain benefits upon a termination of employment whenever occurring and to set forth the severance benefits which the Company agrees will be provided to you in the event your employment with the Company or, in the case of a Change of Control described in clause (iv) of paragraph 2, with the successor to the Company is terminated subsequent to a Change of Control under the circumstances 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 July 1, 1998, 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 1^st to April 30^th), 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 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.A. 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)The Company shall pay to you in a lump sum in cash not later than 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.

(ii)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 (as defined in paragraph 4).

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 your employment by the Company shall thereafter have been terminated in accordance with 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 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 § 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 maybe (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.TERMINATION FOLLOWING CHANGE OF CONTROL.

A.If any of the events described in paragraph 2 constituting a Change of Control shall have occurred, then upon any subsequent termination of your employment at any time within thirty-six months following the occurrence of any such event, you shall be entitled to the benefits set forth in paragraph 5, unless such termination is

(i)by the Company because of your Disability or for Cause;

(ii)by you without Good Reason, except that if no Change of Control has occurred other than the commencement of a tender offer or the entering into of an agreement referred to in item (ii) or (iii) of paragraph 2 by you for any reason; or

(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.

B.As used in this agreement, the terms “Disability”, “Cause” and “Good Reason” 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) if no Change of Control has occurred other than the commencement of a tender offer and/or the entering into of an agreement referred to in items (ii) or (iii) of paragraph 2, 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 you 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)Good Reason. “Good Reason” shall mean:

(a)The assignment to you, without your express consent, of any duties inconsistent with the written Objectives approved by the Company with respect to your position, duties, responsibilities and status with the Company in effect immediately prior to a Change of Control, or a change in your reporting responsibilities, titles or offices as described in the Company’s written objectives in effect immediately prior to a Change of Control, or your removal from or any failure to re-elect you to any of such positions or offices, except in connection with the termination of your employment for

Disability or Cause, or by you other than for Good Reason, or as a result of your death.

(b)Failure by the Company to increase your annual base salary, at the time when salary adjustments were historically made by the Company prior to the Change of Control, by an amount which at least equals on a percentage basis the average percentage increase in your base salary during the three (3) full calendar years immediately preceding the Change of Control.

(c)A reduction by the Company of your base salary as in effect on the date hereof or as the same may be increased from time to time.

(d)Failure by the Company to continue in effect any benefit or compensation plan (including but not limited to the Company’s Management Incentive Compensation Program, Key Employees Deferred Compensation Plan, Management Stock Incentive Plan, Supplemental Executive Retirement Plan or any other pension, employee stock ownership, life insurance, medical, health and accident, or disability plan) in which you are participating at the time of a Change of Control or plans providing you with substantially similar benefits; or the taking of any action by the Company which would adversely affect your participation in or materially reduce your benefits under any of such plans or deprive you of any material fringe benefit enjoyed by you at the time of the Change of Control; or the failure by the Company to provide you with the number of paid vacation days to which you would then be entitled in accordance with the Company’s vacation policy in effect at the time of the Change of Control.

(e)The relocation of the Company’s principal executive offices to a location outside Montgomery County, Ohio, if at the time of a Change of Control you are based at the Company’s principal executive offices.

(f)The Company’s requiring you to be based anywhere more than fifty miles from the location where you are based at the time of a Change of Control (except for required travel on the Company’s business to an extent substantially consistent with your business travel obligations as they existed at the time of a Change of Control); or, in the event you consent to being based anywhere more than fifty miles from such location, the failure by the Company to pay (or reimburse you for) all reasonable moving expenses incurred by you relating to a change of your principal residence in connection with such relocation and to indemnify you against any loss (defined as the difference between the actual sale price of such residence after the deduction of all real estate brokerage charges and related selling expenses and the higher of

(1) your aggregate investment in such residence or (2) the fair market value of such residence as determined by a real estate appraiser designated by you and reasonably satisfactory to the Company realized upon the sale of such residence in connection with any such change of residence.

(g)The Company’s requiring you to perform duties or services which necessitate absence overnight from your place of residence, because of travel involving the business or affairs of the Company, to a degree not substantially consistent with the extent of such absence necessitated by such travel during the period of twelve months immediately preceding a Change of Control.

(h)The failure of the Company to obtain the assumption of this agreement by any successor as provided in paragraph 7 hereof.

(i)The Company’s termination of your employment without satisfying any applicable requirements of subparagraph (ii) above or of paragraph 4.

(j)If, within thirty-six months after the date of a Change of Control you determine in good faith that due to the Change of Control, you are not able to effectively discharge your duties.

C.Should your employment be terminated because of a Disability within thirty-six (36) months following the occurrence of a Change of Control, you shall be entitled to receive benefits under any Company employee salary continuation plan or employee disability insurance plan then in effect in accordance with the then applicable terms thereof; provided that if the Change of Control is other than a Change of Control consisting only of the commencement of a tender offer and/or the entering into of an agreement referred to in item (ii) or (iii) of paragraph 2 above, you shall be entitled to receive such benefits or benefits under any similar plan in effect as of the date of the occurrence of such Change of Control, whichever shall result in the highest amount of benefits being paid to you as a result of the Disability in question.

D.If subsequent to a Change of Control your employment is terminated by the Company for Cause, the Company shall pay or make available to you, in compensation for services previously rendered, the amounts provided under paragraph 1.A. above; and the Company shall thereupon have no further obligation to you under this agreement.

4.NOTICE UPON TERMINATION.

A. Any termination of your employment subsequent to a Change of Control, unless by you without Good Reason or because of your death, shall be consummated by written Notice of Termination given to the other party. For purposes of this agreement, “Notice of Termination” shall mean a notice given by the Company, or by you following the event specified in subparagraph 3.B(iii), 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 you terminate your employment for Good Reason, the date specified in your Notice of Termination; or

(iii)if your employment is terminated by the Company or by you for any other reason, the date of such termination.

5.COMPENSATION UPON TERMINATION.

A.If you are entitled to benefits under paragraph 3.A., then

(i)The Company shall pay to you as severance pay in a lump sum in cash not later than the Date of Termination (or in the case of payments under (e), if, and to the extent the amount ofsuch payments are not known or calculable as of such due date, as soon as the amount is known and calculable), subject, however, to any contrary deferral election you may have made with respect thereto, the amounts determined as provided below:

(a)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, orin 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.

(b)In lieu of further salary payments to you for periods subsequent to the Date of Termination, an amount 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 Date of Termination (or, if

higher, at the rate in effect at the time of the Change of Control) 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 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.

(c)In consideration of your agreeing to the following covenants in this paragraph 5.A.(i)(c), if you are due an amount under paragraph 5.A.(i)(b), an additional amount equal to one-half (1/2) the amount determined under paragraph 5.A.(i)(b). In consideration of the Company’s agreement to make this payment per the terms of this paragraph 5.A.(i)(c), you agree that in the event and only in the event that you receive any payments under this paragraph 5.A., then during the term of your employment with the Company and for a period of two years after termination of your employment for any reason, you will not, without our prior written consent, engage, participate or be interested, directly or indirectly, in any business: (i) which is engaged in Ohio, Indiana, Kentucky, Michigan and/or Pennsylvania in providing (as a public utility or otherwise) gas and/or electric power or services on a retail and/or wholesale basis or in providing energy marketing, aggregation and/or procurement services or (ii) which is engaged in any other business being conducted or proposed to be conducted by the Company.

Furthermore, you agree that, during the aforementioned two year period, you will not (i) directly or indirectly, solicit for employment with yourself or any firm or entity with which you are associated, any employee of the Company or otherwise disrupt, impair, damage or interfere with the Company’s relationship with its employees; (ii) solicit for your own behalf or on behalf of any other person(s), any customer of the Company that has purchased goods from the Company at any time in the twelve (12) months preceding your date of termination or that the Company is actively soliciting, for the purpose of marketing or distributing any product or service competitive with any product or service then offered by the Company in any geographic market where the Company is doing or preparing to do business; or (iii) engage yourself or be affiliated with any person(s), in the development or marketing, including but not limited to the establishment of product prices, of any product which will compete with any product the Company is then developing or marketing in any geographic market where the Company is doing or preparing to do business.

At all times, you (i) will keep all confidential, nonpublic and/or proprietary information (including, for example, trade secrets,

financial information, customer information and business and strategic plans) of the Company (regardless of when you became aware of such information) in strict confidence and (ii) will not, directly or indirectly, use or disclose to any person in any manner any of such information, except to the extent directly related to and required by your performance of the duties assigned to you by the Company. You will take all appropriate steps to safeguard such information and to protect it against unauthorized disclosure, misuse, loss or theft. Upon termination of your employment, you will promptly return to the Company, without retaining any copies, all written or computer readable material containing any of such information, as well as all other property and records of the Company, in your possession or control.

The payment under this paragraph 5.A.(i)(c) and the payment under paragraph 5.A.(i)(b) are herein together referred to as the “Additional Compensation Payment.”

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 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.

(d)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.

(e)Any amount payable under paragraph 9 hereof.

(ii)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 under this subparagraph (ii) shall terminate on the earliest of the following dates:

(a)the third anniversary date of the Date of Termination; 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.

(iii)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 (ii) 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.

(iv)The Company shall enable you to purchase the automobile, if any, which the Company was providing for your use at the time Notice of Termination was given 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.

B.With respect to the Management Stock Incentive Plan (“MSIP”), 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 l0(b) (or successor provision) of the MSIP. All capitalized terms in this paragraph B shall have the same meaning as in the MSIP. Stock Incentive Units are sometimes referred to as “Restricted Stock Units.”

C.The benefits provided under this agreement shall not be treated as damages, but rather shall be treated as severance 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 hereunder if you terminated your employment for Good Reason regardless of whether you in fact have done so, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination.

The 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.

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 Date of Termination, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time of termination of your employment, 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 time of the termination of your employment, the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest payable with respect to such excess) at the time that the amount of such excess is finally determined.

The Gross-Up Payment shall be paid not later than the Date of Termination or, if and to the extent such payment is not known or calculable as of such date, as soon as the amount is known and calculable.

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&Lrepresenting 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 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 5.A (ii) and (iii) 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:

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

Arthur G. Meyer 3325

Ridgeway Road

Kettering, Ohio 45429

Any party may change the address to which notices to such party are to be directed by giving written notice of such change to the other parties in the manner specified in this 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.

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 l0); 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 President
	THE DAYTON POWER AND LIGHT COMPANY
	By:
		Its President
Confirmed and agreed to:
Date:

EX-10.CC

Exhibit 10(cc)

DPL INC.

STOCK OPTION PLAN

Management Stock Option Agreement

This Agreement is made as of January 1, 2001 (the “Grant Date”), by and between DPL Inc., an Ohio corporation (the “Company”) and Arthur Meyer (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 50,000 Common Shares of the Company at $29 ⁵/₈ 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 Percent of Option	Vested as of December 31
20%	2001
40%	2002
60%	2003
80%	2004
100%	2005

b.Exercise. The vested portion of the Option shall become exercisable on January 1, 2006. 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 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.

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.

5.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.

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

7.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.

8.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.

9.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.

10.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.

11.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.

12.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.

13.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.

14.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 (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.

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).

15.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.

16.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.

17.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:
	President & CEO
	Arthur Meyer

EX-10.DD

Exhibit 10(dd)

October 28, 1998

Mr. Arthur G. Meyer

MacGregor Park

Dear Art,

It is my pleasure to tell you that effective January 1, 1999, you are included in DPL’s executive health care plan. As well as providing current full medical benefits, this program also ensures that you will have complete medical benefits during your lifetime.

The enclosed packet provides all the necessary information. If you have any questions, please call Jeanne Holihan.

I appreciate your continued contributions to our Company.

Best regards,

Allen M. Hill

President and

Chief Executive Officer

EX-10.EE

Exhibit 10(ee)

November 26, 1997

Arthur G. Meyer

MacGregor Park

Dear Art:

In addition to your current benefit programs, I’m pleased to inform you that you will be provided the following benefits:

Basic Life Insurance

As a participant in the Executive program, your life insurance benefit will change to three times your base pay or $450,000. There is no cost to you for this coverage and DP&L will also pay any federal, state and local taxes associated with the new coverage. Since this benefit is tied to your salary, future pay increases will provide for additional benefits.

Executive Physical

Health Appraisal Systems, Inc. will provide a company-paid comprehensive health appraisal examination for you on an annual basis. Their procedures include a broad range of physical, clinical and laboratory tests including stress and exercise (treadmill) programs and will take a half day. Appointments at Health Appraisal, located at 7100 Corporate Way in Centerville, may be scheduled by calling 435-0220. When scheduling, identify yourself as a DP&L employee for the Executive Physical Examination, Program I.

AYCO Financial Services

AYCO Financial Services has been providing financial counseling to members of the Executive staff. We feel committed to helping you prepare for the future and your participation in this program will help ensure your security now and in years to come. The program provides financial counseling for you up to $5,000 annually. DPL’s AYCO representative is Madeline Niewodowski. Madeline is a registered investment advisor and investment representative who has been with

AYCO for 14 years. Her experience in all aspects of financial planning has been beneficial to everyone who is currently participating in this program. She will not only provide counseling from her Pittsburgh office, but also make periodic trips to Dayton to meet with you and Valerie, if needed. We will let her know that you are new to the program and she will contact you to arrange a meeting time.

As an officer of the Company, your role will be even more critical to the success of our Company and we appreciate your dedication and commitment. I trust these new benefits will provide you the additional security that will make your time even more productive.

Sincerely,

Allen M. Hill

President and

Chief Executive Officer

EX-21

Exhibit 21

SUBSIDIARIES OF DPL INC.

DPL Inc. had the following subsidiaries on December 31, 2005:

	State of Incorporation
The Dayton Power and Light Company	Ohio
Miami Valley Insurance Company	Vermont
DPL Energy, LLC	Ohio
MVE, Inc.	Ohio
DPL Finance Company, Inc.	Delaware
DPL Energy Resources, Inc.	Ohio

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EX-23

Exhibit 23

Consent of Independent Registered Public Accounting Firm

The Board of Directors

DPL Inc.:

We consent to the incorporation by reference in the Registration Statement (No. 333-44370) on Form S-3 and Registration Statement (No. 333-39982) on Form S-8 of DPL Inc. and Subsidiaries (the Company) of our reports dated February 27, 2006, with respect to the consolidated balance sheets of the Company as of December 31, 2005 and 2004, and the related consolidated statements of results of operations, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2005, and all related financial statement schedules, management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2005 and the effectiveness of internal control over financial reporting as of December 31, 2005, which reports appear in the December 31, 2005 annual report on Form 10-K of the Company.  Our report refers to a change in the method of accounting for conditional asset retirement obligations.

/s/ KPMG LLP

KPMG LLP

Kansas City, Missouri

February 27, 2006

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EX-31.A

Exhibit 31(a)

CERTIFICATIONS

I, James V. Mahoney, certify that:

1.I have reviewed this annual report on Form 10-K of DPL Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)  Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)  Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 27, 2006
	/s/ James V. Mahoney
	James V. Mahoney
	President and Chief Executive Officer

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EX-31.B

Exhibit 31(b)

CERTIFICATIONS

I, John J. Gillen, certify that:

1.I have reviewed this annual report on Form 10-K of DPL Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or cause such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 27, 2006
	/s/ John J. Gillen
	John J. Gillen
	Senior Vice President and Chief Financial Officer

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EX-32.A

Exhibit 32(a)

DPL Inc.

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

The undersigned officers of DPL Inc. (the “Issuer”) hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Issuer’s Annual Report on Form 10-K for the period ended December 31, 2005, which this certificate accompanies, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained therein fairly presents, in all material respects, the financial condition and results of operations of the Issuer as of the dates and for the periods expressed therein.

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this statement required by Section 906 of the Sarbanes-Oxley Act of 2002, has been provided to the Issuer and will be retained by the Issuer and furnished to the Securities and Exchange Commission or its staff upon request.

Signed:

/s/ James V. Mahoney

James V. Mahoney

President and Chief Executive Officer

Date: February 27, 2006

The foregoing certificate is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Issuer’s Annual Report or as a separate disclosure document.

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EX-32.B

Exhibit 32(b)

DPL Inc.

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

The undersigned officers of DPL Inc. (the “Issuer”) hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Issuer’s Annual Report on Form 10-K for the period ended December 31, 2005, which this certificate accompanies, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained therein fairly presents, in all material respects, the financial condition and results of operations of the Issuer as of the dates and for the periods expressed therein.

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this statement required by Section 906 of the Sarbanes-Oxley Act of 2002, has been provided to the Issuer and will be retained by the Issuer and furnished to the Securities and Exchange Commission or its staff upon request.

Signed:

/s/ John J. Gillen

John J. Gillen

Senior Vice President and Chief Financial Officer

Date: February 27, 2006

The foregoing certificate is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Issuer’s Annual Report or as a separate disclosure document.

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