-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AuPWXA5B5iCRI4fwW2I7CJWLMt6BNvAGddpyctzuQ/bZ40h5dy8yDbNmak9OCZ3X nlNt+CP6ENthTh+lOH6/6A== 0000950124-98-001066.txt : 19980304 0000950124-98-001066.hdr.sgml : 19980304 ACCESSION NUMBER: 0000950124-98-001066 CONFORMED SUBMISSION TYPE: SC 13E4 PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 19980303 SROS: NYSE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ILLINOIS POWER CO CENTRAL INDEX KEY: 0000049816 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 370344645 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13E4 SEC ACT: SEC FILE NUMBER: 005-10419 FILM NUMBER: 98556117 BUSINESS ADDRESS: STREET 1: 500 S 27TH ST STREET 2: C/O HARRIS TRUST & SAVINGS BANK CITY: DECATUR STATE: IL ZIP: 62525-1805 BUSINESS PHONE: 2174246600 FORMER COMPANY: FORMER CONFORMED NAME: ILLINOIS IOWA POWER CO DATE OF NAME CHANGE: 19660822 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: ILLINOVA CORP CENTRAL INDEX KEY: 0000914755 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 371319890 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13E4 BUSINESS ADDRESS: STREET 1: 500 SOUTH 27TH STREET CITY: DECATUR STATE: IL ZIP: 62525-1805 BUSINESS PHONE: 2174246600 MAIL ADDRESS: STREET 1: 500 SOUTH 27TH ST STREET 2: 500 SOUTH 27TH ST CITY: DECATUR STATE: IL ZIP: 62525-1905 FORMER COMPANY: FORMER CONFORMED NAME: IP HOLDING CO DATE OF NAME CHANGE: 19931115 SC 13E4 1 TENDER OFFER MATERIAL 1 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------ Issuer Tender Offer Statement (Pursuant to Section 13(e)(1) of the Securities Exchange Act of 1934) ILLINOIS POWER COMPANY (Name of Issuer) ILLINOVA CORPORATION (Name of Person Filing Statement) ------------------
TITLE CUSIP NUMBER ----- ------------ CUMULATIVE PREFERRED STOCK ($50 PAR VALUE) 4.08% SERIES 452092 20 8 4.20% SERIES 452092 30 7 4.26% SERIES 452092 40 6 4.42% SERIES 452092 50 5 4.70% SERIES 452092 60 4 7.75% SERIES 452092 79 4 (Title and CUSIP Number of Class of Securities)
LEAH MANNING STETZNER, ESQ. GENERAL COUNSEL AND CORPORATE SECRETARY ILLINOVA CORPORATION 500 S. 27TH STREET DECATUR, IL 62525 (217) 424-6600 with a copy to: ROBERT J. REGAN, ESQ. SCHIFF HARDIN & WAITE 7200 SEARS TOWER CHICAGO, ILLINOIS 60616 (312) 258-5606 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of the Person Filing Statement) ------------------ ON OR ABOUT , 1998 (Date Tender Offer First Published, Sent or Given to Security Holders) ------------------ CALCULATION OF FILING FEE - -------------------------------------------------------------------------------- TRANSACTION VALUATION* $52,607,718.80 AMOUNT OF FILING FEE $10,521.54 - -------------------------------------------------------------------------------- * Solely for purposes of calculating the filing fee and computed pursuant to Section 13(e)(3) of the Securities Exchange Act of 1934, as amended, and Rule 0-11(b)(1) thereunder, the transaction value equals the total amount of funds, excluding fees and other expenses, required to purchase all outstanding shares of each class of securities listed above pursuant to the Offer described in the Offer to Purchase and Proxy Statement filed as Exhibit 99(a)(1) hereto. The purchase price per share for the outstanding shares will be based on a formula utilizing the 30-year Treasury Bond rate (except that the 5-year Treasury Bond rate will be used with respect to the 7.75% Series) at the commencement of the Offer. The above transaction value is based on the formula utilizing the 30-year and 5-year Treasury Bond rates as of February 25, 1998. Any adjustments to the filing fee will be made upon filing an Amendment to this Schedule 13E-4 upon commencement of the Offer. [ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. Amount Previously Paid: ____________________ Filing Party: Form or Registration No.: Date Filed: - -------------------------------------------------------------------------------- 2 ITEM 1. SECURITY AND ISSUER. (a) Incorporated herein by reference to the information appearing on the front cover of the Offer to Purchase and Proxy Statement, dated , 1998, filed as Exhibit 99(a)(1) to this Issuer Tender Offer Statement on Schedule 13E-4 (the "Offer to Purchase and Proxy Statement"). (b) Incorporated herein by reference to the information appearing on the front cover of the Offer to Purchase and Proxy Statement, and to the information appearing under the captions "Terms of the Offer -- Number of Shares; Purchase Prices; Expiration Date; Dividends" and "Transactions and Agreements Concerning the Shares" in the Offer to Purchase and Proxy Statement. (c) Incorporated herein by reference to the information appearing under the caption "Price Range of Shares; Dividends" in the Offer to Purchase and Proxy Statement. (d) Illinova Corporation, an Illinois corporation ("ILN"), is the person filing this statement and is the parent holding company of the Issuer, Illinois Power Company ("IPC"). ILN's principal office is at 500 S. 27th Street, Decatur, IL 62525. ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a) Incorporated herein by reference to the information appearing under the caption "Source and Amount of Funds" in the Offer to Purchase and Proxy Statement. (b) Incorporated herein by reference to the information appearing under the caption "Source and Amount of Funds" in the Offer to Purchase and Proxy Statement. ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE. Incorporated herein by reference to the information appearing under the captions "Special Factors -- Purpose of the Offer; Certain Effects of the Offer; Plans of ILN and IPC After the Offer" and "Proposed Amendment and Proxy Solicitation -- Reasons for the Proposed Amendment" in the Offer to Purchase and Proxy Statement. ITEM 4. INTEREST IN SECURITIES OF THE ISSUER. Incorporated herein by reference to the information appearing under the caption "Transactions and Agreements Concerning the Shares" in the Offer to Purchase and Proxy Statement. ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE ISSUER'S SECURITIES. Incorporated herein by reference to the information appearing under the caption "Transactions and Agreements Concerning the Shares" in the Offer to Purchase and Proxy Statement. ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. Incorporated herein by reference to the information appearing under the caption "Fees and Expenses Associated with the Offer" in the Offer to Purchase and Proxy Statement. ITEM 7. FINANCIAL INFORMATION. (a) Incorporated herein by reference to IPC's financial statements included in the Annual Report on Form 10-K for the year ended December 31, 1997 (to be filed by IPC by March 10, 1998), referenced herein as Exhibit 99(g)(1) and to the information appearing under the caption "Summary of Consolidated Financial Information" in the Offer to Purchase and Proxy Statement. (b) Not applicable. 2 3 ITEM 8. ADDITIONAL INFORMATION. (a) Not applicable. (b) Incorporated herein by reference to the information appearing under the caption "Special Factors -- Certain Legal Matters; Regulatory Approvals; Dissenters' Rights" and "Terms of the Offer -- Certain Conditions of the Offer" in the Offer to Purchase and Proxy Statement. (c) Not applicable. (d) Not applicable. (e) See Exhibits 99(a)(1) and 99(a)(2). ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
EXHIBIT NO. DESCRIPTION ----------- ----------- 99(a)(1) Offer to Purchase and Proxy Statement, dated , 1998. 99(a)(2) Form of Letter of Transmittal and Proxy. 99(a)(3) Form of Separate Proxy. 99(a)(4) Form of Notice of Guaranteed Delivery. 99(a)(5) Notice of Special Meeting of Shareholders. 99(a)(6) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. 99(a)(7) Form of Letter to Clients of Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. 99(a)(8) Letter to Shareholders, dated , 1998. 99(a)(9) Summary Advertisement, dated , 1998.* 99(a)(10) Press Release, dated , 1998* 99(b) Credit Agreement, dated as of June 12, 1996, as amended on June 28, 1996, among ILN, CIBC Inc., as Administrative Agent, The First National Bank of Chicago, Bank of America Illinois, The First National Bank of Boston, Bank of Montreal, The Fuji Bank, Limited, ABN AMRO Bank N.V. Chicago Branch, The Bank of New York and Deutsche Bank A.G. New York Branch and/or Cayman Islands Branch. 99(c) Not applicable. 99(d) Not applicable. 99(e) Not applicable. 99(f) Not applicable. 99(g)(1) Annual Report on Form 10-K for the year ended December 31, 1997, (to be filed by IPC by March 10, 1998) incorporated by reference to SEC File No. 1-3004.*
- ------------------------- * To be filed by amendment. 3 4 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: March 2, 1998 ILLINOVA CORPORATION By: /s/ Leah Manning Stetzner ------------------------------------ Leah Manning Stetzner, General Counsel and Corporate Secretary 4 EX-99.(A)(1) 2 OFFER TO PURCHASE & PROXY 1 OFFER TO PURCHASE AND PROXY STATEMENT ILLINOVA CORPORATION OFFER TO PURCHASE FOR CASH ANY AND ALL OUTSTANDING SHARES OF THE FOLLOWING SERIES OF CUMULATIVE PREFERRED STOCK OF ILLINOIS POWER COMPANY 283,290 SHARES, CUMULATIVE PREFERRED STOCK, 4.08% SERIES AT A PURCHASE PRICE OF $ PER SHARE, CUSIP NUMBER 452092 20 8 167,720 SHARES, CUMULATIVE PREFERRED STOCK, 4.20% SERIES AT A PURCHASE PRICE OF $ PER SHARE, CUSIP NUMBER 452092 30 7 136,000 SHARES, CUMULATIVE PREFERRED STOCK, 4.26% SERIES AT A PURCHASE PRICE OF $ PER SHARE, CUSIP NUMBER 452092 40 6 134,400 SHARES, CUMULATIVE PREFERRED STOCK, 4.42% SERIES AT A PURCHASE PRICE OF $ PER SHARE, CUSIP NUMBER 452092 50 5 176,000 SHARES, CUMULATIVE PREFERRED STOCK, 4.70% SERIES AT A PURCHASE PRICE OF $ PER SHARE, CUSIP NUMBER 452092 60 4 241,700 SHARES, CUMULATIVE PREFERRED STOCK, 7.75% SERIES AT A PURCHASE PRICE OF $ PER SHARE, CUSIP NUMBER 452092 79 4 ------------------------------------- ILLINOIS POWER COMPANY PROXY STATEMENT WITH RESPECT TO ITS COMMON STOCK AND CUMULATIVE PREFERRED STOCK ------------------------------------- THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON [EXPIRATION DATE], UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE"). Illinova Corporation, an Illinois corporation ("ILN"), invites the holders of each series of cumulative preferred stock (par value $50 per share) listed above (each a "Series of Preferred," and the holder thereof a "Preferred Shareholder") of Illinois Power Company, an Illinois corporation and direct utility subsidiary of ILN ("IPC"), to tender any and all of their shares of a Series of Preferred ("Shares") for purchase at the purchase price per Share listed above (the "Purchase Price"), net to the seller in cash, upon the terms and subject to the conditions set forth in this Offer to Purchase and Proxy Statement and in the accompanying Letter of Transmittal and Proxy (which together constitute the "Offer"). ILN will purchase any and all Shares validly tendered and not withdrawn, upon the terms and subject to the conditions of the Offer. See "Terms of the Offer -- Certain Conditions of the Offer" and "Terms of the Offer -- Extension of Tender Period; Termination; Amendments." THE OFFER FOR A SERIES OF PREFERRED IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES OF SUCH SERIES OF PREFERRED BEING TENDERED AND IS INDEPENDENT OF THE OFFER FOR ANY OTHER SERIES OF PREFERRED. THE OFFER, HOWEVER, IS CONDITIONED UPON, AMONG OTHER THINGS, THE PROPOSED AMENDMENT, AS DESCRIBED BELOW, BEING ADOPTED AT THE SPECIAL MEETING (AS DEFINED BELOW). SEE "TERMS OF THE OFFER -- CERTAIN CONDITIONS OF THE OFFER." Concurrently with the Offer, the Board of Directors of IPC is soliciting proxies for use at a special meeting of shareholders of IPC to be held at IPC's principal office, 500 South 27th Street, Decatur, Illinois 62525, on [EXPIRATION DATE] at 4:30 p.m., New York City time, or any adjournment or postponement of such meeting (the "Special Meeting"). The purpose of the Special Meeting is to consider an amendment (the "Proposed Amendment") to IPC's Amended and Restated Articles of Incorporation (the "Articles") which would remove a provision of the Articles that limits IPC's ability to issue or assume unsecured indebtedness (the "Debt Limitation Provision"). WHILE PREFERRED SHAREHOLDERS WHO WISH TO TENDER THEIR SHARES PURSUANT TO THE OFFER ARE NOT REQUIRED TO VOTE IN FAVOR OF THE PROPOSED AMENDMENT, THE OFFER IS CONDITIONED UPON THE PROPOSED AMENDMENT BEING ADOPTED AT THE SPECIAL MEETING. IN ADDITION, PREFERRED SHAREHOLDERS HAVE THE RIGHT TO VOTE FOR THE PROPOSED AMENDMENT REGARDLESS OF WHETHER THEY TENDER THEIR SHARES. IF THE PROPOSED AMENDMENT IS ADOPTED AT THE SPECIAL MEETING, IPC WILL MAKE A SPECIAL CASH PAYMENT (AS DEFINED HEREIN) IN THE AMOUNT OF $ PER SHARE TO EACH PREFERRED SHAREHOLDER WHO VOTED IN FAVOR OF THE PROPOSED AMENDMENT, PROVIDED THAT SUCH SHARES HAVE NOT BEEN TENDERED PURSUANT TO THE OFFER. THOSE PREFERRED SHAREHOLDERS WHO VALIDLY TENDER THEIR SHARES WILL BE ENTITLED ONLY TO THE PURCHASE PRICE PER SHARE LISTED ABOVE. ------------------------------------- ILN will pay to a Soliciting Dealer (as defined herein) a solicitation fee for Shares tendered, accepted for payment and paid for pursuant to the Offer, subject to certain conditions. See "Fees and Expenses Associated with the Offer." ------------------------------------- THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC") NOR HAS THE SEC PASSED UPON THE FAIRNESS OR MERITS OF THIS TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. ------------------------------------- NEITHER ILN, IPC, THEIR RESPECTIVE BOARDS OF DIRECTORS, NOR ANY OF THEIR RESPECTIVE OFFICERS MAKES ANY RECOMMENDATION TO ANY PREFERRED SHAREHOLDER AS TO WHETHER TO TENDER ANY OR ALL SHARES. EACH PREFERRED SHAREHOLDER MUST MAKE HIS OR HER OWN DECISION AS TO WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER. ------------------------------------- IPC'S BOARD OF DIRECTORS RECOMMENDS VOTING FOR THE PROPOSED AMENDMENT. ------------------------------------- This Offer to Purchase and Proxy Statement is first being mailed on or about [STATEMENT DATE] to Preferred Shareholders of record on [RECORD DATE]. IPC has declared the regular quarterly dividend on each Series of Preferred to be paid on May 1, 1998 (the "May 1998 Dividend") to holders of record as of the close of business on April 9, 1998. A tender and purchase of Shares pursuant to the Offer will not deprive a Preferred Shareholder of his or her right to receive the May 1998 Dividend on his or her Shares held of record as of the close of business on April 9, 1998, regardless of whether such Preferred Shareholder tenders his or her Shares in the Offer prior to that date. Tendering Preferred Shareholders will not be entitled to any dividends in respect of any dividend period (or any portion thereof) after May 1, 1998. Each Series of Preferred is traded on the New York Stock Exchange, Inc. (the "NYSE"), except the 7.75% Series which trades in the over-the-counter market (the "OTC"). On [LAST SALE DATE REFERENCE], the last reported sales prices on the NYSE were $ for the 4.08% Series of Preferred (on ); $ for the 4.20% Series of Preferred (on ); $ for the 4.26% Series of Preferred (on ); $ for the 4.42% Series of Preferred (on ); and $ for the 4.70% Series of Preferred (on ). On [LAST SALE DATE REFERENCE], the last reported sales price as reported by the National Quotation Bureau, Inc. was $ for the 7.75% Series of Preferred (on ). Preferred Shareholders are urged to obtain a current market quotation, if available, for their Shares. ------------------------------------- THE DEALER MANAGER FOR THE OFFER IS: DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION The date of this Offer to Purchase and Proxy Statement is [STATEMENT DATE]. 2 NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF ILN OR IPC AS TO WHETHER PREFERRED SHAREHOLDERS SHOULD TENDER OR REFRAIN FROM TENDERING SHARES OF ANY SERIES OF PREFERRED PURSUANT TO THE OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN, IN THE RELATED LETTER OF TRANSMITTAL AND PROXY OR IN THE SEPARATE PROXY. IF GIVEN OR MADE, SUCH RECOMMENDATION AND SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY ILN OR IPC. IMPORTANT Any Preferred Shareholder desiring to accept the Offer and tender all or any portion of his or her Shares should either (i) request his or her broker, dealer, commercial bank, trust company or nominee to effect the transaction for him or her, (ii) complete and sign the applicable Letter of Transmittal and Proxy enclosed herewith (the "Letter of Transmittal and Proxy") in accordance with the instructions in such Letter of Transmittal and Proxy, mail or deliver the same and any other required documents to First Chicago Trust Company of New York (the "Depositary"), and deliver the certificates for such Shares, together with the Letter of Transmittal and Proxy, to the Depositary, or (iii) tender such Shares pursuant to the procedure for book-entry transfer set forth below under "Terms of the Offer -- Procedure for Tendering Shares," in each case on or prior to the Expiration Date (as defined below). A Preferred Shareholder whose Shares are registered in the name of a broker, dealer, commercial bank, trust company or nominee must contact such broker, dealer, commercial bank, trust company or nominee if he or she desires to tender such Shares. Any Preferred Shareholder who desires to tender Shares and whose certificates for such Shares are not immediately available, or who cannot comply in a timely manner with the procedure for book-entry transfer, should tender such Shares by following the procedures for guaranteed delivery set forth below under "Terms of the Offer -- Procedure for Tendering Shares." EACH SERIES OF PREFERRED HAS ITS OWN LETTER OF TRANSMITTAL AND PROXY AND ITS OWN SEPARATE PROXY. ONLY THE APPLICABLE LETTER OF TRANSMITTAL AND PROXY FOR SUCH SERIES OF PREFERRED OR A NOTICE OF GUARANTEED DELIVERY MAY BE USED TO TENDER SHARES OF SUCH SERIES OF PREFERRED. A PROXY (WHETHER INCLUDED AS PART OF THE LETTER OF TRANSMITTAL AND PROXY OR AS A SEPARATE DOCUMENT ENCLOSED HEREWITH) MAY BE USED TO VOTE IN FAVOR OF THE PROPOSED AMENDMENT EVEN IF NO SHARES ARE BEING TENDERED. ------------------------- Questions or requests for assistance may be directed to MacKenzie Partners, Inc. ("MacKenzie" or the "Information Agent") or to Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ" or the "Dealer Manager") at their respective telephone numbers and addresses set forth on the back cover of this Offer to Purchase and Proxy Statement. Requests for additional copies of this Offer to Purchase and Proxy Statement, the Letter of Transmittal and Proxy, the separate Proxy or other related tender offer or proxy materials may be directed to the Information Agent, and such copies will be furnished promptly at ILN's or IPC's expense, as applicable. Preferred Shareholders may also contact their local broker, dealer, commercial bank or trust company for assistance concerning the Offer. 2 3 TABLE OF CONTENTS SUMMARY..................................................... 4 SPECIAL FACTORS............................................. 7 Purpose of the Offer; Certain Effects of the Offer........ 7 Liquidity of Trading Market............................... 8 Potential Effects of the Proposed Amendment on Non-Tendering Preferred Shareholders................... 8 Plans of ILN and IPC After the Offer...................... 9 Certain Legal Matters; Regulatory Approvals............... 10 Dissenters' Rights........................................ 10 TERMS OF THE OFFER.......................................... 10 Number of Shares; Purchase Prices; Expiration Date; Dividends.............................................. 10 Procedure for Tendering Shares............................ 11 Withdrawal Rights......................................... 13 Acceptance of Shares for Payment and Payment of Purchase Price.................................................. 14 Certain Conditions of the Offer........................... 15 Extension of Tender Period; Termination; Amendments....... 16 PROPOSED AMENDMENT AND PROXY SOLICITATION................... 17 Introduction.............................................. 17 Voting Securities, Rights and Procedures.................. 17 Dissenters' Rights........................................ 18 Proxies................................................... 19 Special Cash Payments..................................... 19 Security Ownership of Certain Beneficial Owners and Management............................................. 20 Business to Come Before the Special Meeting............... 21 Explanation of the Proposed Amendment..................... 21 Reasons for the Proposed Amendment........................ 21 Relationship with Independent Accountants................. 23 PRICE RANGE OF SHARES; DIVIDENDS............................ 23 CERTAIN FEDERAL INCOME TAX CONSEQUENCES..................... 25 SOURCE AND AMOUNT OF FUNDS.................................. 27 TRANSACTIONS AND AGREEMENTS CONCERNING THE SHARES........... 27 FEES AND EXPENSES ASSOCIATED WITH THE OFFER................. 27 CERTAIN INFORMATION REGARDING ILN AND IPC; INCORPORATION BY REFERENCE................................................. 29 SUMMARY OF CONSOLIDATED FINANCIAL INFORMATION; INCORPORATION BY REFERENCE.............................................. 30 MISCELLANEOUS............................................... 32 ATTACHMENT A................................................ A-1
3 4 SUMMARY The following summary is provided solely for the convenience of the Preferred Shareholders. This summary is not intended to be complete and is qualified in its entirety by reference to the full text and more specific details contained in this Offer to Purchase and Proxy Statement, the Letter of Transmittal and Proxy and the separate Proxy and any amendments hereto or thereto. Preferred Shareholders are urged to read this Offer to Purchase and Proxy Statement, the Letter of Transmittal and Proxy and the separate Proxy in their entirety. Each of the capitalized terms used in this summary and not defined herein has the meaning set forth elsewhere in this Offer to Purchase and Proxy Statement. The Companies................. Illinova Corporation ("ILN"), 500 South 27th Street, Decatur, Illinois 62525, is an exempt holding company under the Public Utility Holding Company Act of 1935, as amended (the "Holding Company Act"). ILN has three principal operating subsidiaries: Illinois Power Company ("IPC"), a combination electric and gas utility; Illinova Generating Company, an independent power supply company; and Illinova Energy Partners, Inc., an energy broker and services company. IPC is engaged in the generation, transmission, distribution and sale of electric energy and the distribution, transportation and sale of natural gas in the State of Illinois. Its service area is a widely diversified industrial and agricultural area comprising approximately 15,000 square miles in northern, central and southern Illinois. Electric service is provided at retail to 310 incorporated municipalities, adjacent suburban and rural areas and numerous unincorporated municipalities. Gas service is provided to 257 incorporated municipalities, adjacent suburban areas and numerous unincorporated municipalities. The Shares.................... 4.08% Series, Cumulative Preferred Stock (par value $50 per share) 4.20% Series, Cumulative Preferred Stock (par value $50 per share) 4.26% Series, Cumulative Preferred Stock (par value $50 per share) 4.42% Series, Cumulative Preferred Stock (par value $50 per share) 4.70% Series, Cumulative Preferred Stock (par value $50 per share) 7.75% Series, Cumulative Preferred Stock (par value $50 per share) The Offer and Purchase Price......................... Offer to purchase any or all Shares of each Series of Preferred at the prices set forth below, which prices shall be the "Purchase Price" with respect to the applicable Series of Preferred. $ per Share of the 4.08% Series $ per Share of the 4.20% Series $ per Share of the 4.26% Series $ per Share of the 4.42% Series $ per Share of the 4.70% Series $ per Share of the 7.75% Series Independent Offer............. The Offer for one Series of Preferred is independent of the Offer for any other Series of Preferred. The Offer is not conditioned upon any minimum number of Shares of the applicable Series of Preferred being tendered. Preferred Shareholders who wish to tender their Shares are not required to vote in favor of the Proposed Amendment. The Offer is subject, however, to adoption of the Proposed Amendment at the Special Meeting and certain other conditions described herein. See "Terms of the Offer -- Certain Conditions of the Offer." 4 5 Expiration Date of the Offer......................... The Offer expires at 5:00 p.m., New York City time on [Expiration Date], unless extended (the "Expiration Date"). How to Tender Shares.......... See "Terms of the Offer -- Procedure for Tendering Shares." For further information, call the Information Agent or the Dealer Manager or consult your broker for assistance. Withdrawal Rights............. Tendered Shares of any Series of Preferred may be withdrawn at any time until the Expiration Date with respect to such Series of Preferred and, unless previously accepted for payment, may also be withdrawn after , 1998. See "Terms of the Offer -- Withdrawal Rights." Any proxy accompanying any tendered Shares that are withdrawn will not be considered revoked unless the Preferred Shareholder specifically revokes such proxy as described herein. See "Proposed Amendment and Proxy Solicitation -- Proxies." Purpose of the Offer.......... ILN is making the Offer because ILN believes that the purchase of Shares is economically attractive to ILN, its shareholders and IPC. In addition, the Offer gives Preferred Shareholders the opportunity to sell their Shares at a price which ILN believes to be a premium over the current market price on the date of the announcement of the Offer and without the usual transaction costs associated with a market sale. See "Special Factors." Dividends..................... IPC has declared the regular quarterly dividend on each Series of Preferred to be paid on May 1, 1998 (the "May 1998 Dividend") to holders of record as of the close of business on April 9, 1998. A tender and purchase of Shares pursuant to the Offer will not deprive a Preferred Shareholder of his or her right to receive the May 1998 Dividend on his or her Shares held of record as of the close of business on April 9, 1998. Tendering Preferred Shareholders will not be entitled to any dividends in respect of any dividend period (or any portion thereof) after May 1, 1998. Brokerage Commissions......... Not payable by Preferred Shareholders. Solicitation Fee.............. ILN will pay a solicitation fee of $ per Share that is tendered, accepted for payment and paid for pursuant to the Offer in transactions for beneficial owners of fewer than Shares and a solicitation fee of $ per Share for transactions for beneficial owners of or more Shares; provided that solicitation fees payable in transactions for beneficial owners of or more Shares shall be paid 80% to the Dealer Manager and 20% to any designated Soliciting Dealer (as defined herein) (which may be the Dealer Manager). If the Proposed Amendment is adopted at the Special Meeting, IPC will pay to each designated Soliciting Dealer a separate fee of $ per Share for Shares that are not tendered pursuant to the Offer but which are voted in favor of the Proposed Amendment in transactions for beneficial owners of fewer than Shares and a separate fee of $ per Share for Shares that are not tendered pursuant to the Offer but which are voted in favor of the Proposed Amendment in transactions for beneficial owners of or more Shares; provided that the separate fee payable in transactions for beneficial owners of or more Shares shall be paid 80% to the Dealer Manager 5 6 and 20% to any designated Soliciting Dealer (which may be the Dealer Manager). A Soliciting Dealer will not be entitled to a solicitation fee or a separate fee for Shares beneficially owned by such Soliciting Dealer. Proposed Amendment............ Concurrently with the Offer, the Board of Directors of IPC is soliciting proxies for use at the Special Meeting. The purpose of the Special Meeting is to consider an amendment to IPC's Articles which would remove a provision that limits IPC's ability to issue or assume unsecured indebtedness. If the Proposed Amendment is adopted at the Special Meeting, the clause of the Articles that places restrictions on IPC's ability to issue or assume unsecured indebtedness will be eliminated with respect to any Shares that remain outstanding after the consummation of the Offer. See "Special Factors." Preferred Shareholders may be entitled to dissenters' rights in connection with the adoption of the Proposed Amendment. See "Proposed Amendment and Proxy Solicitation -- Dissenters' Rights." Special Meeting............... IPC will consider the Proposed Amendment at the Special Meeting to be held at its principal office, 500 South 27th Street, Decatur, Illinois 62525, on [Expiration Date] at 4:30 p.m., New York City time. Only holders of record of IPC's voting securities at the close of business on the Record Date will be entitled to vote at the Special Meeting. Record Date................... [Record Date]. Special Cash Payment.......... If the Proposed Amendment is adopted at the Special Meeting by IPC's shareholders, IPC will make a special cash payment of $ per Share to each Preferred Shareholder who voted in favor of the Proposed Amendment but who did not tender his or her Shares (the "Special Cash Payment"). Preferred Shareholders who validly tender their Shares will be entitled only to the purchase price per Share listed on the front cover of this Offer to Purchase and Proxy Statement. Payment Date.................. Promptly after the Expiration Date or any extension thereof (the "Payment Date"). Stock Transfer Tax............ Except as described herein, ILN will pay or cause to be paid any stock transfer taxes with respect to the sale and transfer of any Shares to it or its order pursuant to the Offer. Each Preferred Shareholder will be responsible for paying any income or gross receipts taxes imposed by any jurisdiction by reason of the Special Cash Payment and/or the sale of the Shares. See Instruction 6 of the applicable Letter of Transmittal and Proxy. See also "Terms of the Offer -- Acceptance of Shares for Payment and Payment of Purchase Price" and "Certain Federal Income Tax Consequences." Further Information........... Additional copies of this Offer to Purchase and Proxy Statement, the applicable Letter of Transmittal and Proxy, and the applicable separate Proxy may be obtained by contacting MacKenzie Partners, Inc., at (800) 322-2885 (toll free) or (212) 929-5500 (brokers and dealers). Questions about the Offer should be directed to DLJ at (800) 334-1604 (toll free). 6 7 SPECIAL FACTORS PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER ILN believes that the purchase of the Shares at this time represents an attractive economic opportunity that will benefit ILN, its shareholders and IPC. In addition, the Offer gives Preferred Shareholders the opportunity to sell their Shares at a price which ILN believes to be a premium to the respective market prices of Shares of each Series of Preferred on the date of the announcement of the Offer and without the usual transaction costs associated with a sale. ILN did not find it practicable to, and did not, quantify or otherwise assign relative weights to these considerations. Trading of the Shares of each Series of Preferred has been limited and sporadic. Therefore, ILN determined the Purchase Price for each Series of Preferred with reference to certain objective factors, including, but not limited to, historical and recent market prices, yields on U.S. Treasury and municipal securities, yields on comparable preferred securities, the prior trading characteristics of each Series of Preferred, and the current and future redemption price of each Series of Preferred, as well as certain subjective factors, including, but not limited to, general industry outlook, general market supply of securities of similar type, and supply and demand factors in the securities markets generally. Although the weighing of these factors is subjective, ILN gave relatively more weight to objective factors, such as yields on U.S. Treasury and municipal securities, yields on comparable preferred securities, and current and future redemption prices of the Series of Preferred. Neither ILN, IPC nor their respective boards of directors (individually, a "Board of Directors" and collectively, the "Boards of Directors") received any report, opinion or appraisal from an outside party which is related to the Offer, including, but not limited to, any report, opinion or appraisal relating to the consideration or the fairness of the consideration to be offered to the holders of the Shares or the fairness of such Offer to ILN, IPC or the unaffiliated holders of Shares. Neither of the Boards of Directors nor any individual director of ILN or IPC has retained an unaffiliated representative to act solely on behalf of unaffiliated holders of Shares for the purposes of negotiating the terms of the Offer or preparing a report concerning the fairness of the Offer. Neither ILN, IPC nor their respective Boards of Directors believed these measures were necessary to ensure fairness in light of the fact that the Offer will not result in a liquidation or change in control in ILN, IPC or any of their affiliates. Preferred Shareholders are not under any obligation to tender Shares pursuant to the Offer. The Offer does not constitute notice of redemption of any Series of Preferred pursuant to IPC's Articles, nor does ILN or IPC intend to effect any such redemption by making the Offer. Further, the Offer does not constitute a waiver by IPC of any option it has to redeem Shares. The 4.08% Series, 4.20% Series, 4.26% Series, 4.42% Series and 4.70% Series of cumulative preferred stock are not subject to mandatory redemption, but presently are redeemable at the option of IPC at $51.50 per Share, $52.00 per Share, $51.50 per Share, $51.50 per Share and $51.50 per Share respectively. The 7.75% Series is also not subject to mandatory redemption and is not redeemable until July 1, 2003. On or after July 1, 2003, the 7.75% Series is redeemable at the option of IPC at $50.00 per Share. The Shares of each Series of Preferred have no preemptive or conversion rights. Upon liquidation or dissolution of IPC, owners of the Shares would be entitled to receive an amount equal to the liquidation preference of $50.00 per share plus all accrued and unpaid dividends (whether or not earned or declared) thereon to the date of payment, prior to the payment of any amounts to the holders of IPC's common stock (currently, ILN is the only holder of IPC's common stock). Shares validly tendered to the Depositary pursuant to the Offer and not withdrawn in accordance with the procedures set forth herein shall be held until the Expiration Date (or returned to the extent the Offer is terminated in accordance herewith). To the extent that the Proposed Amendment is adopted at the Special Meeting and the Shares tendered are accepted for payment and paid for in accordance with the terms hereof, ILN presently intends to sell or otherwise transfer Shares to IPC and, at that time, it is expected that IPC would retire and cancel the Shares. However, in the event the Proposed Amendment is not adopted at the Special Meeting, ILN may elect to, but is not obligated to, waive, subject to applicable law, such condition. In that case, subsequent to ILN's waiver and purchase of the Shares, IPC anticipates, as promptly as practicable thereafter, that it would call another special meeting of its shareholders and solicit proxies therefrom for an amendment substantially similar to the Proposed Amendment. At that meeting, ILN would vote any Shares 7 8 purchased by it pursuant to the Offer or otherwise (together with its shares of IPC's common stock) in favor of such amendment, thereby maximizing the prospects for the adoption of the amendment. The purchase of Shares of each Series of Preferred pursuant to the Offer will reduce the number of holders of Shares and the number of such Shares that might otherwise trade publicly, and, depending upon the number of Shares so purchased, such reduction could adversely affect the ratings, liquidity and market value of the remaining Shares of each such Series of Preferred held by the public. The extent of the public market for such Shares and the availability of price quotations would, however, depend upon such factors as the number of shareholders remaining at such time, the interest in maintaining a market in the Shares on the part of securities firms and other factors. As of [RECORD DATE], there were registered holders of the 4.08% Series, registered holders of the 4.20% Series, registered holders of the 4.26% Series, registered holders of the 4.42% Series, registered holders of the 4.70% Series and registered holders of the 7.75% Series. Depending on the number of Shares tendered and purchased pursuant to the Offer, the Series of Preferred listed and trading on the NYSE may no longer meet the requirements of the NYSE for continued listing, which could adversely affect the market for such Shares. In addition, each Series of Preferred (other than the 7.75% Series) is currently registered under Section 12(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Registration of such Shares under the Exchange Act may be terminated upon the application by IPC to the SEC if such Shares are neither listed on a national securities exchange nor held by more than 300 holders of record. Termination of registration of such Shares under the Exchange Act would substantially reduce the information required to be furnished to Preferred Shareholders and could make certain provisions of the Exchange Act, such as the requirement of Rule 13e-3 thereunder with respect to "going private transactions," no longer applicable to IPC. As of the date of this Offer to Purchase and Proxy Statement, each Series of Preferred was rated Baa2, BBB- and BBB-, by Moody's Investors Service, Inc. ("Moody's), Standard & Poor's Rating Services ("S&P") and Duff & Phelps, Inc. (D&P"), respectively. LIQUIDITY OF TRADING MARKET To the extent that Shares of any Series of Preferred are tendered, accepted for payment and paid for in the Offer, the trading market for Shares of such Series of Preferred that remain outstanding may be significantly more limited, which might adversely affect the liquidity, market value and price volatility of such Shares. Equity securities with a smaller outstanding market value available for trading (the "float") may command a lower price than would comparable equity securities with a greater float. Therefore, the market price for Shares that are not tendered in the Offer may be affected adversely to the extent that the number of Shares purchased pursuant to the Offer reduces the float. A reduced float may also make the trading price of the Shares that are not tendered, accepted for payment and paid for in the Offer more volatile. Preferred Shareholders of the remaining Shares may attempt to obtain quotations for the Shares from their brokers; however, there can be no assurance that any trading market will exist for such Shares following consummation of the Offer. To the extent a market continues to exist for the Shares after the Offer, the Shares may trade at a discount compared to present trading depending on the market for shares with similar features, the performance of IPC and other factors. There is no assurance that an active market in the Shares will exist and no assurance as to the prices at which the Shares may trade. POTENTIAL EFFECTS OF THE PROPOSED AMENDMENT ON NON-TENDERING PREFERRED SHAREHOLDERS If the Proposed Amendment is adopted at the Special Meeting, Preferred Shareholders of Shares that are not tendered and purchased pursuant to the Offer will no longer be entitled to the benefits of the Debt Limitation Provision, which will have been removed by the Proposed Amendment. As discussed above, the Debt Limitation Provision places restrictions on IPC's ability to issue or assume unsecured indebtedness. Although IPC's debt instruments may contain certain restrictions on IPC's ability to issue or assume debt, any such restrictions may be waived and the increased flexibility afforded IPC by the removal of the Debt Limitation Provision may permit IPC to take certain actions that may increase the credit risks with respect to IPC, adversely affecting the market price and credit rating of the remaining Shares or otherwise be materially adverse to the interests of the remaining Preferred Shareholders. In addition, to the extent that IPC elects to 8 9 issue or assume additional unsecured indebtedness, the remaining Preferred Shareholders' relative position in IPC's capital structure could be perceived to decline, which in turn could adversely affect the market prices and credit ratings of the remaining Shares. PLANS OF ILN AND IPC AFTER THE OFFER Following the consummation of the Offer, the business and operations of IPC are expected to be continued substantially as they are currently being conducted. Except as disclosed herein, ILN and IPC currently have no plans or proposals that relate to or would result in: (i) the acquisition by any person or entity of additional securities of IPC or the disposition of securities of IPC, other than in the ordinary course of business; (ii) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving IPC or any of its subsidiaries; (iii) a sale or transfer of a material amount of assets of IPC or any of its subsidiaries; (iv) any change in the present Board of Directors or management of IPC; (v) any material change in the present dividend rate or policy, or indebtedness or capitalization of IPC; (vi) any other material change in IPC's corporate structure or business; (vii) any change in IPC's Articles or by-laws ("By-laws") or any actions that may impede the acquisition of control of IPC by any person; (viii) a class of equity securities of IPC being delisted from a national securities exchange or no longer authorized to be quoted on the OTC; (ix) a class of equity securities of IPC becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Exchange Act; or (x) the suspension of IPC's obligation to file reports pursuant to Section 15(d) of the Exchange Act. However, ILN and IPC have from time to time considered, and expect to consider in the future, various strategies designed to enhance IPC's ability to anticipate and adapt to changes in the increasingly competitive utility industry. ILN and IPC are currently developing strategies responsive to the enactment of Public Act 90-561 ("PA 90-561") in Illinois on December 16, 1997. PA 90-561 amends the Illinois Public Utilities Act in numerous respects and provides a comprehensive framework for restructuring the electric utility industry in Illinois, including a managed transition to a competitive industry. PA 90-561 permits electric utilities in Illinois, including IPC, upon approval of the Illinois Commerce Commission ("ICC"), to issue, directly or indirectly, securitization bonds on or after August 1, 1998 in an aggregate amount not to exceed, among certain other restrictions, 50% of the electric utility's total capitalization as of December 31, 1996, with the proceeds of such issuance generally limited to the refinancing of debt or equity of the electric utility. IPC intends to file an application with the ICC seeking the approvals required for such issuance of securitization bonds and may determine to proceed with such issuance in 1998. In addition, ILN and IPC may pursue other business strategies, including business combinations with other companies, internal restructurings involving the complete or partial separation of IPC's generation, transmission and distribution businesses, acquisitions or dispositions of assets or lines of business, and additions to or reductions of franchised service territories. ILN and IPC may from time to time engage in discussions, either internally or with third parties, regarding one or more of these potential strategies. Those discussions may be subject to confidentiality agreements and the policy of ILN and IPC is generally not to comment on such activities. No assurances can be given that any potential transaction of the types described above may actually occur, or if one does occur, no assurances can be given with respect to the ultimate effect of any such transaction on ILN's or IPC's results or operations, financial condition or competitive position. After the consummation of the Offer, ILN or IPC, in its sole discretion, may purchase additional Shares on the open market, in privately negotiated transactions, through one or more tender offers or otherwise. Any such purchases may be on the same terms as, or on terms which are more or less favorable to holders of Shares than, the terms of the Offer. However, Rule 13e-4(f)(6) under the Exchange Act, prohibits ILN and its affiliates (including IPC) from purchasing any Shares of a Series of Preferred, other than pursuant to the Offer, until at least ten business days after the Expiration Date with respect to that Series of Preferred. Any future purchases of Shares by ILN or IPC would depend on many factors, including the success of the Offer, the market price of the Shares, ILN's business and financial position, legal restrictions on ILN's ability to purchase Shares as well as general economic and market conditions. NEITHER ILN, IPC, THEIR RESPECTIVE BOARDS OF DIRECTORS, NOR ANY OF THEIR RESPECTIVE OFFICERS MAKES ANY RECOMMENDATION TO ANY PREFERRED SHAREHOLDER AS TO WHETHER TO TENDER ANY OR ALL SHARES. EACH PREFERRED 9 10 SHAREHOLDER MUST MAKE HIS OR HER OWN DECISION AS TO WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS Neither ILN nor IPC needs to obtain approval from the ICC to undertake the Offer or the proxy solicitation. ILN is not aware of any license or regulatory permit that would be material to ILN's or IPC's business that might be adversely affected by ILN's acquisition of Shares as contemplated in the Offer or of any other approval or other action by any government or governmental, administrative or regulatory authority or agency, domestic or foreign, that would be required for ILN's acquisition of Shares pursuant to the Offer. Should any approval or other action be required, ILN currently contemplates that it will seek such approval or other action. ILN cannot predict whether it could be required to delay the acceptance for payment of, or payment for, Shares tendered pursuant to the Offer pending the outcome of any such matter. There can be no assurance that any such approval or other action, if needed, would be obtained, or would be obtained without substantial conditions or that the failure to obtain any such approval or other action might not result in adverse consequences to ILN's or IPC's business. ILN intends to make all required filings under the Exchange Act. ILN's obligation under the Offer to accept for payment, or make payment for, Shares is subject to certain conditions. See "Terms of the Offer -- Certain Conditions of the Offer." Except for adoption of the Proposed Amendment, which condition can be waived by ILN, no approval of the holders of any Shares or the holders of any of IPC's other securities or the holders of ILN's securities is required in connection with the Offer. See "Proposed Amendment and Proxy Solicitation." DISSENTERS' RIGHTS No dissenters' rights are available to holders of Shares in connection with the Offer. However, holders of Shares may be entitled to dissenters' rights in connection with the adoption of the Proposed Amendment. See "Proposed Amendment and Proxy Solicitation -- Dissenters' Rights." TERMS OF THE OFFER NUMBER OF SHARES; PURCHASE PRICES; EXPIRATION DATE; DIVIDENDS Upon the terms and subject to the conditions described herein and in the applicable Letter of Transmittal, ILN will purchase any and all Shares that are validly tendered on or prior to the Expiration Date (and not properly withdrawn in accordance with "Terms of the Offer -- Withdrawal Rights") at the purchase price per Share listed on the front cover of this Offer to Purchase and Proxy Statement for the Shares tendered, net to the seller in cash. See "Terms of the Offer -- Certain Conditions of the Offer" and "Terms of the Offer -- Extension of Tender Period; Termination; Amendments." On , there were issued and outstanding 283,290 Shares of the 4.08% Series of Preferred; 167,720 Shares of the 4.20% Series of Preferred; 136,000 Shares of the 4.26% Series of Preferred; 134,400 Shares of the 4.42% Series of Preferred; 176,000 Shares of the 4.70% Series of Preferred; and 241,700 Shares of the 7.75% Series of Preferred. THE OFFER FOR A SERIES OF PREFERRED IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES OF SUCH SERIES OF PREFERRED BEING TENDERED AND IS INDEPENDENT OF THE OFFER FOR ANY OTHER SERIES OF PREFERRED. THE OFFER, HOWEVER, IS CONDITIONED UPON, AMONG OTHER THINGS, THE PROPOSED AMENDMENT, AS DESCRIBED HEREIN, BEING ADOPTED AT THE SPECIAL MEETING. SEE "TERMS OF THE OFFER -- CERTAIN CONDITIONS OF THE OFFER." The Offer is being sent to all persons in whose names Shares are registered on the books of IPC as of the close of business on [RECORD DATE] and transferees of such persons. Only a record holder of Shares on the Record Date may vote in person or by proxy at the Special Meeting. No record date is fixed for determining which persons are permitted to tender Shares. Any person who is the beneficial owner but not the record holder of Shares must arrange for the record transfer of such Shares prior to tendering. 10 11 With respect to each Series of Preferred, the Expiration Date is the later of 5:00 p.m. New York City time, on [EXPIRATION DATE] or the latest time and date to which the Offer with respect to such Series of Preferred is extended. ILN expressly reserves the right, in its sole discretion, and at any time and/or from time to time, to extend the period of time during which the Offer for any Series of Preferred is open, by giving oral or written notice of such extension to the Depositary and making a public announcement thereof, without extending the period of time during which the Offer for any other Series of Preferred is open. There is no assurance whatsoever that ILN will exercise its right to extend the Offer for any Series of Preferred. If ILN decides, in its sole discretion, to (i) decrease the number of Shares of any Series of Preferred being sought, (ii) increase or decrease the consideration offered in the Offer to holders of any Series of Preferred or (iii) increase or decrease the Soliciting Dealers' fees and, at the time that notice of such increase or decrease is first published, sent or given to holders of such Series of Preferred in the manner specified herein, the Offer for such Series of Preferred is scheduled to expire at any time earlier than the tenth business day from the date that such notice is first so published, sent or given, such Offer will be extended until the expiration of such ten-business-day period. For purposes of the Offer, a "business day" means any day other than a Saturday, Sunday or federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, New York City time. NO ALTERNATIVE, CONDITIONAL OR CONTINGENT TENDERS WILL BE ACCEPTED. The May 1998 Dividend has been declared on each Series of Preferred, payable May 1, 1998 to holders of record as of the close of business on April 9, 1998. A tender and purchase of Shares pursuant to the Offer will not deprive such Preferred Shareholder of his or her right to receive the May 1998 Dividend on his or her Shares held of record on April 9, 1998, regardless of when such tender is made. Tendering Preferred Shareholders will not be entitled to any dividends in respect of any dividend period (or any portion thereof) after May 1, 1998. The payment of the May 1998 Dividend will be made separately from payments for Shares tendered in the Offer or the payment of any Special Cash Payments. PROCEDURE FOR TENDERING SHARES To tender Shares pursuant to the Offer, the tendering owner of Shares must either: (i) send to the Depositary (at one of its addresses set forth on the back cover of this Offer to Purchase and Proxy Statement) a properly completed and duly executed Letter of Transmittal and Proxy, or facsimile thereof, together with any required signature guarantees and any other documents required by the Letter of Transmittal and Proxy and either (a) certificates for the Shares to be tendered must be received by the Depositary at one of such addresses or (b) such Shares must be delivered pursuant to the procedures for book-entry transfer described herein (and a confirmation of such delivery must be received by the Depositary), in each case by 5:00 p.m., New York City time, on the Expiration Date; or (ii) comply with the guaranteed delivery procedure described under "Guaranteed Delivery Procedure" below. A tender of Shares made pursuant to any method of delivery set forth herein or in the Letter of Transmittal and Proxy will constitute a binding agreement between the tendering holder and ILN upon the terms and subject to the conditions of the Offer. The Depositary will establish an account with respect to the Shares at The Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of the Offer within two business days after the date of this Offer to Purchase and Proxy Statement, and any financial institution that is a participant in the system of a Book-Entry Transfer Facility may make delivery of Shares by causing the Book-Entry Transfer Facility to transfer such Shares into the Depositary's account in accordance with the procedures of the Book-Entry Transfer Facility. Although delivery of Shares may be effected through book-entry transfer, such delivery must be accompanied by either (i) a properly completed and duly executed Letter of Transmittal and Proxy, together with any required signature guarantees and any other required documents or (ii) an Agent's Message 11 12 (as hereinafter defined) and, in any case, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase and Proxy Statement on or prior to the Expiration Date. The confirmation of a book entry transfer of Shares into the Depositary's account at the Book-Entry Transfer Facility as described above is referred to as a "Book-Entry Confirmation." DELIVERY OF THE LETTER OF TRANSMITTAL AND PROXY AND ANY OTHER REQUIRED DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY OR TO ILN DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. The term "Agent's Message" means a message, transmitted by the Book-Entry Transfer Facility, received by the Depositary and forming a part of the book-entry transfer when a tender is initiated, which states that the Book-Entry Transfer Facility has received an express acknowledgment from a participant tendering Shares, that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and Proxy and that ILN may enforce such agreement against such participant. Signature Guarantees. Except as otherwise provided below, all signatures on a Letter of Transmittal and Proxy must be guaranteed by a firm that is a member in good standing of a registered national securities exchange or the National Association of Securities Dealers, Inc. ("NASD"), or by a commercial bank or trust company having an office or correspondent in the United States that is a participant in an approved Signature Guarantee Medallion Program (each of the foregoing being referred to as an "Eligible Institution"). Signatures on a Letter of Transmittal and Proxy need not be guaranteed if (i) the Letter of Transmittal and Proxy is signed by the registered owner of the Shares tendered therewith and such owner has not completed the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" on the Letter of Transmittal and Proxy or (ii) such Shares are tendered for the account of an Eligible Institution. See Instructions 1 and 5 of the Letter of Transmittal and Proxy. If Shares are registered in the name of a person other than the signatory on the Letter of Transmittal and Proxy, or if unpurchased Shares are to be issued to a person other than the registered holder(s), the certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered holder(s) appear on the Shares with the signature(s) on the Shares or stock powers guaranteed as stated above. See Instructions 4, 6 and 7 to the Letter of Transmittal and Proxy. Guaranteed Delivery Procedure. If a Preferred Shareholder desires to tender Shares pursuant to the Offer and such Preferred Shareholder's certificates are not immediately available or the procedures for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Depositary prior to the Expiration Date, such Shares may nevertheless be tendered if all of the following guaranteed delivery procedures are complied with: (i) such tender is made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by ILN and IPC herewith, is received (with any required signatures or signature guarantees) by the Depositary as provided below on or prior to 5:00 p.m., New York City time, on the Expiration Date; and (iii) the certificates for all tendered Shares in proper form for transfer or a Book-Entry Confirmation with respect to all tendered Shares, together with a properly completed and duly executed Letter of Transmittal and Proxy, or a manually signed facsimile thereof, and any other documents required by the Letter of Transmittal and Proxy, are received by the Depositary no later than 5:00 p.m., New York City time, within three business days after the date of execution of such Notice of Guaranteed Delivery. THE NOTICE OF GUARANTEED DELIVERY MAY BE DELIVERED BY HAND OR MAILED OR TRANSMITTED BY FACSIMILE TO THE DEPOSITARY AND MUST INCLUDE AN ENDORSEMENT BY AN ELIGIBLE INSTITUTION IN THE FORM SET FORTH IN SUCH NOTICE OF GUARANTEED DELIVERY. In all cases, Shares shall not be deemed validly tendered unless a properly completed and duly executed Letter of Transmittal and Proxy, a manually signed facsimile thereof, or, if applicable, an Agent's Message, is received by the Depositary. 12 13 Notwithstanding any other provision hereof, payment for Shares accepted for payment pursuant to the Offer in all cases will be made only after timely receipt by the Depositary of certificates for (or an Agent's Message with respect to) such Shares, a Letter of Transmittal and Proxy, properly completed and duly executed, or a manually signed facsimile thereof, with any required signature guarantees and all other documents required by the Letter of Transmittal and Proxy. Accordingly, tendering Preferred Shareholders may be paid at different times depending upon when certificates for Shares or Book-Entry Confirmations are actually received by the Depositary. Under no circumstances will interest be paid on the Purchase Price for Shares tendered to ILN pursuant to the Offer, regardless of any extension of the Offer or any delay in making such payment. THE METHOD OF DELIVERY OF SHARES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING PREFERRED SHAREHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. BECAUSE IT IS THE TIME OF RECEIPT, NOT THE TIME OF MAILING, WHICH DETERMINES WHETHER A TENDER HAS BEEN MADE PRIOR TO THE EXPIRATION DATE, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. TO AVOID FEDERAL INCOME TAX BACKUP WITHHOLDING EQUAL TO 31% OF THE GROSS PAYMENTS MADE PURSUANT TO THE OFFER, EACH TENDERING PREFERRED SHAREHOLDER WHO IS A UNITED STATES PERSON MUST NOTIFY THE DEPOSITARY OF SUCH PREFERRED SHAREHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND PROVIDE CERTAIN OTHER INFORMATION BY PROPERLY COMPLETING AND EXECUTING THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL AND PROXY OR IN THE SEPARATE PROXY (OR, IN THE CASE OF A FOREIGN PREFERRED SHAREHOLDER, FORM W-8 OBTAINABLE FROM THE DEPOSITARY). SEE "CERTAIN FEDERAL INCOME TAX CONSEQUENCES." EACH PREFERRED SHAREHOLDER IS URGED TO CONSULT WITH HIS OR HER OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF THE OFFER. Determinations of Validity. All questions as to the form of documents and the validity, eligibility (including the time of receipt) and acceptance for payment of any tender of Shares will be determined by ILN, in its sole discretion, and its determination will be final and binding. ILN reserves the absolute right to reject any or all tenders of Shares that (i) it determines are not in proper form or (ii) the acceptance for payment of or payment for which may, in the opinion of ILN's counsel, be unlawful. ILN also reserves the absolute right to waive any defect or irregularity in any tender of Shares. No tender of Shares will be deemed to be properly made until all defects or irregularities have been cured or waived. None of ILN, IPC, the Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notice of any defect or irregularity in tenders, nor shall any of them incur any liability for failure to give any such notice. WITHDRAWAL RIGHTS Tenders of Shares made pursuant to the Offer may be withdrawn at any time prior to the Expiration Date. Thereafter, such tenders are irrevocable, except that they may be withdrawn after , 1998 unless previously accepted for payment as provided in this Offer to Purchase and Proxy Statement. The proxy accompanying any tendered Shares that are withdrawn will not be considered revoked unless the Preferred Shareholder specifically revokes such proxy as described herein. See "Proposed Amendment and Proxy Solicitation -- Proxies." To be effective, a written or facsimile notice of withdrawal must be timely received by the Depositary, at one of its addresses set forth on the back cover of this Offer to Purchase and Proxy Statement, and must specify the name of the person who tendered the Shares to be withdrawn and the number of Shares to be withdrawn. If the Shares to be withdrawn have been delivered to the Depositary, a signed notice of withdrawal 13 14 with signatures guaranteed by an Eligible Institution (except in the case of Shares tendered by an Eligible Institution) must be submitted prior to the release of such Shares. In addition, such notice must specify, in the case of Shares tendered by delivery of certificates, the name of the registered owner (if different from that of the tendering Preferred Shareholder) and the serial numbers shown on the particular certificates evidencing the Shares to be withdrawn or, in the case of Shares tendered by book-entry transfer, the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares and the name of the registered holder (if different from the name of such account). Withdrawals may not be rescinded, and Shares withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be re-tendered by again following one of the procedures described in "Terms of the Offer -- Procedure for Tendering Shares" at any time prior to the Expiration Date. All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by ILN, in its sole discretion, and its determination will be final and binding. None of ILN, IPC, the Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defect or irregularity in any notice of withdrawal or will incur any liability for failure to give any such notification. ACCEPTANCE OF SHARES FOR PAYMENT AND PAYMENT OF PURCHASE PRICE Upon the terms and subject to the conditions of the Offer, and as promptly as practicable after the Expiration Date, ILN will accept for payment (and thereby purchase) and pay for Shares validly tendered and not withdrawn as permitted in "Terms of the Offer -- Withdrawal Rights." Thereafter, payment for all Shares validly tendered on or prior to the Expiration Date and accepted pursuant to the Offer will be made by the Depositary as promptly as practicable after the Expiration Date. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made promptly but only after timely receipt by the Depositary of certificates for such Shares (or of an Agent's Message), a properly completed and duly executed Letter of Transmittal and Proxy (or in the case of an Eligible Institution, a facsimile thereof) and any other required documents. Accordingly, tendering Preferred Shareholders may be paid at different times depending upon when Share certificates or Book-Entry Confirmations are actually received by the Depositary. For purposes of the Offer, ILN will be deemed to have accepted for payment (and thereby purchased) Shares that are validly tendered and not withdrawn as, if and when it gives oral or written notice to the Depositary of its acceptance for payment of such Shares. ILN will pay for Shares that it has purchased pursuant to the Offer by depositing the purchase price therefor thereon with the Depositary, which will act as agent for tendering Preferred Shareholders for the purpose of receiving payment from ILN and transmitting payment to tendering Preferred Shareholders. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON AMOUNTS TO BE PAID TO TENDERING PREFERRED SHAREHOLDERS, REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT. Certificates for all Shares not validly tendered will be returned or, in the case of Shares tendered by book-entry transfer, such Shares will be credited to an account maintained with the Book-Entry Transfer Facility, as promptly as practicable, without expense to the tendering Preferred Shareholder. Payment for Shares may be delayed in the event of difficulty in determining the number of Shares properly tendered. If certain events occur, ILN may not be obligated to purchase Shares pursuant to the Offer. See "Terms of the Offer -- Certain Conditions of the Offer." ILN will pay or cause to be paid any stock transfer taxes with respect to the sale and transfer of any Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or Shares not tendered or not purchased are to be registered in the name of, any person other than the registered owner, or if tendered Shares are registered in the name of any person other than the person signing the Letter of Transmittal and Proxy, the amount of any stock transfer taxes (whether imposed on the registered owner, such other person or otherwise) payable on account of the transfer to such person will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes, or exemption therefrom, is submitted. Each Preferred Shareholder will be responsible for paying any income or gross receipts taxes imposed by any jurisdiction by reason of the sale of the Shares or the Special Cash Payment, as described 14 15 herein. See Instruction 6 of the accompanying Letter of Transmittal and Proxy. See also "Proposed Amendment and Proxy Solicitation -- Special Cash Payments" and "Certain Federal Income Tax Consequences." CERTAIN CONDITIONS OF THE OFFER ILN WILL NOT BE REQUIRED TO ACCEPT FOR PAYMENT OR PAY FOR ANY SHARES TENDERED IF THE PROPOSED AMENDMENT IS NOT ADOPTED AT THE SPECIAL MEETING. PREFERRED SHAREHOLDERS OF RECORD HAVE THE RIGHT TO VOTE FOR OR AGAINST THE PROPOSED AMENDMENT REGARDLESS OF WHETHER THEY TENDER THEIR SHARES. IF THE PROPOSED AMENDMENT IS ADOPTED AT THE SPECIAL MEETING, IPC WILL MAKE A SPECIAL CASH PAYMENT TO EACH PREFERRED SHAREHOLDER WHO VOTED IN FAVOR OF THE PROPOSED AMENDMENT, PROVIDED THAT THEIR SHARES HAVE NOT BEEN TENDERED PURSUANT TO THE OFFER. PREFERRED SHAREHOLDERS WHO TENDER THEIR SHARES WILL ONLY BE ENTITLED TO THE PURCHASE PRICE PER SHARE LISTED ON THE FRONT COVER OF THIS OFFER TO PURCHASE AND PROXY STATEMENT. In addition, notwithstanding any other provision of the Offer, ILN will not be required to accept for payment or pay for any Shares tendered, and may terminate or amend the Offer (by oral or written notice to the Depositary and timely public announcement) or may postpone (subject to the requirements of the Exchange Act for prompt payment for or return of Shares) the acceptance for payment of, or payment for, Shares tendered, if at any time on or after [DAY BEFORE STATEMENT DATE], and at or before the Expiration Date, any of the following shall have occurred (which shall not have been waived by ILN): (i) there shall have been threatened, instituted or pending any action or proceeding by any government or governmental, regulatory or administrative agency, authority or tribunal or any other person, domestic or foreign, or before any court, authority, agency or tribunal that (a) challenges the acquisition of Shares pursuant to the Offer or otherwise in any manner relates to or affects the Offer or (b) in the reasonable judgment of ILN, would or might materially and adversely affect the business, condition (financial or otherwise), income, operations or prospects of ILN and its subsidiaries taken as a whole, or otherwise materially impair in any way the contemplated future conduct of the business of ILN or any of its subsidiaries or materially impair the Offer's contemplated benefits to ILN; (ii) there shall have been any action threatened, pending or taken, or approval withheld, or any statute, rule, regulation, judgment, order or injunction threatened, proposed, sought, promulgated, enacted, entered, amended, enforced or deemed to be applicable to the Offer or ILN or any of its subsidiaries, by any legislative body, court, authority, agency or tribunal that, in ILN's reasonable judgment, would or might directly or indirectly (a) make the acceptance for payment of, or payment for, some or all of the Shares illegal or otherwise restrict or prohibit consummation of the Offer; (b) delay or restrict the ability of ILN, or render ILN unable, to accept for payment or pay for some or all of the Shares; (c) materially impair the contemplated benefits of the Offer to ILN or IPC (including materially increasing the effective interest cost of certain types of unsecured indebtedness); or (d) materially affect the business, condition (financial or otherwise), income, operations or prospects of ILN and its subsidiaries taken as a whole, or otherwise materially impair in any way the contemplated future conduct of the business of ILN or any of its subsidiaries; (iii) there shall have occurred (a) any significant decrease in the market price of the Shares, (b) any change in the general political, market, economic or financial conditions in the United States or abroad that, in the reasonable judgment of ILN, would or might have a material adverse effect on ILN's business, operations, prospects or ability to obtain financing generally or the trading in the Shares or other equity securities of ILN; (c) the declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or any limitation on, or any event that, in ILN's reasonable judgment, would or might affect the extension of credit by lending institutions in the United States; (d) the commencement of war, armed hostilities or other international or national calamity directly or 15 16 indirectly involving the United States; (e) any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market; (f) in the case of any of the foregoing existing at the time of the commencement of the Offer, in ILN's reasonable judgment, a material acceleration or worsening thereof, (g) any decline in either the Dow Jones Industrial Average or the Standard and Poor's Composite 500 Stock Index by an amount in excess of 15% measured from the close of business on [DAY BEFORE STATEMENT DATE]; or (h) a decline in the ratings accorded any of ILN's securities or the Shares by Moody's, S&P or D&P, or that S&P, Moody's or D&P has announced that it has placed any such rating under surveillance or review with negative implications; (iv) any tender or exchange offer with respect to some or all of the Shares (other than the Offer) or other equity securities of ILN, or a merger, acquisition or other business combination proposal for ILN, shall have been proposed, announced or made by any person or entity; or (v) there shall have occurred any event or events that have resulted, or, in ILN's reasonable judgment, may result, in an actual or threatened change in the business, condition (financial or otherwise), income, operations, stock ownership or prospects of ILN and its subsidiaries; and in the sole judgment of ILN, such event or events make it undesirable or inadvisable to proceed with the Offer or with such acceptance for payment or payment. The foregoing conditions (including the condition that the Proposed Amendment be adopted at the Special Meeting) are for the sole benefit of ILN and may be asserted by ILN regardless of the circumstances (including any action or inaction by ILN) giving rise to any such condition, and any such condition may be waived by ILN, in whole or in part, at any time and from time to time in its sole discretion. A decision by ILN to terminate or otherwise amend any Offer, following the occurrence of any of the foregoing, with respect to one Series of Preferred will not create an obligation on behalf of ILN to terminate or otherwise amend in a similar manner the Offer with respect to any other Series of Preferred. The failure by ILN at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. Any determination by ILN concerning the events described above will be final and binding on all parties. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS ILN expressly reserves the right, in its sole discretion, and at any time and/or from time to time prior to the Expiration Date, to extend the period of time during which the Offer for any Series of Preferred is open by giving oral or written notice of such extension to the Depositary, without extending the period of time during which the Offer for any other Series of Preferred is open. There can be no assurance, however, that ILN will exercise its right to extend the Offer for any Series of Preferred. During any such extension, all Shares of the subject Series of Preferred previously tendered will remain subject to the Offer, except to the extent that such Shares may be withdrawn as set forth in "Terms of the Offer -- Withdrawal Rights." ILN also expressly reserves the right, in its sole discretion, to, among other things, terminate the Offer and not accept for payment or pay for any Shares tendered, subject to Rule 13e-4(f) (5) under the Exchange Act, which requires ILN either to pay the consideration offered or to return the Shares tendered promptly after the termination or withdrawal of the Offer upon the occurrence of any of the conditions specified in "Terms of the Offer -- Certain Conditions of the Offer" by giving oral or written notice of such termination to the Depositary, and making a public announcement thereof. Subject to compliance with applicable law, ILN further reserves the right, in its sole discretion, to amend the Offer in any respect. Amendments to the Offer may be made at any time and/or from time to time effected by public announcement thereof, such announcement, in the case of an extension, to be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Any public announcement made pursuant to the Offer will be disseminated promptly to Preferred Shareholders affected thereby in a manner reasonably designed to inform such Preferred Shareholders of such change. Without limiting the manner in which ILN may choose to make a public announcement, except as 16 17 required by applicable law, ILN shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by making a release to the Dow Jones News Service. If ILN materially changes the terms of the Offer or the information concerning the Offer, or if it waives a material condition of the Offer, ILN will extend the Offer to the extent required by Rules 13e-4(d) (2) and 13e-4(e) (2) under the Exchange Act. Those rules require that the minimum period during which the Offer must remain open following material changes in the terms of the Offer or information concerning the Offer (other than a change in price, a change in percentage of securities sought or a change in the dealerIs solicitation fee) will depend on the facts and circumstances, including the relative materiality of such terms or information. The SEC has stated that, in its view, an offer should remain open for a minimum of five business days from the date that a notice of such a material change is first published, sent or given. If the Offer is scheduled to expire at any time earlier than the expiration of a period ending on the tenth business day from, and including, the date that ILN publishes, sends or gives to Preferred Shareholders a notice that it will (i) increase or decrease the price it will pay for Shares, (ii) decrease the percentage of Shares it seeks or (iii) increase or decrease the Soliciting Dealers' Fees, the Offer will be extended until the expiration of such period of ten business days. THE OFFER FOR EACH SERIES OF PREFERRED IS INDEPENDENT OF THE OFFER FOR ANY OTHER SERIES OF PREFERRED. IF ILN EXTENDS OR AMENDS ANY OFFER WITH RESPECT TO ONE SERIES OF PREFERRED FOR ANY REASON, ILN WILL HAVE NO OBLIGATION TO EXTEND THE OFFER FOR ANY OTHER SERIES OF PREFERRED. PROPOSED AMENDMENT AND PROXY SOLICITATION INTRODUCTION This Offer to Purchase and Proxy Statement is first being mailed on or about [STATEMENT DATE] to the Preferred Shareholders of IPC in connection with the solicitation of proxies by the Board of Directors of IPC (the "Board") for use at the Special Meeting. At the Special Meeting, the shareholders of record of IPC will vote upon the Proposed Amendment to the Articles. While Preferred Shareholders who wish to tender their Shares pursuant to the Offer are not required to vote in favor of the Proposed Amendment, the Offer is conditioned upon the Proposed Amendment being adopted at the Special Meeting. In addition, Preferred Shareholders have the right to vote for the Proposed Amendment regardless of whether they tender their Shares. If the Proposed Amendment is adopted at the Special Meeting, IPC will make a special cash payment in the amount of $ per Share (the "Special Cash Payment") to each Preferred Shareholder who voted in favor of the Proposed Amendment, provided that such Shares have not been tendered pursuant to the Offer. If a Preferred Shareholder votes against the Proposed Amendment or abstains, such Preferred Shareholder shall not be entitled to the Special Cash Payment (regardless of whether the Proposed Amendment is adopted). Those Preferred Shareholders who validly tender their Shares will be entitled only to the purchase price per Share listed on the front cover of this Offer to Purchase and Proxy Statement. See "-- Special Cash Payments." VOTING SECURITIES, RIGHTS AND PROCEDURES Only holders of record of IPC's voting securities at the close of business on [RECORD DATE] (the "Record Date") will be entitled to vote in person or by proxy at the Special Meeting. The outstanding voting securities of IPC are divided into two classes: common stock and cumulative preferred stock (par value $50 per Share). The class of cumulative preferred stock has been issued in the six Series of Preferred with the record holders of all Shares of the cumulative preferred stock voting together as one class. The shares outstanding as of the Record Date, and the vote to which each share is entitled in consideration of the Proposed Amendment, are as follows:
SHARES VOTES PER CLASS OUTSTANDING SHARE ----- ----------- --------- Common Stock (No Par Value)............................. 66,215,292 1 vote Cumulative Preferred Stock (Par Value $50 Per Share).... 1,139,110 1 vote
17 18 The affirmative votes of the holders of at least two-thirds of the outstanding shares of IPC's (i) common stock and all Series of Cumulative Preferred Stock, voting together as one class, and (ii) Cumulative Preferred Stock, all Series voting together as one class, are required to approve the Proposed Amendment to be presented at the Special Meeting. Abstentions and broker non-votes will have the effect of votes against the Proposed Amendment. ILN, WHICH OWNS ALL OF THE OUTSTANDING SHARES OF COMMON STOCK OF IPC, HAS ADVISED IPC THAT IT INTENDS TO VOTE ALL OF THE OUTSTANDING SHARES OF COMMON STOCK OF IPC IN FAVOR OF THE PROPOSED AMENDMENT. Votes at the Special Meeting will be tabulated preliminarily by the Depositary. Inspectors of Election, duly appointed by the presiding officer of the Special Meeting, will definitively count and tabulate the votes and determine and announce the results at the Special Meeting. IPC has no established procedure for confidential voting. DISSENTERS' RIGHTS Section 11.65 of the Illinois Business Corporation Act of 1983, as amended (the "Business Corporation Act"), provides that a shareholder of an Illinois corporation is entitled to dissent from, and obtain payment for his or her shares in the event of, among other things, an amendment of the corporation's articles of incorporation that materially and adversely affects rights in respect of a dissenter's shares because it alters or abolishes a preferential right of such shares. As described herein, the Proposed Amendment would amend the Articles to remove a covenant which provides that the issuance or assumption of unsecured indebtedness for certain purposes above a certain threshold requires the consent of the holders of at least a majority of the total number of Shares then outstanding. To the extent that the Proposed Amendment is deemed to alter or abolish a "preferential right" of the Shares within the meaning of Section 11.65 of the Business Corporation Act, the Preferred Shareholders would have the right to dissent from the Proposed Amendment and obtain payment of the fair value of their Shares. Pursuant to Section 11.70 of the Business Corporation Act, a Preferred Shareholder who elects to dissent from the Proposed Amendment (a "Dissenter"), must deliver to IPC before , 1998 a written demand for payment of his or her Shares if the Proposed Amendment is adopted at the Special Meeting. If a written demand is not received by that date, the Dissenter will lose the right to dissent and thereby obtain payment for his or her Shares. A Dissenter also will lose the right to dissent if the Dissenter votes in favor of the Proposed Amendment at the Special Meeting. If the Proposed Amendment gives rise to dissenters' rights under Section 11.65 of the Business Corporation Act and is adopted at the Special Meeting, IPC will advise any Dissenter meeting the foregoing eligibility requirements of its opinion as to the estimated fair value of the Shares owned by the Dissenter, together with supporting information and a commitment to pay for such Shares at the estimated fair value. A Dissenter who does not agree with IPC's estimated fair value of the Shares must notify IPC, within 30 days thereafter, of the Dissenter's estimate of fair value. If, within 60 days thereafter, IPC and the Dissenter have not agreed upon the fair value of the Shares and the interest due, IPC must either pay the Dissenter the difference in value demanded by the Dissenter or file a petition in circuit court requesting the court to determine the fair value of the Shares and the interest due. The foregoing summary does not purport to be a complete statement of the provisions of Sections 11.65 and 11.70 of the Business Corporation Act and is qualified in its entirety by reference to the relevant portions of such Sections, copies of which are attached hereto as Attachment A. A Dissenter who receives payment for his or her Shares upon exercise of the right of dissent will, subject to the provisions of the Section 302(b) of the Internal Revenue Code, recognize gain or loss for Federal income tax purposes, measured by the difference between the cost basis for his or her Shares and the amount of payment received. PREFERRED SHAREHOLDERS WHO WISH TO RESERVE THE RIGHT TO EXERCISE DISSENTERS' RIGHTS SHOULD REVIEW CAREFULLY THE FOREGOING DISCUSSION AND THE PROVISIONS OF THE BUSINESS CORPORATION ACT SET FORTH IN ATTACHMENT A. THE FAILURE TO COMPLY STRICTLY WITH THE DESCRIBED PROCEDURES WILL RESULT IN THE LOSS OF ANY SUCH DISSENTERS' RIGHTS. ANY PREFERRED SHAREHOLDER WHO 18 19 CONTEMPLATES THE ASSERTION OF DISSENTERS' RIGHTS IS URGED TO CONSULT HIS OR HER OWN COUNSEL. PROXIES THE ENCLOSED PROXY (WHICH IS INCLUDED AS PART OF THE LETTER OF TRANSMITTAL AND PROXY AND WHICH IS ALSO ENCLOSED SEPARATELY HEREWITH) IS SOLICITED BY IPC'S BOARD, WHICH RECOMMENDS VOTING IN FAVOR OF THE PROPOSED AMENDMENT. ALL SHARES OF IPC'S COMMON STOCK WILL BE VOTED IN FAVOR OF THE PROPOSED AMENDMENT. Shares of IPC's cumulative preferred stock represented by properly executed proxies received at or prior to the Special Meeting will be voted in accordance with the instructions thereon. If no instructions are indicated, duly executed proxies will be voted in accordance with the recommendation of the Board. It is not anticipated that any other matters will be brought before the Special Meeting. However, the enclosed proxy gives discretionary authority to the proxy holders named therein should any other matters be presented at the Special Meeting, and it is the intention of the proxy holders to act on any other matters in accordance with their best judgment. Execution of a proxy will not prevent a shareholder from attending the Special Meeting and voting in person. Any shareholder giving a proxy may revoke it at any time before it is voted by delivering to the Secretary of IPC written notice of revocation bearing a later date than the proxy, by delivering a duly executed proxy bearing a later date, or by voting in person by ballot at the Special Meeting. Withdrawal of Shares tendered pursuant to the Offer will not revoke a properly executed proxy. IPC will bear the cost of the solicitation of proxies by the Board. IPC has engaged MacKenzie Partners, Inc. to act as Information Agent in connection with the solicitation of proxies for a fee of $ , plus reimbursement of reasonable out-of-pocket expenses. Proxies will be solicited by mail, telephone or other electronic means. In addition, officers and employees of IPC may also solicit proxies personally or by telephone; such persons will receive no additional compensation for these services. The Information Agent has not been retained to make, and will not make, solicitations or recommendations in connection with the Proposed Amendment. The Dealer Manager has not been retained to act in any capacity in connection with the solicitation of proxies. IPC has requested that brokerage firms and other custodians, nominees and fiduciaries forward solicitation materials to the beneficial owners of shares of IPC's cumulative preferred stock held of record by such persons and will reimburse such brokers and other fiduciaries for their reasonable out-of-pocket expenses incurred in connection therewith. SPECIAL CASH PAYMENTS Subject to the terms and conditions set forth in this Offer to Purchase and Proxy Statement, if (but only if) the Proposed Amendment is adopted at the Special Meeting, IPC will make a Special Cash Payment to each Preferred Shareholder who voted at the Special Meeting in favor of the Proposed Amendment either in person by ballot or by proxy, in the amount of $ for each Share held by such Preferred Shareholder on the Record Date which is so voted, provided that such Shares have not been tendered pursuant to the Offer. SPECIAL CASH PAYMENTS WILL BE MADE TO PREFERRED SHAREHOLDERS AS OF THE RECORD DATE (IF SUCH SHARES HAVE NOT BEEN TENDERED PURSUANT TO THE OFFER) ONLY IN RESPECT OF EACH SHARE WHICH IS VOTED IN FAVOR OF THE PROPOSED AMENDMENT; PROVIDED, HOWEVER, THAT THOSE PREFERRED SHAREHOLDERS WHO VALIDLY TENDER THEIR SHARES WILL BE ENTITLED ONLY TO THE PURCHASE PRICE PER SHARE LISTED ON THE FRONT COVER OF THIS OFFER TO PURCHASE AND PROXY STATEMENT. IPC has been advised that there is uncertainty under state law, due to the lack of controlling precedent, as to the permissibility of making Special Cash Payments. While IPC cannot predict how a court would rule on the issue, IPC believes that ILN's Offer is fair to Preferred Shareholders, that the Proposed Amendment is in the best interests of IPC and its shareholders, and, accordingly, has decided to make the Special Cash Payments. If the Proposed Amendment is adopted at the Special Meeting, Special Cash Payments will be paid out of IPC's general funds, promptly after the Proposed Amendment shall have become effective. However, no accrued interest will be paid on the Special Cash Payments regardless of any delay in making such payments. 19 20 Only Preferred Shareholders on the Record Date (or their legal representatives or attorneys-in-fact) are entitled to vote at the Special Meeting and, if the Proposed Amendment is adopted at the Special Meeting, to receive Special Cash Payments from IPC. Any beneficial holder of Shares who is not the registered holder of such Shares as of the Record Date (as would be the case for any beneficial holder whose Shares are registered in the name of such holder's broker, dealer, commercial bank, trust company or other nominee) must arrange with the record Preferred Shareholder to execute and deliver a proxy form on such beneficial owner's behalf. If a beneficial holder of Shares intends to attend the Special Meeting and vote in person, such beneficial holder must obtain a legal proxy form from his or her broker, dealer, commercial bank, trust company or other nominee. TO AVOID FEDERAL INCOME TAX BACKUP WITHHOLDING EQUAL TO 31% OF THE SPECIAL CASH PAYMENT, EACH PREFERRED SHAREHOLDER VOTING IN FAVOR OF THE PROPOSED AMENDMENT MUST NOTIFY THE DEPOSITARY OF SUCH PREFERRED SHAREHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND PROVIDE CERTAIN OTHER INFORMATION BY PROPERLY COMPLETING AND EXECUTING THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL AND PROXY OR THE SUBSTITUTE FORM W-9 INCLUDED IN THE PROXY. FOREIGN PREFERRED SHAREHOLDERS MUST SUBMIT A PROPERLY COMPLETED FORM W-8 IN ORDER TO AVOID THE APPLICABLE BACKUP WITHHOLDING; PROVIDED, HOWEVER, THAT BACKUP WITHHOLDING WILL NOT APPLY TO FOREIGN PREFERRED SHAREHOLDERS SUBJECT TO 30% (OR LOWER TREATY RATE) WITHHOLDING ON SPECIAL CASH PAYMENTS. SEE "CERTAIN FEDERAL INCOME TAX CONSEQUENCES." SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT IPC Securities. As noted above, ILN owns all the outstanding common stock of IPC. ILN, IPC and their subsidiaries and affiliates do not beneficially own any Shares as of January 31, 1998. None of the pension, profit sharing or other retirement plans of such entities beneficially own any Shares as of January 31, 1998. In addition, IPC's and ILN's directors and executive officers do not beneficially own any Shares as of January 31, 1998. There is no person or group known by management of IPC to be the beneficial owner of more than 5% of the Shares as of January 31, 1998. ILN Securities. The beneficial ownership of ILN's common stock held by each director of ILN and IPC, the five most highly compensated executive officers of ILN and IPC in 1997, and all directors and executive officers as a group of ILN and IPC, as of January 31, 1998, is set forth in the following table.
AMOUNT AND NATURE OF NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS ------------------------ ----------------------- ---------------- Larry F. Altenbaumer....................................... 13,092(2) * John G. Cook............................................... 11,894(2) * Larry D. Haab.............................................. 68,250(2) * Paul L. Lang............................................... 21,216(2) * Robert A. Schultz.......................................... 8,551(2) * J. Joe Adorjan............................................. 0 * C. Steven McMillan......................................... 1,300 * Robert M. Powers........................................... 8,550 * Sheli Z. Rosenberg......................................... 0 * Walter D. Scott............................................ 5,150 * Joe J. Stewart............................................. 0 * Ronald L. Thompson......................................... 3,677 * Walter M. Vannoy........................................... 5,010 * Marilou von Ferstel........................................ 4,420 * John D. Zeglis............................................. 2,626 * All directors and executive officers as a group............ 187,021 *
- ------------------------- * Less than 1%. 20 21 (1) Each person named in the table has sole voting and investment power with respect to shares of ILN's common stock listed as owned by each person. (2) Includes the following Shares issuable pursuant to stock options exercisable on or before March 31, 1998; Mr. Haab, 56,900; Mr. Lang, 17,800; Mr. Altenbaumer, 17,800; Mr. Cook, 9,900; and Mr. Schultz, 6,750. BUSINESS TO COME BEFORE THE SPECIAL MEETING The following Proposed Amendment to the Articles is the only item of business expected to be presented at the Special Meeting: To remove in its entirety ARTICLE V, Section 1, Clause (f)(1), limiting IPC's ability to issue or assume unsecured indebtedness (the "Debt Limitation Provision"). THE FOLLOWING STATEMENTS, UNLESS THE CONTEXT OTHERWISE REQUIRES, ARE SUMMARIES OF THE SUBSTANCE OR GENERAL EFFECT OF PROVISIONS OF THE ARTICLES, AND ARE QUALIFIED IN THEIR ENTIRETY BY THE ARTICLES, INCLUDING ARTICLE V SECTION 1, CLAUSE (F)(1) (AS DESCRIBED BELOW). EXPLANATION OF THE PROPOSED AMENDMENT The Debt Limitation Provision in the Articles currently prohibits, without the consent of the holders of a majority of the outstanding Shares, the issuance or assumption by IPC of any unsecured notes, debentures or other securities representing unsecured indebtedness (other than for the purpose of refunding outstanding unsecured indebtedness or for the redemption or retirement of all outstanding Shares) if, immediately after such issuance or assumption, the total outstanding principal amount of all securities representing unsecured indebtedness (including unsecured securities then to be issued or assumed) would exceed 20% of the aggregate of (i) the total principal amount of all outstanding secured indebtedness issued or assumed by IPC at the time of such issuance or assumption and (ii) the capital and surplus of IPC, as then stated on IPC's books of account. The Proposed Amendment, if adopted, would eliminate in its entirety the Debt Limitation Provision, as set forth below, from the Articles: (f)(1) The Corporation shall not, without the consent (given by vote at a meeting called for that purpose) of the holders of at least a majority of the total number of shares of Preferred Stock then outstanding, issue any unsecured notes, debentures or other securities representing unsecured indebtedness, or assume any such unsecured indebtedness, for purposes other than (A) the refunding of outstanding unsecured indebtedness theretofore issued or assumed by the Corporation, (B) the reacquisition, redemption or other retirement of any indebtedness which reacquisition, redemption or other retirement has been approved by any regulatory authority having jurisdiction in the premises, or (C) the reacquisition, redemption or other retirement of all outstanding shares of Preferred Stock or of any other class of stock ranking prior to, or on a parity with, Preferred Stock as to dividends or other distributions, if immediately after such issue or assumption the total principal amount of all unsecured notes, debentures or other securities representing unsecured indebtedness issued or assumed by the Corporation including unsecured indebtedness then to be issued or assumed would exceed twenty percent (20%) of the aggregate of (a) the total principal amount of all bonds or other securities representing secured indebtedness issued or assumed by the Corporation and then to be outstanding, and (b) the capital and surplus of the Corporation as then to be stated on the books of account of the Corporation. REASONS FOR THE PROPOSED AMENDMENT General. IPC believes that legislative, regulatory, technological and market developments will lead to a more competitive environment in the electric utility industry. As competition intensifies, flexibility and cost reduction will be even more crucial to success. Because the electric utility industry is extremely capital intensive, control and minimization of financing costs are of particular importance. In response to the competitive forces and regulatory changes faced by IPC, IPC has from time to time considered, and expects to continue to consider, various strategies designed to enhance its competitive position and to increase its ability to adapt to and anticipate changes in its utility business. 21 22 IPC believes that adoption of the Proposed Amendment is critical to financial flexibility and capital cost reduction. If the Proposed Amendment is adopted, the Debt Limitation Provision will be eliminated. Historically, IPC's debt financing generally has been accomplished through the issuance of long-term mortgage bonds, unsecured indebtedness and pollution control bonds. IPC has mortgage bonds outstanding under two mortgages: (i) the 1943 Mortgage and Deed of Trust, between IPC and Harris Trust and Savings Bank (the "1943 Mortgage"), and (ii) the 1992 General Mortgage and Deed of Trust, between IPC and Harris Trust and Savings Bank (the "1992 Mortgage"). Mortgage bonds issued under the 1943 Mortgage represent secured indebtedness placing a first priority lien on substantially all of IPC's assets. While subject to the prior lien of the 1943 Mortgage, IPC's utility assets are also subject to the junior lien of the 1992 Mortgage. IPC's mortgage bonds issued under both the 1943 Mortgage and the 1992 Mortgage contain certain restrictive covenants with respect to, among other things, the disposition of assets and the ability to issue additional mortgage bonds. Unsecured indebtedness generally has fewer restrictions than mortgage bonds. Short-term indebtedness, a lower cost form of debt available to IPC, represents one type of unsecured indebtedness. Pollution control bond financing, a more favorable type of financing due to its tax-exempt status, is available only for very limited purposes. The Proposed Amendment will not only allow IPC to issue a greater amount of unsecured indebtedness, but also will allow IPC to issue a greater amount of total indebtedness. IPC, however, presently has no intention of issuing a greater amount of unsecured debt or total debt than it would have issued absent the adoption of the Proposed Amendment, except that (i) IPC may issue additional unsecured debt in the event it determines to purchase the Shares from ILN and (ii) IPC may issue debt in connection with a securitization financing authorized under PA 90-561. Rather, it is IPC's intention to retain flexibility in the mix of its outstanding debt and therefore have the option to use more short-term and other unsecured debt and fewer mortgage bonds. In addition, as a regulated utility, the issuance of any securities by IPC would continue to be subject to the prior approval of the ICC (with respect to securities maturing in more than one year) or the Federal Energy Regulatory Commission (with respect to securities maturing in one year or less). Inasmuch as the Debt Limitation Provision contained in the Articles limits IPC's flexibility in planning and financing its business activities, IPC believes it ultimately will be at a competitive disadvantage if the Debt Limitation Provision is not eliminated. The industry's new competitors (for example, power marketers, exempt wholesale generators, independent power producers and cogeneration facilities) generally are not subject to the type of financing restrictions the Articles impose on IPC. Recently, several other utilities with the same or similar charter restrictions have successfully eliminated such provisions by soliciting their shareholders for the same or similar amendments. In addition, some potential utility competitors have no comparable provision restricting the issuance of unsecured debt. Given the onset of competition in the utility industry, IPC must continue to explore new ways of reducing costs and enhancing flexibility. IPC believes that the adoption of the Proposed Amendment will be in the best long-term competitive interests of its shareholders. Financial Flexibility. If the Proposed Amendment is adopted, IPC will have increased flexibility (i) to choose among different types of debt financing and (ii) to finance projects using the most cost effective means. IPC believes that various types of unsecured debt alternatives may increase in importance as a financing option. The availability and flexibility of unsecured debt is necessary to take full advantage of changing conditions in securities markets. In addition, although IPC's earnings currently are sufficient to meet the earnings coverage tests that must be satisfied before issuing additional mortgage bonds and preferred stock, there is no guarantee that this will be true in the future. Other utilities have been unable to issue mortgage bonds during certain periods because of restrictive covenants in their mortgages. IPC's inability to issue mortgage bonds or preferred stock in the future, combined with the inability to issue additional unsecured debt, would limit IPC's financing options to more costly options, including additional common equity. Moreover, continued reliance on the issuance of mortgage bonds could limit IPC's ability in the future to strategically redeploy its assets. 22 23 Under the Debt Limitation Provision, IPC's use of unsecured short-term indebtedness is presently restricted. However, IPC believes that the prudent use of such indebtedness in excess of this provision is vital to effective financial management of its business. Not only is unsecured short-term indebtedness generally one of the least expensive forms of capital, it also provides flexibility in meeting seasonal and business cycle fluctuations in cash requirements, acts as a bridge between issues of permanent capital and can be used when unfavorable conditions prevail in the market for long-term capital. However, because of the Debt Limitation Provision, as of December 31, 1997, the maximum amount of unsecured indebtedness that IPC would be authorized under its Articles to issue or assume would be approximately $612.7 million. As of December 31, 1997, IPC had approximately $444.8 million of unsecured indebtedness outstanding, thus leaving an additional $167.9 million of capacity available. Lower Costs. As previously mentioned, IPC's short-term debt issuances generally represent one of its lowest-cost forms of financing. By increasing its use of short-term debt, IPC may be able to lower its cost structure further, thereby making its products more competitive and reducing its business risks. However, with the Debt Limitation Provision in place, the availability and corresponding benefits of short-term debt diminish. And although short-term debt may expose the borrower to more volatility in interest rates, it should be noted that the cost of short-term debt seldom exceeds the cost of other forms of capital available at the same time. FOR ALL THE ABOVE REASONS, IPC'S BOARD BELIEVES THE BEST LONG-TERM INTERESTS OF SHAREHOLDERS ARE SERVED BY, AND ENCOURAGES SHAREHOLDERS TO VOTE IN FAVOR OF, THE ADOPTION OF THE PROPOSED AMENDMENT. RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS ILN's Board of Directors has selected Price Waterhouse LLP as independent accountants for ILN and its subsidiaries, including IPC, for the year 1998. A representative of Price Waterhouse LLP is expected to be present at the Special Meeting with the opportunity to make a statement and to respond to appropriate questions from shareholders. PRICE RANGE OF SHARES; DIVIDENDS Shares of the 4.08% Series, 4.20% Series, 4.26% Series, 4.42% Series and 4.70% Series are listed and traded on the NYSE under the symbols "IPCprA," "IPCprB," "IPCprC," "IPCprD" and "IPCprE," respectively. The last reported sales price on the NYSE, as of the close of business on [DAY BEFORE STATEMENT DATE], for each of these Series of Preferred is shown on the front cover of this Offer to Purchase and Proxy Statement. Shares of the 7.75% Series trade in the over-the-counter market under the symbol "ILLNP". The last reported sales price in the over-the-counter market, as of the close of business on [DAY BEFORE STATEMENT DATE], for the 7.75% Series of Preferred is shown on the front cover of this Offer to Purchase and Proxy Statement. However, Preferred Shareholders should be aware that there is no established trading market for these Shares and that the Shares of the Series of Preferred only trade sporadically and on a limited basis and, therefore, the last reported sales price may not necessarily reflect the current market value of such Shares. On , 1998, there were issued and outstanding 283,290 shares of the 4.08% Series of Preferred held by shareholders of record; 167,720 shares of the 4.20% Series of Preferred held by shareholders of record; 136,000 shares of the 4.26% Series of Preferred held by shareholders of record; 134,400 shares of the 4.42% Series of Preferred held by shareholders of record; 176,000 shares of the 4.70% Series of Preferred held by shareholders of record; and 241,700 shares of the 7.75% Series of Preferred held by shareholders of record. PREFERRED SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS, IF AVAILABLE, FOR THE SHARES. 23 24 The following table sets forth the high and low sales prices of each Series of Preferred on the NYSE or in the over-the-counter market as reported by the National Quotation Bureau, Inc., as applicable, and the cash dividends paid thereon for the fiscal quarters indicated. DIVIDENDS AND PRICE RANGES OF CUMULATIVE PREFERRED STOCK BY QUARTERS (1997 AND 1996)
1997 -- QUARTERS 1996 -- QUARTERS -------------------------------------------------- -------------------------------------------------- 1ST 2ND 3RD 4TH 1ST 2ND 3RD 4TH --- --- --- --- --- --- --- --- CUMULATIVE PREFERRED STOCK ($50 Par Value) 4.08% Series Dividends Paid Per Share............. $0.51 $0.51 $0.51 $0.51 $0.51 $0.51 $0.51 $0.51 Market Price -- $ Per Share (NYSE) (High/Low)........ 30.00/25.50 29.00/25.50 28.50/25.38 31.00/27.25 31.50/27.00 31.00/27.88 33.53/29.13 36.00/30.44 4.20% Series Dividends Paid Per Share............. $0.52 1/2 $0.52 1/2 $0.52 1/2 $0.52 1/2 $0.52 1/2 $0.52 1/2 $0.52 1/2 $0.52 1/2 Market Price -- $ Per Share (NYSE) (High/Low)........ 30.00/27.00 29.00/27.38 30.00/26.88 32.00/28.50 32.00/28.00 32.00/27.00 34.52/30.50 37.00/32.00 4.26% Series Dividends Paid Per Share............. $0.53 1/4 $0.53 1/4 $0.53 1/4 $0.53 1/4 $0.53 1/4 $0.53 1/4 $0.53 1/4 $0.53 1/4 Market Price -- $ Per Share (NYSE) (High/Low)........ 31.00/27.38 29.50/27.38 32.00/26.75 32.13/28.00 33.00/28.25 32.50/29.88 34.50/30.94 37.50/32.50 4.42% Series Dividends Paid Per Share............. $0.55 1/4 $0.55 1/4 $0.55 1/4 $0.55 1/4 $0.55 1/4 $0.55 1/4 $0.55 1/4 $0.55 1/4 Market Price -- $ Per Share (NYSE) (High/Low)........ 32.00/29.00 31.50/27.75 32.00/27.13 34.00/29.00 33.50/29.50 34.00/29.50 35.50/32.00 39.00/33.25 4.70% Series Dividends Paid Per Share............. $0.58 3/4 $0.58 3/4 $0.58 3/4 $0.58 3/4 $0.58 3/4 $0.58 3/4 $0.58 3/4 $0.58 3/4 Market Price -- $ Per Share (NYSE) (High/Low)........ 34.00/30.38 33.00/29.38 33.00/29.63 36.00/31.13 35.50/31.00 36.00/33.00 38.63/33.50 41.00/36.00 7.75% Series Dividends Paid Per Share............. $0.96 7/8 $0.96 7/8 $0.96 7/8 $0.968 7/8 $0.96 7/8 $0.96 7/8 $0.96 7/8 $0.96 7/8 Market Price -- $ Per Share (OTC) (High/Low)........ 52.50/52.50 51.75/50.50 53.13/53.13 54.50/52.50 48.25/47.50 50.63/48.50 52.63/52.63 52.50/52.50
- ------------------------- NYSE -- New York Stock Exchange OTC -- Over-the-Counter market quotations provided by National Quotation Bureau, Inc. High and low bid quotations are not available for the 7.75% Series. Dividends for a Series of Preferred are payable when, as and if declared by IPC's Board of Directors at the rate per annum included in such title of the Series of Preferred listed on the front cover of this Offer to Purchase and Proxy Statement. The May 1998 Dividend has been declared on each Series of Preferred, payable May 1, 1998 to holders of record as of the close of business on April 9, 1998. A tender and purchase of Shares pursuant to the Offer will not deprive such Preferred Shareholder of his or her right to receive the May 1998 Dividend on his or her Shares, regardless of when such tender is made. Tendering Preferred Shareholders will not be entitled to any dividends in respect of any dividend period (or any portion thereof) 24 25 after May 1, 1998. The payment of the May 1998 Dividend will be made separately from payments for Shares tendered in the Offer or the payment of any Special Cash Payments. CERTAIN FEDERAL INCOME TAX CONSEQUENCES In the opinion of Schiff Hardin & Waite, counsel to ILN and IPC, the following summary describes the principal United States federal income tax consequences of sales of Shares pursuant to the Offer and the receipt of Special Cash Payments in connection with the adoption of the Proposed Amendment. This summary is based on the Internal Revenue Code of 1986, as amended to the date hereof (the "Code"), administrative pronouncements, judicial decisions and existing and proposed Treasury Regulations, changes to any of which subsequent to the date of this Offer to Purchase and Proxy Statement may adversely affect the tax consequences described herein, possibly on a retroactive basis. This summary is addressed to Preferred Shareholders who hold Shares as capital assets within the meaning of Section 1221 of the Code. This summary does not discuss all of the tax consequences that may be relevant to a Preferred Shareholder in light of such Preferred Shareholder's particular circumstances or to Preferred Shareholders subject to special rules (including certain financial institutions, tax-exempt organizations, insurance companies, dealers in securities or currencies, and Preferred Shareholders who are not citizens or residents of the United States). Preferred Shareholders should consult their tax advisors with regard to the application of the United States federal income tax laws to their particular situations as well as any tax consequences arising under the laws of any state, local or foreign taxing jurisdiction. As used herein, the term "United States Holder" means an owner of a Share that is (i) for United States federal income tax purposes a citizen or resident of the United States; (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States or of any political subdivision thereof; (iii) an estate, or for taxable years beginning on or before December 31, 1996, in general, any trust, the income of which is subject to United States federal income taxation regardless of its source; or (iv) for taxable years beginning after December 31, 1996, any trust if a court within the United States is able to exercise primary supervision over the administration of such trust and one or more United States fiduciaries have the authority to control all substantial decisions of such trust. A "Non-United States Holder" is a Preferred Shareholder that is not a United States Holder. TAX CONSIDERATIONS FOR TENDERING PREFERRED SHAREHOLDERS Characterization of the Sale. A sale of Shares by a Preferred Shareholder pursuant to the Offer will be a taxable transaction for Federal income tax purposes. United States Holders. A United States Holder will recognize gain or loss equal to the difference between the tax basis of such Holder's Shares and the amount of cash received in exchange therefor. A United States Holder's gain or loss will be long-term capital gain or loss if the holding period for the Shares is more than one year as of the date of the sale of such Shares. The excess of net long-term capital gains over net short-term capital losses is taxed at a lower rate than ordinary income for certain non-corporate taxpayers. Capital gain on Shares held by non-corporate taxpayers for more than eighteen months on the date of the sale of such Shares will be subject to a reduced tax rate. The distinction between capital gain or loss and ordinary income or loss is also relevant for purposes of, among other things, limitations on the deductibility of capital losses. Non-United States Holders. Any gain realized upon the sale of Shares by a Non-United States Holder pursuant to the Offer generally will not be subject to United States Federal income tax unless (i) such gain is effectively connected with a trade or business in the United States of the Non-United States Holder, or (ii) in the case of a Non-United States Holder who is an individual, such individual is present in the United States for 183 days or more in the taxable year of such sale and certain other conditions are met. A Non-United States Holder described in clause (i) above will be taxed on the net gain derived from the sale at regular graduated United States Federal income tax rates. If a Non-United States Holder that is a foreign corporation falls under clause (i) above, it may also be subject to an additional "branch profits tax" at a 30% rate (or such lower rate as may be specified by an applicable income tax treaty). Unless an applicable 25 26 tax treaty provides otherwise, an individual Non-United States Holder described in clause (ii) above will be subject to a flat 30% tax on the gain derived from the sale, which may be offset by United States capital losses (notwithstanding the fact that the individual is not considered a resident of the United States). TAX CONSIDERATIONS FOR NON-TENDERING PREFERRED SHAREHOLDERS Preferred Shareholders, whether or not they receive Special Cash Payments, will not recognize any taxable gain or loss with respect to the Shares as a result of the modification of the Articles by the Proposed Amendment. United States Holders. There is no direct authority concerning the Federal income tax consequences of the receipt of Special Cash Payments. IPC will, for information reporting purposes, treat Special Cash Payments as ordinary non-dividend income to recipient United States Holders. Non-United States Holders. IPC will treat Special Cash Payments paid to a Non-United States Holder of Shares as subject to withholding of United States Federal income tax at a 30% rate. However, Special Cash Payments that are effectively connected with the conduct of a trade or business by the Non-United States Holder within the United States are not subject to the withholding tax (provided such Non-United States Holder provides two originals of Internal Revenue Service ("IRS") Form 4224 stating that such Special Cash Payments are so effectively connected), but instead are subject to United States Federal income tax on a net income basis at applicable graduated individual or corporate rates. Any such effectively connected Special Cash Payments received by a foreign corporation may, under certain circumstances, be subject to an additional "branch profits tax" at a 30% rate (or such lower rate as may be specified by an applicable income tax treaty). A Non-United States Holder of Shares eligible for a reduced rate of United States withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by filing an appropriate claim for refund with the IRS. BACKUP WITHHOLDING ANY TENDERING PREFERRED SHAREHOLDER OR PREFERRED SHAREHOLDER WHO VOTES IN FAVOR OF THE PROPOSED AMENDMENT BUT DOES NOT TENDER WHO FAILS TO COMPLETE AND SIGN THE SUBSTITUTE FORM W-9 THAT IS INCLUDED IN THE APPLICABLE LETTER OF TRANSMITTAL AND PROXY (OR, IN THE CASE OF A FOREIGN PREFERRED SHAREHOLDER, FORM W-8 OBTAINABLE FROM THE DEPOSITARY) MAY BE SUBJECT TO A REQUIRED FEDERAL INCOME TAX BACKUP WITHHOLDING OF 31% OF (1) IN THE CASE OF A TENDERING PREFERRED SHAREHOLDER, THE GROSS AMOUNT PAYABLE TO SUCH PREFERRED SHAREHOLDER IN EXCHANGE FOR THE SHARES OR (2) IN THE CASE OF A NON-TENDERING PREFERRED SHAREHOLDER WHO VOTES IN FAVOR OF THE PROPOSED AMENDMENT, THE SPECIAL CASH PAYMENT. To prevent backup United States Federal income tax withholding with respect to the purchase price of Shares purchased pursuant to the Offer or the Special Cash Payment, a United States Holder must provide the Depositary with the Preferred Shareholder's correct taxpayer identification number and certify that the Preferred Shareholder is not subject to backup withholding of Federal income tax by completing the Substitute Form W-9 included in the applicable Letter of Transmittal and Proxy. Certain Preferred Shareholders (including, among others, all corporations and certain foreign shareholders) are exempt from backup withholding. For a corporate United States Holder to qualify for such exemption, such Preferred Shareholder must provide the Depositary with a properly completed and executed Substitute Form W-9 attesting to its exempt status. In order for a foreign Preferred Shareholder to qualify as an exempt recipient, the foreign holder must submit a Form W-8, Certificate of Foreign Status, signed under penalties of perjury, attesting to that Preferred Shareholder's exempt status. A copy of Form W-8 may be obtained from the Depositary. Unless a Preferred Shareholder provides the appropriate certification, under the applicable law and regulations concerning "backup withholding" of Federal United States income tax, the Depositary will be required to withhold, and will withhold, 31% of the gross proceeds otherwise payable to such Preferred Shareholder or other payee. The amount of any backup withholding from a payment to a Preferred 26 27 Shareholder will be allowed as a credit against such Preferred Shareholder's United States federal income tax liability and may entitle such Preferred Shareholder to a refund, provided that the required information is furnished to the IRS. However, backup withholding is not required for amounts subject to withholding discussed above under "Tax Consideration for Tendering Preferred Shareholders -- Non-United States Holders" and "Tax Considerations for Non-Tendering Preferred Shareholders -- Non-United States Holders." SOURCE AND AMOUNT OF FUNDS Assuming that ILN purchases all outstanding Shares pursuant to the Offer, the total amount required by ILN to purchase such Shares will be approximately $ million, exclusive of the May 1, 1998 Dividend, fees and other expenses. ILN intends to fund the Offer through borrowings under its $150 million Credit Agreement, dated as of June 12, 1996, as amended on June 28, 1996, with various financial institutions and CIBC Inc. as Administrative Agent (the "Credit Agreement"). The Credit Agreement terminates, unless extended, on June 11, 1998. The Credit Agreement permits ILN to borrow funds at floating interest rates determined by reference to the federal funds rate published by the Federal Reserve Bank of New York or, for certain fixed periods, at fixed interest rates determined by the interbank Eurodollar market. ILN's borrowings under the Credit Agreement are expected to be repaid through funds received from IPC, which expects to derive its funds from internally generated funds or the issuance of short-term debt. TRANSACTIONS AND AGREEMENTS CONCERNING THE SHARES Each of ILN and IPC has been advised by its directors and executive officers that no directors or executive officers of the respective companies own any Shares. Based upon the companies' records and upon information provided to each company by its directors and executive officers, neither company nor, to the knowledge of either, any of their subsidiaries, affiliates, directors or executive officers, or associates of the foregoing, or any of their pension, profit-sharing or retirement plans, has engaged in any transactions involving Shares during the 60 business days preceding the date hereof. Neither company nor, to the knowledge of either, any of its directors or executive officers or an associate of the foregoing is a party to any contract, arrangement, understanding or relationship relating directly or indirectly to the Offer with any other person or entity with respect to any securities of IPC. IPC purchased Shares on the open market on the dates and at the prices shown below in fiscal 1996 and 1997.
NUMBER OF RANGE OF PURCHASE PRICES AVERAGE PURCHASE SERIES FISCAL QUARTER SHARES (HIGH/LOW) PRICE PER SHARE - ------ -------------- --------- ------------------------ ---------------- 4.08% 3rd Quarter 1997 16,710 $36.520/$35.000 $35.606 4.20% 3rd Quarter 1997 12,280 37.590/34.841 35.762 4.26% 3rd Quarter 1997 14,000 36.059/36.059 36.059 4.42% 3rd Quarter 1997 15,600 37.413/37.413 37.413 4.70% 3rd Quarter 1997 24,000 38.989/38.989 38.989 7.75% 3rd Quarter 1996 135,100 52.750/52.125 52.421
FEES AND EXPENSES ASSOCIATED WITH THE OFFER Dealer Manager, Depositary and Information Agent Fees. Donaldson, Lufkin & Jenrette Securities Corporation will act as the Dealer Manager for ILN in connection with the Offer. ILN has agreed to pay the Dealer Manager a fee of $ per Share for any Shares tendered, accepted for payment and paid for pursuant to the Offer and to pay the Dealer Manager a fee of $ per Share for any Shares that are not tendered pursuant to the Offer but which vote in favor of the Proposed Amendment, provided that the Proposed Amendment is adopted at the Special Meeting. The Dealer Manager will also be reimbursed by ILN for its reasonable out-of-pocket expenses, including attorneys' fees, and will be indemnified against certain liabilities, 27 28 including certain liabilities under the federal securities laws, in connection with the Offer. The Dealer Manager has rendered, is currently rendering and is expected to continue to render various investment banking and other advisory services to ILN and IPC. The Dealer Manager has received, and will continue to receive, customary compensation from ILN and IPC for such services. ILN has retained First Chicago Trust Company of New York as Depositary and MacKenzie Partners, Inc. as Information Agent in connection with the Offer. The Depositary and Information Agent will receive reasonable and customary compensation for their services and will also be reimbursed for reasonable out-of-pocket expenses, including attorney fees. ILN has agreed to indemnify the Depositary and Information Agent against certain liabilities, including certain liabilities under the federal securities law, in connection with the Offer. Neither the Depositary nor the Information Agent has been retained to make solicitations or recommendations in connection with the Offer. Solicited Tender Fees; Separate Fees. Pursuant to Instruction 10 of the accompanying Letter of Transmittal and Proxy, ILN will pay a solicitation fee of $ per Share that is tendered, accepted for payment and paid for pursuant to the Offer in transactions for beneficial owners of fewer than Shares and a solicitation fee of $ per Share for transactions for beneficial owners of or more Shares; provided that solicitation fees payable in transactions for beneficial owners of or more Shares shall be paid 80% to the Dealer Manager and 20% to any designated Soliciting Dealer (which may be the Dealer Manager). If the Proposed Amendment is adopted at the Special Meeting, IPC will pay to each designated Soliciting Dealer a separate fee of $ per Share for Shares that are not tendered pursuant to the Offer but which are voted in favor of the Proposed Amendment in transactions for beneficial owners of fewer than Shares and a separate fee of $ per Share for Shares that are not tendered pursuant to the Offer but which are voted in favor of the Proposed Amendment in transactions for beneficial owners of or more Shares; provided that the separate fee payable in transactions for beneficial owners of or more Shares shall be paid 80% to the Dealer Manager and 20% to any designated Soliciting Dealer (which may be the Dealer Manager). A designated Soliciting Dealer is an entity obtaining the tender or proxy, if the Letter of Transmittal and Proxy or the separate Proxy, as the case may be, shall include its name and it is (i) any broker or dealer in securities, including a Dealer Manager in its capacity as a dealer or broker, which is a member in good standing of any national securities exchange or of the NASD, (ii) any foreign broker or dealer not eligible for membership in the NASD which agrees to conform to the NASD's Rules of Fair Practice in soliciting tenders outside the United States to the same extent as though it were an NASD member, or (iii) any bank or trust company. No solicitation fee or separate fee (other than solicitation fees payable to the Dealer Manager as provided above) shall be payable to a Soliciting Dealer with respect to the tender of Shares or the vote of Shares by a holder unless the Letter of Transmittal and Proxy or the separate Proxy accompanying such tender or vote, as the case may be, designates such Soliciting Dealer. No solicitation fee or separate fee shall be payable to a Soliciting Dealer in respect of Shares registered in the name of such Soliciting Dealer unless such Shares are held by such Soliciting Dealer as nominee and such Shares are being tendered or voted for the benefit of one or more beneficial owners identified on the Letter of Transmittal and Proxy or on the Notice of Solicited Tenders. No solicitation fee or separate fee shall be payable to a Soliciting Dealer if such Soliciting Dealer is required for any reason to transfer the amount of such fee to a depositing holder (other than itself). No solicitation fee shall be paid to a Soliciting Dealer with respect to Shares tendered for such Soliciting Dealer's own account and no separate fee shall be paid to a Soliciting Dealer with respect to Shares voted for such Soliciting Dealer's own account. A Soliciting Dealer shall not be entitled to a solicitation fee or a separate fee for Shares beneficially owned by such Soliciting Dealer. No broker, dealer, bank, trust company or fiduciary shall be deemed to be the agent of ILN, IPC, the Depositary, the Dealer Manager or the Information Agent for purposes of the Offer. Soliciting Dealers will include any of the organizations described in clauses (i), (ii) and (iii) above even when the activities of such organizations in connection with the Offer consist solely of forwarding to clients materials relating to the Offer, including the Letter of Transmittal and Proxy and tendering Shares as directed by beneficial owners thereof. No Soliciting Dealer is required to make any recommendation to holders of Shares as to whether to tender or refrain from tendering in the Offer. No assumption is made, in making payment to any Soliciting Dealer, that its activities in connection with the Offer included any activities other 28 29 than those described above, and for all purposes noted in all materials relating to the Offer, the term "solicit" shall be deemed to mean no more than "processing shares tendered" or "forwarding to customers materials regarding the Offer." Stock Transfer Taxes. ILN will pay all stock transfer taxes, if any, payable on account of the acquisition of Shares by ILN pursuant to the Offer, except in certain circumstances where special payment or delivery procedures are utilized pursuant to Instruction 6 of the accompanying Letter of Transmittal and Proxy. Estimated Expenses. Assuming that all Shares of each Series of Preferred are tendered and purchased by ILN pursuant to the Offer, it is estimated that the expenses incurred by ILN in connection with the Offer will be as approximately set forth below. ILN will be responsible for paying all such expenses. Dealer Manager Fees......................................... $ Depositary and Information Agent Fees....................... $ Solicitation Fees........................................... $ Printing and Mailing Fees................................... $ Filing Fees................................................. $ Legal and Miscellaneous..................................... $ ----------- Total.................................................. $ ===========
CERTAIN INFORMATION REGARDING ILN AND IPC; INCORPORATION BY REFERENCE ILN is a holding company organized in Illinois in May 1994, which conducts substantially all of its business through its subsidiaries. It has three principal operating subsidiaries: IPC, organized in May 1923, is a combination electric and gas utility; Illinova Generating Company, organized in October 1992, is an independent power company which invests in energy supply projects and competes in the independent power market worldwide; and Illinova Energy Partners, Inc., organized in July 1994, is in the business of (i) developing and marketing energy-related services to the unregulated energy market in the United States and (ii) brokering and marketing electric power and gas to various customers. IPC's financial position and results of operations are currently the principal factors affecting ILN's consolidated financial position and results of operation. IPC is engaged in the generation, transmission, distribution and sale of electric energy and the distribution, transportation and sale of natural gas in the State of Illinois. Its service area is a widely diversified industrial and agricultural area comprising approximately 15,000 square miles in northern, central and southern Illinois. Electric service is provided at retail to 310 incorporated municipalities, adjacent suburban and rural areas and numerous unincorporated municipalities. Gas service is provided to 257 incorporated municipalities, adjacent suburban areas and numerous unincorporated municipalities. The larger cities served include Decatur, East St. Louis (gas only), Champaign, Danville, Belleville, Granite City, Bloomington (electric only), Galesburg, Urbana and Normal (electric only). ILN and IPC are subject to the informational requirements of the Exchange Act and in accordance therewith file reports and other information with the SEC. Such reports and other information may be inspected and copied at the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549; 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of such material can be obtained from the Public Reference Section of the SEC, 450 Fifth Street, N.W., Washington D.C. 20549 at prescribed rates. The SEC maintains a Web site at http://www.sec.gov containing reports, proxy and information statements and other information regarding registrants that file electronically with the SEC, including ILN and IPC. Reports, proxy materials and other information about ILN and IPC are also available at the offices of the NYSE, 20 Broad Street, New York, New York 10005. In connection with the Offer, ILN has filed an Issuer Tender Offer Statement on Schedule 13E-4 and a Rule 13e-3 Transaction Statement on Schedule 13E-3 with the SEC that includes certain additional information relating to the Offer. ILN's Schedule 13E-4 and 29 30 Schedule 13E-3 will not be available at the SEC's regional offices. IPC has filed this Offer to Purchase and Proxy Statement (and related documents) with the SEC pursuant to Rule 14a-6 of the Exchange Act. SUMMARY OF CONSOLIDATED FINANCIAL INFORMATION; INCORPORATION BY REFERENCE Set forth below is certain consolidated historical financial information of IPC and its subsidiaries. The historical financial information (other than the ratios of earnings to fixed charges) was derived from the audited consolidated financial statements included in IPC's Annual Report on Form 10-K for the year ended December 31, 1997. CONDENSED INCOME STATEMENT DATA:
YEAR ENDED DECEMBER 31, --------------------------- 1997 1996 ---- ---- (THOUSANDS, EXCEPT RATIOS) Operating Revenues.......................................... $ 1,773.9 $ 1,688.7 Operating Income............................................ 278.7 361.4 Allowance for Borrowed Funds Use During Construction........ (5.0) (6.5) Interest Expense............................................ 128.7 133.0 Net Income (Loss)........................................... (44.2) 228.6 Less-Preferred Dividend Requirement....................... 21.5 22.3 Plus -- Carrying Amount Over (Under) Consideration Paid for Redeemed Preferred Stock of Subsidiary............. 0.2 (0.7) Net Income (Loss) Applicable to Common Stock................ (65.5) 205.6 Ratio of Earnings to Fixed Charges.......................... 1.24 3.40
30 31 CONDENSED BALANCE SHEET DATA (AT END OF PERIOD):
DECEMBER 31, ----------------------- 1997 1996 ---- ---- (MILLIONS) Assets Plant and property........................................ $7,353.4 $6,981.5 Less -- accumulated depreciation.......................... 2,808.1 2,419.7 -------- -------- Net utility plant...................................... 4,545.3 4,561.8 Nuclear fuel under capital lease.......................... 133.0 101.7 Investments and other assets.............................. 5.9 14.5 Current assets............................................ 414.8 444.3 Deferred charges.......................................... 192.5 446.2 -------- -------- Total................................................ $5,291.5 $5,568.5 ======== ======== Capital and Liabilities Common stock.............................................. $1,417.3 $1,416.4 Treasury stock............................................ (207.7) (86.2) Retained earnings......................................... 89.5 245.9 Preferred stock........................................... 57.1 96.2 Mandatorily redeemable preferred stock.................... 197.0 197.0 Long-term debt............................................ 1,617.5 1,636.4 -------- -------- Total capitalization................................. 3,170.7 3,505.7 Current liabilities....................................... 729.1 655.5 Deferred credits and other noncurrent liabilities......... 1,391.7 1,407.3 -------- -------- Total................................................ $5,291.5 $5,568.5 ======== ========
The financial statements of IPC and related information included in its Annual Report on Form 10-K for the year ended December 31, 1997, and its Current Reports on Form 8-K, dated February 13, 1998 and January 21, 1998, each as filed with the SEC, are hereby incorporated by reference. All documents subsequently filed by IPC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Offer to Purchase and Proxy Statement and prior to the Expiration Date (or any extension thereof) shall be deemed to be incorporated by reference in this Offer to Purchase and Proxy Statement and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Offer to Purchase and Proxy Statement to the extent that a statement contained herein or in any other subsequently filed documents which is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Offer to Purchase and Proxy Statement. IPC will provide without charge to each person to whom a copy of this Offer to Purchase and Proxy Statement has been delivered, on the written or oral request of any such person, a copy of any or all of the documents described above which have been incorporated by reference in this Offer to Purchase and Proxy Statement, other than exhibits to such documents. Written requests for copies of such documents should be addressed to the Shareholder Services Department, Illinova Corporation at 500 South 27th Street, Decatur, Illinois 62525 (telephone (800) 800-8220) or at its Website on the World Wide Web at http://www.illinova.com. The information relating to ILN and IPC contained in this Offer to Purchase and Proxy Statement does not purport to be comprehensive and should be read together with the information contained in the documents incorporated by reference. 31 32 SHAREHOLDER PROPOSALS If a shareholder intends to present a proposal at the 1999 Annual Meeting of Shareholders of IPC, the proposal must be received by the Corporate Secretary of IPC not later than November 12, 1998 for inclusion in IPC's proxy or information statement and form of proxy, if applicable. MISCELLANEOUS The Offer is not being made to, nor will ILN accept tenders from, owners of Shares in any jurisdiction in which the Offer or its acceptance would not be in compliance with the laws of such jurisdiction. ILN is not aware of any jurisdiction where the making of the Offer or the tender of Shares would not be in compliance with applicable law. If ILN becomes aware of any jurisdiction where the making of the Offer or the tender of Shares is not in compliance with any applicable law, ILN will make a good faith effort to comply with such law. If, after such good faith effort, ILN cannot comply with such law, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the owners of Shares residing in such jurisdiction. In any jurisdiction in which the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer will be deemed to be made on ILN's behalf by one or more registered brokers or dealers licensed under the laws of such jurisdiction. ILLINOVA CORPORATION ILLINOIS POWER COMPANY , 1998 32 33 ATTACHMENT A ILLINOIS DISSENTERS' RIGHTS SECTION 11.65. RIGHT TO DISSENT. (a) A shareholder of a corporation is entitled to dissent from, and obtain payment for his or her shares in the event of any of the following corporate actions: (1) consummation of a plan of merger or consolidation or a plan of share exchange to which the corporation is a party if (i) shareholder authorization is required for the merger or consolidation or the share exchange by Section 11.20 or the articles of incorporation or (ii) the corporation is a subsidiary that is merged with its parent or another subsidiary under Section 11.30; (2) consummation of sale, lease or exchange of all, or substantially all, of the property and assets of the corporation other than in the usual and regular course of business; (3) an amendment of the articles of incorporation that materially and adversely affects rights in respect of a dissenter's shares because it: (i) alters or abolishes a preferential right of such shares; (ii) alters or abolishes a right in respect of redemption, including a provision respecting a sinking fund for the redemption or repurchase, of such shares; (iii) in the case of a corporation incorporated prior to January 1, 1982, limits or eliminates cumulative voting rights with respect to such shares; or (4) any other corporate action taken pursuant to a shareholder vote if the articles of incorporation, by-laws, or a resolution of the board of directors provide that shareholders are entitled to dissent and obtain payment for their shares in accordance with the procedures set forth in Section 11.70 or as may be otherwise provided in the articles, by-laws or resolution. (b) A shareholder entitled to dissent and obtain payment for his or her shares under this Section may not challenge the corporate action creating his or her entitlement unless the action is fraudulent with respect to the shareholder or the corporation or constitutes a breach of a fiduciary duty owed to the shareholder. (c) A record owner of shares may assert dissenters' rights as to fewer than all the shares recorded in such person's name only if such person dissents with respect to all shares beneficially owned by any one person and notifies the corporation in writing of the name and address of each person on whose behalf the record owner asserts dissenters' rights. The rights of a partial dissenter are determined as if the shares as to which dissent is made and other shares were recorded in the names of different shareholders. A beneficial owner of shares who is not the record owner may assert dissenters' rights as to shares held on such person's behalf only if the beneficial owner submits to the corporation the record owner's written consent to the dissent before or at the same time the beneficial owner asserts dissenters' rights. SECTION 11.70. PROCEDURE TO DISSENT. (a) If the corporate action giving rise to the right to dissent is to be approved at a meeting of shareholders, the notice of meeting shall inform the shareholders of their right to dissent and the procedure to dissent. If, prior to the meeting, the corporation furnishes to the shareholders material information with respect to the transaction that will objectively enable a shareholder to vote on the transaction and to determine whether or not to exercise dissenters' rights, a shareholder may assert dissenters' rights only if the shareholder delivers to the corporation before the vote is taken a written demand for payment for his or her shares if the proposed action is consummated, and the shareholder does not vote in favor of the proposed action. A-1 34 (b) If the corporate action giving rise to the right to dissent is not to be approved at a meeting of shareholders, the notice to shareholders describing the action taken under Section 11.30 or Section 7.10 shall inform the shareholders of their right to dissent and the procedure to dissent. If, prior to or concurrently with the notice, the corporation furnishes to the shareholders material information with respect to the transaction that will objectively enable a shareholder to determine whether or not to exercise dissenters' rights, a shareholder may assert dissenters' rights only if he or she delivers to the corporation within 30 days from the date of mailing the notice a written demand for payment for his or her shares. (c) Within 10 days after the date on which the corporate action giving rise to the right to dissent is effective or 30 days after the shareholder delivers to the corporation the written demand for payment, whichever is later, the corporation shall send each shareholder who has delivered a written demand for payment a statement setting forth the opinion of the corporation as to the estimated fair value of the shares, the corporation's latest balance sheet as of the end of a fiscal year ending not earlier than 16 months before the delivery of the statement, together with the statement of income for that year and the latest available interim financial statements, and either a commitment to pay for the shares of the dissenting shareholder at the estimated fair value thereof upon transmittal to the corporation of the certificate or certificates, or other evidence of ownership, with respect to the shares, or instructions to the dissenting shareholder to sell his or her shares within 10 days after delivery of the corporation's statement to the shareholder. The corporation may instruct the shareholder to sell only if there is public market for the shares at which the shares may be readily sold. If the shareholder does not sell within that 10 day period after being so instructed by the corporation, for purposes of this Section the shareholder shall be deemed to have sold his or her shares at the average closing price of the shares, if listed on a national exchange, or the average of the bid and asked price with respect to the shares quoted by a principal market maker, if not listed on a national exchange, during that 10 day period. (d) A shareholder who makes written demand for payment under this Section retains all other rights of a shareholder until those rights are canceled or modified by the consummation of the proposed corporate action. Upon consummation of that action, the corporation shall pay to each dissenter who transmits to the corporation the certificate or other evidence of ownership of the shares the amount the corporation estimates to be the fair value of the shares, plus accrued interest, accompanied by a written explanation of how the interest was calculated. (e) If the shareholder does not agree with the opinion of the corporation as to the estimated fair value of the shares or the amount of interest due, the shareholder, within 30 days from the delivery of the corporation's statement of value, shall notify the corporation in writing of the shareholder's estimated fair value and amount of interest due and demand payment for the difference between the shareholder's estimate of fair value and interest due and the amount of the payment by the corporation or the proceeds of sale by the shareholder, whichever is applicable because of the procedure for which the corporation opted pursuant to subsection (c). (f) If, within 60 days from delivery to the corporation of the shareholder notification of estimate of fair value of the shares and interest due, the corporation and the dissenting shareholder have not agreed in writing upon the fair value of the shares and interest due, the corporation shall either pay the difference in value demanded by the shareholder, with interest, or file a petition in the circuit court of the county in which either the registered office or the principal office of the corporation is located, requesting the court to determine the fair value of the shares and interest due. The corporation shall make all dissenters, whether or not residents of this State, whose demands remain unsettled parties to the proceeding as an action against their shares and all parties shall be served with a copy of the petition. Nonresidents may be served by registered or certified mail or by publication as provided by law. Failure of the corporation to commence an action pursuant to this Section shall not limit or affect the right of the dissenting shareholders to otherwise commence an action as permitted by law. (g) The jurisdiction of the court in which the proceeding is commenced under subsection (f) by a corporation is plenary and exclusive. The court may appoint one or more persons as appraisers to receive evidence and recommend decision of the question of fair value. The appraisers have the power described in the order appointing them, or in any amendment to it. A-2 35 (h) Each dissenter made a party to the proceeding is entitled to judgment for the amount, if any, by which the court finds that the fair value of his or her shares, plus interest, exceeds the amount paid by the corporation or the proceeds of sale by the shareholder, whichever amount is applicable. (i) The court, in a proceeding commenced under subsection (f), shall determine all costs of the proceeding, including the reasonable compensation and expenses of the appraisers, if any, appointed by the court under subsection (g), but shall exclude the fees and expenses of counsel and experts for the respective parties. If the fair value of the shares as determined by the court materially exceeds the amount which the corporation estimated to be the fair value of the shares or if no estimate was made in accordance with subsection (c), then all or any part of the costs may be assessed against the corporation. If the amount which any dissenter estimated to be the fair value of the shares materially exceeds the fair value of the shares as determined by the court, then all or any part of the costs may be assessed against that dissenter. The court may also assess the fees and expenses of counsel and experts for the respective parties, in amounts the court finds equitable, as follows: (1) Against the corporation and in favor of any or all dissenters if the court finds that the corporation did not substantially comply with the requirements of subsections (a), (b), (c), (d), or (f). (2) Against either the corporation or a dissenter and in favor of any other party if the court finds that the party against whom the fees and expenses are assessed acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by this Section. If the court finds that the services of counsel for any dissenter were of substantial benefit to other dissenters similarly situated and that the fees for those services should not be assessed against the corporation, the court may award to that counsel reasonable fees to be paid out of the amounts awarded to the dissenters who are benefitted. Except as otherwise provided in this Section, the practice, procedure, judgment and costs shall be governed by the Code of Civil Procedure. (j) As used in this Section: (1) "Fair value", with respect to a dissenter's shares, means the value of the shares immediately before the consummation of the corporate action to which the dissenter objects excluding any appreciation or depreciation in anticipation of the corporate action, unless exclusion would be inequitable. (2) "Interest" means interest from the effective date of the corporate action until the date of payment, at the average rate currently paid by the corporation on its principal bank loans or, if none, at a rate that is fair and equitable under all the circumstances. A-3 36 Facsimile copies of the Letter of Transmittal and Proxy will only be accepted from Eligible Institutions. Facsimile copies of the separate Proxy will be accepted from any holder. The Letter of Transmittal and Proxy and, if applicable, certificates for Shares should be sent or delivered by each tendering or voting Preferred Shareholder of IPC or his or her broker, dealer, bank or trust company to the Depositary at one of its addresses set forth below. The Depositary is: FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Mail: By Hand: By Overnight Courier: -------- -------- --------------------- First Chicago Trust Company First Chicago Trust Company First Chicago Trust Company of New York of New York of New York Attn: Tenders & Exchanges Attn: Tenders & Exchanges Attn: Tenders & Exchanges P.O. Box 2565 c/o The Depository Trust Suite 4680-CBE Suite 4660 Company 55 Water Street, DTC 14 Wall Street Jersey City, NJ 07303-2565 TAD 8th Floor Vietnam Veterans Memorial Plaza New York, NY 10005 New York, NY 10041
By Facsimile: (201) 222-4720 or (201) 222-4721 Confirm by Telephone: (201) 222-4707 Any questions or requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective telephone numbers and addresses listed below. Requests for additional copies of this Offer to Purchase and Proxy Statement, the Letter of Transmittal and Proxy, the separate Proxy or other tender offer or proxy materials may be directed to the Information Agent, and such copies will be furnished promptly at the companies' expense. Preferred Shareholders may also contact their local broker, dealer, commercial bank or trust company for assistance concerning the Offer. The Information Agent: MACKENZIE PARTNERS, INC. 156 Fifth Avenue New York, New York 10010 (800) 322-2885 (Toll Free) (212) 929-5500 (Call Collect) The Dealer Manager: DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION 277 Park Avenue New York, New York 10172 (800) 334-1604 (Toll Free) (212) 892-3351 (Call Collect) Attn: Paul Galant or Jeff Dorst EX-99.(A)(2) 3 FORM OF LETTER OF TRANSMITTAL & PROXY 1 IPC % LETTER OF TRANSMITTAL AND PROXY to Accompany Shares of % Series Cumulative Preferred Stock CUSIP Number 452092 ________ of ILLINOIS POWER COMPANY Tendered Pursuant to the Offer to Purchase for Cash by ILLINOVA CORPORATION dated [Statement Date], for Purchase at a Purchase Price Of $ Per Share THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON [EXPIRATION DATE], UNLESS THE OFFER IS EXTENDED. To: First Chicago Trust Company of New York
By Mail: By Hand: By Overnight Courier: -------- -------- --------------------- First Chicago Trust Company of First Chicago Trust Company of First Chicago Trust Company of New York New York New York Attn: Tenders & Exchanges Attn: Tenders & Exchanges Attn: Tenders & Exchanges P.O. Box 2565 c/o The Depository Trust Suite 4680-CBE Suite 4660 Company 14 Wall Street Jersey City, NJ 07303-2565 55 Water Street, DTC TAD 8th Floor Vietnam Veterans Memorial Plaza New York, NY 10005 New York, NY 10041
By Facsimile: (201) 222-4720 or 222-4721 Confirm by Telephone: (201) 222-4707 ILLINOVA CORPORATION ("ILN") WILL NOT BE REQUIRED TO ACCEPT FOR PAYMENT OR PAY FOR ANY SHARES TENDERED IF THE PROPOSED AMENDMENT IS NOT APPROVED AND ADOPTED AT THE SPECIAL MEETING. PREFERRED SHAREHOLDERS OF RECORD OF ILLINOIS POWER COMPANY ("IPC") HAVE THE RIGHT TO VOTE FOR THE PROPOSED AMENDMENT REGARDLESS OF WHETHER THEY TENDER THEIR SHARES. IF THE PROPOSED AMENDMENT IS ADOPTED AT THE SPECIAL MEETING, IPC WILL MAKE A SPECIAL CASH PAYMENT TO EACH PREFERRED SHAREHOLDER WHO VOTED IN FAVOR OF THE PROPOSED AMENDMENT, PROVIDED THAT THEIR SHARES ARE NOT TENDERED PURSUANT TO THE OFFER. - --------------------------------------------------------------------------------------------------------------- DESCRIPTION OF SHARES TENDERED - --------------------------------------------------------------------------------------------------------------- NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) IF TENDERING SHARES, PLEASE FILL IN EXACTLY AS INFORMATION APPEARS ON CERTIFICATE(S) (ATTACH ADDITIONAL SIGNED LIST IF CERTIFICATE REPRESENTED BY NUMBER OF SHARES NECESSARY) NUMBER(S)* CERTIFICATE(S) TENDERED** - --------------------------------------------------------------------------------------------------------------- ================================================== -------------------------------------------------- - --------------------------------------------------------------------------------------------------------------- TOTAL NUMBER OF SHARES TENDERED - --------------------------------------------------------------------------------------------------------------- * Need not be completed by shareholders tendering by book-entry transfer. ** Unless otherwise indicated, it will be assumed that all Shares represented by any certificates delivered to the Depositary are being tendered. See Instruction 4. - ---------------------------------------------------------------------------------------------------------------
NOTE: IF YOU ARE VOTING AND TENDERING SHARES, USE THE PROXY CONTAINED IN THIS LETTER OF TRANSMITTAL AND PROXY. IF YOU ARE VOTING BUT NOT TENDERING SHARES, USE THE SEPARATE [PROXY CARD COLOR] PROXY. 2 NOTE: IF SHARES ARE BEING TENDERED, THE REMAINDER OF THIS LETTER OF TRANSMITTAL AND PROXY (THE "LETTER OF TRANSMITTAL AND PROXY") MUST BE COMPLETED, INCLUDING, IF APPLICABLE, THE SUBSTITUTE FORM W-9 BELOW. PROXY The undersigned hereby appoints , and , or any of them, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote as designated hereunder and in their discretion with respect to any other business properly brought before the Special Meeting, all the shares of cumulative preferred stock of Illinois Power Company ("IPC") which the undersigned is entitled to vote at the Special Meeting of Shareholders to be held on , 1998, or any adjournment(s) or postponement(s) thereof. DELIVERY OF THIS LETTER OF TRANSMITTAL AND PROXY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL AND PROXY IN THE APPROPRIATE SPACE THEREFOR PROVIDED AND, IF YOU ARE TENDERING ANY SHARES, COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW OR A FORM W-8, AS APPLICABLE. SEE INSTRUCTION 8 AND "IMPORTANT TAX INFORMATION" BELOW. DO NOT SEND ANY CERTIFICATES TO DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION, MACKENZIE PARTNERS, INC., ILLINOVA CORPORATION OR ILLINOIS POWER COMPANY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL AND PROXY SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL AND PROXY IS COMPLETED. QUESTIONS REGARDING AND REQUESTS FOR COPIES OF THE OFFER TO PURCHASE AND PROXY STATEMENT OR THIS LETTER OF TRANSMITTAL AND PROXY MAY BE DIRECTED TO MACKENZIE PARTNERS, INC., THE INFORMATION AGENT, AT 156 FIFTH AVENUE, NEW YORK, NEW YORK 10010 OR TELEPHONE (800) 322-2885 (TOLL FREE). This Letter of Transmittal and Proxy is to be used (a) if certificates are to be forwarded to the First Chicago Trust Company of New York ("Depositary") or (b) if delivery of tendered Shares (as defined below) is to be made by book-entry transfer to the Depositary's account at The Depository Trust Company ("DTC" or the "Book-Entry Transfer Facility") pursuant to the procedures set forth under the heading "Terms of the Offer -- Procedure for Tendering Shares" in the Offer to Purchase and Proxy Statement (as defined below). Preferred Shareholders (as defined below) who wish to tender Shares but who cannot deliver their Shares and all other documents required hereby to the Depositary by the Expiration Date (as defined in the Offer to Purchase and Proxy Statement) must tender their Shares pursuant to the guaranteed delivery procedure set forth under the heading "Terms of the Offer -- Procedure for Tendering Shares" in the Offer to Purchase and Proxy Statement. See Instruction 2. DELIVERY OF DOCUMENTS TO ILN, IPC OR THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE A VALID DELIVERY. If any of your certificate(s) for Shares have been lost, stolen or destroyed, please call Illinova Corporation's Shareholder Services Department (800) 800-8220. In addition, you should advise the Shareholder Services Department of any certificate(s) you have in your possession. You will need to complete an Affidavit of Loss with respect to the lost certificate(s) (which will be provided by the Shareholder Services Department) and pay an indemnity bond premium fee. THIS LETTER OF TRANSMITTAL AND PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF IPC. The proxy contained herein, when properly executed, will be voted in the manner directed herein by the undersigned shareholder(s). If no direction is made, the proxy will be voted for Item 1. 3 INDICATE YOUR VOTE BY AN (X). THE BOARD OF DIRECTORS OF IPC RECOMMENDS VOTING FOR ITEM 1. ITEM 1. To remove in its entirety ARTICLE V, Section 1, Clause (f)(1) from the Amended and Restated Articles of Incorporation of IPC (the "Articles"), which limits IPC's ability to issue or assume unsecured indebtedness. [ ] FOR [ ] AGAINST [ ] ABSTAIN NOTE: IF SHARES ARE BEING VOTED "FOR" THE PROPOSED AMENDMENT, THE SUBSTITUTE FORM W-9 BELOW SHOULD BE COMPLETED TO AVOID BACK-UP WITHHOLDING ON THE SPECIAL CASH PAYMENT. SHARES REPRESENTED BY ALL PROPERLY EXECUTED PROXIES WILL BE VOTED IN ACCORDANCE WITH INSTRUCTIONS APPEARING ON THIS PROXY. IN THE ABSENCE OF SPECIFIC INSTRUCTIONS, PROXIES WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS OF IPC AND IN THE DISCRETION OF THE PROXY HOLDERS AS TO ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE SPECIAL MEETING. Any holder of Shares held of record on the Record Date in the name of another holder must establish to the satisfaction of IPC his or her entitlement to exercise or transfer this Proxy. This will ordinarily require an assignment by such record holder in blank, or if not in blank, to and from each successive transferee, including the holder, with each signature guaranteed by an Eligible Institution. A form of irrevocable assignment of proxy has been provided herein. Please check box if you plan to attend the Special Meeting. [ ] (BOXES BELOW FOR USE BY ELIGIBLE INSTITUTIONS ONLY) [ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE DEPOSITARY'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING: Name of Tendering Institution: ---------------------------------------------------------------------------- Account No.: ---------------------------------------------------------------------------- VOI No.: ---------------------------------------------------------------------------- [ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of tendering shareholder(s): ------------------------------------- Date of Execution of Notice of Guaranteed Delivery: ---------------------- Name of Institution that Guaranteed Delivery: ---------------------------- If delivery is by book-entry transfer: Name of Tendering Institution: ------------------------------------------- Account No.: ------------------------------------------------------------ VOI No.: ---------------------------------------------------------------- 4 NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: The undersigned hereby tenders to Illinova Corporation, an Illinois corporation ("ILN"), the shares in the amount set forth in the box above designated "Description of Shares Tendered" pursuant to ILN's offer to purchase any and all of the outstanding shares of the series of cumulative preferred stock of Illinois Power Company, an Illinois corporation, and direct utility subsidiary of ILN ("IPC"), shown on the first page hereof as to which this Letter of Transmittal and Proxy is applicable (the "Shares") at the purchase price per Share shown on the first page hereof, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase and Proxy Statement, dated [STATEMENT DATE] (the "Offer to Purchase and Proxy Statement"), receipt of which is hereby acknowledged, and in this Letter of Transmittal and Proxy (which as to the Shares, together with the Offer to Purchase and Proxy Statement, constitutes the "Offer"). WHILE HOLDERS OF SHARES ("PREFERRED SHAREHOLDERS") WHO WISH TO TENDER THEIR SHARES PURSUANT TO THE OFFER NEED NOT VOTE IN FAVOR OF THE PROPOSED AMENDMENT TO IPC'S AMENDED AND RESTATED ARTICLES OF INCORPORATION, AS SET FORTH IN THE OFFER TO PURCHASE AND PROXY STATEMENT (THE "PROPOSED AMENDMENT"), THE OFFER IS CONDITIONED UPON THE PROPOSED AMENDMENT BEING APPROVED AND ADOPTED AT THE SPECIAL MEETING (AS DEFINED IN THE OFFER TO PURCHASE AND PROXY STATEMENT). See "Proposed Amendment and Proxy Solicitation", "Terms of the Offer -- Extension of Tender Period; Termination; Amendments" and "Terms of the Offer -- Certain Conditions of the Offer" in the Offer to Purchase and Proxy Statement. Subject to, and effective upon, acceptance for payment of and payment for the Shares tendered herewith in accordance with the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the undersigned hereby sells, assigns and transfers to, or upon the order of, ILN all right, title and interest in and to all the Shares that are being tendered hereby and hereby constitutes and appoints First Chicago Trust Company of New York (the "Depositary") the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares, with full power of substitution (such power of attorney being an irrevocable power coupled with an interest), to (a) deliver certificates for such Shares, or transfer ownership of such Shares on the account books maintained by DTC, together, in any such case, with all accompanying evidences of transfer and authenticity, to or upon the order of ILN, (b) present such Shares for registration and transfer on the books of IPC and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares, all in accordance with the terms of the Offer. The Depositary will act as agent for tendering shareholders for the purpose of receiving payment from ILN and transmitting payment to tendering shareholders. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby and that, when and to the extent the same are accepted for payment by ILN, ILN will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, charges, encumbrances, conditional sales agreements or other obligations relating to the sale or transfer thereof, and the same will not be subject to any adverse claims. The undersigned will, upon request, execute and deliver any additional documents deemed by the Depositary or ILN to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby. All authority herein conferred or agreed to be conferred shall not be affected by, and shall survive the death, bankruptcy or incapacity of the undersigned, and any obligations of the undersigned hereunder shall be binding upon the heirs, legal representatives, successors, assigns, executors and administrators of the undersigned. Except as stated in the Offer, this tender is irrevocable. The undersigned understands that tenders of Shares pursuant to any one of the procedures described under the heading "Terms of the Offer -- Procedure for Tendering Shares" in the Offer to Purchase and Proxy Statement and in the instructions hereto will constitute the undersigned's acceptance of the terms and conditions of the Offer, including the undersigned's representation and warranty that (a) the undersigned has 5 a net long position in the Shares being tendered within the meaning of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended, and (b) the tender of such Shares complies with such Rule 14e-4. ILN's acceptance for payment of Shares tendered pursuant to the Offer will constitute a binding agreement between the undersigned and ILN upon the terms and subject to the conditions of the Offer. The undersigned recognizes that, under certain circumstances set forth in the Offer to Purchase and Proxy Statement, ILN may terminate or amend the Offer or may not be required to purchase any of the Shares tendered hereby. In either event, the undersigned understands that certificate(s) for any Shares not tendered or not purchased will be returned to the undersigned. Unless otherwise indicated in the box below under the heading "Special Payment Instructions", please issue the check for the purchase price of any Shares purchased, and/or return any Shares not tendered or not purchased, in the name(s) of the undersigned (and, in the case of Shares tendered by book-entry transfer, by credit to the account at the Book-Entry Transfer Facility). Similarly, unless otherwise indicated in the box below under the heading "Special Delivery Instructions", please mail the check for the purchase price of any Shares purchased and/or any certificates for Shares not tendered or not purchased (and accompanying documents, as appropriate) to the undersigned at the address shown below the undersigned signature(s). In the event that both "Special Payment Instructions" and "Special Delivery Instructions are completed, please issue the check for the purchase price of any Shares purchased and/or return any Shares not tendered or not purchased in the name(s) of, and mail said check and/or any certificates to, the person(s) so indicated. The undersigned recognizes that ILN has no obligation, pursuant to the "Special Payment Instructions", to transfer any Shares from the name of the registered holder(s) thereof if ILN does not accept for payment any of the Shares so tendered. SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 4, 5 AND 7) To be completed ONLY if the check for the purchase price of Shares purchased and/or certificates for Shares not tendered or not purchased are to be issued in the name of someone other than the undersigned. Issue: [ ] check to: [ ] certificate(s) to: Name --------------------------------------------------------------------------- (Please Print) Address ------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Include Zip Code) - -------------------------------------------------------------------------------- (Taxpayer Identification or Social Security Number) SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 4 AND 7) To be completed ONLY if the check for the purchase price of Shares purchased and/or certificates for Shares not tendered or not purchased are to be mailed to someone other than the undersigned or to the undersigned at an address other than that shown below the undersigned's signature(s). Mail: [ ] check to: [ ] certificate(s) to: Name --------------------------------------------------------------------------- (Please Print) Address ------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Include Zip Code) - -------------------------------------------------------------------------------- (Taxpayer Identification or Social Security Number) 6 - -------------------------------------------------------------------------------- SIGNATURE(S) OF OWNER(S) X -------------------------------------------------------------------------- X -------------------------------------------------------------------------- Dated: , 1998 --------------------------------------------------------------- Name(s): ------------------------------------------------------------------ -------------------------------------------------------------------------- (Please Print) Capacity (Full Title or "Individual," if applicable) -------------------------------------------------------------------------- -------------------------------------------------------------------------- Addresses: ---------------------------------------------------------------- -------------------------------------------------------------------------- (Include Zip Code) Daytime Area Code and Telephone No.: -------------------------------------------------------------------------- (Must be signed by the registered holder(s) exactly as name(s) appear(s) on the stock certificate(s) or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please set forth full title and see Instruction 5.) GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 5) Authorized Signature: ----------------------------------------------------- Name: --------------------------------------------------------------------- Name of Firm: ------------------------------------------------------------- Address of Firm: ---------------------------------------------------------- Area Code and Telephone No.: ---------------------------------------------- Dated: , 1998 -------------------------------------------------------------- IF SHARES ARE BEING TENDERED, PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW OR A FORM W-8, AS APPLICABLE. - -------------------------------------------------------------------------------- 7 SOLICITED TENDERS (SEE INSTRUCTION 10) As provided in Instruction 10, ILN will pay a solicitation fee of $ per Share that is tendered, accepted for payment and paid for pursuant to the Offer in transactions for beneficial owners of fewer than Shares and a solicitation fee of $ per Share for transactions for beneficial owners of or more Shares; provided that solicitation fees payable in transactions for beneficial owners of or more Shares shall be paid 80% to the Dealer Manager and 20% to any designated Soliciting Dealer (as defined in Instruction 10) (which may be the Dealer Manager). However, Soliciting Dealers will not be entitled to a solicitation fee for Shares beneficially owned by such Soliciting Dealer. The above signed represents that the Soliciting Dealer which solicited and obtained this tender is: Name of Firm: (Please Print) Name of Individual Broker or Financial Consultant: (Please Print) Telephone Number of Broker or Financial Consultant: Identification Number (if known): Address: (Include zip code) The following to be completed ONLY if customer's Shares held in nominee name are tendered. NAME OF BENEFICIAL OWNER NUMBER OF SHARES TENDERED
(ATTACH ADDITIONAL LIST IF NECESSARY) The acceptance of compensation by such Soliciting Dealer will constitute a representation by it that (a) it has complied with the applicable requirements of the Securities Exchange Act of 1934, as amended, and the applicable rules and regulations thereunder, in connection with such solicitation; (b) it is entitled to such compensation for such solicitation under the terms and conditions of the Offer to Purchase and Proxy Statement; (c) in soliciting tenders of Shares, it has used no solicitation materials other than those furnished by ILN; and (d) if it is a foreign broker or dealer not eligible for membership in the National Association of Securities Dealers, Inc. (the "NASD"), it has agreed to conform to the NASD's Rules of Fair Practice in making solicitations. The payment of compensation to any Soliciting Dealer is dependent on such Soliciting Dealer returning a Notice of Solicited Tenders to the Depositary. THIS LETTER OF TRANSMITTAL AND PROXY IS TO BE USED ONLY FOR THE TENDER OF SHARES OF THE SERIES OF CUMULATIVE PREFERRED STOCK OF IPC SHOWN ON THE FIRST PAGE HEREOF. ANY PERSON DESIRING TO TENDER SHARES OF ANY OTHER SERIES OF CUMULATIVE PREFERRED STOCK FOR WHICH ILN IS MAKING A TENDER OFFER MUST SUBMIT THE LETTER OF TRANSMITTAL AND PROXY RELATING TO THAT SPECIFIC SERIES. 8 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all signatures on this Letter of Transmittal and Proxy must be guaranteed by a firm that is a member in good standing of a registered national securities exchange or the NASD or by a commercial bank or trust company having an office or correspondent in the United States which is a participant in an approved Medallion Signature Guarantee Program (each of the foregoing being referred to as an "Eligible Institution"). Signatures on this Letter of Transmittal and Proxy need not be guaranteed (a) if this Letter of Transmittal and Proxy is signed by the registered holder(s) of the Shares (which term, for purposes of this document, shall include any participant in one of the Book-Entry Transfer Facilities whose name appears on a security position listing as the owner of Shares) tendered herewith and such holder(s) has not completed the box above under the heading "Special Payment Instructions" or the box above under the heading "Special Delivery Instructions" on this Letter of Transmittal and Proxy, or (b) if such Shares are tendered for the account of an Eligible Institution. See Instruction 5. 2. DELIVERY OF LETTER OF TRANSMITTAL AND PROXY AND SHARES. This Letter of Transmittal and Proxy is to be used if (a) certificates are to be forwarded herewith, or (b) delivery of Shares is to be made by book-entry transfer pursuant to the procedures set forth under the heading "Terms of the Offer -- Procedure for Tendering Shares" in the Offer to Purchase and Proxy Statement. Certificates for all physically delivered Shares, or a confirmation of a book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility of all Shares delivered electronically, as well as a properly completed and duly executed Letter of Transmittal and Proxy, and any other documents required by this Letter of Transmittal and Proxy, must be received by the Depositary at one of its addresses set forth on the front page of this Letter of Transmittal and Proxy on or prior to the Expiration Date (as defined in the Offer to Purchase and Proxy Statement) with respect to all Shares. Preferred Shareholders who wish to tender their Shares yet who cannot deliver their Shares and all other required documents to the Depositary on or prior to the Expiration Date must tender their Shares pursuant to the guaranteed delivery procedure set forth under the heading "Terms of the Offer -- Procedure for Tendering Shares -- Guaranteed Delivery Procedure" in the Offer to Purchase and Proxy Statement. Pursuant to such procedure: (a) such tender must be made by or through an Eligible Institution, (b) a properly completed and duly executed Notice of Guaranteed Delivery in the form provided by ILN (with any required signature guarantees) must be received by the Depositary on or prior to the applicable Expiration Date and (c) the certificates for all physically delivered Shares, or a confirmation of a book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility of all Shares delivered electronically, together with a properly completed and duly executed Letter of Transmittal and Proxy and any other documents required by this Letter of Transmittal and Proxy must be received by the Depositary by 5:00 p.m. (New York City time) within three New York Stock Exchange trading days after the date of execution of such Notice of Guaranteed Delivery, all as provided under the heading "Terms of the Offer -- Procedure for Tendering Shares -- Guaranteed Delivery Procedure" in the Offer to Purchase and Proxy Statement. THE METHOD OF DELIVERY OF SHARES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING PREFERRED SHAREHOLDER. IF CERTIFICATES FOR SHARES ARE SENT BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. No alternative, conditional or contingent tenders will be accepted. See "Terms of the Offer -- Number of Shares; Purchase Prices; Expiration Date; Dividends" in the Offer to Purchase and Proxy Statement. By executing this Letter of Transmittal and Proxy, the tendering shareholder waives any right to receive any notice of the acceptance for payment of the Shares. 3. VOTING. WHILE PREFERRED SHAREHOLDERS WHO WISH TO TENDER THEIR SHARES PURSUANT TO THE OFFER NEED NOT VOTE IN FAVOR OF THE PROPOSED AMENDMENT, THE OFFER IS CONDITIONED UPON THE PROPOSED AMENDMENT BEING APPROVED AND ADOPTED AT THE SPECIAL MEETING. In addition, Preferred Shareholders have the right to vote for the Proposed Amendment regardless of whether they tender their Shares by casting their vote and duly executing the proxy enclosed herewith or by voting in person at the Special Meeting. By 9 executing a Notice of Guaranteed Delivery, a Preferred Shareholder is deemed to have tendered the Shares described in such Notice of Guaranteed Delivery and to have voted such Shares in accordance with the proxy returned therewith, if any. If no vote is indicated on an otherwise properly executed proxy, then all Shares in respect of such proxy will be voted in favor of the Proposed Amendment. See "Proposed Amendment and Proxy Solicitation" in the Offer to Purchase and Proxy Statement. The Offer is being sent to all persons in whose names Shares are registered on the books of IPC on the Record Date (as defined in the Offer to Purchase and Proxy Statement) and transferees thereof. Only a record holder of Shares on the Record Date may vote in person or by proxy at the Special Meeting. No record date is fixed for determining which persons are permitted to tender Shares. Any person who is the beneficial owner but not the record holder of Shares must arrange for the record transfer of such Shares prior to tendering. 4. PARTIAL TENDERS (NOT APPLICABLE TO SHAREHOLDERS WHO TENDER BY BOOK-ENTRY TRANSFER). If fewer than all the Shares represented by any certificate delivered to the Depositary are to be tendered, fill in the number of Shares that are to be tendered in the box above under the heading "Description of Shares Tendered". In such case, a new certificate for the remainder of the Shares represented by the old certificate will be sent to the person(s) signing this Letter of Transmittal and Proxy, unless otherwise provided in the box above under the heading "Special Payment Instructions" or "Special Delivery Instructions", as promptly as practicable following the expiration or termination of the Offer. All Shares represented by certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. SIGNATURES ON THIS LETTER OF TRANSMITTAL AND PROXY AND/OR NOTICE OF GUARANTEED DELIVERY; STOCK POWERS AND ENDORSEMENTS. If either this Letter of Transmittal and Proxy or the Notice of Guaranteed Delivery (together, the "Tender Documents") is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond with the name(s) as written on the face of the certificates without alteration, enlargement or any change whatsoever. If any of the Shares tendered under either Tender Document is held of record by two or more persons, all such persons must sign such Tender Document. If any of the Shares tendered under either Tender Document is registered in different names or different certificates, it will be necessary to complete, sign and submit as many separate applicable Tender Documents as there are different registrations or certificates. If either Tender Document is signed by the registered holder(s) of the Shares tendered hereby, no endorsements of certificates or separate stock powers are required unless payment of the purchase price is to be made to, or Shares not tendered or not purchased are to be registered in the name of, any person other than the registered holder(s). Signatures on any such certificates or stock powers must be guaranteed by an Eligible Institution. See Instruction 1. If this Letter of Transmittal and Proxy is signed by a person other than the registered holder(s) of the Shares tendered hereby, certificates must be endorsed or accompanied by appropriate stock powers, in either case, signed exactly as the name(s) of the registered holder(s) appear(s) on the certificates for such Shares. Signature(s) on any such certificates or stock powers must be guaranteed by an Eligible Institution. See Instruction 1. If either Tender Document or any certificate or stock power is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to ILN of the authority of such person so to act must be submitted. 6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, ILN will pay or cause to be paid any stock transfer taxes with respect to the sale and transfer of any Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or Shares not tendered or not purchased are to be registered in the name of, any person other than the registered holder(s), or if tendered Shares are registered in the name of any person other than the person(s) signing this Letter of Transmittal and Proxy, the amount of any stock transfer taxes (whether imposed on the registered holder(s), such other person or otherwise) payable on account of the transfer to such person will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes, or exemption therefrom, is submitted. See "Terms of the Offer -- Acceptance of Shares for Payment and Payment of Purchase Price" in the Offer to Purchase and Proxy Statement. EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY TO AFFIX TRANSFER TAX STAMPS TO THE CERTIFICATES REPRESENTING SHARES TENDERED HEREBY. 10 7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for the purchase price of any Shares purchased is to be issued in the name of, and/or any Shares not tendered or not purchased are to be returned to, a person other than the person(s) signing this Letter of Transmittal and Proxy or if the check and/or any certificate for Shares not tendered or not purchased are to be mailed to someone other than the person(s) signing this Letter of Transmittal and Proxy or to an address other than that shown in the box above under the heading "Name(s) and Address(es) of Registered Holder(s)", then the "Special Payment Instructions" and/or "Special Delivery Instructions" on this Letter of Transmittal and Proxy should be completed. Preferred Shareholders tendering Shares by book-entry transfer will have any Shares not accepted for payment returned by crediting the account maintained by such Preferred Shareholder at the Book-Entry Transfer Facility from which such transfer was made. 8. SUBSTITUTE FORM W-9 AND FORM W-8. The tendering Preferred Shareholder is required to provide the Depositary with either a correct Taxpayer Identification Number ("TIN") on Substitute Form W-9, which is provided under "Important Tax Information" below, or a properly completed Form W-8. Failure to provide the information on either Substitute Form W-9 or Form W-8 may subject the tendering Preferred Shareholder to a $50 penalty imposed by the Internal Revenue Service and to 31% federal income tax backup withholding on the payment of the purchase price for the Shares. The box in Part 2 of Substitute Form W-9 may be checked if the tendering Preferred Shareholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future. If the box in Part 2 is checked and the Depositary is not provided with a TIN by the time of payment, the Depositary will withhold 31% on all payments of the purchase price for the Shares thereafter until a TIN is provided to the Depositary. 9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Any questions or requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective telephone numbers and addresses listed below. Requests for additional copies of the Offer to Purchase and Proxy Statement, this Letter of Transmittal and Proxy or other related tender offer materials may be directed to the Information Agent and such copies will be furnished promptly at ILN's expense. Preferred Shareholders may also contact their local broker, dealer, commercial bank or trust company for assistance concerning the Offer. 10. SOLICITED TENDERS. ILN will pay a solicitation fee of $ per Share that is tendered, accepted for payment and paid for pursuant to the Offer in transactions for beneficial owners of fewer than Shares and a solicitation fee of $ per Share for transactions for beneficial owners of or more Shares; provided that solicitation fees payable in transactions for beneficial owners of or more Shares shall be paid 80% to the Dealer Manager and 20% to any designated Soliciting Dealer (which may be the Dealer Manager) covered by the Letter of Transmittal and Proxy which designates, under the heading "Solicited Tenders," as having solicited and obtained the tender, the name of (a) any broker or dealer in securities, including a Dealer Manager in its capacity as a dealer or broker, which is a member of any national securities exchange or of the NASD, (b) any foreign broker or dealer not eligible for membership in the NASD which agrees to conform to the NASD's Rules of Fair Practice in soliciting tenders outside the United States to the same extent as though it were an NASD member, or (c) any bank or trust company (each of which is referred to herein as a "Soliciting Dealer"). No such fee shall be payable to a Soliciting Dealer with respect to the tender of Shares by a holder unless the Letter of Transmittal and Proxy accompanying such tender designates such Soliciting Dealer. No such fee shall be payable to a Soliciting Dealer in respect of Shares registered in the name of such Soliciting Dealer unless such Shares are held by such Soliciting Dealer as nominee and such Shares are being tendered for the benefit of one or more beneficial owners identified on the Letter of Transmittal and Proxy or on the Notice of Solicited Tenders (included in the materials provided to brokers and dealers). No such fee shall be payable to a Soliciting Dealer with respect to the tender of Shares by the holder of record, for the benefit of the beneficial owner, unless the beneficial owner has designated such Soliciting Dealer. If tendered Shares are being delivered by book-entry transfer, the Soliciting Dealer must return a Notice of Solicited Tenders to the Depositary within three business days after expiration of the Offer to receive a solicitation fee. No such fee shall be payable to a Soliciting Dealer if such Soliciting Dealer is required for any reason to transfer the amount of such fee to a depositing holder (other than itself). No such fee shall be paid to a Soliciting Dealer with respect to Shares tendered for such Soliciting Dealer's own account. No broker, dealer, bank, trust company or fiduciary shall be deemed to be the agent of ILN, the Depositary, the Information 11 Agent or the Dealer Manager for purposes of the Offer. Soliciting Dealers will include any organizations described in clauses (a), (b) or (c) above even when the activities of such organization in connection with the Offer consist solely of forwarding to clients materials relating to the Offer, including this Letter of Transmittal and Proxy, and rendering Shares as directed by beneficial owners thereof. No Soliciting Dealer is required to make any recommendation to holders of Shares as to whether to tender or refrain from tendering in the Offer. No assumption is made, in making payment to any Soliciting Dealer, that its activities in connection with the Offer included any activities other than those described above, and for all purposes noted in all materials relating to the Offer, the term "solicit" shall be deemed to mean no more than "processing shares tendered" or "forwarding to customers materials regarding the Offer." 11. IRREGULARITIES. All questions as to the form of documents and the validity, eligibility (including time of receipt) and acceptance of any tender of Shares will be determined by ILN, in its sole discretion, and its determination shall be final and binding. ILN reserves the absolute right to reject any and all tenders of Shares that it determines are not in proper form or the acceptance for payment of or payment for Shares that may, in the opinion of ILN's counsel, be unlawful. ILN also reserves the absolute right to waive any of the conditions to the Offer or any defect or irregularity in any tender of Shares and ILN's interpretation of the terms and conditions of the Offer (including these instructions) shall be final and binding. Unless waived, any defects or irregularities in connection with tenders must be cured within such time as ILN shall determine. None of ILN, IPC, the Dealer Manager, the Depositary, the Information Agent or any other person shall be under any duty to give notice of any defect or irregularity in tenders, nor shall any of them incur any liability for failure to give any such notice. Tenders will not be deemed to have been made until all defects and irregularities have been cured or waived. 12. LOST, DESTROYED OR STOLEN CERTIFICATES. If any of your certificate(s) for Shares have been lost, stolen or destroyed, please call the ILN's Shareholder Services Department at (800)800-8220. In addition, you should advise ILN's Shareholder Services Department of any certificate(s) you have in your possession. You will need to complete an Affidavit of Loss with respect to the lost certificate(s) (which will be provided by ILN's Shareholder Services Department) and pay an indemnity bond premium fee. The tender of Shares pursuant to this Letter of Transmittal and Proxy will not be valid unless prior to the Expiration Date: (a) such procedures have been completed and a replacement certificate for the Shares has been delivered to the Depositary or (b) a Notice of Guaranteed Delivery has been delivered to the Depositary. See Instruction 2. IMPORTANT: THIS LETTER OF TRANSMITTAL AND PROXY, DULY EXECUTED, TOGETHER WITH, IF APPLICABLE, CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER, AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE DEPOSITARY, OR, IF APPLICABLE, THE NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE EXPIRATION DATE. IMPORTANT TAX INFORMATION Under United States Federal income tax law, a Preferred Shareholder whose tendered Shares are accepted for payment is required to provide the Depositary (as payer) with either such Preferred Shareholder's correct TIN on Substitute Form W-9 or a properly completed Form W-8. If such Preferred Shareholder is an individual, the TIN is his or her social security number. For businesses and other entities, the number is the Federal employer identification number. If the Depositary is not provided with the correct TIN or properly completed Form W-8, the Preferred Shareholder may be subject to a $50 penalty imposed by the Internal Revenue Code. In addition, payments that are made to such Preferred Shareholder with respect to Shares purchased pursuant to the Offer may be subject to 31% backup withholding. To avoid backup withholding, an individual Preferred Shareholder is required to complete the Substitute Form W-9 attached hereto certifying that the TIN provided on Substitute Form W-9 is correct and that (a) the Preferred Shareholder has not been notified by the Internal Revenue Service that he or she is subject to United States Federal income tax backup withholding as a result of a failure to report all interest or dividends or (b) the Internal Revenue Service has notified the Preferred Shareholder that he or she is no longer subject to United 12 States Federal income tax backup withholding. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. Certain Preferred Shareholders (including, among others, all corporations and certain foreign individuals) are exempt from backup withholding. For a corporate United States Preferred Shareholder to qualify for such exemption, such Preferred Shareholder must provide the Depositary with a properly completed and executed Substitute Form W-9 attesting to its exempt status. In order for a foreign Preferred Shareholder to qualify as an exempt recipient, such Preferred Shareholder must submit to the Depositary a properly completed Internal Revenue Service Form W-8, signed under penalties of perjury attesting to that Preferred Shareholder's exempt status. A Form W-8 can be obtained from the Depositary. If United States Federal income tax backup withholding applies, the Depositary is required to withhold 31% of any payments made to the Preferred Shareholder. Backup withholding is not an additional tax. Rather, the United States Federal income tax liability of persons subject to backup withholding will be reduced by the amount of the tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. WHAT NUMBER TO GIVE THE DEPOSITARY The Preferred Shareholder is required to give the Depositary the social security number or employer identification number of the registered owner of the Shares. If the Shares are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance on which number to report. 13 - ------------------------------------------------------------------------------------------------------------------------ PAYER'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK - ------------------------------------------------------------------------------------------------------------------------ PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND SUBSTITUTE CERTIFY BY SIGNING AND DATING BELOW. ----------------------------- FORM W-9 Social Security Number(s) OR -------------------------- Employer Identification Number ------------------------------------------------------------------------------------------- DEPARTMENT OF THE TREASURY PART 2-- PART 3-- INTERNAL REVENUE SERVICE CERTIFICATION -- Under Penalties of Perjury, I certify Awaiting TIN [ ] that: (1) The number shown on this form is my correct taxpayer identification number (or a TIN has not been issued to me but I have mailed or delivered an application to receive a TIN or intend to do so in the near future), (2) I am not subject to backup withholding either because (a) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (b) the IRS has notified me that I am no longer subject to backup withholding. ------------------------------------------------------------------------------------------- You must cross out item (2) above if you have been notified by the IRS that you are PAYER'S REQUEST FOR currently subject to backup withholding because of underreporting interest or dividends TAXPAYER IDENTIFICATION on your tax return. NUMBER (TIN) SIGNATURE _________________________________ DATE ____________________________ 1998 - -----------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED CERTIFICATION "GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9" FOR ADDITIONAL DETAILS. NOTE: YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 2 OF SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (2) I intend to do so in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all payments of the purchase price made to me will be withheld until I provide such a number. SIGNATURE __________________________________________________ DATE _______1998 14 The Information Agent for the Offer to Purchase and Proxy Solicitation is: MACKENZIE PARTNERS, INC. 156 Fifth Avenue New York, New York 10010 (800) 322-2885 (Toll Free) (212) 929-5500 (Call Collect) The Dealer Manager for the Offer to Purchase and Proxy Solicitation is: DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION 277 Park Avenue New York, New York 10172 (800) 334-1604 (Toll Free) (212) 892-3351 (Call Collect) Attn: Paul Galant or Jeff Dorst EX-99.(A)(3) 4 PROXY CARD 1 TO BE COMPLETED ONLY BY THOSE PREFERRED SHAREHOLDERS WHO ARE NOT TENDERING THEIR SHARES IN THE OFFER PROXY The undersigned hereby appoints , and , or any of them, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote as designated hereunder and in their discretion with respect to any other business properly brought before the Special Meeting, all the shares of cumulative preferred stock of Illinois Power Company ("IPC") which the undersigned is entitled to vote at the Special Meeting of Shareholders to be held on , 1998, or any adjournment(s) or postponement(s) thereof. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF IPC. When properly executed, this Proxy will be voted in the manner directed herein by the undersigned shareholder(s). If no direction is made, the Proxy will be voted for Item 1. INDICATE YOUR VOTE BY AN (X). THE BOARD OF DIRECTORS OF IPC RECOMMENDS VOTING FOR ITEM 1. ITEM 1. To remove in its entirety ARTICLE V, Section 1, Clause (f)(1) from the Amended and Restated Articles of Incorporation of IPC (the "Articles"), which limits IPC's ability to issue or assume unsecured indebtedness. [ ] FOR [ ] AGAINST [ ] ABSTAIN NOTE: IF SHARES ARE BEING VOTED "FOR" THE PROPOSED AMENDMENT, THE SUBSTITUTE FORM W-9 BELOW SHOULD BE COMPLETED TO AVOID BACK-UP WITHHOLDING ON THE SPECIAL CASH PAYMENT. SHARES REPRESENTED BY ALL PROPERLY EXECUTED PROXIES WILL BE VOTED IN ACCORDANCE WITH INSTRUCTIONS APPEARING ON THIS PROXY. IN THE ABSENCE OF SPECIFIC INSTRUCTIONS, PROXIES WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS OF IPC AND IN THE DISCRETION OF THE PROXY HOLDERS AS TO ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE SPECIAL MEETING. Any holder of Shares held of record on the Record Date in the name of another holder must establish to the satisfaction of IPC his or her entitlement to exercise or transfer this Proxy. This will ordinarily require an assignment by such record holder in blank, or if not in blank, to and from each successive transferee, including the holder, with each signature guaranteed by an Eligible Institution. Please check box if you plan to attend the Special Meeting. [ ] Signature Date: , 1998 -------------------- ------------- Print Name: ------------------ 2 NOTICE OF SOLICITED VOTES If the Proposed Amendment is adopted at the Special Meeting, IPC will pay to each designated Soliciting Dealer a separate fee of $ per Share for Shares that are not tendered pursuant to the Offer but which are voted in favor of the Proposed Amendment in transactions for beneficial owners of fewer than Shares and a separate fee of $ per Share for Shares that are not tendered pursuant to the Offer but which are voted in favor of the Proposed Amendment in transactions for beneficial owners of or more Shares; provided that the separate fee payable in transactions for beneficial owners of or more Shares shall be paid 80% to the Dealer Manager and 20% to any designated Soliciting Dealer (which may be the Dealer Manager). However, Soliciting Dealers will not be entitled to a fee for Shares beneficially owned by such Soliciting Dealer. For purposes of this paragraph, a "Soliciting Dealer" shall include: (a) any broker or dealer in securities, including a Dealer Manager in its capacity as a dealer or broker, which is a member of any national securities exchange or of the NASD, (b) any foreign broker or dealer not eligible for membership in the NASD which agrees to conform to the NASD's Rules of Fair Practice in soliciting votes outside the United States to the same extent as though it were an NASD member, or (c) any bank or trust company. No fee shall be payable to a Soliciting Dealer with respect to the vote of Shares in favor of the Proposed Amendment by a holder unless the Proxy relating to such Shares designates such Soliciting Dealer. No such fee shall be payable to a Soliciting Dealer in respect of Shares registered in the name of such Soliciting Dealer unless such Shares are held by such Soliciting Dealer as nominee and such Shares are being voted for the benefit of one or more beneficial owners identified on the Proxy. No such fee shall be payable to a Soliciting Dealer with respect to the vote of Shares by the holder of record, for the benefit of the beneficial owner, unless the beneficial owner has designated such Soliciting Dealer in the Letter from the Dealer Manager to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees (the "Broker Letter"). The above signed represents that the Soliciting Dealer which solicited and obtained this vote in favor of the Proposed Amendment is: Name of Firm: - -------------------------------------------------------------------------------- (Please Print) Name of Individual Broker or Financial Consultant: - -------------------------------------------------------------------------------- (Please Print) Telephone Number of Broker or Financial Consultant: - -------------------------------------------------------------------------------- Identification Number (if known): - --------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- (Include Zip Code) The following to be completed ONLY if customer's Shares held in nominee name are tendered. NAME OF BENEFICIAL OWNER - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ NUMBER OF SHARES VOTED FOR THE PROPOSED AMENDMENT - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ (ATTACH ADDITIONAL LIST IF NECESSARY) The acceptance of compensation by such Soliciting Dealer will constitute a representation by it that (a) it has complied with the applicable requirements of the Securities Exchange Act of 1934, as amended, and the applicable rules and regulations thereunder, in connection with such solicitation; (b) it is entitled to such compensation for such solicitation under the terms and conditions of the Offer to Purchase and Proxy 3 Statement; (c) in soliciting votes in favor of the Proposed Amendment, it has used no solicitation materials other than those furnished by IPC; and (d) if it is a foreign broker or dealer not eligible for membership in the National Association of Securities Dealers, Inc. (the "NASD"), it has agreed to conform to the NASD's Rules of Fair Practice in making solicitations. The payment of compensation to any Soliciting Dealer is dependent on such Soliciting Dealer returning a Notice of Solicited Votes to the Depositary. 4 - ---------------------------------------------------------------------------------------------------------------------------- PAYER'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK - ---------------------------------------------------------------------------------------------------------------------------- PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND SUBSTITUTE CERTIFY BY SIGNING AND DATING BELOW. ---------------------------------- FORM W-9 Social Security Number(s) OR ------------------------------- Employer Identification Number ----------------------------------------------------------------------------------------------- DEPARTMENT OF THE TREASURY PART 2-- PART 3-- INTERNAL REVENUE SERVICE CERTIFICATION -- Under Penalties of Perjury, I certify Awaiting TIN [ ] that: (1) The number shown on this form is my correct taxpayer identification number (or a TIN has not been issued to me but I have mailed or delivered an application to receive a TIN or intend to do so in the near future), (2) I am not subject to backup withholding either because (a) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (b) the IRS has notified me that I am no longer subject to backup withholding. ------------------------------------------------------------------------------------------------ You must cross out item (2) above if you have been notified by the IRS that you are PAYER'S REQUEST FOR currently subject to backup withholding because of underreporting interest or dividends TAXPAYER IDENTIFICATION on your tax return. NUMBER (TIN) SIGNATURE _________________________________ DATE ____________________________ 1998 - ----------------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY SPECIAL CASH PAYMENTS MADE TO YOU. PLEASE REVIEW THE ENCLOSED CERTIFICATION "GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9" FOR ADDITIONAL DETAILS. NOTE: YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 2 OF SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (2) I intend to do so in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all payments of the purchase price made to me will be withheld until I provide such a number. SIGNATURE __________________________________________________ DATE 1998 EX-99.(A)(4) 5 FORM OF NOTICE OF GUARANTEED DELIVERY 1 NOTICE OF GUARANTEED DELIVERY FOR ILLINOVA CORPORATION OFFER TO PURCHASE FOR CASH ANY AND ALL OUTSTANDING SHARES OF THE FOLLOWING SERIES OF CUMULATIVE PREFERRED STOCK OF ILLINOIS POWER COMPANY CUMULATIVE PREFERRED STOCK ($50 PAR VALUE): 4.08% SERIES 4.20% SERIES 4.26% SERIES 4.42% SERIES 4.70% SERIES 7.75% SERIES This form, or a form substantially equivalent to this form, must be used to accept the Offer (as defined below) if certificates for shares of a series of cumulative preferred stock (each a "Series of Preferred") of Illinois Power Company ("IPC"), an Illinois corporation and direct utility subsidiary of Illinova Corporation, an Illinois corporation ("ILN"), to be tendered pursuant to the Offer (the "Shares") are not immediately available, if the procedure for book-entry transfer cannot be completed on a timely basis, or if time will not permit all other documents required by the Letter of Transmittal (as defined in the Offer to Purchase and Proxy Statement, which is defined below) to be delivered to the Depositary (as defined below) on or prior to the Expiration Date (as defined in the Offer to Purchase and Proxy Statement). Such form may be delivered by hand or transmitted by mail to the Depositary. See "Terms of the Offer -- Procedure for Tendering Shares" in the Offer to Purchase and Proxy Statement. A SEPARATE NOTICE OF GUARANTEED DELIVERY MUST BE USED FOR EACH SERIES OF PREFERRED. THE ELIGIBLE INSTITUTION (AS DEFINED IN THE LETTER OF TRANSMITTAL AND PROXY) WHICH COMPLETES THIS FORM MUST DELIVER THE LETTER OF TRANSMITTAL AND PROXY AND CERTIFICATES FOR SHARES TO THE DEPOSITARY WITHIN THE TIME SHOWN HEREIN. FAILURE TO DO SO COULD RESULT IN A FINANCIAL LOSS TO SUCH ELIGIBLE INSTITUTION. To: First Chicago Trust Company of New York, Depositary (the "Depositary")
By Mail: By Hand: By Overnight Courier: -------- -------- --------------------- First Chicago Trust Company of First Chicago Trust Company of First Chicago Trust Company of New York New York New York Attn: Tenders & Exchanges Attn: Tenders & Exchanges Attn: Tenders & Exchanges P.O. Box 2565 c/o The Depository Trust Suite 4680-CBE Suite 4660 Company 14 Wall Street Jersey City, NJ 07303-2565 55 Water Street, DTC TAD 8th Floor Vietnam Veterans Memorial Plaza New York, NY 10005 New York, NY 10041
By Facsimile: (201) 222-4720 or 222-4721 Confirm by Telephone: (201) 222-4707 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. 2 This form is not to be used to guarantee signatures. If a signature on a Letter of Transmittal and Proxy is required to be guaranteed by an Eligible Institution under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal and Proxy. The undersigned hereby tenders to ILN, upon the terms and subject to the conditions set forth in the Offer to Purchase and Proxy Statement, dated (the "Offer to Purchase and Proxy Statement"), and the related Letter of Transmittal and Proxy (which together constitute the "Offer"), receipt of which is hereby acknowledged, the number of Shares listed below, pursuant to the guaranteed delivery procedure set forth in "Terms of the Offer - -- Procedure for Tendering Shares" in the Offer to Purchase and Proxy Statement. WHILE PREFERRED SHAREHOLDERS WHO WISH TO TENDER THEIR SHARES PURSUANT TO THE OFFER NEED NOT VOTE IN FAVOR OF THE PROPOSED AMENDMENT TO IPC'S AMENDED AND RESTATED ARTICLES OF INCORPORATION, AS SET FORTH IN THE OFFER TO PURCHASE AND PROXY STATEMENT (THE "PROPOSED AMENDMENT"), THE OFFER IS CONDITIONED UPON THE PROPOSED AMENDMENT BEING APPROVED AND ADOPTED AT THE SPECIAL MEETING (AS DEFINED IN THE OFFER TO PURCHASE AND PROXY STATEMENT). IN ADDITION, PREFERRED SHAREHOLDERS OF RECORD HAVE THE RIGHT TO VOTE FOR THE PROPOSED AMENDMENT REGARDLESS OF WHETHER THEY TENDER THEIR SHARES BY CASTING THEIR VOTE AND SIGNING THE PROXY ENCLOSED HEREWITH (OR THE PROXY CONTAINED IN THE LETTER OF TRANSMITTAL AND PROXY) OR BY VOTING IN PERSON AT THE SPECIAL MEETING. IF THE PROPOSED AMENDMENT IS APPROVED AND ADOPTED BY IPC'S SHAREHOLDERS, IPC WILL MAKE A SPECIAL CASH PAYMENT (AS DEFINED IN THE OFFER TO PURCHASE AND PROXY STATEMENT) TO EACH PREFERRED SHAREHOLDER WHO VOTED IN FAVOR OF THE PROPOSED AMENDMENT, PROVIDED THAT SUCH PREFERRED SHAREHOLDER'S SHARES ARE NOT TENDERED PURSUANT TO THE OFFER. 3 Series of Preferred Signature(s) of Holder(s): (Select One) [ ] 4.08% Series ----------------------------------------------------- [ ] 4.20% Series [ ] 4.26% Series ----------------------------------------------------- [ ] 4.42% Series [ ] 4.70% Series Name(s) of Holder(s): [ ] 7.75% Series ----------------------------------------------------- Number of Shares: -------------------------------- ----------------------------------------------------- (Please Type or Print) Certificate Nos. (if available): Address and ZIP Code: ----------------------------------------------------- ----------------------------------------------------- ----------------------------------------------------- ----------------------------------------------------- Check box if Shares will be delivered by book-entry transfer: Area Code and Telephone No.: [ ] The Depository Trust Company ----------------------------------------------------- Dated: -----------------------------------------------
GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm that is a member of a registered national securities exchange or the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office or correspondent in the United States, guarantees (a) that the above-named person(s) has a net long position in the Shares being tendered within the meaning of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended, (b) that such tender of Shares complies with such Rule 14e-4 and (c) to deliver to the Depositary at one of its addresses set forth above certificate(s) for the Shares tendered hereby, in proper form for transfer, or a confirmation of the book-entry transfer of the Shares tendered hereby into the Depositary's account at The Depository Trust Company together with a properly completed and duly executed Letter(s) of Transmittal and Proxy (or facsimile(s) thereof), with any required signature guarantee(s) and any other required documents, all within three New York Stock Exchange trading days after the date hereof. ----------------------------------------------------- ----------------------------------------------------- Name of Firm Authorized Signature ----------------------------------------------------- ----------------------------------------------------- Address Name ----------------------------------------------------- ----------------------------------------------------- City, State, Zip Code Title ----------------------------------------------------- Dated: , 1998 Area Code and Telephone Number -----------------------------------------
DO NOT SEND STOCK CERTIFICATES WITH THIS FORM. YOUR STOCK CERTIFICATES MUST BE SENT WITH THE APPLICABLE LETTER OF TRANSMITTAL AND PROXY. EX-99.(A)(5) 6 NOTICE OF SPECIAL MEETING 1 [ILLINOIS POWER COMPANY LOGO] ILLINOIS POWER COMPANY 500 SOUTH 27TH STREET DECATUR, ILLINOIS 62525 NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD , , 1998 TO SHAREHOLDERS OF ILLINOIS POWER COMPANY NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of Illinois Power Company ("IPC") will be held at its principal office, 500 South 27th Street, Decatur, Illinois 62525 on , , 1998 at 4:30 p.m., New York City time, for the following purposes: 1. To approve an amendment to Illinois Power Company's Amended and Restated Articles of Incorporation to remove the limitation on the issuance or assumption of unsecured indebtedness; and 2. To transact such other business as may properly come before the meeting or any adjournment thereof. The Board of Directors of IPC has fixed the close of business on , 1998 as the record date for determining the shareholders entitled to notice of, and to vote at, the meeting or any adjournment thereof. IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AND VOTED AT THIS MEETING. WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, YOU ARE URGED TO SIGN AND DATE THE ENCLOSED LETTER OF TRANSMITTAL AND PROXY AND/OR SEPARATE PROXY, AS APPROPRIATE, AND RETURN IT IMMEDIATELY TO THE DEPOSITARY IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE. SEE THE OFFER TO PURCHASE AND PROXY STATEMENT ENCLOSED HEREWITH FOR FURTHER INSTRUCTIONS. By order of the Board of Directors, ILLINOIS POWER COMPANY -------------------------------------- By: Leah Manning Stetzner, General Counsel and Corporate Secretary EX-99.(A)(6) 7 FORM OF LETTERS 1 DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION THE DEALER MANAGER FOR ILLINOVA CORPORATION OFFER TO PURCHASE FOR CASH ANY AND ALL OUTSTANDING SHARES OF THE FOLLOWING SERIES OF CUMULATIVE PREFERRED STOCK OF ILLINOIS POWER COMPANY 283,290 SHARES, CUMULATIVE PREFERRED STOCK, 4.08% SERIES AT A PURCHASE PRICE OF $ PER SHARE, CUSIP NUMBER 452092 20 8 167,720 SHARES, CUMULATIVE PREFERRED STOCK, 4.20% SERIES AT A PURCHASE PRICE OF $ PER SHARE, CUSIP NUMBER 452092 30 7 136,000 SHARES, CUMULATIVE PREFERRED STOCK, 4.26% SERIES AT A PURCHASE PRICE OF $ PER SHARE, CUSIP NUMBER 452092 40 6 134,400 SHARES, CUMULATIVE PREFERRED STOCK, 4.42% SERIES AT A PURCHASE PRICE OF $ PER SHARE, CUSIP NUMBER 452092 50 5 176,000 SHARES, CUMULATIVE PREFERRED STOCK, 4.70% SERIES AT A PURCHASE PRICE OF $ PER SHARE, CUSIP NUMBER 452092 60 4 241,700 SHARES, CUMULATIVE PREFERRED STOCK, 7.75% SERIES AT A PURCHASE PRICE OF $ PER SHARE, CUSIP NUMBER 452092 79 4 THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , UNLESS EXTENDED. [STATEMENT DATE] To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: We have been appointed by Illinova Corporation, an Illinois corporation ("ILN"), to act as Dealer Manager and in connection therewith are enclosing the material listed below relating to the invitation of ILN to the holders of each series of cumulative preferred stock of Illinois Power Company, an Illinois corporation and direct utility subsidiary of ILN ("IPC"), listed above (each a "Series of Preferred") to tender any and all of their shares of a Series of Preferred ("Shares") for purchase at the purchase price per Share listed above, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase and Proxy Statement, dated [STATEMENT DATE] (the "Offer to Purchase and Proxy Statement"), in the Proxy and in the Letter of Transmittal and Proxy for the Shares tendered. As to each Series of Preferred, the Offer to Purchase and Proxy Statement, together with the applicable Letter of Transmittal and Proxy, constitutes the "Offer." ILN will purchase all Shares validly tendered and not withdrawn, upon the terms and subject to the conditions of the Offer. The Offer for a Series of Preferred is not conditioned upon any minimum number of Shares of such Series of Preferred being tendered and is independent of the Offer for any other Series of Preferred. WHILE PREFERRED SHAREHOLDERS WHO WISH TO TENDER THEIR SHARES PURSUANT TO THE OFFER NEED NOT VOTE IN FAVOR OF THE PROPOSED AMENDMENT TO IPC'S AMENDED AND RESTATED ARTICLES OF INCORPORATION, AS SET FORTH IN THE OFFER TO PURCHASE AND PROXY STATEMENT (THE "PROPOSED AMENDMENT"), THE OFFER IS CONDITIONED UPON THE PROPOSED AMENDMENT BEING ADOPTED AT THE SPECIAL MEETING (AS DEFINED IN THE OFFER TO PURCHASE AND PROXY STATEMENT). IN ADDITION, PREFERRED SHAREHOLDERS OF RECORD HAVE THE RIGHT TO 2 VOTE FOR THE PROPOSED AMENDMENT REGARDLESS OF WHETHER THEY TENDER THEIR SHARES BY CASTING THEIR VOTE AND SIGNING THE PROXY ENCLOSED HEREWITH, BY CASTING THEIR VOTE AND SIGNING THE PROXY CONTAINED IN THE LETTER OF TRANSMITTAL AND PROXY OR BY VOTING IN PERSON AT THE SPECIAL MEETING. IF THE PROPOSED AMENDMENT IS ADOPTED BY IPC'S SHAREHOLDERS, IPC WILL MAKE A SPECIAL CASH PAYMENT IN THE AMOUNT OF $ PER SHARE TO EACH PREFERRED SHAREHOLDER WHO VOTED IN FAVOR OF THE PROPOSED AMENDMENT, PROVIDED THAT SUCH SHARES HAVE NOT BEEN TENDERED PURSUANT TO THE OFFER. SEE "PROPOSED AMENDMENT AND PROXY SOLICITATION", "TERMS OF THE OFFER -- CERTAIN CONDITIONS OF THE OFFER" AND "TERMS OF THE OFFER - -- EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS" IN THE OFFER TO PURCHASE AND PROXY STATEMENT. We are asking you to contact your clients for whom you hold Shares registered in your name (or in the name of your nominee) or who hold Shares registered in their own names. Please bring the Offer to their attention as promptly as possible. ILN will pay a solicitation fee of $ per Share that is tendered, accepted for payment and paid for pursuant to the Offer in transactions for beneficial owners of fewer than Shares and a solicitation fee of $ per Share for transactions for beneficial owners of or more Shares; provided that solicitation fees payable in transactions for beneficial owners of or more Shares shall be paid 80% to the Dealer Manager and 20% to any designated Soliciting Dealer (which may be the Dealer Manager). If the Proposed Amendment is adopted at the Special Meeting, IPC will pay to each designated Soliciting Dealer a separate fee of $ per Share for Shares that are not tendered pursuant to the Offer but which are voted in favor of the Proposed Amendment in transactions for beneficial owners of fewer than Shares and a separate fee of $ per Share for Shares that are not tendered pursuant to the Offer but which are voted in favor of the Proposed Amendment in transactions for beneficial owners of or more Shares; provided that the separate fee payable in transactions for beneficial owners of or more Shares shall be paid 80% to the Dealer Manager and 20% to any designated Soliciting Dealer (which may be the Dealer Manager). A designated "Soliciting Dealer" is an entity obtaining the tender or proxy, if the Letter of Transmittal and Proxy or the separate Proxy, as the case may be, shall include its name and it is (i) any broker or dealer in securities, including the Dealer Manager in their capacity as a broker or dealer, which is a member in good standing of any national securities exchange or of the National Association of Securities Dealers, Inc. (the "NASD"), (ii) any foreign broker or dealer not eligible for membership in the NASD which agrees to conform to the NASD's Rules of Fair Practice in soliciting tenders outside the United States to the same extent as though it were an NASD member, or (iii) any bank or trust company. No solicitation fee or separate fee (other than solicitation fees payable to the Dealer Manager as provided above) shall be payable to a Soliciting Dealer with respect to the tender of Shares or the vote of Shares by a holder unless the Letter of Transmittal and Proxy or the separate Proxy accompanying such tender or vote, as the case may be, designates such Soliciting Dealer. No solicitation fee or separate fee shall be payable to a Soliciting Dealer in respect of Shares registered in the name of such Soliciting Dealer unless such Shares are held by such Soliciting Dealer as nominee and such Shares are being tendered or voted for the benefit of one or more beneficial owners identified on the Letter of Transmittal and Proxy or on the Notice of Solicited Tenders (included below). No solicitation fee or separate fee shall be payable to a Soliciting Dealer if such Soliciting Dealer is required for any reason to transfer the amount of such fee to a depositing holder (other than itself). No solicitation fee shall be paid to a Soliciting Dealer with respect to Shares tendered for such Soliciting Dealer's own account and no separate fee shall be paid to a Soliciting Dealer with respect to Shares voted for such Soliciting Dealer's own account. A Soliciting Dealer shall not be entitled to a solicitation fee or a separate fee for Shares beneficially owned by such Soliciting Dealer. No broker, dealer, bank, trust company or fiduciary shall be deemed to be the agent of ILN, IPC, the Depositary (as defined below), the Dealer Manager or the Information Agent (as defined below) for purposes of the Offer. Soliciting Dealers will include any of the organizations described in clauses (i), (ii) and (iii) above even when the activities of such organizations in connection with the Offer consist solely of forwarding to clients 3 materials relating to the Offer, including the Letter of Transmittal and Proxy and tendering Shares as directed by beneficial owners thereof. No Soliciting Dealer is required to make any recommendation to holders of Shares as to whether to tender or refrain from tendering in the Offer. No assumption is made, in making payment to any Soliciting Dealer, that its activities in connection with the Offer included any activities other than those described above, and for all purposes noted in all materials relating to the Offer, the term "solicit" shall be deemed to mean no more than "processing shares tendered" or "forwarding to customers materials regarding the Offer." ILN will also, upon request, reimburse Soliciting Dealers for reasonable and customary handling and mailing expenses incurred by them in forwarding materials relating to the Offer to their customers. ILN will pay all stock transfer taxes applicable to its purchase of Shares pursuant to the Offer, subject to Instruction 6 of the Letter of Transmittal and Proxy. IN ORDER FOR A SOLICITING DEALER TO RECEIVE A SOLICITATION FEE OR A SEPARATE FEE, FIRST CHICAGO TRUST COMPANY OF NEW YORK, AS DEPOSITARY (THE "DEPOSITARY"), MUST HAVE RECEIVED FROM SUCH SOLICITING DEALER A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF SOLICITED TENDERS AND PROXIES IN THE FORM ATTACHED HERETO WITHIN THREE BUSINESS DAYS AFTER THE EXPIRATION OF THE OFFER OR A PROPERLY EXECUTED PROXY ON OR BEFORE THE EXPIRATION DATE. For your information and for forwarding to your clients for whom you hold Shares registered in your name (or in the name of your nominee), we are enclosing the following documents: 1. The Offer to Purchase and Proxy Statement, dated [STATEMENT DATE]. 2. A separate Letter of Transmittal and Proxy for each Series of Preferred for your use and for the information of your clients. 3. A separate Proxy for each Series of Preferred for your use and for the information of your clients. 4. A letter to shareholders of IPC from its Chairman of the Board and Chief Executive Officer. 5. A Notice of Guaranteed Delivery to be used to accept the Offer if the Shares and all other required documents cannot be delivered to the Depositary by the applicable Expiration Date (as defined in the Offer to Purchase and Proxy Statement). 6. A form of letter which may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space for obtaining such clients' instructions with regard to the Offer and with regard to the Proxy solicitation by IPC. 7. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9, providing information relating to backup federal income tax withholding. 8. A return envelope addressed to First Chicago Trust Company of New York, the Depositary. 9. A Notice of Special Meeting of Shareholders. Each Series of Preferred has its own Letter of Transmittal and Proxy, and only the applicable Letter of Transmittal and Proxy for a particular Series or a Notice of Guaranteed Delivery may be used to tender Shares of such Series of Preferred. We urge you to contact your clients as promptly as possible. Please note that the Offer and withdrawal rights will expire at 5:00 p.m., New York City time, on [EXPIRATION DATE], unless the Offer is extended. NEITHER ILN, IPC, THEIR RESPECTIVE BOARDS OF DIRECTORS NOR ANY OF THEIR RESPECTIVE OFFICERS MAKES ANY RECOMMENDATION TO ANY PREFERRED SHAREHOLDER AS TO WHETHER TO TENDER ANY OR ALL SHARES. EACH PREFERRED SHAREHOLDER MUST MAKE HIS OR HER OWN DECISION AS TO WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER. 4 Any questions or requests for assistance or additional copies of the enclosed materials may be directed to MacKenzie Partners, Inc., the Information Agent, or to us, as Dealer Manager, at the respective addresses and telephone numbers set forth on the back cover of the enclosed Offer to Purchase and Proxy Statement. Very truly yours, DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON AS THE AGENT OF ILN, IPC, THE DEALER MANAGER, THE INFORMATION AGENT OR THE DEPOSITARY, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN. NOTICE OF SOLICITED TENDERS AND PROXIES FOR THE CUMULATIVE PREFERRED STOCK OF IPC List below the number of Shares tendered or voted in favor of the Proposed Amendment but not tendered by each beneficial owner whose tender or vote you have solicited. All Shares in a Series of Preferred beneficially owned by a beneficial owner, whether in one account or several, and in however many capacities, must be aggregated for purposes of completing the table below. Any questions as to what constitutes beneficial ownership should be directed to the Depositary. If the space below is inadequate, list the Shares in a separate signed schedule and affix the list to this Notice of Solicited Tenders and Proxies. PLEASE DO NOT COMPLETE THE SECTIONS OF THE TABLE HEADED "TO BE COMPLETED ONLY BY DEPOSITARY." ALL NOTICES OF SOLICITED TENDERS SHOULD BE RETURNED TO, AND ALL QUESTIONS CONCERNING THE NOTICES OF SOLICITED TENDERS SHOULD BE DIRECTED TO, THE DEPOSITARY. ALL NOTICES OF SOLICITED TENDERS MUST BE RECEIVED BY THE DEPOSITARY WITHIN THREE BUSINESS DAYS AFTER THE EXPIRATION DATE. BENEFICIAL HOLDERS OF LESS THAN SHARES (TENDERS ONLY)
------------------------------------------------------------------ TO BE COMPLETED BY SOLICITING TO BE COMPLETED ONLY DEALER BY DEPOSITARY NUMBER OF NUMBER OF SERIES OF SHARES VOI TICKET SHARES $ FEE BENEFICIAL OWNERS PREFERRED TENDERED NUMBER* ACCEPTED PER SHARE - ------------------------------------------------------------------------------------------------------- Beneficial Owner No. 1 - ------------------------------------------------------------------------------------------------------- Beneficial Owner No. 2 - ------------------------------------------------------------------------------------------------------- Beneficial Owner No. 3 - ------------------------------------------------------------------------------------------------------- Beneficial Owner No. 4 - ------------------------------------------------------------------------------------------------------- Beneficial Owner No. 5 - ------------------------------------------------------------------------------------------------------- Total - -------------------------------------------------------------------------------------------------------
5 BENEFICIAL HOLDERS OF OR MORE SHARES (TENDERS ONLY)
----------------------------------------------------------------- TO BE COMPLETED BY SOLICITING TO BE COMPLETED ONLY DEALER BY-DEPOSITARY - ------------------------------------------------------------------------------------------------------ NUMBER OF NUMBER OF SERIES OF SHARES VOI TICKET SHARES $ FEE BENEFICIAL OWNERS PREFERRED TENDERED NUMBER* ACCEPTED PER SHARE - ------------------------------------------------------------------------------------------------------ Beneficial Owner No. 1 - ------------------------------------------------------------------------------------------------------ Beneficial Owner No. 2 - ------------------------------------------------------------------------------------------------------ Beneficial Owner No. 3 - ------------------------------------------------------------------------------------------------------ Beneficial Owner No. 4 - ------------------------------------------------------------------------------------------------------ Beneficial Owner No. 5 - ------------------------------------------------------------------------------------------------------ Total - ------------------------------------------------------------------------------------------------------
* Complete if Shares delivered by book-entry transfer. Please submit a separate VOI ticket for Shares tendered when the solicitation fee is to be directed to another Soliciting Dealer. At the time of tendering Shares in book-entry form, please indicate your request in the comments field. PROXY FOR BENEFICIAL HOLDERS OF LESS THAN SHARES
---------------------------------------------------- TO BE COMPLETED BY TO BE COMPLETED ONLY SOLICITING-DEALER BY DEPOSITARY - ------------------------------------------------------------------------------------------------------ NUMBER OF NUMBER OF SERIES OF SHARES SHARES $ FEE BENEFICIAL OWNERS PREFERRED VOTED ACCEPTED PER SHARE - ------------------------------------------------------------------------------------------------------ Beneficial Owner No. 1 - ------------------------------------------------------------------------------------------------------ Beneficial Owner No. 2 - ------------------------------------------------------------------------------------------------------ Beneficial Owner No. 3 - ------------------------------------------------------------------------------------------------------ Beneficial Owner No. 4 - ------------------------------------------------------------------------------------------------------ Beneficial Owner No. 5 - ------------------------------------------------------------------------------------------------------ Total - ------------------------------------------------------------------------------------------------------
PROXY FOR BENEFICIAL HOLDERS OF OR MORE SHARES
---------------------------------------------------- TO BE COMPLETED BY TO BE COMPLETED ONLY SOLICITING-DEALER BY DEPOSITARY - ------------------------------------------------------------------------------------------------------ NUMBER OF NUMBER OF SERIES OF SHARES SHARES $ FEE BENEFICIAL OWNERS PREFERRED VOTED ACCEPTED PER SHARE - ------------------------------------------------------------------------------------------------------ Beneficial Owner No. 1 - ------------------------------------------------------------------------------------------------------ Beneficial Owner No. 2 - ------------------------------------------------------------------------------------------------------ Beneficial Owner No. 3 - ------------------------------------------------------------------------------------------------------ Beneficial Owner No. 4 - ------------------------------------------------------------------------------------------------------ Beneficial Owner No. 5 - ------------------------------------------------------------------------------------------------------ Total - ------------------------------------------------------------------------------------------------------
All questions as to the validity, form and eligibility (including time of receipt) of any Notice of Solicited Tenders and Proxies will be determined by the Depositary, in its sole discretion, which determination will be final and binding. Neither the Depositary nor any other person will be under any duty to give notification of 6 any defects or irregularities in any Notice of Solicited Tenders or incur any liability for failure to give such notification. PLEASE COMPLETE THE SIGNATURE FORM ON THE LAST PAGE. DO NOT SEND STOCK CERTIFICATES WITH THIS FORM. YOUR STOCK CERTIFICATES MUST BE SENT WITH THE LETTER OF TRANSMITTAL AND PROXY. The undersigned hereby confirms that: (i) it has complied with the applicable requirements of the Securities Exchange Act of 1934, as amended, and the applicable rules and regulations thereunder, in connection with such solicitation; (ii) it is entitled to such compensation for such solicitation under the terms and conditions of the Offer; (iii) in soliciting tenders of Shares, it has used no soliciting materials other than those furnished by IPC or ILN; and (iv) if it is a foreign broker or dealer not eligible for membership in the NASD, it has agreed to conform to the NASD's Rules of Fair Practice in making solicitations. - ------------------------ ---------------------------- Firm Name Address (including Zip Code) - ------------------------ ------------------------------ By: Area Code and Telephone Number Title: 7 DO NOT SEND STOCK CERTIFICATES WITH THIS FORM. YOUR STOCK CERTIFICATES MUST BE SENT WITH THE LETTER OF TRANSMITTAL AND PROXY - -------------------------------------------------------------------------------- SOLICITATION FEE PAYMENT INSTRUCTIONS Issue check to: Name: ------------------------------------------------------------------------- (Please Print) Address: ---------------------------------------------------------------------- ------------------------------------------------------------------------------ (Include Zip Code) ------------------------------------------------------------------------------ (Taxpayer Identification or Social Security No.) - -------------------------------------------------------------------------------- EX-99.(A)(7) 8 FORM OF LETTER 1 ILLINOVA CORPORATION OFFER TO PURCHASE FOR CASH ANY AND ALL OUTSTANDING SHARES OF THE FOLLOWING SERIES OF CUMULATIVE PREFERRED STOCK OF ILLINOIS POWER COMPANY 283,290 SHARES, CUMULATIVE PREFERRED STOCK, 4.08% SERIES AT A PURCHASE PRICE OF $ PER SHARE, CUSIP NUMBER 452092 20 8 167,720 SHARES, CUMULATIVE PREFERRED STOCK, 4.20% SERIES AT A PURCHASE PRICE OF $ PER SHARE, CUSIP NUMBER 452092 30 7 136,000 SHARES, CUMULATIVE PREFERRED STOCK, 4.26% SERIES AT A PURCHASE PRICE OF $ PER SHARE, CUSIP NUMBER 452092 40 6 134,400 SHARES, CUMULATIVE PREFERRED STOCK, 4.42% SERIES AT A PURCHASE PRICE OF $ PER SHARE, CUSIP NUMBER 452092 50 5 176,000 SHARES, CUMULATIVE PREFERRED STOCK, 4.70% SERIES AT A PURCHASE PRICE OF $ PER SHARE, CUSIP NUMBER 452092 60 4 241,700 SHARES, CUMULATIVE PREFERRED STOCK, 7.75% SERIES AT A PURCHASE PRICE OF $ PER SHARE, CUSIP NUMBER 452092 79 4 THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , UNLESS THE OFFER IS EXTENDED. [STATEMENT DATE] To Our Clients: Enclosed for your consideration are the Offer to Purchase and Proxy Statement, dated [STATEMENTDATE] (the "Offer to Purchase and Proxy Statement"), a Proxy and a separate Letter of Transmittal and Proxy for each series of cumulative preferred stock listed above (each a "Series of Preferred" and the holder thereof a "Preferred Shareholder") of Illinois Power Company, an Illinois corporation ("IPC") and direct utility subsidiary of Illinova Corporation, an Illinois corporation ("ILN"), of which you own shares. As to each Series of Preferred, the Offer to Purchase and Proxy Statement, together with the applicable Letter of Transmittal and Proxy, constitutes the "Offer" of ILN to purchase any and all shares of the Series of Preferred ("Shares") at the purchase price per Share listed above, net to the seller in cash, upon the terms and subject to the conditions of the Offer. ILN will purchase any and all Shares validly tendered and not withdrawn, upon the terms and subject to the conditions of the Offer. The Offer for a Series of Preferred is not conditioned upon any minimum number of Shares of such Series of Preferred being tendered and is independent of the Offer for any other Series of Preferred. While Preferred Shareholders who wish to tender their Shares pursuant to the Offer need not vote in favor of the proposed amendment to IPC's Amended and Restated Articles of Incorporation, as set forth in the Offer to Purchase and Proxy Statement (the "Proposed Amendment"), the Offer is conditioned upon the Proposed Amendment being approved and adopted at the Special Meeting (as defined in the Offer to Purchase and Proxy Statement). IPC's Board of Directors recommends voting in favor of the Proposed Amendment. In addition, Preferred Shareholders have the right to vote for the Proposed Amendment regardless of whether they tender their Shares. If the Proposed Amendment is adopted by IPC's shareholders, IPC will make a special cash payment in the amount of $ per Share to each Preferred Shareholder who voted in favor of the Proposed Amendment, provided that such Shares have not been tendered pursuant to the Offer. See "Proposed Amendment and Proxy Solicitation", "Terms of the Offer -- Certain Conditions of the Offer" and "Terms of the Offer -- Extension of Tender Period; Termination; Amendments" in the Offer to Purchase and Proxy Statement. 2 WE ARE THE HOLDER OF RECORD OF SHARES HELD FOR YOUR ACCOUNT BUT NOT REGISTERED IN YOUR NAME. A TENDER OR A VOTE OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. ANY LETTER OF TRANSMITTAL AND PROXY OR SEPARATE PROXY FURNISHED TO YOU IS SOLELY FOR YOUR INFORMATION AND CANNOT BE USED BY YOU TO TENDER OR VOTE SHARES HELD BY US FOR YOUR ACCOUNT. We request instructions as to whether you wish us to tender and/or vote any or all of the Shares held by us for your account, upon the terms and subject to the conditions set forth in the Offer. PLEASE READ THE FOLLOWING INFORMATION CAREFULLY: (1) The Offer is for any and all Shares outstanding as of [STATEMENT DATE]. The Offer for a Series of Preferred is independent of the Offer for any other Series of Preferred. (2) The Offer and withdrawal rights will expire at 5:00 p.m., New York City time, on [EXPIRATION DATE], unless the Offer is extended with respect to a Series of Preferred. Your instructions to us should be forwarded to us in ample time to permit us to submit a tender on your behalf by the expiration of the Offer. If you would like to withdraw your Shares that we have tendered, you can withdraw them so long as the Offer remains open or at any time after the expiration of forty business days from the commencement of the Offer if such tendered Shares have not been accepted for payment. (3) While Preferred Shareholders who wish to tender their Shares pursuant to the Offer need not vote in favor of the Proposed Amendment, the Offer is conditioned upon the Proposed Amendment being approved and adopted at the Special Meeting. (4) Preferred Shareholders have the right to vote for the Proposed Amendment regardless of whether they tender their Shares. If the Proposed Amendment is adopted at the Special Meeting, IPC will make a special cash payment in the amount of $ per Share to each Preferred Shareholder who voted in favor of the Proposed Amendment, provided that such Shares have not been tendered pursuant to the Offer. (5) Any stock transfer taxes applicable to the sale of Shares to ILN pursuant to the Offer will be paid by ILN, except as otherwise provided in Instruction 6 of the Letter of Transmittal and Proxy. NEITHER ILN, IPC, THEIR RESPECTIVE BOARDS OF DIRECTORS NOR ANY OF THEIR RESPECTIVE OFFICERS MAKES ANY RECOMMENDATION TO ANY PREFERRED SHAREHOLDER AS TO WHETHER TO TENDER ANY OR ALL SHARES. EACH PREFERRED SHAREHOLDER MUST MAKE HIS OR HER OWN DECISION AS TO WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER. If you wish to have us tender and/or vote any or all of your Shares held by us for your account upon the terms and subject to the conditions set forth in the Offer, please so instruct us by completing, executing, detaching and returning to us the instruction form on the detachable part hereof. An envelope to return your instructions to us is enclosed. If you authorize tender of your Shares, all such Shares will be tendered unless otherwise specified on the detachable part hereof. Your instructions should be forwarded to us in ample time to permit us to submit a tender and/or vote on your behalf by the expiration of the Offer or the Special Meeting, as applicable. The Offer is being made to all holders of Shares. ILN is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to a valid state statute. If ILN becomes aware of any valid state statute prohibiting the making of the Offer, ILN will make a good faith effort to comply with such statute. If, after such good faith effort, ILN cannot comply with such statute, the Offer will not be made to, nor will tenders be accepted from or on behalf of, holders of Shares in such state. In those jurisdictions where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of ILN by the Dealer Manager (as defined in the Offer) or one or more registered brokers or dealers licensed under the laws of such jurisdictions. 3 INSTRUCTIONS WITH RESPECT TO OFFER TO PURCHASE FOR CASH ANY AND ALL OUTSTANDING SHARES OF THE PREFERRED STOCK OF, AND PROXY SOLICITATION BY ILLINOIS POWER COMPANY The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase and Proxy Statement, dated [STATEMENT DATE], Proxy and a separate Letter of Transmittal and Proxy for each series of preferred stock of Illinois Power Company (each a "Series of Preferred") in which the undersigned owns shares (as to each Series of Preferred, the Offer to Purchase and Proxy Statement, together with the applicable Letter of Transmittal and Proxy, constitutes the "Offer") in connection with the invitation of Illinova Corporation ("ILN") to the holders of each Series of Preferred to tender any and all of their shares of a Series of Preferred ("Shares") for purchase at the purchase price per Share listed on the front cover of the Offer to Purchase and Proxy Statement, net to the seller in cash, upon the terms and subject to the conditions of the Offer, and in connection with the proxy solicitation being conducted by the Board of Directors of Illinois Power Company. This will instruct you to tender to ILN the number of Shares indicated below (or, if no number is indicated below, all Shares) which are held by you for the account of the undersigned, upon the terms and subject to the conditions of the Offer. SERIES OF PREFERRED - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ NUMBER OF SHARES TO BE TENDERED* - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ You are further instructed to vote as designated hereunder in respect of the Proposed Amendment all shares which the undersigned is entitled to vote at the Special Meeting:** [ ] FOR [ ] AGAINST [ ] ABSTAIN SIGN HERE ------------------------------------ Signature(s): ------------------------------------ Name(s): ------------------------------------ Address: ------------------------------------ Social Security or Taxpayer Identification No.: Dated: , 1998 - ------------------------- * By executing and returning these Instructions, unless otherwise indicated, it will be assumed that all Shares held by us for your account are to be tendered. ** By executing and returning these Instructions, unless otherwise indicated, it will be assumed that all Shares held by us for your account are to be voted FOR the Proposed Amendment. EX-99.(A)(8) 9 LETTER TO SHAREHOLDERS 1 [STATEMENT DATE] Dear Preferred Shareholder: Enclosed for your consideration is information regarding two proposals relating to Illinois Power Company ("IPC") and your investment in shares of preferred stock of IPC. First, the Board of Directors of IPC is soliciting proxies for use at a special meeting of shareholders to be held on [EXPIRATION DATE] at 4:30 p.m., New York City time, at the principal office of IPC located at 500 South 27th Street, Decatur, Illinois 62525, to amend IPC's Articles of Incorporation to remove a provision which limits the ability of IPC to issue or assume unsecured indebtedness (the "Proposed Amendment"). Second, IPC's parent holding company, Illinova Corporation ("ILN") is offering to purchase all of the outstanding shares of preferred stock of IPC (the "Offer to Purchase"). If you vote in favor of the Proposed Amendment and it is adopted at the Special Meeting, you will be entitled to receive from IPC a special cash payment ("Special Cash Payment") of $ for each share you vote, provided your shares have not been tendered in the Offer to Purchase. Both the Offer to Purchase and the proxy solicitation for the Proposed Amendment are more fully described in the enclosed Offer to Purchase and Proxy Statement. In connection with the Offer to Purchase and the proxy solicitation for the Proposed Amendment, we ask that you consider the following: 1. If you wish to accept the Offer to Purchase and tender your shares: - Complete, sign, and date the appropriate Letter of Transmittal and Proxy in accordance with the instructions in the Letter of Transmittal and Proxy. - Enclose your completed Letter of Transmittal and Proxy and related certificates for your shares in the brown envelope addressed to First Chicago Trust Company of New York at the appropriate address set forth on the back cover of the enclosed Offer to Purchase and Proxy Statement. - Please note that the Letter of Transmittal and Proxy should be used to vote on the Proposed Amendment if you are tendering Shares. PLEASE BE AWARE THAT THE OFFER TO PURCHASE IS CONDITIONED UPON ADOPTION OF THE PROPOSED AMENDMENT AT THE SPECIAL MEETING. A FAILURE TO RETURN A PROXY IS A VOTE AGAINST THE PROPOSED AMENDMENT. (Please also note that you cannot receive a Special Cash Payment if you tender your shares in the Offer to Purchase). 2. If you wish to receive the Special Cash Payment: - Please vote, sign and date the [PROXY CARD COLOR] Proxy card. PLEASE BE AWARE THAT YOU MUST VOTE IN FAVOR OF THE PROPOSED AMENDMENT AND IT MUST BE ADOPTED IN ORDER FOR YOU TO RECEIVE A SPECIAL CASH PAYMENT. A FAILURE TO RETURN A PROXY IS A VOTE AGAINST THE PROPOSED AMENDMENT. (Please also note that you cannot receive a Special Cash Payment if your tender your shares in the Offer to Purchase.) - Enclose your completed Proxy card in the white envelope addressed to First Chicago Trust Company of New York at the appropriate address set forth on the back cover of the enclosed Offer to Purchase and Proxy Statement. If you have any questions on how to tender or vote your shares, please contact: MacKenzie Partners, Inc. at: (800) 322-2885 (Toll Free) (212) 929-5500 (Call Collect) EX-99.(B) 10 CREDIT AGREEMENT 1 - -------------------------------------------------------------------------------- CREDIT AGREEMENT dated as of June 12, 1996 among ILLINOVA CORPORATION, VARIOUS FINANCIAL INSTITUTIONS and CIBC INC., as Administrative Agent, with CIBC INC. and FIRST CHICAGO CAPITAL MARKETS, INC., as Co-Arrangers, and FIRST CHICAGO CAPITAL MARKETS, INC., as Syndication Agent - -------------------------------------------------------------------------------- 2 CREDIT AGREEMENT This CREDIT AGREEMENT, dated as of June 12, 1996 (as amended or otherwise modified from time to time, this "Agreement"), is entered into among ILLINOVA CORPORATION, an Illinois corporation (the "Company"), the undersigned financial institutions (collectively the "Lenders" and individually each a "Lender") and CIBC INC. (in its individual capacity, "CIBC"), as administrative agent for the Lenders, with CIBC and FIRST CHICAGO CAPITAL MARKETS, INC., as Co-Arrangers, and FIRST CHICAGO CAPITAL MARKETS, INC., as Syndication Agent. In consideration of the premises and the mutual agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1 DEFINITIONS AND INTERPRETATION. 1.1 Definitions. When used herein the following terms shall have the following meanings (such definitions to be applicable to both the singular and plural forms of such terms): Administrative Agent means CIBC in its capacity as administrative agent for the Lenders hereunder and any successor thereto in such capacity. Affected Lender means any Lender that has given notice to the Company (which has not been rescinded) of (i) any obligation by the Company to pay any amount pursuant to Section 7.6 or 8.1 or (ii) the occurrence of any circumstance of the nature described in Section 8.2 or 8.3. Affected Loan - see Section 8.3. Agents means, collectively, the Administrative Agent and the Syndication Agent. Agreement - see the Preamble. Applicable Margin means, at any time, the percentage set forth in Schedule II opposite the then-current Rating Level; it being understood that the Applicable Margin shall adjust concurrently with any change in the applicable Rating Level. 3 Assignee - see Section 14.6.1. Assignment Agreement - see Section 14.6.1. Business Day means any day (other than a Saturday or Sunday) on which banks are open for commercial banking business in New York and, in the case of a Business Day which relates to a Eurodollar Loan, on which dealings are carried on in the New York eurodollar interbank market. Capital Lease means, with respect to any Person, any lease of (or other agreement conveying the right to use) any real or personal property which, in conformity with generally accepted accounting principles, is accounted for as a capital lease on the balance sheet of such Person. CIBC - see the Preamble. Co-Arrangers means, collectively, CIBC and First Chicago Capital Markets, Inc. as co-arrangers. Code means the Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder. Commitment as to any Lender means the commitment of such Lender to make Loans hereunder, as adjusted from time to time pursuant to Section 6.1 or Section 14.6. The amount of the initial Commitment of each Lender is set forth on the Schedule I. Company - see the Preamble. Consolidated Net Worth means, at any date consolidated stockholders' equity (excluding any equity attributed to any preferred stock) of the Company and its Subsidiaries as at such date. Debt of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money, whether or not evidenced by bonds, debentures, notes or similar instruments, (b) all obligations of such Person as lessee under Capital Leases which have been recorded as liabilities on a balance sheet of such Person, (c) all obligations of such Person to pay the deferred purchase price of property or services (other than -2- 4 current accounts payable in the ordinary course of business), (d) all indebtedness secured by a Lien on the property of such Person, whether or not such indebtedness shall have been assumed by such Person (it being understood that if such Person has not assumed or otherwise become personally liable for any such indebtedness, the amount of the Debt of such Person in connection therewith shall be limited to the lesser of the face amount of such indebtedness or the fair market value of all property of such Person securing such indebtedness), (e) all obligations, contingent or otherwise, with respect to the face amount of all letters of credit (whether or not drawn) and banker's acceptances issued for the account of such Person, (f) all Suretyship Liabilities of such Person and (g) all Debt (as defined above) of any partnership in which such Person is a general partner. Dollar and the sign "$" mean lawful money of the United States of America. Duff & Phelps Rating means, at any time, the rating issued by Duff & Phelps Rating Co. and then in effect with respect to the First Mortgage Bonds. Effective Date - see Section 11.1. Environmental Laws means all federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any governmental authorities, in each case relating to environmental, health, safety and land use matters. ERISA means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA also refer to any successor sections. Eurocurrency Reserve Percentage means, for any day in any Interest Period for any Eurodollar Loan of any Lender, the percentage in effect on such day as prescribed by the Board of Governors of the Federal Reserve System (or any successor thereto) or other U.S. government agency for determining the reserve requirement (including, without limitation, any marginal, -3- 5 basic, supplemental or emergency reserves) for such Lender in respect of liabilities or assets (with a term equal to such Interest Period) consisting of or including "Eurocurrency liabilities" as currently defined in Regulation D or any other applicable regulation or other liabilities or assets which such Lender determines are actually maintained and attributable to or allocable to such Eurodollar Loan. In determining such amount, each Lender may use any reasonable averaging and attribution methods. Eurodollar Loan means any Loan which bears interest at a rate determined by reference to the Eurodollar Rate. Eurodollar Office means with respect to any Lender the office or offices of such Lender which shall be making or maintaining the Eurodollar Loans of such Lender hereunder. A Eurodollar Office of any Lender may be, at the option of such Lender, either a domestic or foreign office. Eurodollar Rate means, with respect to any Eurodollar Loan for any Interest Period, the rate per annum at which Dollar deposits in immediately available funds are offered to the New York office of CIBC two Business Days prior to the beginning of such Interest Period by major banks in the interbank eurodollar market as at or about 10:00 a.m., New York time, for delivery on the first day of such Interest Period, for the number of days comprised therein and in an amount equal or comparable to amount of the Eurodollar Loan of CIBC for such Interest Period. Existing Agreement means the Credit Agreement dated as of June 16, 1995 among the Company, various financial institutions, and CIBC, as agent. Event of Default means any of the events described in Section 12.1. Federal Funds Rate means, for any day, the rate set forth in the daily statistical release designated as the Composite 3:30 p.m. Quotations for U.S. Government Securities, or any successor publication, published by the Federal Reserve Bank of New York (including any such successor publication, the "Composite 3:30 p.m. Quotations") for such day under the caption "Federal Funds -4- 6 Effective Rate". If such rate is not published in the Composite 3:30 p.m. Quotations for any Business Day, the rate for such day will be the arithmetic mean of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m., New York City time, on such day by each of three leading brokers of Federal funds transactions in New York City, selected by the Administrative Agent. The rate for any day which is not a Business Day shall be the rate for the immediately preceding Business Day. First Mortgage Bonds means the bonds issued pursuant to or secured by (i) the Mortgage and Deed of Trust from Illinois Power to Harris Trust and Savings Bank, as Trustee, dated as of November 1, 1943, and (ii) the General Mortgage Indenture and Deed of Trust from the Company to Harris Trust and Savings Bank, as Trustee, dated as of November 1, 1992. Floating Rate means at any time the greater of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the Prime Rate. Floating Rate Loan means any Loan which bears interest at or by reference to the Floating Rate. Group - see Section 2.2. Illinois Power means Illinois Power Company, an Illinois corporation. Interest Period - see Section 4.3. Lender - see the Preamble. Lien means, when used with respect to any Person, any interest of any other Person in any real or personal property, asset or other right owned or being purchased or acquired by such Person which secures payment or performance of any obligation and shall include any mortgage, lien, encumbrance, charge or other security interest of any kind, whether arising by contract, as a matter of law, by judicial process or otherwise. Loan - see Section 2.1. Loan Documents means this Agreement and the Notes. -5- 7 Margin Stock means any "margin stock" as defined in Regulation G, T, U or X of the Board of Governors of the Federal Reserve System. Moody's Rating means, at any time, the rating issued by Moody's Investors Service, Inc. and then in effect with respect to the First Mortgage Bonds. Non-Use Fee Rate means the percentage set forth in Schedule II opposite the then-current Rating Level; it being understood that the Non-Use Fee Rate shall adjust concurrently with any change in the applicable Rating Level. Note - see Section 3.1. Participant - see Section 14.6.2. Percentage means as to any Lender the percentage which such Lender's Commitment is of the aggregate Commitments (or, if the Commitments have terminated, which the principal amount of such Lender's outstanding Loans is of the principal amount of all outstanding Loans). The Percentages of the Lenders as of the Effective Date are set forth on the Schedule I. Person means any natural person, corporation, partnership, trust, association, governmental authority or unit, or any other entity, whether acting in an individual, fiduciary or other capacity. Prime Rate means at any time the rate per annum then most recently announced by CIBC as its prime rate at New York, New York. Rating Level means at any time the Level set forth in the table below opposite the then-current Moody's Rating, S&P Rating or Duff & Phelps Rating, whichever results in the numerically lower of the two highest (one being highest) Levels; provided that if at any time there is no Moody's Rating or no S&P Rating or no Duff & Phelps Rating, the Rating Level shall be Level 4. -6- 8 Duff & Phelps Level Moody's Rating S&P Rating Rating - ----- -------------- ---------- ------ 1 Baa1 or better BBB+ or better BBB+ or better 2 Baa2 or better but BBB or better but BBB or better less than Baa1 less than BBB+ but less than BBB+ 3 Baa3 or better but BBB- or better BBB- or less than Baa2 but less than BBB better but less than BBB 4 less than Baa3 less than BBB less than BBB-- Reportable Event means a "reportable event" as defined in Section 4043 of ERISA. Required Lenders means Lenders having an aggregate Percentage of 66-2/3% or more. SEC means the Securities and Exchange Commission. Significant Subsidiary means any Subsidiary of the Company which is a "significant subsidiary" as defined in Regulation S-X of the SEC. S&P Rating means, at any time, the rating issued by Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. and then in effect with respect to the First Mortgage Bonds. Stock Repurchase Capacity means the maximum amount of common stock of Illinois Power which Illinois Power is permitted to repurchase pursuant to the order of the Illinois Commerce Commission dated March 22, 1995, Docket No. 94-0518. Subsidiary means, with respect to any Person, any corporation of which such Person and/or its other Subsidiaries own, directly or indirectly, such number of outstanding shares as have not less than 50% of the ordinary voting power for the election of directors. Unless the context otherwise requires, each reference to Subsidiaries herein shall be a reference to Subsidiaries of the Company. -7- 9 Suretyship Liability means any agreement, undertaking or other contractual arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to or otherwise to invest in a debtor, or otherwise to assure a creditor against loss) any indebtedness, obligation or other liability (including accounts payable) of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the shares of any other Person. The amount of any Person's obligation under any Suretyship Liability shall (subject to any limitation set forth therein) be deemed to be the principal amount of the indebtedness, obligation or other liability guaranteed thereby; provided that the amount of any Person's obligation under any Suretyship Liability relating to an interest rate swap, currency swap, commodity swap or similar hedging arrangement shall be deemed to be equal to the net liabilities of the primary obligor under all such arrangements with the same counterparty calculated on a mark-to-market basis as of the date of determination; and provided, further, that if the amount of any Person's obligation under any Suretyship Liability is not determinable, the amount thereof for purposes of this Agreement shall be the maximum reasonably anticipated liability of such Person in respect thereof as reasonably estimated by such Person as of the date of determination. Syndication Agent means First Chicago Capital Markets, Inc., in its capacity as syndication agent. Termination Date means June 11, 1997 or such other date on which the Commitments shall terminate pursuant to Section 6.1 or 12.2. Type of Loan or Borrowing - see Section 2.2. The types of Loans or borrowings under this Agreement are as follows: Floating Rate Loans or borrowings and Eurodollar Loans or borrowings. Unmatured Event of Default means any event which if it continues uncured will, with lapse of time or notice or lapse of time and notice, constitute an Event of Default. -8- 10 1.2 Computations. Where the character or amount of any asset or liability or any item of income or expense is required to be determined, or any consolidation or other accounting computation is required to be made, for purposes of this Agreement, such determination or calculation shall, to the extent applicable and except as otherwise specified in this Agreement, be made in accordance with generally accepted accounting principles in effect from time to time. 1.3 Cross-References; Section Captions. A Section, an Exhibit or a Schedule is, unless otherwise stated, a reference to a section hereof or an exhibit or schedule hereto, as the case may be. Section captions are for convenience only and shall not affect the interpretation of this Agreement. SECTION 2 COMMITMENTS OF THE LENDERS; TYPES OF LOANS; BORROWING AND CONVERSION PROCEDURES. 2.1 Commitments. Subject to the terms and conditions of this Agreement, each of the Lenders, severally and for itself alone, agrees to make loans to the Company on a revolving basis (collectively the "Loans" and individually each a "Loan") from time to time before the Termination Date in such Lender's Percentage of such aggregate amounts as the Company may from time to time request from all Lenders; provided, however, that (i) the aggregate principal amount of all Loans which any Lender shall be committed to have outstanding hereunder on loan to the Company shall not at any one time exceed the amount set forth opposite such Lender's name on Schedule I hereto (as adjusted from time to time pursuant to Section 6.1 and 14.6) and (ii) the aggregate principal amount of all Loans which all Lenders shall be committed to have outstanding hereunder on loan to the Company shall not at any one time exceed $100,000,000 (less any reductions made pursuant to Section 6.1). 2.2 Various Types of Loans. Each Loan shall be either a Floating Rate Loan or a Eurodollar Loan (each a "type" of Loan), as the Company shall specify in the related notice of borrowing or conversion pursuant to Section 2.3 or 2.4. Eurodollar Loans having the same Interest Period are sometimes called a "Group" or collectively "Groups". Floating Rate Loans and Eurodollar Loans may be outstanding at the same time, provided that (i) not more than five different Groups of Loans shall be outstanding at any -9- 11 one time and (ii) the aggregate principal amount of each Group of Loans shall at all times (including after giving effect to any conversion or continuation of any Loans) be an integral multiple of $1,000,000. 2.3 Borrowing Procedures. The Company shall give notice to the Administrative Agent (which may be by telephone if promptly confirmed in writing) of each proposed borrowing not later than (a) in the case of a Floating Rate borrowing, 10:00 a.m., Chicago time, on the proposed date of such borrowing, and (b) in the case of a Eurodollar borrowing, 10:00 a.m., Chicago time, at least three Business Days prior to the proposed date of such borrowing. Each such notice shall be effective upon receipt by the Administrative Agent and shall specify the date, amount and type of borrowing and, in the case of a Eurodollar borrowing, the initial Interest Period therefor. Promptly upon receipt of such notice, the Administrative Agent shall advise each Lender thereof. Not later than noon, New York time, on the date of a proposed borrowing, each Lender shall provide the Administrative Agent at the principal office of the Administrative Agent in New York with immediately available funds covering such Lender's Percentage of such borrowing and, subject to the satisfaction of the conditions precedent set forth in Section 11 with respect to such borrowing, the Administrative Agent shall pay over such funds to the Company on the requested borrowing date. Each borrowing shall be on a Business Day. 2.4 Conversion Procedures. Subject to the last sentence of Section 2.2, the Company may convert all or any part of any outstanding Loan into a Loan of a different type by giving notice (which may be by telephone if promptly confirmed in writing) to the Administrative Agent not later than (a) in the case of conversion into a Floating Rate Loan, 10:00 a.m., Chicago time, on the proposed date of such conversion, and (b) in the case of a conversion into a Eurodollar Loan, 10:00 a.m., Chicago time, at least three Business Days prior to the proposed date of such conversion. Each such notice shall be effective upon receipt by the Administrative Agent and shall specify the date and amount of such conversion, the Loan to be so converted, the type of Loan to be converted into and, in the case of a conversion into a Eurodollar Loan, the initial Interest Period therefor. Promptly upon receipt of such notice, the Administrative Agent shall advise each Lender thereof. Subject to Section 2.6, such Loan -10- 12 shall be so converted on the requested date of conversion. Each conversion shall be on a Business Day. 2.5 Warranty upon Conversion. Each notice of conversion pursuant to Section 2.4 shall automatically constitute a warranty by the Company to the Administrative Agent and each Lender to the effect that, on the date of such requested conversion, no Event of Default or Unmatured Event of Default shall have then occurred and be continuing. 2.6 Conditions. Notwithstanding any other provision of this Agreement, no Lender shall be obligated to make any Loan, or to convert into or permit the continuation at the end of the applicable Interest Period of any Eurodollar Loan, if an Event of Default or Unmatured Event of Default exists or would result therefrom. 2.7 Pro Rata Treatment. All borrowings, conversions and repayments shall be effected so that after giving effect thereto each Lender will have a pro rata share (according to its Percentage) of all types and Groups of Loans. 2.8 Commitments Several. The failure of any Lender to make a requested Loan on any date shall not relieve any other Lender of its obligation (if any) to make a Loan on such date, but no Lender shall be responsible for the failure of any other Lender to make any Loan to be made by such other Lender. SECTION 3 NOTES EVIDENCING LOANS. 3.1 Notes. The Loans of each Lender shall be evidenced by a promissory note (as amended, supplemented, replaced or otherwise modified from time to time, individually each a "Note" and collectively for all Lenders the "Notes") substantially in the form set forth in Exhibit A, with appropriate insertions, dated the Effective Date (or such other date as shall be satisfactory to the Administrative Agent), payable to the order of such Lender in the principal amount of the Commitment of such Lender (or, if less, in the aggregate unpaid principal amount of such Lender's Loans) on the Termination Date. 3.2 Recordkeeping. Each Lender shall record in its records, or at its option on the schedule attached to its Note, -11- 13 the date and amount of each Loan made by such Lender, each repayment or conversion thereof and, in the case of each Eurodollar Loan, the dates on which each Interest Period for such Loan shall begin and end. The aggregate unpaid principal amount so recorded shall be rebuttable presumptive evidence of the principal amount owing and unpaid on such Note. The failure to so record any such amount or any error in so recording any such amount shall not, however, limit or otherwise affect the obligations of the Company hereunder or under any Note to repay the principal amount of the Loans evidenced by such Note together with all interest accruing thereon. SECTION 4 INTEREST. 4.1 Interest Rates. (a) The Company promises to pay interest on the unpaid principal amount of each Loan for the period commencing on and including the date of such Loan to but excluding the date such Loan is paid in full, as follows: (i) at all times while such Loan is a Floating Rate Loan, at a rate per annum equal to the Floating Rate from time to time in effect; and (ii) at all times while such Loan is a Eurodollar Loan, at a rate per annum equal to the Eurodollar Rate applicable to each Interest Period for such Loan plus the Applicable Margin; provided, however, that after maturity of any Loan (whether by acceleration or otherwise), such Loan shall bear interest on the unpaid principal amount thereof at a rate per annum equal to the Prime Rate from time to time in effect (but not less than the interest rate in effect for such Loan immediately prior to maturity) plus 2%. (b) The Company also promises to pay, to each Lender that incurs reserve requirements as a consequence of funding any Eurodollar Loan, additional interest on such Eurodollar Loan at a rate per annum equal to the excess of (i) the rate obtained by dividing the Eurodollar Rate applicable to each Interest Period for such Loan by a percentage (expressed as a decimal) equal to 100% minus the Eurocurrency Reserve Percentage for such Lender for such Interest Period over (ii) the Eurodollar Rate for such -12- 14 Interest Period; it being understood that each Lender shall invoice the Company (and provide a copy of such invoice to the Administrative Agent), from time to time for the interest due to such Lender pursuant to this Section 4.1(b), which invoice shall be (x) payable within 10 days after receipt thereof by the Company and (y) accompanied by a statement setting forth in reasonable detail the computation of such additional interest and shall be conclusive and binding upon the parties hereto, in the absence of demonstrable error. 4.2 Interest Payment Dates. Accrued interest on each Floating Rate Loan shall be payable on the last day of each calendar quarter and at maturity. Accrued interest on each Eurodollar Loan shall be payable on the last day of each Interest Period relating to such Loan (and, in the case of any Eurodollar Loan with an Interest Period exceeding three months, on each three-month anniversary of the first day of such Interest Period) and at maturity. After maturity, accrued interest on all Loans shall be payable on demand. 4.3 Interest Periods. Each "Interest Period" for a Eurodollar Loan shall commence on the date such Eurodollar Loan is made or converted from a Floating Rate Loan, or on the expiration of the immediately preceding Interest Period for such Eurodollar Loan, and shall end on the date which is one, two, three or six months thereafter, as the Company may specify: (a) in the case of an Interest Period which commences on the date a Eurodollar Loan is made or converted from a Floating Rate Loan, in the related notice of borrowing or conversion pursuant to Section 2.3 or 2.4, or (b) in the case of a succeeding Interest Period with respect to any Eurodollar Loan, by notice to the Administrative Agent (which may be by telephone if promptly confirmed in writing) not later than 10:00 a.m., Chicago time, at least three Business Days prior to the first day of such succeeding Interest Period, it being understood that (i) each such notice shall be effective upon receipt by the Administrative Agent (which shall promptly advise each Lender thereof) and (ii) if the Company fails to give such notice, such Loan shall automatically become a Floating Rate Loan at the end of its then-current Interest Period. -13- 15 Each Interest Period for a Eurodollar Loan that begins on the last day of a calendar month (or on a day for which there is no numerically corresponding day in the appropriate subsequent month) shall end on the last Business Day of the appropriate subsequent calendar month. Each Interest Period for a Eurodollar Loan which would otherwise end on a day which is not a Business Day shall end on the immediately succeeding Business Day (unless such immediately succeeding Business Day is in another calendar month, in which case such Interest Period shall end on the immediately preceding Business Day). The Company may not select any Interest Period which would end after the scheduled Termination Date. 4.4 Setting and Notice of Eurodollar Rates. The applicable Eurodollar Rate for each Interest Period shall be determined by the Administrative Agent, and notice thereof shall be given by the Administrative Agent promptly to the Company and each Lender. Each determination of the applicable Eurodollar Rate by the Administrative Agent shall be conclusive and binding upon the parties hereto, in the absence of demonstrable error. The Administrative Agent shall, upon written request of the Company or any Lender, deliver to the Company or such Lender a statement showing the computations used by the Administrative Agent in determining any applicable Eurodollar Rate hereunder. 4.5 Computation of Interest. Interest shall be computed for the actual number of days elapsed on the basis of a year of 360 days. The applicable interest rate for each Floating Rate Loan shall change simultaneously with each change in the Floating Rate. SECTION 5 FEES. 5.1 Non-Use Fee. The Company agrees to pay to the Administrative Agent for the account of each Lender a non-use fee for the period from and including June 12, 1996 to but excluding the Termination Date in an amount equal to the Non-Use Fee Rate multiplied by the daily average of the unused amount of such Lender's Commitment. Such non-use fee shall be payable in arrears on the last day of each calendar quarter and on the Termination Date for any period then ending for which such nonuse fee shall not have been theretofore paid. The non-use fee shall be computed for the actual number of days elapsed on the -14- 16 basis of a year of 360 days. Administrative Agent's Fees. The Company agrees to pay to the Administrative Agent for its own account such fees as are agreed to from time to time by the Company and the Administrative Agent. SECTION 6 REDUCTION OR TERMINATION OF THE COMMITMENTS; PREPAYMENTS. 6.1 Reduction or Termination of the Commitments. The Company may from time to time on at least five Business Days' prior written notice received by the Administrative Agent (which shall promptly advise each Lender thereof) permanently reduce the amount of the Commitments to an amount not less than the aggregate unpaid principal amount of the Loans. Any such reduction shall be in an amount that is an integral multiple of $1,000,000 and shall be pro rata among the Lenders according to their respective Percentages. The Company may at any time on like notice terminate the Commitments upon payment in full of all Loans and all other obligations of the Company hereunder. 6.2 Prepayments. The Company may from time to time prepay the Loans in whole or in part, provided that (a) the Company shall give the Administrative Agent (which shall promptly advise each Lender) written notice thereof not later than noon, New York time, on the date of such prepayment, in the case of Floating Rate Loans, and not less than three Business Days' prior to the date of such prepayment, in the case of Eurodollar Loans, in each case specifying the Loans to be prepaid and the date (which shall be a Business Day) and amount of prepayment, (b) each partial prepayment of Loans shall be in an integral multiple of $1,000,000 and (c) any prepayment of Eurodollar Loans on a day other than the last day of an Interest Period therefor shall be subject to Section 8.4. After giving effect to any prepayment of Eurodollar Loans, each Group of Eurodollar Loans shall be an integral multiple of $1,000,000. SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES. 7.1 Making of Payments. All payments of principal of or interest on the Notes, and of all fees, shall be made by the Company to the Administrative Agent in immediately available -15- 17 funds at its office in New York not later than 1:00 p.m., New York time, on the date due; and funds received after that hour shall be deemed to have been received by the Administrative Agent on the immediately following Business Day. The Administrative Agent shall promptly remit to each Lender its share of all such payments received in collected funds by the Administrative Agent for the account of such Lender. All payments under Sections 8.1 and 8.4 shall be made by the Company directly to the Lender entitled thereto. 7.2 Application of Certain Payments. Each payment of principal shall be applied to such Loans as the Company shall direct by notice to be received by the Administrative Agent on or before the date of such payment or, in the absence of such notice, as the Administrative Agent shall determine in its discretion. Concurrently with each remittance to any Lender of its share of any such payment, the Administrative Agent shall advise such Lender as to the application of such payment. 7.3 Due Date Extension. If any payment of principal or interest with respect to any of the Notes, or of any fee, falls due on a day which is not a Business Day, then such due date shall be extended to the immediately following Business Day and, in the case of principal, additional interest shall accrue and be payable for the period of any such extension. 7.4 Setoff. To the extent not prohibited by applicable law (and without waiving any other rights of the Administrative Agent or any Lender), the Administrative Agent and each Lender shall, upon the occurrence of any Event of Default described in Section 12.1.4 or any Unmatured Event of Default that may result in such an Event of Default, have the right to appropriate and apply to the payment of any amount payable by the Company hereunder any and all balances, credits, deposits, accounts or moneys of the Company then or thereafter with such Person, other than as trustee or custodian for the benefit of Persons other than the Company. 7.5 Proration of Payments. If any Lender shall obtain by payment or other recovery (whether voluntary, involuntary, by application of offset or otherwise) on account of principal of or interest on any Note in excess of its pro rata share of payments -16- 18 and other recoveries obtained by all Lenders on account of principal of and interest on all Notes (other than any non-pro rata interest payment resulting from a Loan being an Affected Loan or as a result of replacement of a Lender pursuant to Section 8.7), such Lender shall purchase from the other Lenders such participations in the Notes held by them as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery ratably with each of them; provided, however, that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Lender, the purchase shall be rescinded and the purchase price restored to the extent of such recovery. 7.6 Payments Net of Taxes. All payments under this Agreement shall be made without setoff or counterclaim and in such amounts as may be necessary in order that all such payments (after deduction or withholding for or on account of any present or future taxes, levies, imposts, duties, or other charges of whatsoever nature imposed by any government or any political subdivision or taxing authority thereof (collectively, "Taxes"), other than any Taxes on or measured by the net income, net worth, or shareholder's capital of a Lender pursuant to the income tax laws of the jurisdiction where such Lender's principal office or Eurodollar Office is located) shall not be less than the amounts otherwise specified to be paid under this Agreement and the Notes. A certificate as to any additional amounts payable to any Lender under this Section 7.6 submitted to the Company by such Lender shall show in reasonable detail the amount payable and the calculations used to determine such amount, and shall be conclusive and binding upon the parties hereto in the absence of demonstrable error. With respect to each deduction or withholding for or on account of any Taxes, the Company shall promptly (and in no event later than 45 days thereafter) furnish to each Lender such certificates, receipts and other documents as may be required (in the reasonable judgment of such Lender) to establish any tax credit to which such Lender may be entitled. All payments under this Agreement shall be made under all circumstances, irrespective of any bilateral or multilateral payment or clearing agreement that may be in force, and of any restrictions then existing in any jurisdiction, and without regard to the nationality, residence or domicile of any Lender, and without requiring any affidavit or the fulfillment of any other formality. All obligations provided for in this -17- 19 Section 7.6 shall survive repayment of the Loans, cancellation of the Notes or any termination of this Agreement. SECTION 8 INCREASED COSTS; SPECIAL PROVISIONS FOR EURODOLLAR LOANS. 8.1 Increased Costs. (a) If, after the date hereof, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation (including, without limitation, Regulation D of the Board of Governors of the Federal Reserve System), or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or any Eurodollar Office of such Lender) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency (A) shall subject any Lender (or any Eurodollar Office of such Lender) to any tax, duty or other charge with respect to its Eurodollar Loans, its Note or its obligation to make Eurodollar Loans, or shall change the basis of taxation of payments to any Lender of the principal of or interest on its Eurodollar Loans or any other amounts due under this Agreement in respect of its Eurodollar Loans or its obligation to make Eurodollar Loans (except for taxes imposed on or measured by the overall net income of such Lender or its Eurodollar Office imposed by the jurisdiction, or any political subdivision thereof or taxing authority therein, in which such Lender's principal executive office or Eurodollar Office is located or in which such Lender is incorporated); or (B) shall impose, modify or deem applicable any reserve (including, without limitation, any reserve imposed by the Board of Governors of the Federal Reserve System, but excluding any reserve included in the determination of interest rates pursuant to Section 4), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by any Lender (or any Eurodollar Office of such Lender); or (C) shall impose on any Lender (or its Eurodollar -18- 20 Office) any other condition affecting its Eurodollar Loans, its Note or its obligation to make Eurodollar Loans; and the result of any of the foregoing is to increase the cost to (or in the case of Regulation D referred to above, to impose a cost on) such Lender (or any Eurodollar Office of such Lender) of making or maintaining any Eurodollar Loan, or to reduce the amount of any sum received or receivable by such Lender (or its Eurodollar Office) under this Agreement or under its Note with respect thereto, then within 10 days after demand by such Lender (which demand shall be accompanied by a statement setting forth the basis of such demand, a copy of which shall be furnished to the Administrative Agent), the Company shall pay directly to such Lender such additional amount or amounts as will compensate such Lender for such increased cost or such reduction. (b) If any Lender shall reasonably determine that the adoption or phase-in of any applicable law, rule or regulation regarding capital adequacy, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its Eurodollar Office) or any Person controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Lender's or such controlling Person's capital as a consequence of such Lender's obligations hereunder (including, without limitation, such Lender's Commitment) to a level below that which such Lender or such controlling Person could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such controlling Person's policies with respect to capital adequacy) by an amount deemed by such Lender or such controlling Person to be material, then from time to time, within 10 days after demand by such Lender (which demand shall be accompanied by a statement setting forth the basis of such demand, a copy of which shall be furnished to the Administrative Agent), the Company shall pay to such Lender such additional amount or amounts as will compensate such Lender or such controlling Person for such reduction. 8.2 Basis for Determining Interest Rate Inadequate or -19- 21 Unfair. If with respect to any Interest Period: (a) deposits in Dollars (in the applicable amounts) are not being offered to one or more Lenders in the London interbank eurodollar market for such Interest Period, or the Administrative Agent otherwise reasonably determines (which determination shall be binding and conclusive on the Company) that by reason of circumstances affecting the London interbank eurodollar market adequate and reasonable means do not exist for ascertaining the applicable Eurodollar Rate; or (b) Lenders having an aggregate Percentage of 30% or more advise the Administrative Agent that the Eurodollar Rate as determined by the Administrative Agent will not adequately and fairly reflect the cost to such Lenders of maintaining or funding such Loans for such Interest Period, or that the making or funding of Eurodollar Loans has become impracticable as a result of an event occurring after the date of this Agreement which in the reasonable opinion of such Lenders materially affects such Loans, then the Administrative Agent shall promptly notify the other parties thereof and, so long as such circumstances shall continue, (i) no Lender shall be under any obligation to make or convert into Eurodollar Loans and (ii) on the last day of the current Interest Period for each Eurodollar Loan, such Loan shall, unless then repaid in full, automatically convert to a Floating Rate Loan. 8.3 Changes in Law Rendering Eurodollar Loans Unlawful. In the event that any change in (including the adoption of any new) applicable laws or regulations, or any change in the interpretation of applicable laws or regulations by any governmental or other regulatory body charged with the administration thereof, should make it (or in the good faith judgment of any Lender cause a substantial question as to whether it is) unlawful for any Lender to make, maintain or fund Eurodollar Loans, then such Lender shall promptly notify each of the other parties hereto and, so long as such circumstances shall continue, (a) such Lender shall have no obligation to make or convert into Eurodollar Loans (but shall make Floating Rate Loans concurrently with the making of or conversion into Eurodollar Loans by the Lenders which are not so affected, in each case in -20- 22 an amount equal to such Lender's Percentage of all Eurodollar Loans which would be made or converted into at such time in the absence of such circumstances) and (b) on the last day of the current Interest Period for each Eurodollar Loan of such Lender (or, in any event, if such Lender so requests, on such earlier date as may be required by the relevant law, regulation or interpretation), such Eurodollar Loan shall, unless then repaid in full, automatically convert to a Floating Rate Loan. Each Floating Rate Loan made by a Lender which, but for the circumstances described in the foregoing sentence, would be a Eurodollar Loan (an "Affected Loan") shall, notwithstanding any other provision of this Agreement, remain outstanding for the same period as the Group of Eurodollar Loans of which such Affected Loan would be a part absent such circumstances. 8.4 Funding Losses. The Company hereby agrees that upon demand by any Lender (which demand shall be accompanied by a statement setting forth the basis for the calculations of the amount being claimed, a copy of which shall be furnished to the Administrative Agent) the Company will indemnify such Lender against any net loss or expense which such Lender may sustain or incur (including, without limitation, any net loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund or maintain any Eurodollar Loan), as reasonably determined by such Lender, as a result of (a) any payment or prepayment or conversion of any Eurodollar Loan of such Lender on a date other than the last day of an Interest Period for such Loan (including, without limitation, any conversion pursuant to Section 8.3) or (b) any failure of the Company to borrow or convert any Loans on a date specified therefor in a notice of borrowing or conversion pursuant to this Agreement (other than as a result of a default by such Lender or the Administrative Agent). For this purpose, all notices to the Administrative Agent pursuant to this Agreement shall be deemed to be irrevocable. 8.5 Right of Lenders to Fund through Other Offices. Each Lender may, if it so elects, fulfill its commitment as to any Eurodollar Loan by causing a foreign branch or affiliate of such Lender to make such Loan, provided that in such event for the purposes of this Agreement such Loan shall be deemed to have been made by such Lender and the obligation of the Company to repay such Loan shall nevertheless be to such Lender and shall be -21- 23 deemed held by it, to the extent of such Loan, for the account of such branch or affiliate. 8.6 Discretion of Lenders as to Manner of Funding. Notwithstanding any provision of this Agreement to the contrary, each Lender shall be entitled to fund and maintain its funding of all or any part of its Loans in any manner it sees fit, it being understood, however, that for the purposes of this Agreement all determinations hereunder shall be made as if such Lender had actually funded and maintained each Eurodollar Loan during each Interest Period for such Loan through the purchase of deposits having a maturity corresponding to such Interest Period and bearing an interest rate equal to the Eurodollar Rate for such Interest Period. 8.7 Mitigation of Circumstances; Replacement of Affected Lender. (a) Each Lender shall promptly notify the Company and the Administrative Agent of any event of which it has knowledge which will result in, and will use reasonable commercial efforts available to it (and not, in such Lender's sole judgment, otherwise disadvantageous to such Lender) to mitigate or avoid, (i) any obligation by the Company to pay any amount pursuant to Section 7.6 or 8.1 (ii) the occurrence of any circumstance of the nature described in Section 8.2 or 8.3 (and, if any Lender has given notice of any such event described in clause (i) or (ii) above and thereafter such event ceases to exist, such Lender shall promptly so notify the Company and the Administrative Agent). Without limiting the foregoing, each Lender will designate a different funding office if such designation will avoid (or reduce the cost to the Company of) any event described in clause (i) or (ii) of the preceding sentence and such designation will not, in such Lender's sole judgment, be otherwise disadvantageous to such Lender. (b) At any time any Lender is an Affected Lender, the Company may replace such Affected Lender as a party to this Agreement with one or more other bank(s) or financial institution(s) reasonably satisfactory to the Administrative Agent, such bank(s) or financial institution(s) to have a Commitment or Commitments, as the case may be, in such amounts as shall be reasonably satisfactory to the Administrative Agent (and upon notice from the Company such Affected Lender shall assign, without recourse or warranty, its Commitment, its Loans, its Note -22- 24 and all of its other rights and obligations hereunder to such replacement bank(s) or other financial institution(s) for a purchase price equal to the sum of the principal amount of the Loans so assigned, all accrued and unpaid interest thereon, its ratable share of all accrued and unpaid non-use fees, any amounts payable under Section 8.4 as a result of such Lender receiving payment of any Eurodollar Loan prior to the end of an Interest Period therefor and all other obligations owed to such Affected Lender hereunder). 8.8 Conclusiveness of Statements; Survival of Provisions. Determinations and statements of any Lender pursuant to Section 8.1, 8.2, 8.3 or 8.4 shall be conclusive absent demonstrable error. Lenders may use reasonable averaging and attribution methods in determining compensation under Sections 8.1 and 8.4, and the provisions of such Sections shall survive repayment of the Loans, cancellation of the Notes and any termination of this Agreement. SECTION 9 WARRANTIES. To induce the Administrative Agent and the Lenders to enter into this Agreement and to induce the Lenders to make Loans hereunder, the Company warrants to the Administrative Agent and the Lenders that: 9.1 Organization, etc. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Illinois. 9.2 Authorization; No Conflict. The execution and delivery of this Agreement, the Notes and each other Loan Document to which it is a party, the borrowings hereunder, and the performance by the Company of its obligations under this Agreement, the Notes and each other Loan Document to which it is a party are within the Company's corporate powers, will have been duly authorized by all necessary corporate action prior to any borrowings hereunder, have received all necessary governmental and regulatory approval, and do not and will not contravene or conflict with, or result in the creation or imposition of a Lien under, any provision of law or of the Articles of Incorporation or by-laws of the Company or any Subsidiary or of any agreement, instrument, order or decree that is binding upon the Company or -23- 25 any Subsidiary. 9.3 Validity and Binding Nature. Each of this Agreement and each other Loan Document to which the Company is a party is, or upon the execution and delivery thereof will be, legal, valid, and binding obligations of the Company enforceable against the Company in accordance with their respective terms, except to the extent enforceability thereof is limited by bankruptcy, insolvency or other laws relating to, or affecting the enforcement of, creditors' rights in general, and by general principles of equity. 9.4 Financial Statements. The Company's audited financial statements as at December 31, 1995 and unaudited financial statements as at March 31, 1996, copies of which have been furnished to each Lender, have been prepared in conformity with generally accepted accounting principles applied on a basis consistent with those of the preceding year, and present fairly the financial position of the Company at such dates and the results of its operations for the periods then ended. 9.5 Conduct of Business. Since December 31, 1995, no event has occurred or condition has arisen that has resulted in, or created a reasonable likelihood of, a material adverse change in the business, properties, condition (financial or otherwise), prospects or results of operations of the Company and its Subsidiaries taken as a whole. 9.6 Litigation and Contingent Liabilities. No litigation (including, without limitation, derivative actions), arbitration proceedings or governmental or regulatory proceedings are pending or threatened against the Company that would, if adversely determined, materially and adversely affect the financial condition, prospects, business, or operations of the Company and its Subsidiaries taken as a whole, except as set forth in reports made by the Company and filed with the SEC prior to the date of this Agreement, copies of which have been furnished to each Lender. Other than any liability incident to such litigation or proceedings, the Company does not have any material contingent liabilities not provided for or disclosed in the financial statements referred to in Section 9.4. 9.7 Liens. None of the assets of the Company is subject to -24- 26 any Lien, except as permitted pursuant to Section 10.14. 9.8 Subsidiaries. Exhibit B correctly lists each Significant Subsidiary of the Company owned as of the date hereof, and the state of incorporation of each such Subsidiary. Each Subsidiary is duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation. All Subsidiaries, except Illinois Power Fuel Company, are currently wholly-owned by the Company or by Illinois Power, and all of the shares of stock of each Subsidiary (including the shares of stock of Illinois Power Fuel Company that are owned by Illinois Power) have been duly issued, are fully paid and non-assessable, and are owned by the Company or by Illinois Power as of the date hereof free and clear of any Lien. 9.9 Employee Benefit Plans. Each employee benefit plan as to which the Company may have any liability complies in all material respects with all applicable requirements of law and regulations, and (i) to the best of the Company's knowledge, no Reportable Event has occurred with respect to any such plan, (ii) neither the Company nor any Subsidiary has withdrawn from any such plan and (iii) no such plan has been terminated. Neither the execution and delivery of this Agreement or any other Loan Document to which the Company is a party nor the making of Loans hereunder will give rise to a prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code. 9.10 Investment Company Act. The Company is not an "investment company" or, to the best of the Company's knowledge, a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. 9.11 Public Utility Holding Company Act. The Company and its Subsidiaries are exempt from the provisions of the Public Utility Holding Company Act of 1935, as amended, except Section 9(a)(2) thereof, and, to the best of the Company's knowledge, no proceedings to revoke or modify such exemption have been instituted or are pending. 9.12 Regulation U. The Company is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock. -25- 27 9.13 Debt. Exhibit C correctly sets forth all Debt of the Company as of the date of this Agreement (or such other date as set forth on Exhibit C)(other than items of Debt which individually do not exceed $1,000,000 and collectively do not exceed $5,000,000). 9.14 Taxes. The Company has filed all income or franchise tax returns and reports required by law to have been filed by it and has paid all taxes and governmental charges thereby shown to be owing, except for any such taxes or charges which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with generally accepted accounting principles shall have been set aside on its books. 9.15 Compliance with Laws. Except as set forth on Exhibit F, the Company is not in violation of any law, ordinance, rule, regulation or order of any governmental authority applicable to it or its property (including, without limitation, any Environmental Law), except where any such violation would not materially and adversely affect the financial condition, prospects, business, or operations of the Company and its Subsidiaries taken as a whole. SECTION 10 COVENANTS. Until the expiration or termination of the Commitments, and thereafter until all obligations of the Company hereunder and under the Loan Documents are paid in full, the Company agrees that, unless at any time the Required Lenders shall otherwise expressly consent in writing, it will: 10.1 Reports, Certificates and Other Information. Furnish to each Lender: 10.1.1 Annual Report. Within 90 days after each fiscal year of the Company, a copy of the annual report of the Company to the SEC on Form 10-K. Concurrently with the delivery of each such annual report, the Company will furnish to each Lender the written statement of the certified public accountants whose opinion is contained in such annual report to the effect that in making the examination necessary for their opinion relating to the Company's financial statements contained in such annual -26- 28 report (no other review having been conducted), they have obtained no knowledge of any event described in Section 12.1.1, 12.1.2 or 12.1.6, or of any other circumstance that such accountants should disclose in the exercise of then generally accepted auditing standards; or, if such accountants shall have obtained knowledge of any such event or any such other circumstance, they shall disclose in such statement the event(s) or circumstances(s) and the nature and status thereof. 10.1.2 Interim Reports. Within 60 days after each quarter (except the last quarter) of each fiscal year of the Company, a copy of the quarterly report of the Company to the SEC on Form 10-Q, signed by a proper accounting officer of the Company. 10.1.3 Certificates. Contemporaneously with the furnishing of a copy of each report provided for in Section 10.1.1 or 10.1.2, a certificate dated the date of such report and signed by an authorized officer of the Company, (a) to the effect that, to the best of his knowledge, after diligent inquiry, no Event of Default or Unmatured Event of Default has occurred and is continuing, or, if there is any such event, describing it and the steps, if any, being taken to cure it, and (b) containing a computation in reasonable detail of the covenants set forth in Sections 10.11, 10.15 and 10.16 as of the end of the applicable fiscal quarter or fiscal year. 10.1.4 Reports to SEC and to Shareholders. Promptly upon their becoming available, copies of (i) each financial statement, report, notice or proxy statement sent by the Company to its stockholders generally, and (ii) each regular or periodic report or other report with respect to the institution of, or any adverse determination in, any litigation, arbitration proceeding, or governmental or regulatory proceeding, and any registration statement or prospectus (other than on or in respect of Form S-8 or any similar form) or similar document, in each case, filed by the Company with any securities exchange or with the SEC or any successor agency. 10.1.5 Notice of Default and ERISA Matters. Forthwith -27- 29 upon learning of the occurrence of any of the following, written notice thereof, describing the same and the steps being taken by the Company with respect thereto: (i) the occurrence of an Event of Default or an Unmatured Event of Default, or (ii) the occurrence of a Reportable Event Under, or the institution of steps by the Company or any Subsidiary to withdraw from or the institution of any steps to terminate, any employee benefit plan as to which the Company may have any liability. 10.1.6 Significant Subsidiaries. A written report of any changes in the list of its Significant Subsidiaries, promptly upon the occurrence thereof. 10.1.7 Other Information. From time to time, such other information concerning the Company and its Subsidiaries as any Lender or the Administrative Agent may reasonably request. 10.2 Books, Records, and Inspections. Maintain complete and accurate books and records; permit access by any Lender or the Administrative Agent to the books and records of the Company; and permit any Lender or the Administrative Agent to inspect the properties and operations of the Company. 10.3 Insurance. Maintain such insurance as may be required by law, and maintain such other insurance, to such extent and against such hazards and liabilities, as is customarily maintained by companies similarly situated and operating like properties. 10.4 Taxes and Liabilities. Pay when due all taxes, assessments, and other liabilities except as contested in good faith and by appropriate proceedings. 10.5 Mergers, Consolidations, Sales. Not be a party to any merger or consolidation, or purchase or otherwise acquire all or substantially all of the assets or stock of any class of, or any partnership or joint venture interest in, any other Person that if such Person had been a Subsidiary of the Company, would be a Significant Subsidiary, or, except in the ordinary course of its business, sell, transfer, convey or lease all or any substantial part of its assets, except for any such merger or consolidation, -28- 30 sale, transfer, conveyance, lease or assignment of or by any wholly-owned Subsidiary into the Company and any such purchase or other acquisition by the Company of the assets or stock of any wholly-owned Subsidiary. 10.6 Maintenance of Properties. Cause all properties used or useful in the conduct of the business of the Company to be maintained, and kept in reasonable condition, repair and working order, and cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that the Company shall not be prevented from discontinuing the operation and maintenance of any such properties if such discontinuance is, in the judgment of the Company, desirable in the operation of its business and not disadvantageous in any material respect to any Lender. 10.7 Conduct of Business. Carry out and conduct its business in substantially the same manner and in substantially the same fields as contemplated in the Company's Form 10-K filed with the SEC for the fiscal year ended December 31, 1995, and do or cause to be done all things necessary to preserve and keep in full force and effect the corporate existence, and the rights (statutory and arising under its Articles of Incorporation) and franchises, of the Company; provided, however, that the Company shall not be required to preserve any such right or franchise if it determines that the preservation thereof is no longer necessary or desirable in the conduct of its business and that the loss thereof is not disadvantageous in any material respect to the holder of any Note. 10.8 Employee Benefit Plans. Maintain each employee benefit plan as to which it may have any liability in compliance with all applicable requirements of law and regulations. 10.9 Use of Proceeds. Use the proceeds of all Loans only for the payment of dividends, making investments in or acquisitions of non-regulated, energy-related businesses, and for general corporate purposes; and not use any proceeds of any Loan, or permit any such proceeds to be used, either directly or indirectly, for the purpose, whether immediate, incidental or -29- 31 ultimate, of "purchasing or carrying" any Margin Stock. 10.10 Other Agreements. Not enter into any agreement containing any provision that would be violated or breached by the performance of its obligations hereunder or under any instrument or document delivered or to be delivered by it hereunder or in connection herewith. 10.11 Restrictions on Debt. Not at any time permit all Debt of the Company to exceed the product of 3 multiplied by the lesser of (a) the amount of dividends paid to the Company during the period of four consecutive fiscal quarters then most recently ended and (b) the aggregate net income of all Subsidiaries of the Company during such period. 10.12 Illinois Power. Cause Illinois Power to comply with all of the covenants set forth in Section 9 of the Credit Agreement dated as of May 26, 1995 among Illinois Power, various financial institutions and Bank of America National Trust and Savings Association, as agent, as such Credit Agreement is in effect on the date hereof (without giving effect to (i) any termination thereof or (ii) any amendment or other modification thereto unless consented to by the Required Lenders). A copy of such Section 9 as in effect on the date hereof is attached hereto as Exhibit H. 10.13 Compliance with Laws. Comply in all material respects with all laws, ordinances, rules, regulations or orders of any governmental authority having jurisdiction over it or its business (including, without limitation, the Federal Fair Labor Standards Act and Environmental Laws), except as such may be contested in good faith by appropriate proceedings. 10.14 Limitation on Liens. Not, and not permit any Significant Subsidiary to create, incur, assume or permit to exist any Lien on any of its properties (other than Liens on the common stock of Illinois Power so long as the obligations of the Company hereunder are equally and ratably secured), except (a) any Liens in existence as of the Effective Date and listed on Exhibit G hereto; (b) Liens for taxes, assessments or other governmental -30- 32 charges or levies not yet due or which are being contested in good faith by appropriate proceedings; (c) Liens in connection with workmen's compensation, unemployment insurance or other social security, old age pension or similar obligations; (d) Liens in connection with any litigation or other legal proceeding or arising out of a judgment or award, for sums not exceeding $5,000,000, with respect to which an appeal is being prosecuted and the execution or other enforcement of such Liens is effectively stayed; (e) landlord's, vendor's, carrier's, warehousemen's, repairmen's, mechanic's, workmen's, materialmen's, construction or similar Liens; (f) easements, rights-of-way, restrictions and other similar encumbrances which, in the aggregate, do not materially adversely interfere with the occupation, use and enjoyment of the property encumbered thereby; (g) in the case of Illinois Power, (i) Liens arising pursuant to that certain Mortgage and Deed of Trust from Illinois Power to Harris Trust and Savings Bank, as Trustee, dated as of November 1, 1943, and "permitted liens" as defined in such Mortgage, and (ii) Liens arising pursuant to that certain General Mortgage Indenture and Deed of Trust from Illinois Power to Harris Trust and Savings Bank, as Trustee, dated as of November 1, 1992, and "Permitted Liens" as defined in such General Mortgage; (h) in the case of any Significant Subsidiary, Capital Leases; (i) in the case of the Company, purchase money security interests and Capital Leases, provided that the aggregate amount of the Debt secured thereby shall not exceed $1,000,000; and (j) extensions, renewals or replacements of any Lien permitted by the foregoing provisions of this Section 10.14, but only if the principal amount of the Debt secured thereby immediately prior to such extension, renewal or replacement is -31- 33 not increased and such Lien is not extended to any other property. 10.15 Illinova Net Worth. Not permit Consolidated Net Worth to at any time be less than $1,100,000,000. 10.16 Illinois Power Stock Repurchase Capacity. Not permit Stock Repurchase Capacity to at any time be less than $75,000,000. SECTION 11 CONDITIONS OF LENDING. The obligation of each Lender to make its Loans is subject to the following conditions precedent: 11.1 Initial Loan. The obligation of each Lender to make its initial Loan is, in addition to the conditions precedent specified in Section 11.2, subject to the conditions precedent (and the date on which all such conditions precedent have been satisfied or waived in writing by the Lenders is herein called the "Effective Date") that (i) the Existing Agreement shall have been terminated and all amounts due and owing thereunder shall have been paid in full and (ii) the Administrative Agent shall have received all of the following, each duly executed and dated the Effective Date (or such other date as shall be satisfactory to the Administrative Agent), in form and substance satisfactory to the Administrative Agent, and each (except for the Notes, of which only the originals shall be signed) in sufficient number of signed counterparts to provide one for each Lender: 11.1.1 Notes. The Notes of the Company payable to the order of the Lenders. 11.1.2 Resolutions. Certified copies of resolutions of the Board of Directors of the Company authorizing the execution, delivery and performance by the Company of this Agreement, the Notes, the other Loan Documents and the other documents to be executed by the Company pursuant hereto. 11.1.3 Consents, etc. Certified copies of all documents evidencing any consents and governmental approvals (if any) required for the execution, delivery and performance by the Company of this Agreement, the Notes, the Loan Documents and the -32- 34 other documents to be executed by the Company pursuant hereto. 11.1.4 Incumbency and Signature Certificates. An incumbency and signature certificate of the Company certifying the names of the officer or officers of the Company authorized to sign this Agreement, the Notes, the Loan Documents and the other documents required to be delivered by the Company in connection with this Agreement, together with a sample of the true signature of each such officer (it being understood that the Administrative Agent and each Lender may conclusively rely on such certificate until formally advised by a like certificate of any changes therein). 11.1.5 Opinion of Counsel for the Company. The opinion of Schiff Hardin & Waite, counsel to the Company, substantially in the form of Exhibit D. 11.1.6 Other. Such other documents as the Administrative Agent or any Lender may reasonably request. 11.2 All Loans. The obligation of each Lender to make each Loan is subject to the following further conditions precedent that: 11.2.1 No Default. (a) No Event of Default or Unmatured Event of Default has occurred and is continuing or will result from the making of such Loan and (b) the warranties of the Company contained in Section 9 (excluding (i) the second sentence of Section 9.6, (ii) Section 9.8 and (iii) Section 9.9) are true and correct in all material respects as of the date of the making of such requested Loan, with the same effect as though made on such date. 11.2.2 Satisfaction of Conditions Precedent. Each request by the Company for the making of a Loan shall be deemed to constitute a warranty by the Company that the conditions precedent set forth in Section 11.2.1 will be satisfied at the time of the making of such Loan. SECTION 12 EVENTS OF DEFAULT AND THEIR EFFECT. 12.1 Events of Default. Each of the following shall constitute an Event of Default under this Agreement: -33- 35 12.1.1 Non-Payment of the Loans, etc. Default in the payment when due of the principal of any Loan; or default, and continuance thereof for five days, in the payment when due of any interest, fees or other amount payable by the Company hereunder or under any other Loan Document. 12.1.2 Non-Payment of Other Debt. Any default shall occur under the terms applicable to any Debt of the Company or Illinois Power in an aggregate amount (for all Debt so affected) exceeding $10,000,000 or under the terms applicable to any Debt of any other Subsidiary in an aggregate amount (for all Debt so affected) exceeding $5,000,000 and such default shall (a) consist of the failure to pay such Debt when due (subject to any applicable grace period), whether by acceleration or otherwise, or (b) accelerate the maturity of such Debt or permit the holder or holders thereof, or any trustee or agent for such holder or holders, to cause such Debt to become due and payable prior to its expressed maturity. 12.1.3 Warranties. Any warranty made by the Company herein is breached or is false or misleading in any material respect, or any schedule, certificate, financial statement, report, notice or other writing furnished by the Company to the Administrative Agent or any Lender is false or misleading in any material respect on the date as of which the facts therein set forth are stated or certified. 12.1.4 Bankruptcy, Insolvency, etc. The Company or any Subsidiary becomes insolvent or generally fails to pay, or admits in writing its inability or refusal to pay, debts as they become due; or the Company or any Subsidiary applies for, consents to, or acquiesces in the appointment of a trustee, receiver or other custodian for the Company or such Subsidiary or any property thereof, or makes a general assignment for the benefit of creditors; or, in the absence of such application, consent or acquiescence, a trustee, receiver or other custodian is appointed for the Company or any Subsidiary or for a substantial part of the property of any thereof and is not discharged within 60 days; or any bankruptcy, reorganization, debt arrangement, or other case or proceeding under any bankruptcy or insolvency law, or any dissolution or liquidation proceeding (except the voluntary -34- 36 dissolution, not under any bankruptcy or insolvency law, of a Subsidiary other than Illinois Power), is commenced in respect of the Company or any Subsidiary, and if such case or proceeding is not commenced by the Company or such Subsidiary, it is consented to or acquiesced in by the Company or such Subsidiary, or remains for 60 days undismissed; or the Company or any Subsidiary takes any corporate or partnership action to authorize, or in furtherance of, any of the foregoing. 12.1.5 Non-Compliance with Provisions of this Agreement. Failure by the Company to comply with or to perform any covenant set forth in Sections 10.1.5, 10.5, 10.9, 10.11, 10.12, 10.14, 10.15 and 10.16; or failure by the Company to comply with or to perform any other provision of this Agreement (and not constituting an Event of Default under any of the other provisions of this Section 12) and continuance of such failure for 30 days after notice thereof to the Company from the Administrative Agent or any Lender. 12.1.6 Employee Benefit Plans. With respect to any employee benefit plan as to which the Company or any Subsidiary may have any liability, there shall exist a deficiency of more than $20,000,000 in the plan assets available to satisfy the benefits guaranteeable under ERISA with respect to such plan, or such plan is terminated or the Company or any Subsidiary withdraws from such plan. 12.1.7 Ownership of Significant Subsidiaries. The Company shall fail at any time to own, directly or indirectly, all of the capital stock of each Subsidiary which is at any time a Significant Subsidiary, in each case free and clear of any Lien. 12.1.8 Judgments. Final judgments which exceed an aggregate of $10,000,000 shall be rendered against the Company, or any Subsidiary and shall not have been discharged or vacated or had execution thereof stayed pending appeal within 30 days after entry or filing of such judgments. 12.1.9 Change in Control. (a) Any Person or group of Persons (within the meaning of Section 13 or 14 of the -35- 37 Securities Exchange Act of 1934, as amended) shall acquire beneficial ownership (within the meaning of Rule 13d-3 promulgated under such Act) of 20% or more of the outstanding shares of common stock of the Company; or (b) during any 24-month period, individuals who at the beginning of such period constituted the Company's Board of Directors (together with any new directors whose election by the Company's Board of Directors or whose nomination for election by the Company's shareholders was approved by a vote of a majority of the directors who either were directors at the beginning of such period or whose election or nomination was previously so approved) cease for any reason to constitute a majority of the Board of Directors of the Company. 12.1.10 Environmental. The Company or any of its Subsidiaries shall be the subject of any proceeding or investigation pertaining to the release by the Company or any of its Subsidiaries, or any other Person of any toxic or hazardous waste or substance into the environment, or there shall occur any violation of any Environmental Law, which, in either case, could materially and adversely affect the financial condition, prospects, business or operations of the Company and its Subsidiaries taken as a whole. 12.2 Effect of Event of Default. If any Event of Default described in Section 12.1.4 shall occur, the Commitments (if they have not theretofore terminated) shall immediately terminate and the Notes and all other obligations hereunder shall become immediately due and payable, all without presentment, demand, protest or notice of any kind; and in the case of any other Event of Default, the Administrative Agent may, and upon written request of the Required Lenders shall, declare the Commitments (if they have not theretofore terminated) to be terminated and/or declare all Notes and all other obligations hereunder to be due and payable, whereupon the Commitments (if they have not theretofore terminated) shall immediately terminate and/or all Notes and all other obligations hereunder shall become immediately due and payable, all without presentment, demand, protest or notice of any kind. The Administrative Agent shall promptly advise the Company of any such declaration, but failure to do so shall not impair the effect of such declaration. Notwithstanding the foregoing, the effect as an Event of Default -36- 38 of any event described in Section 12.1.1 or Section 12.1.4 may be waived by the written concurrence of all of the Lenders, and the effect as an Event of Default of any other event described in this Section 12 may be waived by the written concurrence of the Required Lenders. SECTION 13 THE ADMINISTRATIVE AGENT. 13.1 Authorization. Each Lender authorizes the Administrative Agent to act on behalf of such Lender to the extent provided herein or any other document or instrument delivered hereunder or in connection herewith, and to take such other action as may be reasonably incidental thereto. 13.2 Indemnification. Each Lender agrees to reimburse and indemnify the Administrative Agent for, and hold the Administrative Agent harmless against, a share (determined in accordance with such Lender's Percentage) of any loss, damage, penalty, action, judgment, obligation, cost, disbursement, liability or expense (including reasonable attorneys' fees) which may at any time be incurred by the Administrative Agent (and for which the Administrative Agent is not reimbursed by the Company) arising out of or in connection with the performance of its obligations or the exercise of its powers hereunder or any other document or instrument delivered hereunder or in connection herewith, as well as the costs and expenses of defending against any claim against the Administrative Agent arising hereunder or thereunder, provided that no Lender shall be liable for any of the foregoing which are determined by a court of competent jurisdiction in a final proceeding to have resulted solely from the Administrative Agent's gross negligence or willful misconduct. 13.3 Exculpation. The Administrative Agent shall be entitled to rely upon advice of counsel concerning legal matters, and upon this Agreement and any schedule, certificate, statement, report, notice or other writing which it believes to be genuine or to have been presented by a proper person. Neither the Administrative Agent nor any of its directors, officers, employees or agents shall (i) be responsible for any recitals, representations or warranties contained in, or for the execution, validity, genuineness, effectiveness or enforceability of, this Agreement or any other instrument or document delivered hereunder -37- 39 or in connection herewith, (ii) be responsible for the validity, genuineness, perfection, effectiveness, enforceability, existence, value or enforcement of any collateral security, (iii) be under any duty to inquire into or pass upon any of the foregoing matters, or to make any inquiry concerning the performance by the Company or any other obligor of its obligations, or (iv) in any event, be liable as such for any action taken or omitted by it or them, except for its or their own gross negligence or willful misconduct. The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, the Administrative Agent in its individual capacity. 13.4 Credit Investigation. Each Lender acknowledges that it has made such inquiries and taken such care on its own behalf as would have been the case had such Lender's Commitment been granted and such Lender's Loans been made directly by such Lender to the Company without the intervention of the Administrative Agent or any other Lender. Each Lender agrees and acknowledges that the Administrative Agent makes no representations or warranties about the creditworthiness of the Company or any other party to this Agreement or with respect to the legality, validity, sufficiency or enforceability of this Agreement or any Note or the value of any security therefor. 13.5 Administrative Agent and Affiliates. The Administrative Agent in its individual capacity shall have the same rights and powers hereunder as any other Lender and may exercise or refrain from exercising the same as though it were not the Administrative Agent, and the Administrative Agent and its affiliates may accept deposits from and generally engage in any kind of business with the Company or any affiliate thereof as if the Administrative Agent were not the Administrative Agent hereunder. 13.6 Action on Instructions of the Required Lenders. As to any matters not expressly provided for by this Agreement (including, without limitation, enforcement of this Agreement and collection of the Loans), the Administrative Agent shall not be required to exercise any discretion or take any action, but the Administrative Agent shall in all cases be fully protected in acting or refraining from acting upon the written instructions (i) from the Required Lenders, except for instructions which -38- 40 under the express provisions hereof must be received by the Administrative Agent from all Lenders, and (ii) in the case of such instructions, from all Lenders. In no event will the Administrative Agent be required to take any action which exposes the Administrative Agent to personal liability or which is contrary to this Agreement or applicable law. The relationship between the Agent and the Lenders is and shall be that of agent and principal only and nothing herein contained shall be construed to constitute the Administrative Agent a trustee for any holder of a Note or of a participation therein nor to impose on the Administrative Agent duties and obligations other than those expressly provided for herein. 13.7 Funding Reliance. (a) Unless the Administrative Agent receives notice from a Lender by 1:00 p.m., Atlanta time, on the day of a proposed borrowing that such Lender will not make available to the Administrative Agent the amount which would constitute its Percentage of such borrowing in accordance with Section 2.3, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent and, in reliance upon such assumption, make a corresponding amount available to the Company. If and to the extent such Lender has not made any such amount available to the Administrative Agent, such Lender and the Company jointly and severally agree to repay such amount to the Administrative Agent forthwith on demand, together with interest thereon (i) in the case of the Company, the interest rate applicable to Loans comprising such borrowing and (ii) in the case of such Lender, the Federal Funds Rate (or, beginning on the third Business Day after demand, the rate set forth in clause (i)). Nothing set forth in this clause (a) shall relieve any Lender of any obligation it may have to make any Loan hereunder. (b) Unless the Administrative Agent receives notice from the Company prior to the due date for any payment hereunder that the Company does not intend to make such payment, the Administrative Agent may assume that the Company has made such payment and, in reliance upon such assumption, make available to each Lender its share of such payment. If and to the extent that the Company has not made any such payment to the Administrative Agent, each Lender which received a share of such payment shall repay such share (or the relevant portion thereof) to the Administrative Agent forthwith on demand, together with interest -39- 41 thereon at the Federal Funds Rate (or, beginning on the third Business Day after demand, at the Floating Rate). Nothing set forth in this clause (b) shall relieve the Company of any obligation it may have to make any payment hereunder. 13.8 Resignation. The Administrative Agent may resign as such at any time upon at least 30 days' prior notice to the Company and the Lenders. In the event of any such resignation, the Required Lenders (with, so long as no Event of Default or Unmatured Event of Default exists, the consent of the Company, which consent shall not be unreasonably delayed or withheld) shall as promptly as practicable appoint a successor Administrative Agent. If no successor shall have been so appointed, and shall have accepted such appointment, within 30 days after the giving of notice of such resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, which shall be a commercial bank having a branch in the United States of America and having a combined capital, surplus and undivided profits of at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from all further duties and obligations under this Agreement. After any resignation pursuant to this Section 13.8, the provisions of this Section 13 shall inure to the benefit of the retiring Administrative Agent as to any actions taken or omitted to be taken by it while it was Administrative Agent hereunder. SECTION 14 GENERAL. 14.1 Waiver; Amendments. No delay on the part of the Administrative Agent or any Lender in the exercise of any right, power or remedy shall operate as a waiver thereof, nor shall any single or partial exercise by any of them of any right, power or remedy preclude other or further exercise thereof, or the exercise of any other right, power or remedy. No amendment, modification or waiver of, or consent with respect to, any provision of this Agreement or the Notes shall in any event be effective unless the same shall be in writing and signed and delivered by the Administrative Agent and signed and delivered by -40- 42 Lenders having an aggregate Percentage of not less than the aggregate Percentage expressly designated herein with respect thereto or, in the absence of such designation as to any provision of this Agreement or the Notes, by the Required Lenders, and then any such amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No amendment, modification, waiver or consent shall (i) extend or increase the amount of the Commitments, (ii) extend the date for payment of any principal of or interest on the Loans or any fees payable hereunder, (iii) reduce the principal amount of any Loan, the rate of interest thereon or any fees payable hereunder, (iv) change the definition of Required Lenders or otherwise reduce the aggregate Percentage required to effect an amendment, modification, waiver or consent or (v) amend this sentence without, in each case, the consent of all Lenders. No provisions of Section 13 shall be amended, modified or waived without the written consent of the Administrative Agent. 14.2 Confirmations. The Company and each holder of a Note agree from time to time, upon written request received by it from the other, to confirm to the other in writing (with a copy of each such confirmation to the Administrative Agent) the aggregate unpaid principal amount of the Loans then outstanding under such Note. 14.3 Notices. Except as otherwise provided in Sections 2.3, 2.4 and 4.3, all notices hereunder shall be in writing (including, without limitation, facsimile transmission) and shall be sent to the applicable party at its address shown below its signature hereto or at such other address as such party may, by written notice received by the other party, have designated as its address for such purpose. Notices sent by facsimile transmission shall be deemed to have been given when sent; notices sent by mail shall be deemed to have been given three Business Days after the date when sent by registered or certified mail, postage prepaid; and notices sent by hand delivery shall be deemed to have been given when received. For purposes of Sections 2.3, 2.4 and 4.3, the Administrative Agent shall be entitled to rely on telephonic instructions from any person that the Administrative Agent in good faith believes is an authorized officer or employee of the Company, and the Company shall hold the Administrative Agent and each Lender harmless from -41- 43 any loss, cost or expense resulting from any such reliance. 14.4 Costs, Expenses and Taxes. The Company agrees to pay on demand all reasonable out-of-pocket costs and expenses of the Agents and the Co-Arrangers (including the fees and charges of counsel for the Administrative Agent and of local counsel, if any, who may be retained by said counsel) in connection with the preparation, execution, delivery and administration of this Agreement and all other documents provided for herein or delivered or to be delivered hereunder or in connection herewith (including, without limitation, any amendment, supplement or waiver to this Agreement or any such other document). The Company further agrees to pay all reasonable out-of-pocket costs and expenses (including reasonable attorneys' fees, court costs and other legal expenses and allocated costs of staff counsel) incurred by each Agent, each Co-Arranger and each Lender in connection with (i) the negotiation of any restructuring or "work-out" (whether or not consummated) of the obligations of the Company hereunder and (ii) the enforcement of this Agreement or any other document provided for herein or delivered or to be delivered hereunder or in connection herewith. In addition, the Company agrees to pay, and to save the Agents, the Co-Arrangers and the Lenders harmless from all liability for, any stamp or other similar taxes which may be payable in connection with the execution and delivery of this Agreement, the borrowings hereunder, the issuance of the Notes or the execution and delivery of any other document provided for herein or delivered or to be delivered hereunder or in connection herewith. All obligations provided for in this Section 14.4 shall survive repayment of the Loans, cancellation of the Notes and any termination of this Agreement. 14.5 Successors and Assigns. This Agreement shall be binding upon the Company, the Lenders and the Administrative Agent and their respective successors and assigns, and shall inure to the benefit of the Company, the Lenders and the Administrative Agent and the successors and assigns of the Lenders and the Administrative Agent. The Company may not assign its rights or obligations hereunder without the prior written consent of all Lenders. -42- 44 14.6 Assignments; Participations. 14.6.1 Assignments. Any Lender may, with the prior written consents of the Company and the Administrative Agent (which consents shall not be unreasonably delayed or withheld), at any time assign and delegate to one or more commercial banks or other Persons (any Person to whom such an assignment and delegation is to be made being herein called an "Assignee"), all or any fraction of such Lender's Loans and Commitment (which assignment and delegation shall be of a constant, and not a varying, percentage of all the assigning Lender's Loans and Commitment) in a minimum aggregate amount equal to the lesser of (i) the assigning Lender's remaining Commitment and (ii) $5,000,000; provided, however, that (a) no assignment and delegation may be made to any Person if, at the time of such assignment and delegation, the Company would be obligated to pay any greater amount under Section 4.1(b), 7.6 or 8 to the Assignee than the Company is then obligated to pay to the assigning Lender under such Section and (b) the Company and the Administrative Agent shall be entitled to continue to deal solely and directly with such Lender in connection with the interests so assigned and delegated to an Assignee until the date when all of the following conditions shall have been met: (x) five Business Days (or such lesser period of time as the Administrative Agent and the assigning Lender shall agree) shall have passed after written notice of such assignment and delegation, together with payment instructions, addresses and related information with respect to such Assignee, shall have been given to the Company and the Administrative Agent by such assigning Lender and the Assignee, (y) the assigning Lender and the Assignee shall have executed and delivered to the Company and the Administrative Agent an assignment agreement substantially in the form of Exhibit E (an "Assignment Agreement"), together with any documents required to be delivered thereunder, which Assignment Agreement shall have been accepted by the Administrative Agent and the Company, and (z) the assigning Lender or the Assignee shall have paid the Administrative Agent a processing fee of $2,500. -43- 45 From and after the date on which the conditions described above have been met, (x) such Assignee shall be deemed automatically to have become a party hereto and, to the extent that rights and obligations hereunder have been assigned and delegated to such Assignee pursuant to such Assignment Agreement, shall have the rights and obligations of a Lender hereunder, and (y) the assigning Lender, to the extent that rights and obligations hereunder have been assigned and delegated by it pursuant to such Assignment Agreement, shall be released from its obligations hereunder. Within five Business Days after effectiveness of any assignment and delegation, the Company shall execute and deliver to the Administrative Agent (for delivery to the Assignee and the Assignor, as applicable) a new Note in the principal amount of the Assignee's Commitment and, if the assigning Lender has retained a Commitment hereunder, a replacement Note in the principal amount of the Commitment retained by the assigning Lender (such Note to be in exchange for, but not in payment of, the predecessor Note held by such assigning Lender). Each such Note shall be dated the effective date of such assignment. The assigning Lender shall mark the predecessor Note "exchanged" and deliver it to the Company. Accrued interest on that part of the predecessor Note being assigned shall be paid as provided in the Assignment Agreement. Accrued interest and fees on that part of the predecessor Note not being assigned shall be paid to the assigning Lender. Accrued interest and accrued fees shall be paid at the same time or times provided in the predecessor Note and in this Agreement. Any attempted assignment and delegation not made in accordance with this Section 14.6.1 shall be null and void. Notwithstanding the foregoing provisions of this Section 14.6.1 or any other provision of this Agreement, any Lender may at any time assign all or any portion of its Loans and its Note to a Federal Reserve Bank (but no such assignment shall release any Lender from any of its obligations hereunder). 14.6.2 Participations. Any Lender may at any time sell to one or more commercial banks or other Persons participating interests in any Loan owing to such Lender, the Note held by such Lender, the Commitment of such Lender or any other interest of such Lender hereunder (any Person purchasing any such participating interest being herein called a "Participant"). In the event of a sale by a Lender of a participating interest to a -44- 46 Participant, (x) such Lender shall remain the holder of its Note for all purposes of this Agreement and (y) the Company and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations hereunder. No Participant shall have any direct or indirect voting rights hereunder (except that a Lender may grant a Participant rights with respect to any of the events described in the penultimate sentence of Section 14.1). The Company agrees that if amounts outstanding under this Agreement and any Note are due and payable (as a result of acceleration or otherwise), each Participant shall be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement and any Note to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement or such Note; provided that such right of setoff shall be subject to the obligation of each Participant to share with the Lenders, and the Lenders agree to share with each Participant, as provided in Section 7.5. The Company also agrees that each Participant shall be entitled to the benefits of Sections 4.1(b), 7.6 and 8 as if it were a Lender (provided that no Participant shall receive any greater compensation pursuant to such Sections than would have been paid to the participating Lender if no participation had been sold). 14.7 Governing Law. This Agreement and each Note shall be a contract made under and governed by the laws of the State of Illinois applicable to contracts made and to be performed entirely within the State of Illinois. Whenever possible each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. All obligations of the Company and rights of the Administrative Agent and the Lenders expressed herein or in the Notes shall be in addition to and not in limitation of those provided by applicable law. 14.8 Counterparts; Effectiveness. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts and each such counterpart -45- 47 shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Agreement. When counterparts executed by all of the parties hereto shall have been lodged with the Administrative Agent (or, in the case of any Lender as to which an executed counterpart shall not have been so lodged, the Administrative Agent shall have received confirmation from such Lender of execution of a counterpart hereof by such Lender), this Agreement shall become effective as of the date hereof, and at such time the Administrative Agent shall notify the Company and each Lender. 14.9 Computations. Where the character or amount of any asset or liability or item of income or expense is required to be determined, or any consolidation or other accounting computations is required to be made, for the purpose of this Agreement, such determination or calculation shall, to the extent applicable and except as otherwise specified in this Agreement, be made in accordance with generally accepted accounting principles applied on a basis consistent with those used in the preparation of the Company's audited financial statements for the fiscal year of the Company ended December 31, 1995. -46- 48 Delivered at Chicago, Illinois, as of the day and year first above written. ILLINOVA CORPORATION By______________________________ Title___________________________ Illinova Corporation 500 South 27th Street Decatur, Illinois 60525 Attention: Treasurer Telephone: 217-424-6600 Facsimile: 217-424-6978 With a copy to: Schiff Hardin & Waite 7200 Sears Tower 233 South Wacker Drive Attention: Robert J. Regan Telephone: (312) 258-5600 Facsimile: (312) 258-5606 CIBC INC., individually and as Administrative Agent By________________________________ Title_____________________________ CIBC Inc. 425 Lexington Avenue Syndications, 7th Floor New York, New York 10017 Attention: Cynthia Trust Telephone: (212) 856-3675 Facsimile: (212) 856-3763 -47- 49 With a copy to: CIBC Inc. 200 West Madison, Suite 2300 Chicago, Illinois 60606 Attention: Utilities Group Telephone: 312-855-3252 Facsimile: 312-750-0927 THE FIRST NATIONAL BANK OF CHICAGO By________________________________ Title_____________________________ The First National Bank of Chicago One First National Plaza Chicago, Illinois 60670 Attention: Richard H. Waldman Telephone: (312) 732-3520 Facsimile: (312) 732-3055 -48- 50 SCHEDULE I COMMITMENTS AND PERCENTAGES
Lender Commitment Percentage - ------ ---------- ---------- CIBC Inc. $ 50,000,000 50% The First National Bank $ 50,000,000 50% of Chicago ------------ -- $100,000,000 100%
51 SCHEDULE II PRICING SCHEDULE The Applicable Margin and Non-Use Fee Rate shall be determined based on the then-current Rating Level as set forth below.
========================================================================================= Rating Applicable Non-Use Fee Level Margin Rate ------- ---------- ----------- - ----------------------------------------------------------------------------------------- 1 0.550% 0.150% - ----------------------------------------------------------------------------------------- 2 0.650% 0.175% - ----------------------------------------------------------------------------------------- 3 0.875% 0.200% - ----------------------------------------------------------------------------------------- 4 1.250% 0.250% ==========================================================================================
52 EXHIBIT A FORM OF NOTE $___________ ___________, 199_ Chicago, Illinois FOR VALUE RECEIVED, the undersigned promises to pay to the order of _________________, at the principal office of CIBC INC. (the "Administrative Agent"), in New York, New York, on the date set forth in the Credit Agreement referred to below, ______________________ Dollars ($____________) or, if less, the aggregate unpaid amount of all Loans made by the payee to the undersigned pursuant to the Credit Agreement (as shown in the records of the payee or, at the payee's option, on the schedule attached hereto and any continuation thereof). The undersigned further promises to pay interest on the unpaid principal amount of each Loan evidenced hereby from the date of such Loan until such Loan is paid in full, payable at the rate(s) and at the time(s) set forth in the Credit Agreement. Payments of both principal and interest are to be made in lawful money of the United States of America. This Note evidences indebtedness incurred under, and is subject to the terms and provisions of, the Credit Agreement, dated as of June 12, 1996 (herein, as amended or otherwise modified from time to time, called the "Credit Agreement"; terms not otherwise defined herein are used herein as defined in the Credit Agreement), among the undersigned, certain financial institutions (including the payee) and the Administrative Agent, to which Credit Agreement reference is hereby made for a statement of the terms and provisions under which this Note may or must be paid prior to its due date or may have its due date accelerated. In addition to and not in limitation of the foregoing and the provisions of the Credit Agreement, the undersigned further agrees, subject only to any limitation imposed by applicable law, to pay all reasonable expenses, including reasonable attorneys' fees and legal expenses, incurred by the holder of this Note in endeavoring to collect any amounts payable hereunder which are not paid when due, whether by acceleration or otherwise. Each of the Company and each guarantor hereof waives demand, presentment, 53 protest, diligence, notice of dishonor and any other formality in connection with this Note. This Note is made under and governed by the internal laws of the State of Illinois. ILLINOVA CORPORATION By ----------------------------- Title --------------------------- -2- 54 Schedule Attached to Note dated __________, 199_ of ILLINOVA CORPORATION payable to the order of ________________________. Date and Date and Amount of Amount of Loan or of Repayment or of conversion from conversion into Unpaid another type of another type of Interest Principal Notation Loan Loan Period Balance Made by
1. FLOATING RATE LOANS ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ 2. EURODOLLAR LOANS ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ -3- 55 ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ -4- 56 EXHIBIT B SCHEDULE OF SIGNIFICANT SUBSIDIARIES Percentage Ownership of the Company Name of Significant State of and its Subsidiary Organization Subsidiaries - ------------------- ------------ ------------ Illinois Power Illinois 100% Company
57 EXHIBIT C SCHEDULE OF DEBT
Description of Debt Amount - ------------------- ------ Illinois Generating Company equity guarantee for the Tenaska Washington Partners II, IPG Frederickson, Inc. project $7,670,000 Illinova Generating Company equity guarantee for the Tenaska IV Texas Partners, IGC Brazos, Inc. project 4,867,000 Illinova Generating Company equity guarantee for the Aguaytia energy, L.L.C., IGC Aguaytia Partners, L.L.C., Project 21,718,000 Illinova letters of credit for the Tenaska Uch Power Project 4,344,000 Illinova letters of credit for the Tenaska Uch Power Project 17,619,000 Illinova guarantees for the account Tenaska Marketing Ventures 23,561,000 Tenaska Marketing Ventures hedging position Mark to Market 5,244,000*
* As of June 7, 1996 58 EXHIBIT D FORM OF OPINION OF COUNSEL FOR THE COMPANY June __, 1996 CIBC INC., individually and as Administrative Agent, and the other financial institutions which are parties to the Credit Agreement referred to below 200 West Madison Chicago, Illinois 60606 Re: Credit Agreement, dated as of June 12, 1996, with Illinova Corporation Ladies and Gentlemen: We have acted as counsel for Illinova Corporation, an Illinois corporation (the "Company"), in connection with the execution and delivery of the Credit Agreement, dated as of June 12, 1996 (the "Credit Agreement"), among the Company, the financial institutions which are parties thereto (the "Lenders"), and CIBC Inc., as administrative agent for the Lenders. We are rendering this opinion at the request of the Company as required by Section 11.1.5 of the Credit Agreement. Unless otherwise defined herein, capitalized terms used herein shall have the respective meanings assigned to such terms in the Credit Agreement. In this connection, we have examined an original or a copy of the following: (a) The Credit Agreement; (b) The form of Notes to be issued by the Company to each Lender; (c) The Articles of Incorporation and By-Laws of the Company; and (d) Resolutions adopted at a meeting of the Board of Directors of the Company on June 11, 1996 (the "Resolutions"), certified by the Secretary of the 59 Company. We have examined such other records, documents, proceedings and certificates of officers and representatives of the Company and made such other examinations as we have deemed necessary in order to enable us to give the opinions hereinafter contained. For purposes of this opinion, we have assumed (a) the genuineness of the signatures, and the authority, of persons signing all documents in connection with which this opinion is rendered on behalf of parties other than the Company, (b) the authenticity of all documents submitted to us as originals, (c) the conformity to authentic original documents of all documents submitted to us as certified or photostatic copies, and (d) that the Credit Agreement is the legal, valid and binding obligation of the parties thereto other than the Company. Based upon and subject to the foregoing, and subject to the qualifications set forth below, we are of the opinion that: (1) The Company and Illinois Power Company are corporations duly incorporated, validly existing and in good standing under the laws of the jurisdiction of their respective incorporation. (2) The Company has full corporate power to execute, deliver and perform the Credit Agreement and the Notes, to borrow moneys under the Credit Agreement, and to perform its obligations under the Credit Agreement and the Notes. (3) The execution and delivery of the Credit Agreement and the Notes and the borrowing of Loans under the Credit Agreement, and the performance by the Company of its obligations under the Credit Agreement and the Notes have been duly authorized by all necessary corporate action, have received all necessary governmental and regulatory approval, and do not and will not violate, or result in the creation or imposition of a Lien under, any provision of law or of the Articles of Incorporation or By-Laws of the Company or, to our knowledge, of any agreement, instrument, order or decree that is binding upon the Company. (4) The Credit Agreement has been duly executed and delivered by the Company, and the Credit Agreement is, and the Notes, when duly executed and delivered by the Company will be, -2- 60 legal, valid and binding obligations of the Company, enforceable in accordance with their terms. Our opinion is subject to the following qualifications: (a) We express no opinion as to the effect of the law of any jurisdiction other than the State of Illinois. (b) We express no opinion with respect to the rights of any Participant under Section 7.4 of the Credit Agreement. (c) Our opinion in paragraph (4) above is subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors' rights generally and to the effect of general principles of equity (regardless of whether considered in a proceeding in equity or at law), including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing. (d) We express no opinion with respect to indemnification or contribution obligations which contravene public policy. We are members of the bar of the State of Illinois, and the foregoing opinion is limited to the laws of the State of Illinois and the Federal law of the United States of America. Very truly yours, -3- 61 EXHIBIT E FORM OF ASSIGNMENT AGREEMENT Date: ______________ To: Illinova Corporation and CIBC Inc., as Administrative Agent Re: Assignment under the Credit Agreement referred to below Gentlemen and Ladies: We refer to Section 14.6.1 of the Credit Agreement dated as of June 12, 1996 (as amended or otherwise modified, the "Credit Agreement") among Illinova Corporation (the "Company"), various financial institutions and CIBC Inc., as administrative agent (the "Administrative Agent"). Unless otherwise defined herein or the context otherwise requires, terms used herein have the meanings provided in the Credit Agreement. _____________________ (the "Assignor") hereby sells and assigns to ______________ (the "Assignee"), and the Assignee hereby purchases and assumes from the Assignor, that interest in and to the Assignor's rights and obligations under the Credit Agreement as of the date hereof equal to ____% of all of the Loans and Commitments, such sale, purchase, assignment and assumption to be effective as of ______________, 199__, or such later date on which the Company and the Administrative Agent shall have consented hereto (the "Effective Date"). After giving effect to such sale, purchase, assignment and assumption, the Assignee's Percentage for purposes of the Credit Agreement will be as set forth opposite the Assignee's name on the signature pages hereof. The Assignor hereby instructs the Administrative Agent to make all payments from and after the Effective Date in respect of the interest assigned hereby directly to the Assignee. The Assignor and the Assignee agree that all interest and fees accrued up to, but not including, the Effective Date are the property of the Assignor, and not the Assignee. The Assignee 62 agrees that, upon receipt of any such interest or fees, the Assignee will promptly remit the same to the Assignor. The Assignee hereby confirms that it has received a copy of the Credit Agreement and the exhibits related thereto, together with copies of the documents which were required to be delivered under the Credit Agreement as a condition to the making of the initial Loans thereunder. The Assignee acknowledges and agrees that it (i) has made and will continue to make such inquiries and has taken and will take such care on its own behalf as would have been the case had its Commitment been granted and its Loans been made directly by the Assignee to the Company without the intervention of the Administrative Agent, the Assignor or any other Lender and (ii) has made and will continue to make, independently and without reliance upon the Administrative Agent, the Assignor or any other Lender and based on such documents and information as it has deemed appropriate, its own credit analysis and decisions relating to the Credit Agreement. The Assignee further acknowledges and agrees that neither the Administrative Agent nor the Assignor has made any representation or warranty about the creditworthiness of the Company or any other party to the Credit Agreement or with respect to the legality, validity, sufficiency or enforceability of the Credit Agreement or any Note or the value of any security therefor. This assignment shall be made without recourse to the Assignor. The Assignor represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim. The Assignee represents and warrants to the Company and the Administrative Agent that, as of the date hereof, the Company will not be obligated to pay any greater amount under Section 7.6 or 8.1 of the Credit Agreement than the Company is obligated to pay to the Assignor under such Section. Except as otherwise provided in the Credit Agreement, effective as of the Effective Date: (a) the Assignee (i) shall be deemed automatically to have become a party to the Credit Agreement and have all the rights and obligations of a "Lender" under the Credit -2- 63 Agreement as if it were an original signatory thereto to the extent specified in the second paragraph hereof; and (ii) agrees to be bound by the terms and conditions set forth in the Credit Agreement as if it were an original signatory thereto; and (b) the Assignor shall be released from its obligations under the Credit Agreement to the extent specified in the second paragraph hereof. The Assignor and the Assignee hereby agree that the [Assignor] [Assignee] will pay to the Administrative Agent the processing fee referred to in Section 14.6 of the Credit Agreement. The payment of the processing fee shall be a condition to the effectiveness of this assignment. The Assignee hereby advises each of you of the following administrative details with respect to the assigned Loans and Commitment: (A) Address for Notices: Institution Name: Address: Attention: Telephone: Facsimile: (B) Payment Instructions: Please evidence your receipt hereof and consent to the sale, assignment, purchase and assumption set forth herein by signing and returning counterparts hereof to the Assignor and the Assignee. Percentage = % [ASSIGNEE] --- -3- 64 By: --------------------- Title: [ASSIGNOR] By: -------------------- Title: ACKNOWLEDGED AND CONSENTED TO this ____ day of ________, 199_ CIBC INC., as Administrative Agent By: ---------------------------------- Title: ---------------------------- ACKNOWLEDGED AND CONSENTED TO this ___ day of _____________, 199__ ILLINOVA CORPORATION By: ---------------------------------- Title: ---------------------------- -4- 65 EXHIBIT F COMPLIANCE (SECTION 9.15) NONE 66 EXHIBIT G LIENS (SECTION 10.14) NONE 67 EXHIBIT H SECTION 9 OF ILLINOIS POWER CREDIT AGREEMENT 68 TABLE OF CONTENTS
PAGE ---- SECTION 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 1.3 Cross-References; Section Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 SECTION 2 COMMITMENTS OF THE LENDERS; TYPES OF LOANS; BORROWING AND CONVERSION PROCEDURES. . . . . 8 2.1 Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.2 Various Types of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.3 Borrowing Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.4 Conversion Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.5 Warranty upon Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.6 Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.7 Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.8 Commitments Several . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 SECTION 3 NOTES EVIDENCING LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 3.1 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 3.2 Recordkeeping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 SECTION 4 INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 4.1 Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 4.2 Interest Payment Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 4.3 Interest Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 4.4 Setting and Notice of Eurodollar Rates . . . . . . . . . . . . . . . . . . . . . . . . .12 4.5 Computation of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 SECTION 5 FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 5.1 Non-Use Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 5.2 Administrative Agent's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 SECTION 6 REDUCTION OR TERMINATION OF THE COMMITMENTS; PREPAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 6.1 Reduction or Termination of the Commitments . . . . . . . . . . . . . . . . . . . . . .13 6.2 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES . . . . . . . . . . . . . . . . . . . .13
-i- 69 TABLE OF CONTENTS (CONTINUED)
PAGE ---- 7.1 Making of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 7.2 Application of Certain Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 7.3 Due Date Extension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 7.4 Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 7.5 Proration of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 7.6 Payments Net of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 SECTION 8 INCREASED COSTS; SPECIAL PROVISIONS FOR EURODOLLAR LOANS. . . . . . . . . . . . . . . . .15 8.1 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 8.2 Basis for Determining Interest Rate Inadequate or Unfair . . . . . . . . . . . . . . . .17 8.3 Changes in Law Rendering Eurodollar Loans Unlawful. . . . . . . . . . . . . . . . . . . .17 8.4 Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18 8.5 Right of Lenders to Fund through Other Offices . . . . . . . . . . . . . . . . . . . . .18 8.6 Discretion of Lenders as to Manner of Funding . . . . . . . . . . . . . . . . . . . . .18 8.7 Mitigation of Circumstances; Replacement of Affected Lender . . . . . . . . . . . . . . .19 8.8 Conclusiveness of Statements; Survival of Provisions . . . . . . . . . . . . . . . . . .19 SECTION 9 WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 9.1 Organization, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 9.2 Authorization; No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 9.3 Validity and Binding Nature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 9.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 9.5 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 9.6 Litigation and Contingent Liabilities . . . . . . . . . . . . . . . . . . . . . . . . .21 9.7 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 9.8 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 9.9 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 9.10 Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 9.11 Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . .22 9.12 Regulation U . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 9.13 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 9.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 9.15 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
-ii- 70 TABLE OF CONTENTS (CONTINUED)
PAGE ---- SECTION 10 COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 10.1 Reports, Certificates and Other Information . . . . . . . . . . . . . . . . . . . . . .22 10.1.1 Annual Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 10.1.2 Interim Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 10.1.3 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 10.1.4 Reports to SEC and to Shareholders . . . . . . . . . . . . . . . . . . . .23 10.1.5 Notice of Default and ERISA Matters . . . . . . . . . . . . . . . . . . . .23 10.1.6 Significant Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . .24 10.1.7 Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24 10.2 Books, Records, and Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . .24 10.3 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24 10.4 Taxes and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24 10.5 Mergers, Consolidations, Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24 10.6 Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24 10.7 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25 10.8 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25 10.9 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25 10.10 Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25 10.11 Restrictions on Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25 10.12 Illinois Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25 10.13 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26 10.14 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26 10.15 Illinova Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 10.16 Illinois Power Stock Repurchase Capacity . . . . . . . . . . . . . . . . . . . . . . . .27 SECTION 11 CONDITIONS OF LENDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 11.1 Initial Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 11.1.1 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 11.1.2 Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 11.1.3 Consents, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28 11.1.4 Incumbency and Signature Certificates . . . . . . . . . . . . . . . . . . .28 11.1.5 Opinion of Counsel for the Company . . . . . . . . . . . . . . . . . . . .28 11.1.6 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28 11.2 All Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28 11.2.1 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28 11.2.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
-iii- 71 TABLE OF CONTENTS (CONTINUED)
PAGE ---- SECTION 12 EVENTS OF DEFAULT AND THEIR EFFECT . . . . . . . . . . . . . . . . . . . . . . . . . . .28 12.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28 12.1.1 Non-Payment of the Loans, etc. . . . . . . . . . . . . . . . . . . . . . .29 12.1.2 Non-Payment of Other Debt . . . . . . . . . . . . . . . . . . . . . . . . .29 12.1.3 Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29 12.1.4 Bankruptcy, Insolvency, etc . . . . . . . . . . . . . . . . . . . . . . . .29 12.1.5 Non-Compliance with Provisions of this Agreement . . . . . . . . . . . . .30 12.1.6 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . .30 12.1.7 Ownership of Significant Subsidiaries . . . . . . . . . . . . . . . . . . .30 12.1.8 Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30 12.1.9 Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30 12.1.10 Environmental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 12.2 Effect of Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 SECTION 13 THE ADMINISTRATIVE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 13.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 13.2 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 13.3 Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32 13.4 Credit Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32 13.5 Administrative Agent and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . .32 13.6 Action on Instructions of the Required Lenders . . . . . . . . . . . . . . . . . . . . .33 13.7 Funding Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33 13.8 Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34 SECTION 14 GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34 14.1 Waiver; Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34 14.2 Confirmations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35 14.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35 14.4 Costs, Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35 14.5 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36 14.6 Assignments; Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36 14.6.1 Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36 14.6.2 Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38 14.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38 14.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
-iv- 72 SCHEDULE I Commitments and Percentages SCHEDULE II Pricing Schedule EXHIBIT A Form of Note (Section 3.1) EXHIBIT B Schedule of Significant Subsidiaries (Section 9.8) EXHIBIT C Schedule of Debt (Section 9.13) EXHIBIT D Form of Opinion of Counsel for the Company (Section 11.1.5) EXHIBIT E Form of Assignment Agreement (Section 14.6.1) EXHIBIT F Compliance (Section 9.15) EXHIBIT G Liens (Section 10.14) EXHIBIT H Illinois Power Credit Agreement (Section 10.12)
-v- 73 FIRST AMENDMENT Dated as of June 28, 1996 THIS FIRST AMENDMENT dated as of June 28, 1996 amends the Credit Agreement dated as of June 12, 1996 (the "Credit Agreement") among ILLINOVA CORPORATION (the "Company"), various financial institutions and CIBC INC., as Administrative Agent (the "Administrative Agent"). Terms defined in the Credit Agreement are, unless otherwise defined herein or the context otherwise requires, used herein as defined therein. WHEREAS, the Company, the Administrative Agent and the Lenders have entered into the Credit Agreement which provides for the Lenders to make Loans to the Company from time to time; and WHEREAS, the parties hereto desire to amend the Credit Agreement in certain respects as hereinafter set forth; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties hereto agree as follows: SECTION 15 AMENDMENTS. Effective on (and subject to the occurrence of) the First Amendment Effective Date (as defined below), the Credit Agreement shall be amended in accordance with Sections 1.1 through 1.3 below. 15.1 Addition of Lenders. The Credit Agreement is amended to include each of Bank of America Illinois, The First National Bank of Boston, Bank of Montreal, The Fuji Bank, Limited, ABN AMRO Bank N.V., The Bank of New York and Deutsche Bank A.G. (collectively, the "Purchasing Lenders" and each individually a "Purchasing Lender") as a party to the Credit Agreement, as amended hereby (as so amended, the "Amended Credit Agreement"), and each such entity shall have all rights and obligations of a Lender under the Amended Credit Agreement. 74 15.2 Section 2.1. Section 2.1 of the Credit Agreement is amended by deleting the amount "$100,000,000" therein and substituting therefor the amount "$150,000,000". 15.3 Section 9.8. Section 9.8 of the Credit Agreement is amended by deleting the language "free and clear of any Lien" at the end of such Section. 15.4 Section 11.2.1. The parenthetical in clause (b) of Section 11.2.1 of the Credit Agreement is amended in its entirety to read as follows: (excluding (i) the second sentence of Section 9.6 and (ii) the first sentence of Section 9.8) 15.5 Section 12.1.7. Section 12.1.7 of the Credit Agreement is amended in its entirety to read as follows: 12.1.7 Ownership of Significant Subsidiaries. The Company shall fail at any time to own, directly or indirectly, all of the capital stock of each Subsidiary which is at any time a Significant Subsidiary. 15.6 Schedule I. Schedule I of the Credit Agreement is amended in its entirety to read in the form of Schedule I attached hereto. SECTION 16 ASSIGNMENTS. In furtherance of the amendments set forth in Sections 1.1 and 1.3, on the First Amendment Effective Date each of CIBC Inc. and The First National Bank of Chicago (collectively, the "Assigning Lenders") shall sell assignments to the Purchasing Lenders, and each of the Purchasing Lenders shall purchase assignments from each of the Assigning Lenders, so that, after giving effect to such purchases and sales, each Lender will have a pro rata share (according to its Percentage, after giving effect to Section 1.6) of all Types of Loans. All payments shall be made in immediately available funds by the Purchasing Lenders to the Administrative Agent for the account of the Assigning Lenders at the office of the Administrative Agent in New York not later than 1:00 p.m., New York time, on the First Amendment Effective Date. The -2- 75 Administrative Agent shall promptly remit to each Assigning Lender its share of all such payments. SECTION 17 REPRESENTATIONS AND WARRANTIES. The Company represents and warrants to the Administrative Agent and the Lenders that (a) each warranty set forth in Section 9 of the Amended Credit Agreement is true and correct as on the date hereof, (b) the execution and delivery by the Company of this First Amendment and the New Notes (as defined below) and the performance by the Company of its obligations under the Amended Credit Agreement and the New Notes (i) are within the corporate powers of the Company, (ii) have been duly authorized by all necessary corporate action, (iii) have received all necessary governmental approvals and (iv) do not and will not contravene or conflict with any provision of law or of the articles of incorporation or by-laws of the Company or of any indenture, loan agreement or other contract, order or decree which is binding upon the Company and (c) each of the Amended Credit Agreement and each New Note is the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. SECTION 18 EFFECTIVENESS. The amendments and assignments set forth in Sections 1 and 2 above shall become effective, as of the day and year first above written, on such date (the "First Amendment Effective Date") which is the later to occur of (i) June 28, 1996 and (ii) the date on which the Administrative Agent shall have received (a) counterparts of this First Amendment executed by all of the parties hereto and (b) each of the following documents in form and substance satisfactory to the Administrative Agent: 18.1 New Notes. Promissory notes (the "New Notes") of the Company, in the form of Exhibit A to the Credit Agreement, payable to the order of the Lenders in the amount of their respective Commitments after giving effect hereto. 18.2 Resolutions. Certified copies of resolutions of the Board of Directors of the Company authorizing the execution and delivery by the Company of this First Amendment and the New Notes and the performance by the -3- 76 Company of this First Amendment, the Amended Credit Agreement and the New Notes. 18.3 Incumbency and Signature Certificates. A certificate of the Secretary or an Assistant Secretary of the Company certifying the names of the officer or officers of the Company authorized to sign this First Amendment, the New Notes and any other document to be executed pursuant to this First Amendment or the Amended Credit Agreement, together with a sample of the true signature of each such officer (it being understood that the Administrative Agent and each Lender may conclusively rely on each such certificate until formally advised by a like certificate of any changes therein). 18.4 Opinion of Counsel for the Company. The opinion of Schiff Hardin & Waite, counsel to the Company, substantially in the form of Exhibit A. 18.5 Other. Such other documents as the Administrative Agent or any Lender may reasonably request. SECTION 19 MISCELLANEOUS. 19.1 Continuing Effectiveness, etc. As herein amended, the Credit Agreement shall remain in full force and effect and is atified and confirmed in all respects. After the First Amendment Effective Date, all references in the Credit Agreement and the New Notes to "Credit Agreement", "Agreement" or similar terms shall refer to the Amended Credit Agreement. 19.2 Counterparts. This First Amendment may be executed in any number of counterparts and by the different parties on separate counterparts, and each such counterpart shall be deemed to be an original but all such counterparts shall together constitute one and the same First Amendment. 19.3 Governing Law. This First Amendment shall be a contract made under and governed by the internal laws of the State of Illinois. -4- 77 19.4 Successors and Assigns. This First Amendment shall be binding upon the Company, the Lenders and the Administrative Agent and their respective successors and assigns, and shall inure to the benefit of the Company, the Lenders and the Administrative Agent and the respective successors and assigns of the Administrative Agent and the Lenders. 19.5 New Lenders. On the First Amendment Effective Date each of Bank of America Illinois, The First National Bank of Boston, Bank of Montreal, The Fuji Bank, Limited, ABN AMRO Bank N.V., The Bank of New York and Deutsche Bank A.G. shall become a party to the Amended Credit Agreement as fully as if it were named as a "Lender" thereunder, shall assume all of the rights and obligations of a Lender under the Amended Credit Agreement, and shall be governed by the terms and provisions of the Amended Credit Agreement. 19.6 Return of Old Notes. As promptly as practicable after the First Amendment Effective Date, each Assigning Lender shall return to the Company the notes previously issued to such Assigning Lender under the Credit Agreement marked to show that such notes have been superseded. -5- 78 Delivered at Chicago, Illinois, as of the day and year first above written. ILLINOVA CORPORATION By ---------------------------- Title ------------------------- CIBC INC., as Administrative Agent By ----------------------------- Title -------------------------- THE FIRST NATIONAL BANK OF CHICAGO By ---------------------------- Title -------------------------- BANK OF AMERICA ILLINOIS By ----------------------------- Title -------------------------- -6- 79 THE FIRST NATIONAL BANK OF BOSTON By ----------------------------- Title -------------------------- BANK OF MONTREAL By ----------------------------- Title -------------------------- THE FUJI BANK, LIMITED By ----------------------------- Title -------------------------- ABN AMRO BANK N.V. CHICAGO BRANCH By: ABN AMRO NORTH AMERICA, INC., its agent By ----------------------------- Title -------------------------- THE BANK OF NEW YORK -7- 80 By ----------------------------- Title -------------------------- -8- 81 DEUTSCHE BANK A.G. By ----------------------------- Title -------------------------- -9- 82 SCHEDULE I COMMITMENTS AND PERCENTAGES
Lender Commitment Percentage - ------ ---------- ---------- CIBC Inc. $ 23,000,000 15.333333333% The First National Bank $ 23,000,000 15.333333333% of Chicago Bank of America Illinois $ 17,000,000 11.333333333% The First National Bank $ 17,000,000 11.333333333% of Boston Bank of Montreal $ 17,000,000 11.333333333% The Fuji Bank, Limited $ 17,000,000 11.333333333% ABN AMRO Bank N.V. $ 12,000,000 8.000000000% The Bank of New York $ 12,000,000 8.000000000% Deutsche Bank A.G. $ 12,000,000 8.000000000% ------------ ------------ $150,000,000 100%
83 EXHIBIT A FORM OF OPINION -----END PRIVACY-ENHANCED MESSAGE-----