-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, qCdsEr17CaQ61d3gd1fKw1jAQqXgD6aHHS6bnVVl/D/1Ouh/qdclGUqlI4DdNWEc DLR5mHnOxlYAZj0eNqRJog== 0000950124-94-001398.txt : 19940823 0000950124-94-001398.hdr.sgml : 19940823 ACCESSION NUMBER: 0000950124-94-001398 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 19940822 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ILLINOIS POWER CO CENTRAL INDEX KEY: 0000049816 STANDARD INDUSTRIAL CLASSIFICATION: 4931 IRS NUMBER: 370344645 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 033-55165 FILM NUMBER: 94545190 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 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ILLINOIS POWER CAPITAL L P CENTRAL INDEX KEY: 0000928690 STANDARD INDUSTRIAL CLASSIFICATION: 0000 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 033-55165-01 FILM NUMBER: 94545191 BUSINESS ADDRESS: STREET 1: C/O THE CORPORATION TRUST COMPANY STREET 2: 1209 ORANGE STREET CITY: WILMINGTON STATE: DE ZIP: 19801 BUSINESS PHONE: 302-658-7581 MAIL ADDRESS: STREET 1: C/O THE CORPORATION TRUST CO STREET 2: 1209 ORANGE ST CITY: WILMINGTON STATE: DE ZIP: 19801 S-3 1 PROSPECTUS AND 2 PROSPECTUS SUPPLEMENTS 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 19, 1994 REGISTRATION NOS. 33- 33- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------ FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------ ILLINOIS POWER COMPANY (Exact name of registrant as specified in its charter) ILLINOIS (State or other jurisdiction of incorporation or organization) 37-0344645 (I.R.S. Employer Identification No.) LARRY D. HAAB CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER ILLINOIS POWER COMPANY 500 SOUTH 27TH STREET DECATUR, ILLINOIS 62525 (217) 424-6600 ILLINOIS POWER CAPITAL, L.P. (Exact name of registrant as specified in Limited Partnership Agreement) DELAWARE (State or other jurisdiction of incorporation or organization) APPLIED FOR (I.R.S. Employer Identification No.) C/O LARRY D. HAAB CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER ILLINOIS POWER COMPANY 500 SOUTH 27TH STREET DECATUR, ILLINOIS 62525 (217) 424-6600 (Address, including zip code, and telephone number, including area code, of registrants' principal executive offices and agent for service) PLEASE SEND COPIES OF ALL COMMUNICATIONS TO: ROBERT J. REGAN, ESQ. SCHIFF HARDIN & WAITE 7200 SEARS TOWER CHICAGO, ILLINOIS 60606 (312) 876-1000 KEVIN STACEY, ESQ. REID & PRIEST 40 WEST 57TH STREET NEW YORK, NEW YORK (212) 603-2144 ------------------ Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this Registration Statement. ------------------ If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box: / / IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED ON A DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT OF 1933, OTHER THAN SECURITIES OFFERED ONLY IN CONNECTION WITH DIVIDEND OR INTEREST REINVESTMENT PLANS, PLEASE CHECK THE FOLLOWING BOX: /X/ ------------------ CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ PROPOSED PROPOSED MAXIMUM MAXIMUM AMOUNT OFFERING PRICE AGGREGATE AMOUNT OF TITLE OF EACH CLASS OF SECURITIES TO BE PER UNIT OFFERING PRICE REGISTRATION TO BE REGISTERED REGISTERED(1) (1)(2)(3) (1)(2)(3) FEE(1) - ------------------------------------------------------------------------------------------------------------------------ Illinois Power Capital, L.P. Preferred Securities..... - ------------------------------------------------------------------------------------------------------------------------ Illinois Power Company Subordinated Debentures(4)..... - ------------------------------------------------------------------------------------------------------------------------ Illinois Power Company Guarantee with respect to Illinois Power Capital, L.P. Preferred Securities(4)....................................... - ------------------------------------------------------------------------------------------------------------------------ Total................................................. $100,000,000.00 100% $100,000.00 $34,483 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------
(1) Pursuant to Rule 457(o) under the Securities Act of 1933, which permits the registration fee to be calculated on the basis of the maximum offering price of all the securities listed, the table does not specify by each class information as to the amount to be registered, proposed maximum offering price per unit or proposed maximum aggregate offering price. (2) Estimated solely for the purpose of determining the registration fee. (3) Exclusive of accrued interest and dividends, if any. (4) No separate consideration will be received for Illinois Power Company's Subordinated Debentures or its Guarantee. ------------------ The Registrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrants shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 EXPLANATORY NOTE This Registration Statement contains two forms of Prospectus Supplement to the Prospectus included herein: the first form is to be used in connection with an offering by Illinois Power Capital, L.P. of fixed rate Cumulative Monthly Income Preferred Securities, and the second form is to be used in connection with an offering by Illinois Power Capital, L.P. of adjustable rate Cumulative Monthly Income Preferred Securities. 3 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED AUGUST 19, 1994 PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED AUGUST , 1994 PREFERRED SECURITIES ILLINOIS POWER CAPITAL % CUMULATIVE MONTHLY INCOME PREFERRED SECURITIES ("MIPS"*), SERIES A (LIQUIDATION PREFERENCE $25 PER PREFERRED SECURITY) GUARANTEED TO THE EXTENT ILLINOIS POWER CAPITAL HAS FUNDS AS SET FORTH HEREIN BY ILLINOIS POWER COMPANY ------------------------------ The % Cumulative Monthly Income Preferred Securities, Series A (the "Series A Preferred Securities"), representing the limited partner interests offered hereby, are being issued by Illinois Power Capital, L.P., a limited partnership formed under the laws of the State of Delaware ("Illinois Power Capital"). All of the general partner interests in Illinois Power Capital are owned by Illinois Power Company, an Illinois corporation (the "Company"). Illinois Power Capital exists for the sole purpose of issuing its partner interests and using the proceeds thereof to purchase certain debt securities of the Company. The proceeds of the Series A Preferred Securities will be used by Illinois Power Capital to purchase the Company's % Subordinated Deferrable Interest Debentures, Series A (the "Series A Subordinated Debentures"). The limited partner interests represented by the Series A Preferred Securities will have a preference with respect to cash distributions and amounts payable on liquidation over the general partner interests in Illinois Power Capital. Holders of the Series A Preferred Securities will be entitled to receive cumulative preferential cash distributions at an annual rate of % of the liquidation preference of $25 per Series A Preferred Security, accruing from the date of original issuance and payable monthly in arrears on the last day of each calendar month of each year, commencing , 1994 ("dividends"). The payment of dividends and payments on liquidation of Illinois Power Capital or the redemption of Series A Preferred Securities, to the extent that Illinois Power Capital has sufficient cash on hand to permit such payments and funds legally available therefor, are guaranteed by the Company to the extent set forth herein and in the accompanying Prospectus (the "Guarantee"). See "Description of the Guarantee" in the accompanying Prospectus. If the Company fails to make interest payments on the Series A Subordinated Debentures purchased by Illinois Power Capital with the proceeds of this offering, Illinois Power Capital will have insufficient funds to pay dividends on the Series A Preferred Securities. The Guarantee does not provide for payment by the Company directly of dividends for which Illinois Power Capital does not have sufficient funds available. In such event, the remedy of a holder of Series A Preferred Securities is to enforce Illinois Power Capital's rights under the Series A Subordinated Debentures purchased by Illinois Power Capital from the Company. The obligations of the Company under the Guarantee are subordinate and junior in right of payment to all liabilities of the Company, and the Company's obligations under the Series A Subordinated Debentures are subordinate and junior in right of payment to all present and future Senior Indebtedness (as defined in the accompanying Prospectus) of the Company. At June 30, 1994, Senior Indebtedness of the Company aggregated approximately $2.2 billion. The Series A Preferred Securities are redeemable at the option of Illinois Power Capital, in whole or in part, from time to time, on or after , 1999, at $25 per Series A Preferred Security plus any accumulated and unpaid dividends thereon to the date fixed for redemption (the "Redemption Price"), and will be redeemed at such price from the proceeds of any repayment or redemption of the Series A Subordinated Debentures. See "Description of Series A Preferred Securities -- Optional Redemption" and "-- Mandatory Redemption." In addition, upon the occurrence of certain special events arising from a change in law or a change in legal interpretation, the Series A Preferred Securities are redeemable in whole at the Redemption Price at the option of the Company, in its capacity as the general partner of Illinois Power Capital (the "General Partner"), or the General Partner may dissolve Illinois Power Capital and cause Series A Subordinated Debentures to be distributed to the holders of the Series A Preferred Securities in liquidation of their interests in Illinois Power Capital. See "Description of Series A Preferred Securities -- Special Event Redemption or Distribution" and "Description of the Series A Subordinated Debentures." If the Series A Subordinated Debentures are so distributed, the Company will use its best efforts to have them listed on the same exchange on which the Series A Preferred Securities are then listed. In the event of the dissolution of Illinois Power Capital, the holders of Series A Preferred Securities will be entitled to a liquidation preference for each Series A Preferred Security of $25 plus any accumulated and unpaid dividends thereon to the date of payment, subject to certain limitations, unless, in connection with such dissolution, Series A Subordinated Debentures are distributed to the holders of the Series A Preferred Securities. See "Description of Series A Preferred Securities -- Liquidation Distribution Upon Dissolution." SEE "CERTAIN INVESTMENT CONSIDERATIONS" FOR CERTAIN CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE SERIES A PREFERRED SECURITIES, INCLUDING THE PERIOD DURING WHICH AND CIRCUMSTANCES UNDER WHICH PAYMENT OF DIVIDENDS ON THE SERIES A PREFERRED SECURITIES MAY BE DEFERRED. Application will be made to list the Series A Preferred Securities on the New York Stock Exchange. ------------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
INITIAL PUBLIC UNDERWRITING PROCEEDS TO ILLINOIS POWER OFFERING PRICE COMMISSION(1) CAPITAL(2)(3) -------------- ------------- -------------------------- Per Series A Preferred Security.................................. $ (2) $ Total............................................................ $ (2) $
- ------------------ (1) Illinois Power Capital and the Company have agreed to indemnify the several Underwriters against certain civil liabilities, including liabilities under the Securities Act of 1933, as amended. See "Underwriting." (2) As the proceeds of the sale of the Series A Preferred Securities will be loaned to the Company, the Company has agreed in the Underwriting Agreement to pay to the Underwriters $ per Series A Preferred Security (or $ in the aggregate); provided that such payment will be $ per Series A Preferred Security sold to certain institutions. Therefore, to the extent that Series A Preferred Securities are sold to such institutions, the actual amount of Underwriters' compensation will be less than the amount specified in the preceding sentence and the Proceeds to Illinois Power Capital will be greater than the amount set forth in the table above. See "Underwriting." (3) Expenses of the offering which are payable by the Company are estimated to be $ . ------------------------------ The Series A Preferred Securities offered hereby are offered severally by the Underwriters, as specified herein, subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part. It is expected that delivery of certificates for the Series A Preferred Securities will be made only in book-entry form through the facilities of The Depository Trust Company on or about , 1994. - ------------------ * An application has been filed by Goldman, Sachs & Co. with the United States Patent and Trademark Office for the registration of the MIPS servicemark. GOLDMAN, SACHS & CO. The date of this Prospectus Supplement is , 1994. 4 IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. S-2 5 CERTAIN INVESTMENT CONSIDERATIONS Prospective purchasers of Series A Preferred Securities should carefully review the information contained elsewhere in this Prospectus Supplement and in the accompanying Prospectus and should particularly consider the following matters. Capitalized terms used and not otherwise defined in this Prospectus Supplement shall have the meanings ascribed thereto in the accompanying Prospectus. SUBORDINATION OF GUARANTEE AND SERIES A SUBORDINATED DEBENTURES. The Company's obligations under the Guarantee are subordinate and junior in right of payment to all other liabilities of the Company. The obligations of the Company under the Series A Subordinated Debentures are subordinate and junior in right of payment to all present and future Senior Indebtedness of the Company. At June 30, 1994, Senior Indebtedness of the Company aggregated approximately $2.2 billion. There are no terms in the Series A Preferred Securities, the Series A Subordinated Debentures or the Guarantee that limit the Company's ability to incur additional indebtedness, including indebtedness that ranks senior to the Series A Junior Subordinated Debentures and the Guarantee. See "Description of the Guarantee -- Status of the Guarantee" and "Description of the Subordinated Debentures -- Subordination" in the accompanying Prospectus. OPTION TO EXTEND INTEREST PAYMENT PERIOD. The Company has the right under the Indenture to extend the interest payment period from time to time on the Series A Subordinated Debentures to a period not exceeding 60 consecutive months, and, as a consequence, monthly dividends on the Series A Preferred Securities would be deferred (but would continue to accrue with interest thereon) by Illinois Power Capital during any such extended interest payment period. In the event that the Company exercises this right, the Company may not declare or pay dividends on, or redeem, purchase or acquire, any of its capital stock until the deferred interest on the Series A Subordinated Debentures is paid in full. Prior to the termination of any such extension period, the Company may further extend the interest payment period, provided that such extension period together with all such previous and further extensions thereof may not exceed 60 consecutive months. Upon the termination of any extension period and the payment of all amounts then due, the Company may select a new extension period, subject to the above requirements. The Company has no current intention of extending the interest payment period on the Series A Subordinated Debentures since it desires to continue the declaration and payment of dividends on its capital stock. See "Description of the Series A Preferred Securities -- Dividends" and "Description of the Series A Subordinated Debentures -- Option to Extend Interest Payment Period." Should an extended interest payment period occur, Illinois Power Capital will continue to accrue income for United States federal income tax purposes which will be allocated, but not distributed, to holders of record of Series A Preferred Securities. As a result, such a holder will include such interest in gross income for United States federal income tax purposes in advance of the receipt of cash, and will not receive the cash from Illinois Power Capital related to such income if such a holder disposes of his or her Series A Preferred Securities prior to the record date for payment of dividends. See "United States Taxation -- Potential Extension of Interest Payment Period." SPECIAL EVENT REDEMPTION OR DISTRIBUTION. Upon the occurrence of a Special Event (as defined herein), the General Partner will elect to either (i) redeem the Series A Preferred Securities in whole or (ii) dissolve Illinois Power Capital and cause Series A Subordinated Debentures to be distributed to the holders of the Series A Preferred Securities in liquidation of their interests in Illinois Power Capital. The Series A Subordinated Debentures will initially be issued at face value as a Global Security (as defined herein) and will be limited in aggregate principal amount to approximately $ million, such amount being the sum of the aggregate liquidation preference of the Series A Preferred Securities and the General Partnership Payment (as defined herein). In the case of a Tax Event (as defined herein), the General Partner may also elect to cause the Series A Preferred Securities to remain outstanding. See "Description of the Series A Preferred Securities -- Special Event Redemption or Distribution" and "Description of the Series A Subordinated Debentures -- General." Under current United States federal income tax law, the distribution of Series A Subordinated Debentures in connection with the dissolution of Illinois Power Capital would not be a taxable event to S-3 6 holders of the Series A Preferred Securities. Under a change in law, a change in legal interpretation or the other circumstances giving rise to a Special Event, however, the dissolution of Illinois Power Capital and the distribution of Series A Subordinated Debentures in connection with the dissolution of Illinois Power Capital could be a taxable event to holders of the Series A Preferred Securities. In the judgment of tax counsel to the Company and Illinois Power Capital, the series of events which would result in the recognition of taxable gain by holders of the Series A Preferred Securities, by reason of a dissolution of Illinois Power Capital in response to a Special Event, is unlikely to occur. There can be no assurance in this regard, however. See "United States Taxation - -- Receipt of Series A Subordinated Debentures Upon Dissolution of Illinois Power Capital." ILLINOIS POWER COMPANY The Company was incorporated under the laws of the State of Illinois on May 25, 1923. Effective May 27, 1994, the Company became a subsidiary of Illinova Corporation, an exempt holding company under the Public Utility Holding Company Act of 1935, as amended, pursuant to a merger in which each outstanding share of the Company's Common Stock was converted into one share of common stock of Illinova Corporation. The Company is engaged in the generation, transmission, distribution and sale of electric energy and the distribution 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 309 incorporated municipalities, adjacent suburban and rural areas and numerous unincorporated municipalities having an aggregate population of approximately 1,283,000. Gas service is provided to 257 incorporated municipalities, adjacent suburban areas and numerous unincorporated municipalities having an aggregate population of approximately 935,000. 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). The executive offices of the Company are located at 500 South 27th Street, Decatur, Illinois 62525, and the Company's telephone number is (217) 424-6600. ILLINOIS POWER CAPITAL Illinois Power Capital is a limited partnership formed under the Delaware Revised Uniform Limited Partnership Act, as amended (the "Partnership Act"). Illinois Power Capital exists for the sole purpose of issuing its partner interests, including the Series A Preferred Securities, and using the proceeds thereof to purchase certain debt securities of the Company, including the Series A Subordinated Debentures. The Company is the sole general partner (the "General Partner") of Illinois Power Capital and will manage all of the business and affairs of Illinois Power Capital. Holders of Series A Preferred Securities will be limited partners of Illinois Power Capital. The Company, as the General Partner of Illinois Power Capital, will make capital contributions to Illinois Power Capital from time to time to the extent required so that the total contributions made by the General Partner shall at all times be at least equal to 3% of the total contributions made by all partners. The rights and obligations of the General Partner and the limited partners of Illinois Power Capital will be governed by the Partnership Act and by an Amended and Restated Agreement of Limited Partnership of Illinois Power Capital (the "Partnership Agreement") substantially in the form filed as an exhibit to the Registration Statement of which this Prospectus Supplement and the accompanying Prospectus form a part. USE OF PROCEEDS The proceeds to be received by Illinois Power Capital from the sale of the Series A Preferred Securities will be used to purchase Series A Subordinated Debentures of the Company and will be applied by the Company to the payment or provision for payment at maturity, the purchase or the redemption of outstanding securities of the Company and for general corporate purposes. S-4 7 SUMMARY FINANCIAL INFORMATION OF THE COMPANY (THOUSANDS EXCEPT PER SHARE AMOUNTS AND RATIOS)
12 MONTHS YEAR ENDED DECEMBER 31, ENDED -------------------------------------------------------------- JUNE 30, 1994 1989 1990 1991 1992 1993(A) (UNAUDITED)(A)(B) ---------- ---------- ---------- ---------- ---------- ----------------- INCOME STATEMENT DATA: Operating Revenues..... $1,393,778 $1,469,480 $1,474,905 $1,479,449 $1,581,190 $ 1,628,094 Net Income............. (288,432) (78,484) 109,244 122,088 (56,038) (42,031) Preferred Dividend Requirements......... 37,365 36,839 30,866 28,854 26,123 24,283 Net Income Applicable to Common Stock...... (325,797) (115,323) 78,378 93,234 (82,161) (66,314) Earnings Per Share of Common Stock......... (4.34) (1.53) 1.04 1.23 (1.08) (0.91) Ratio of Earnings to Fixed Charges(c)..... (0.52)(d) 0.70(d) 1.85 2.02 0.80(d) 0.93(d) Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividend Requirements(c)...... (0.45)(e) 0.60(e) 1.48 1.61 0.70(e) 0.82(e)
AMOUNT PERCENTAGE ---------- ---------- CAPITALIZATION AT JUNE 30, 1994: Long-Term Debt............................................................... $1,868,191 52.2% Preferred Stock (not subject to mandatory redemption)........................ 303,705 8.5 Preferred Stock (subject to mandatory redemption)............................ 36,000 1.0 Common Stock Equity.......................................................... 1,368,858 38.3 ---------- ---------- Total Capitalization..................................................... $3,576,754 100.0% ========= =========
- --------------- (a) Subsequent to the Company's merger with Illinova Corporation, net assets of Illinova Generating Company (formerly IP Group, Inc.) were transferred in the form of a dividend from the Company to Illinova Corporation. The income statement data contained herein has been restated to reflect the financial results of the Company's current operations. (b) In the opinion of the Company, all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the unaudited twelve-month period ended June 30, 1994, have been made. (c) Earnings used in the calculation of the ratio of earnings to fixed charges and the ratio of earnings to combined fixed charges and preferred stock dividend requirements include the allowance for funds used during construction and the deferred financing costs associated with the Company's Clinton Power Station, and are before deduction of income taxes and fixed charges. Fixed charges include interest on long-term debt, related amortization of debt discount, premium, and expense, other interest and that portion of rent expense which is estimated to be representative of the interest component. Preferred stock dividend requirements have been increased to an amount representing the pre-tax earnings required to cover such dividend requirements. (d) The ratios of earnings to fixed charges for the twelve months ended June 30, 1994 and for the years ended December 31, 1993, 1990 and 1989 of 0.93, 0.80, 0.70 and (0.52), respectively, indicate that earnings were inadequate to cover fixed charges. The dollar amounts of the coverage deficiency for the twelve months ended June 30, 1994, and for the years ended 1993, 1990 and 1989 were approximately $13 million, $37 million, $68 million and $375 million, respectively. Excluding the loss on disallowed plant costs of $200 million, net of income taxes, recorded in the S-5 8 third quarter of 1993, the ratio of earnings to fixed charges would have been 2.42 for the twelve months ended June 30, 1994 and 2.25 for the year ended 1993. Excluding the loss on disallowed plant costs of $137 million, net of income taxes, recorded in the fourth quarter of 1990, the ratio of earnings to fixed charges would have been 1.41 for the year ended 1990. Excluding the loss on disallowed plant costs of $346 million, net of income taxes, recorded in the first quarter of 1989, the ratio of earnings to fixed charges would have been 1.31 for the year ended 1989. (e) The ratios of earnings to combined fixed charges and preferred stock dividend requirements for the twelve months ended June 30, 1994 and for the years ended December 31, 1993, 1990 and 1989 of 0.82, 0.70, 0.60 and (0.45), respectively, indicate that earnings were inadequate to cover combined fixed charges and preferred stock dividend requirements. The dollar amounts of the coverage deficiency for the twelve months ended June 30, 1994, and for the years ended 1993, 1990 and 1989 were approximately $38 million, $63 million, $105 million and $412 million, respectively. Excluding the loss on disallowed plant costs of $200 million, net of income taxes, recorded in the third quarter of 1993, the ratio of earnings to combined fixed charges and preferred stock dividend requirements would have been 1.98 for the twelve months ended June 30, 1994 and 1.83 for the year ended 1993. Excluding the loss on disallowed plant costs of $137 million, net of income taxes, recorded in the fourth quarter of 1990, the ratio of earnings to combined fixed charges and preferred stock dividend requirements would have been 1.09 for the year ended 1990. Excluding the loss on disallowed plant costs of $346 million, net of income taxes, recorded in the first quarter of 1989, the ratio of earnings to combined fixed charges and preferred stock dividend requirements would have been 1.06 for the year ended 1989. S-6 9 DESCRIPTION OF THE SERIES A PREFERRED SECURITIES GENERAL All of the partnership interests in Illinois Power Capital, other than the Series A Preferred Securities offered hereby, are owned by the General Partner. The Partnership Agreement authorizes and creates the Series A Preferred Securities, which represent limited partner interests in Illinois Power Capital (the "Preferred Securities"). Preferred Securities may be issued from time to time in one or more series as described in the accompanying Prospectus. The limited partner interests represented by the Series A Preferred Securities will have a preference with respect to dividends and amounts payable on liquidation over the General Partner's interest in Illinois Power Capital. The Partnership Agreement does not permit the issuance of any Preferred Securities ranking, as to participation in profits and dividends and in the assets of Illinois Power Capital, senior or junior to the Series A Preferred Securities or the incurrence of any indebtedness by Illinois Power Capital. The summary of certain terms and provisions of the Series A Preferred Securities set forth below does not purport to be complete and is subject to, and qualified in its entirety by reference to, the Partnership Agreement and the Partnership Act. DIVIDENDS The dividends payable on each Series A Preferred Security will be fixed at a rate per annum of % of the liquidation preference of $25 per Preferred Security. Dividends in arrears for more than one month will bear interest thereon at the rate per annum of % thereof. The term "dividends" as used herein includes any such interest payable unless otherwise stated. The amount of dividends payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. Dividends on the Series A Preferred Securities will be cumulative, will accrue from the date of initial issuance and will be payable monthly in arrears, on the last day of each calendar month of each year, commencing , 1994, when, as and if available and determined to be so payable by the General Partner, except as otherwise described below. The Company has the right under the Indenture to extend the interest payment period from time to time on the Series A Subordinated Debentures to a period not exceeding 60 consecutive months, and, as a consequence, monthly dividends on the Series A Preferred Securities would be deferred (but would continue to accrue with interest) by Illinois Power Capital during any such extended interest payment period. In the event that the Company exercises this right, the Company may not declare or pay dividends on, or redeem, purchase or acquire, any of its capital stock. Prior to the termination of any such extension period, the Company may further extend the interest payment period, provided that such extension period together with all such previous and further extensions thereof may not exceed 60 consecutive months. Upon the termination of any extension period and the payment of all amounts then due, the Company may select a new extension period, subject to the above requirements. See "Description of the Series A Subordinated Debentures -- Interest" and "-- Option to Extend Interest Payment Period." Dividends on the Series A Preferred Securities must be paid on the dates payable to the extent that Illinois Power Capital has (i) funds legally available for the payment of such dividends and (ii) cash on hand sufficient to permit such payments. It is anticipated that Illinois Power Capital's earnings available for distribution to the holders of the Series A Preferred Securities will be limited to payments under the Series A Subordinated Debentures in which Illinois Power Capital will invest the proceeds from the issuance and sale of the Series A Preferred Securities and the General Partner's capital contribution. See "Description of the Series A Subordinated Debentures." The payment of dividends, out of moneys held by Illinois Power Capital, are guaranteed by the Company as set forth under "Description of the Guarantee" in the accompanying Prospectus. Dividends on the Series A Preferred Securities will be payable to the holders thereof as they appear on the books and records of Illinois Power Capital on the relevant record dates, which, as long as the Series A Preferred Securities remain in book-entry-only form, will be one Business Day (as defined below) prior to the relevant payment dates. Subject to any applicable laws and regulations and the provisions of the Partnership Agreement, each such payment will be made as described under S-7 10 "Book-Entry-Only Issuance -- The Depository Trust Company" below. In the event the Series A Preferred Securities shall not continue to remain in book-entry-only form, the General Partner shall have the right to select relevant record dates which shall be more than one Business Day prior to the relevant payment dates. In the event that any date on which dividends are payable on the Series A Preferred Securities is not a Business Day, then payment of the dividend payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. A "Business Day" shall mean any day other than a day on which banking institutions in The City of New York are authorized or required by law to close. CERTAIN RESTRICTIONS ON ILLINOIS POWER CAPITAL If dividends have not been paid in full on the Series A Preferred Securities, Illinois Power Capital shall not: (i) pay, or set aside for payment, any dividends on any other series of Preferred Securities, unless the amount of any dividends declared on any other series of Preferred Securities is paid on such other series of Preferred Securities and the Series A Preferred Securities on a pro rata basis on the date such dividends are paid on such other series of Preferred Securities, so that (x) the aggregate amount of dividends paid on the Series A Preferred Securities bears to the aggregate amount of dividends paid on such other series of Preferred Securities the same ratio as (y) the aggregate of all accumulated and unpaid dividends in respect of the Series A Preferred Securities bears to the aggregate of all accumulated and unpaid dividends in respect of such other series of Preferred Securities; or (ii) redeem, purchase or otherwise acquire any other Preferred Securities; until, in each case, such time as all accumulated and unpaid dividends on the Series A Preferred Securities shall have been paid in full for all dividend periods terminating on or prior to, in the case of clause (i), such payment and, in the case of clause (ii), the date of such redemption, purchase or acquisition. As of the date of this Prospectus Supplement, there are no series of Preferred Securities outstanding. OPTIONAL REDEMPTION The Series A Preferred Securities are redeemable, at the option of Illinois Power Capital, in whole or in part, from time to time, on or after , 1999, upon not less than 30 nor more than 60 days' notice, at the Redemption Price. In the event that fewer than all the outstanding Series A Preferred Securities are to be so redeemed, the Series A Preferred Securities to be redeemed will be selected as described under "Book-Entry-Only Issuance -- The Depository Trust Company" below. If a partial redemption would result in the delisting of the Series A Preferred Securities, Illinois Power Capital may only redeem the Series A Preferred Securities in whole. SPECIAL EVENT REDEMPTION OR DISTRIBUTION If a Tax Event or an Investment Company Event (each, as defined below, and, each, a "Special Event") shall occur and be continuing, the General Partner shall elect to either (i) redeem the Series A Preferred Securities in whole (and not in part), upon not less than 30 or more than 60 days' notice at the Redemption Price within 90 days following the occurrence of such Special Event; provided, that, if at the time there is available to the General Partner the opportunity to eliminate, within such 90-day period, the Special Event by taking some ministerial action, such as filing a form or making an election, or pursuing some other similar reasonable measure, which has no adverse effect on Illinois Power Capital or the S-8 11 General Partner, the General Partner will pursue such measure in lieu of redemption, or (ii) dissolve Illinois Power Capital and, after satisfaction of liabilities of creditors as required by the Partnership Act, cause Series A Subordinated Debentures to be distributed to the holders of the Series A Preferred Securities in liquidation of their interests in Illinois Power Capital, within 90 days following the occurrence of such Special Event. In the case of a Tax Event, the General Partner may also elect to cause the Series A Preferred Securities to remain outstanding. "Tax Event" means that the General Partner shall have obtained an opinion of nationally recognized independent tax counsel experienced in such matters to the effect that, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, (b) any amendment to or change in an interpretation or application of such laws or regulations by any legislative body, court, governmental agency or regulatory authority (including the enactment of any legislation and the publication of any judicial decision or regulatory determination on or after such date) or (c) any interpretation or pronouncement that provides for a position with respect to such laws or regulations that differs from the generally accepted position on , 1994, which amendment or change is effective or such interpretation or pronouncement is announced on or after , 1994, there is more than an insubstantial risk that (i) Illinois Power Capital is subject to federal income tax with respect to interest received on the Series A Subordinated Debentures, (ii) interest payable to Illinois Power Capital on the Series A Subordinated Debentures will not be deductible for federal income tax purposes or (iii) Illinois Power Capital is subject to more than a de minimis amount of other taxes, duties or other governmental charges. "Investment Company Event" means the occurrence of a change in law or regulation or a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law") to the effect that Illinois Power Capital is or will be considered an "investment company" which is required to be registered under the Investment Company Act of 1940, as amended (the "1940 Act"), which Change in 1940 Act Law becomes effective on or after , 1994; provided, that no Investment Company Event shall be deemed to have occurred if the General Partner obtains a written opinion of nationally recognized independent counsel experienced in practice under the 1940 Act to the effect that the General Partner has successfully issued an additional or supplemental irrevocable and unconditional guarantee (x) of accrued and unpaid dividends (whether or not determined to be paid out of moneys legally available therefor) on the Series A Preferred Securities and (y) of the full amount of the Liquidation Distribution (as hereinafter defined) on the Series A Preferred Securities upon a liquidation of Illinois Power Capital (regardless of the amount of assets of Illinois Power Capital otherwise available for distribution in such liquidation) to avoid such Change in 1940 Act Law so that in the opinion of such counsel, notwithstanding such Change in 1940 Act Law, Illinois Power Capital is not required to be registered as an "investment company" within the meaning of the 1940 Act. After the date fixed for any distribution of Series A Subordinated Debentures, upon dissolution of Illinois Power Capital, (i) the Series A Preferred Securities will no longer be deemed to be outstanding, (ii) The Depository Trust Company (the "Depository" or "DTC") or its nominee, as the record holder of the Series A Preferred Securities, will receive a registered global certificate or certificates representing the Series A Subordinated Debentures to be delivered upon such distribution and (iii) any certificates representing Series A Preferred Securities not held by DTC or its nominee will be deemed to represent Series A Subordinated Debentures having a principal amount equal to the aggregate liquidation preference of such Series A Preferred Securities until such certificates are presented to the Company or its agent for transfer or reissuance. MANDATORY REDEMPTION Upon the repayment of the Series A Subordinated Debentures at maturity, the proceeds from such repayment will be applied to redeem the Series A Preferred Securities, in whole, upon not less than 30 nor more than 60 days' notice, at the Redemption Price. S-9 12 REDEMPTION PROCEDURES Illinois Power Capital may not redeem fewer than all the outstanding Series A Preferred Securities unless all accumulated and unpaid dividends have been paid on all Series A Preferred Securities for all monthly dividend periods terminating on or prior to the date of redemption. If Illinois Power Capital gives a notice of redemption in respect of Series A Preferred Securities (which notice will be irrevocable), then, by 12:00 noon, New York time, on the redemption date, Illinois Power Capital will irrevocably deposit with DTC funds sufficient to pay the applicable Redemption Price and will give DTC irrevocable instructions and authority to pay the Redemption Price to the holders of the Series A Preferred Securities. See "Book-Entry-Only Issuance -- The Depository Trust Company." If notice of redemption shall have been given and funds deposited as required, then upon the date of such deposit, all rights of holders of such Series A Preferred Securities so called for redemption will cease, except the right of the holders of such Series A Preferred Securities to receive the Redemption Price, but without interest on such Redemption Price. In the event that any date fixed for redemption of Series A Preferred Securities is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day. In the event that payment of the Redemption Price in respect of Series A Preferred Securities is improperly withheld or refused and not paid either by Illinois Power Capital or by the Company pursuant to the Guarantee described under "Description of the Guarantee" in the accompanying Prospectus, dividends on such Series A Preferred Securities will continue to accrue at the then applicable rate, from the original redemption date to the date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price. Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws), the Company or its subsidiaries may at any time and from time to time purchase outstanding Series A Preferred Securities by tender, in the open market or by private agreement. LIQUIDATION DISTRIBUTION UPON DISSOLUTION In the event of any voluntary or involuntary dissolution, winding-up or termination of Illinois Power Capital, the holders of the Series A Preferred Securities at the time will be entitled to receive out of the assets of Illinois Power Capital available for distribution to partners, after satisfaction of liabilities of creditors as required by the Partnership Act, before any distribution of assets is made to the General Partner, but together with the holders of every other series of Preferred Securities outstanding, an amount equal to, in the case of holders of Series A Preferred Securities, the aggregate of the liquidation preference of $25 per Series A Preferred Security and all accumulated and unpaid dividends thereon to the date of payment (the "Liquidation Distribution"), unless, in connection with such dissolution, winding-up or termination, Series A Subordinated Debentures in an aggregate principal amount equal to the Liquidation Distribution have been distributed on a pro rata basis to the holders of the Series A Preferred Securities. If, upon any such dissolution, the Liquidation Distribution can be paid only in part because Illinois Power Capital has insufficient assets available to pay in full the aggregate Liquidation Distribution and the aggregate maximum liquidation distributions on any other series of Preferred Securities, then the amounts payable directly by Illinois Power Capital on the Series A Preferred Securities and on such other series of Preferred Securities shall be paid on a pro rata basis, so that (i) the aggregate amount paid in respect of the Liquidation Distribution bears to the aggregate amount paid as liquidation distributions on the other series of Preferred Securities the same ratio as (ii) the aggregate Liquidation Distribution bears to the aggregate maximum liquidation distributions on the other series of Preferred Securities. S-10 13 Pursuant to the Partnership Agreement, Illinois Power Capital shall be dissolved and its affairs shall be wound up: (i) upon the expiration of the term of Illinois Power Capital on December 31, 2047, (ii) upon the bankruptcy or withdrawal of the General Partner, (iii) upon the assignment by the General Partner of its entire interest in Illinois Power Capital when the assignee is not admitted to Illinois Power Capital as a general partner of Illinois Power Capital in accordance with the Partnership Agreement, or the filing of a certificate of dissolution or its equivalent with respect to the General Partner, or the revocation of the General Partner's charter and the expiration of 90 days after the date of notice to the General Partner of revocation without a reinstatement of its charter, or any other event occurs which causes the General Partner to cease to be a general partner of Illinois Power Capital under the Partnership Act, unless the business of Illinois Power Capital is continued in accordance with the Partnership Act, (iv) in accordance with the provisions of the Series A Preferred Securities, (v) upon the entry of a decree of a judicial dissolution or (vi) upon the written consent of all partners of Illinois Power Capital. MERGER, CONSOLIDATION OR AMALGAMATION OF ILLINOIS POWER CAPITAL Illinois Power Capital may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other body, except as described below. Illinois Power Capital may, without the consent of the holders of the Series A Preferred Securities, consolidate, amalgamate, merge with or into, or be replaced by a limited liability company, a limited partnership or a trust organized as such under the laws of any state of the United States; provided, that (i) such successor entity either (x) expressly assumes all of the obligations of Illinois Power Capital under the Series A Preferred Securities or (y) substitutes for the Series A Preferred Securities other securities having substantially the same terms as the Series A Preferred Securities (the "Successor Securities") so long as the Successor Securities rank, with respect to participation in the profits and dividends or in the assets of the successor entity, at least as high as the Series A Preferred Securities rank with respect to participation in the profits and dividends or in the assets of Illinois Power Capital, (ii) the Company expressly acknowledges such successor entity as the holder of the Series A Subordinated Debentures, (iii) the Series A Preferred Securities or any Successor Securities are listed, or any Successor Securities will be listed upon notification of issuance, on any national securities exchange or other organization on which the Series A Preferred Securities are then listed, (iv) such merger, consolidation, amalgamation or replacement does not cause the Series A Preferred Securities to be downgraded by any "nationally recognized statistical rating organization," as that term is defined by the Commission for purposes of Rule 436(g)(2) under the Securities Act, or cause any Successor Securities to be rated lower than the Series A Preferred Securities immediately prior to such merger, consolidation, amalgamation or replacement, (v) such merger, consolidation, amalgamation or replacement does not adversely affect the powers, preferences and other special rights of the holders of the Series A Preferred Securities in any material respect, (vi) such successor entity has a purpose substantially identical to that of Illinois Power Capital and (vii) prior to such merger, consolidation, amalgamation or replacement, the Company has received an opinion of nationally recognized independent counsel to Illinois Power Capital experienced in such matters to the effect that (x) such successor entity will be treated as a partnership for federal income tax purposes, (y) following such merger, consolidation, amalgamation or replacement, the Company and such successor entity will be in compliance with the 1940 Act without registering thereunder as an investment company and (z) such merger, consolidation, amalgamation or replacement will not adversely affect the limited liability of the holders of the Series A Preferred Securities. VOTING RIGHTS Except as provided below and under "Description of the Guarantee -- Amendments and Assignment" in the accompanying Prospectus and as otherwise required by law and the Partnership Agreement, the holders of the Series A Preferred Securities will have no voting rights. S-11 14 If (i) Illinois Power Capital fails to pay dividends in full on the Series A Preferred Securities for 18 consecutive monthly dividend periods; (ii) an Event of Default (as defined in the Indenture) occurs and is continuing on the Series A Subordinated Debentures; or (iii) the Company is in default on any of its payment or other obligations under the Guarantee (as described under "Description of the Guarantee -- Certain Covenants of the Company" in the accompanying Prospectus), then the holders of the Series A Preferred Securities, together with the holders of any other series of Preferred Securities having the right to vote for the appointment of a special representative of Illinois Power Capital and the limited partners (a "Special Representative") in such event, acting as a single class, will be entitled by the majority vote of such holders to appoint and authorize a Special Representative to enforce Illinois Power Capital's creditor rights under the Series A Subordinated Debentures, to enforce the rights of the holders of the Series A Preferred Securities under the Guarantee and to enforce the rights of the holders of the Series A Preferred Securities to receive dividends on the Series A Preferred Securities. The Special Representative shall not be admitted as a partner in Illinois Power Capital or otherwise be deemed to be a partner in Illinois Power Capital and shall have no liability for the debts, obligations or liabilities of Illinois Power Capital. For purposes of determining whether Illinois Power Capital has failed to pay dividends in full for 18 consecutive monthly dividend periods, dividends shall be deemed to remain in arrears, notwithstanding any payments in respect thereof, until full cumulative dividends have been or contemporaneously are paid with respect to all monthly dividend periods terminating on or prior to the date of payment of such full cumulative dividends. Not later than 30 days after such right to appoint a Special Representative arises, the General Partner will convene a meeting for the purpose of appointing a Special Representative. If the General Partner fails to convene such meeting within such 30-day period, the holders of 10% in liquidation preference of the outstanding Preferred Securities will be entitled to convene such meeting. The provisions of the Partnership Agreement relating to the convening and conduct of the meetings of the partners will apply with respect to any such meeting. Any Special Representative so appointed shall cease to be a Special Representative of Illinois Power Capital and the limited partners if Illinois Power Capital (or the Company pursuant to the Guarantee) shall have paid in full all accrued and unpaid dividends on the Preferred Securities or such default or breach, as the case may be, shall have been cured, and the General Partner shall continue the business of Illinois Power Capital without dissolution. Notwithstanding the appointment of any such Special Representative, the Company shall continue as General Partner and shall retain all rights under the Indenture, including the right to extend the interest payment period from time to time to a period not exceeding 60 consecutive months as provided under "Description of the Series A Subordinated Debentures -- Option to Extend Interest Payment Period." If any proposed amendment to the Partnership Agreement provides for, or the General Partner otherwise proposes to effect, (i) any action which would adversely affect the powers, preferences or special rights of the Series A Preferred Securities, whether by way of amendment to the Partnership Agreement or otherwise (including, without limitation, the authorization or issuance of any limited partner interests in Illinois Power Capital ranking, as to participation in the profits and dividends or in the assets of Illinois Power Capital, senior to the Series A Preferred Securities), or (ii) the dissolution, winding-up or termination of Illinois Power Capital, other than (x) in connection with the distribution of Series A Subordinated Debentures upon the occurrence of a Special Event or (y) as described under "Merger, Consolidation or Amalgamation of Illinois Power Capital" above, then the holders of outstanding Series A Preferred Securities will be entitled to vote on such amendment or proposal of the General Partner (but not on any other amendment or proposal) as a class with all other holders of series of Preferred Securities similarly affected, and such amendment or proposal shall not be effective except with the approval of the holders of 66 2/3% in liquidation preference of such outstanding Preferred Securities having a right to vote on the matter; provided, however, that no such approval shall be required if the dissolution, winding-up or termination of Illinois Power Capital is proposed or initiated upon the initiation of proceedings, or after proceedings have been initiated, for the dissolution, winding-up, liquidation or termination of the Company. The rights attached to the Series A Preferred Securities will be deemed not to be adversely affected by the creation or issue of, and no vote will be required for the creation of, any further limited partner interests of Illinois Power Capital ranking pari passu with the Series A Preferred Securities with regard to S-12 15 participation in the profits and dividends or in the assets of Illinois Power Capital. Holders of Series A Preferred Securities have no preemptive rights. So long as any Series A Subordinated Debentures are held by Illinois Power Capital, the General Partner shall not (i) direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or executing any trust or power conferred on the Trustee with respect to such series, (ii) waive any past default which is waivable under Section 6.06 of the Indenture, (iii) exercise any right to rescind or annul a declaration that the principal of all the Series A Subordinated Debentures shall be due and payable or (iv) consent to any amendment, modification or termination of the Indenture, where such consent shall be required, without, in each case, obtaining the prior approval of the holders of at least 66 2/3% in liquidation preference of all series of Preferred Securities affected thereby, acting as a single class; provided, however, that where a consent under the Indenture would require the consent of each holder affected thereby, no such consent shall be given by the General Partner without the prior consent of each holder of all series of Preferred Securities affected thereby. The General Partner shall not revoke any action previously authorized or approved by a vote of any series of Preferred Securities. The General Partner shall notify all holders of the Series A Preferred Securities of any notice of default received from the Trustee with respect to the Series A Subordinated Debentures. Any required approval of holders of Series A Preferred Securities may be given at a separate meeting of holders of Preferred Securities convened for such purpose, at a meeting of all of the partners in Illinois Power Capital or pursuant to written consent. Illinois Power Capital will cause a notice of any meeting at which holders of Series A Preferred Securities are entitled to vote, or of any matter upon which action by written consent of such holders is to be taken, to be mailed to each holder of record of Series A Preferred Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. No vote or consent of the holders of Series A Preferred Securities will be required for Illinois Power Capital to redeem and cancel Series A Preferred Securities in accordance with the Partnership Agreement. Notwithstanding that holders of Series A Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Series A Preferred Securities and any other series of Preferred Securities that are entitled to vote or consent with such Series A Preferred Securities as a single class at such time that are owned by the Company or any entity owned more than 50% by the Company, either directly or indirectly, shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if they were not outstanding. Holders of the Series A Preferred Securities will have no rights to remove or replace the General Partner. BOOK-ENTRY-ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY DTC will act as securities depository for the Series A Preferred Securities. The Series A Preferred Securities will be issued only as fully-registered securities registered in the name of Cede & Co. (DTC's nominee). One or more fully-registered global Series A Preferred Security certificates will be issued, representing in the aggregate the total number of Series A Preferred Securities, and will be deposited with DTC. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). DTC holds securities that its participants ("Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such S-13 16 as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations ("Direct Participants"). DTC is owned by a number of its Direct Participants and by The New York Stock Exchange, Inc. (the "New York Stock Exchange"), the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The rules applicable to DTC and its Participants are on file with the Commission. Purchases of Series A Preferred Securities within the DTC system must be made by or through Direct Participants, which will receive a credit for the Series A Preferred Securities on DTC's records. The ownership interest of each actual purchaser of each Series A Preferred Security ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchases, but Beneficial Owners are expected to receive written confirmations providing details of the transactions, as well as periodic statements of their holdings, from the Direct or Indirect Participants through which the Beneficial Owners purchased Series A Preferred Securities. Transfers of ownership interests in the Series A Preferred Securities are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Series A Preferred Securities, except in the event that use of the book-entry system for the Series A Preferred Securities is discontinued. DTC has no knowledge of the actual Beneficial Owners of the Series A Preferred Securities; DTC's records reflect only the identity of the Direct Participants to whose accounts such Series A Preferred Securities are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to Cede & Co. If less than all of the Series A Preferred Securities are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such series to be redeemed. Although voting with respect to the Series A Preferred Securities is limited, in those cases where a vote is required, neither DTC nor Cede & Co. will itself consent or vote with respect to Series A Preferred Securities. Under its usual procedures, DTC would mail an Omnibus Proxy to Illinois Power Capital as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Series A Preferred Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). Dividend payments on the Series A Preferred Securities will be made to DTC. DTC's practice is to credit Direct Participants' accounts on the relevant payment date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payments on such payment date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices and will be the responsibility of such Participant and not of DTC, Illinois Power Capital or the Company, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of dividends to DTC is the responsibility of Illinois Power Capital, disbursement of such payments to Direct Participants is the responsibility of DTC, and disbursement of such payments to the Beneficial Owners is the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Series A Preferred Securities at any time by giving reasonable notice to Illinois Power Capital. Under such S-14 17 circumstances, in the event that a successor securities depository is not obtained, Series A Preferred Security certificates are required to be printed and delivered. Additionally, Illinois Power Capital (with the consent of the Company) may decide to discontinue use of the system of book-entry transfers through DTC (or a successor depository). In that event, certificates for the Series A Preferred Securities will be printed and delivered. In each of the above circumstances, the General Partner will appoint a paying agent with respect to the Series A Preferred Securities. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that Illinois Power Capital believes to be reliable, but Illinois Power Capital takes no responsibility for the accuracy thereof. REGISTRAR AND TRANSFER AGENT The Company will act as registrar and transfer agent for the Series A Preferred Securities. Registration of transfers of Series A Preferred Securities will be effected without charge by or on behalf of Illinois Power Capital, but upon payment (with the giving of such indemnity as Illinois Power Capital or the Company may require) in respect of any tax or other government charges which may be imposed in relation to it. Illinois Power Capital will not be required to register or cause to be registered the transfer of Series A Preferred Securities after such Series A Preferred Securities have been called for redemption. MISCELLANEOUS Application will be made to list the Series A Preferred Securities on the New York Stock Exchange. The General Partner is authorized and directed to conduct its affairs and to operate Illinois Power Capital in such a way that (i) Illinois Power Capital will not be deemed to be an "investment company" required to be registered under the 1940 Act, (ii) Illinois Power Capital will be taxed as a partnership for federal income tax purposes and (iii) the Series A Subordinated Debentures will be treated as indebtedness of the Company for federal income tax purposes. In this connection, the General Partner is authorized to take any action, not inconsistent with applicable law, the certificate of limited partnership or the Partnership Agreement, that the General Partner determines in its discretion to be necessary or desirable for such purposes, as long as such action does not adversely affect the interests of the holders of the Series A Preferred Securities. S-15 18 DESCRIPTION OF THE SERIES A SUBORDINATED DEBENTURES Set forth below is a description of the specific terms of the Series A Subordinated Debentures in which Illinois Power Capital will invest with the proceeds of the issuance and sale of (i) the Series A Preferred Securities and (ii) the General Partner's capital contribution with respect to the Series A Preferred Securities (the "General Partnership Payment"). This description supplements the description of the general terms and provisions of the Subordinated Debentures set forth in the accompanying Prospectus under the caption "Description of the Subordinated Debentures." The following description does not purport to be complete and is qualified in its entirety by reference to the description in the accompanying Prospectus and the Indenture between the Company and The First National Bank of Chicago, as Trustee, as supplemented by a First Supplemental Indenture (the Indenture, as so supplemented, is hereinafter referred to as the "Indenture"). Under certain circumstances involving the dissolution of Illinois Power Capital following the occurrence of a Special Event, Series A Subordinated Debentures may be distributed to the holders of the Series A Preferred Securities in liquidation of Illinois Power Capital. See "Description of the Series A Preferred Securities -- Special Event Redemption or Distribution." GENERAL The Series A Subordinated Debentures will be issued as a series of Subordinated Debentures under the Indenture. The Series A Subordinated Debentures will be limited in aggregate principal amount to approximately $ million, such amount being the sum of the aggregate liquidation preference of the Series A Preferred Securities and the General Partnership Payment. The entire principal amount of the Series A Subordinated Debentures will become due and payable, together with any accrued and unpaid interest thereon, including Additional Interest (as hereinafter defined), if any, on , 2043. The Series A Subordinated Debentures if distributed to holders of Series A Preferred Securities upon the dissolution of Illinois Power Capital will initially be so issued as a Global Security (as defined below). As described herein, under certain limited circumstances Series A Subordinated Debentures may be issued in certificated form in exchange for a Global Security. See "Book-Entry and Settlement" below. In the event that Series A Subordinated Debentures are issued in certificated form, such Series A Subordinated Debentures will be in denominations of $25 and integral multiples thereof and may be transferred or exchanged at the offices described below. Payments on Series A Subordinated Debentures issued as a Global Security will be made to DTC, as the depository for the Series A Subordinated Debentures. In the event Series A Subordinated Debentures are issued in certificated form, principal and interest will be payable, the transfer of the Series A Subordinated Debentures will be registrable and the Series A Subordinated Debentures will be exchangeable for Series A Subordinated Debentures of other denominations of a like aggregate principal amount at the corporate trust office of the Trustee in The City of New York; provided, that payment of interest may be made at the option of the Company by check mailed to the address of the persons entitled thereto. If the Series A Subordinated Debentures are distributed to the holders of Series A Preferred Securities upon the dissolution of Illinois Power Capital, the Company will use its best efforts to list the Series A Subordinated Debentures on the New York Stock Exchange or on such other exchange as the Series A Preferred Securities are then listed and traded on the same part of any such exchange. MANDATORY PREPAYMENT If Illinois Power Capital redeems Series A Preferred Securities in accordance with the terms thereof, the Series A Subordinated Debentures will become due and payable in a principal amount equal to the aggregate liquidation preference of the Series A Preferred Securities so redeemed, together with all accrued and unpaid interest, including Additional Interest, if any. Any payment pursuant to this provision S-16 19 shall be made prior to 12:00 noon, New York time, on the date of such redemption or at such other time on such earlier date as the parties thereto shall agree. OPTIONAL REDEMPTION If there shall be no Series A Preferred Securities outstanding, the Company shall have the right to redeem the Series A Subordinated Debentures, in whole or in part, from time to time, on or after , 1999, upon not less than 30 nor more than 60 days' notice, at a redemption price equal to 100% of the principal amount to be redeemed plus any accrued and unpaid interest, including Additional Interest, if any, to the redemption date. INTEREST Each Series A Subordinated Debenture will bear interest at the rate of % per annum from the original date of issuance until the principal of such Series A Debenture becomes due and payable, and on any overdue principal and (to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the same rate per annum, payable monthly in arrears on the last day of each calendar month of each year (each, an "Interest Payment Date"), commencing , 1994, to the person in whose name such Series A Subordinated Debenture is registered, subject to certain exceptions, at the close of business on the Business Day next preceding such Interest Payment Date. In the event the Series A Subordinated Debentures shall not continue to remain in book-entry-only form, the Company shall have the right to select record dates which shall be more than one Business Day prior to the Interest Payment Date. The amount of interest payable for any period will be computed on the basis of a 360-day year of twelve 30-day months and for any period shorter than a full month on the basis of actual days elapsed in such period. In the event that any date on which interest is payable on the Series A Subordinated Debentures is not a Business Day, then payment of the interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. OPTION TO EXTEND INTEREST PAYMENT PERIOD So long as the Company is not in default in the payment of interest on any series of Subordinated Debentures issued under the Indenture, the Company shall have the right at any time during the term of the Series A Subordinated Debentures to extend the interest payment period from time to time to a period not exceeding 60 consecutive months (the "Extension Period"), at the end of which Extension Period the Company shall pay all interest then accrued and unpaid (together with interest thereon at the rate specified for the Series A Subordinated Debentures to the extent permitted by applicable law); provided, that, during any such Extension Period, the Company shall not declare or pay any dividend on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock or make any guarantee payments with respect to the foregoing (other than payments on the Guarantee); and provided further that any such extended interest payment period may only be selected with respect to the Series A Subordinated Debentures if an extended interest payment period of identical length is simultaneously selected for all Subordinated Debentures then outstanding under the Indenture. Prior to the termination of any such Extension Period, the Company may further extend the interest payment period, provided that such Extension Period together with all such previous and further extensions thereof may not exceed 60 consecutive months. Upon the termination of any Extension Period and the payment of all amounts then due, the Company may select a new Extension Period, subject to the above requirements. No interest shall be due and payable during an Extension Period, except at the end thereof. If Illinois Power Capital shall be the sole holder of the Series A Subordinated Debentures, the Company shall give Illinois Power Capital notice of its selection of such Extension Period one Business Day prior to the earlier of (i) the next succeeding date on which the dividends on the Series A Preferred Securities are payable or (ii) the date Illinois Power Capital is required to give notice to the New York S-17 20 Stock Exchange or other applicable self-regulatory organization or to holders of the Series A Preferred Securities of the record date or the date such dividend is payable, but in any event not less than one Business Day prior to such record date. The Company shall cause Illinois Power Capital to give notice of the Company's selection of such Extension Period to the holders of the Series A Preferred Securities. If Illinois Power Capital shall not be the sole holder of the Series A Subordinated Debentures, the Company shall give the holders of the Series A Subordinated Debentures notice of its selection of such Extension Period ten Business Days prior to the earlier of (i) the next succeeding Interest Payment Date or (ii) the date the Company is required to give notice to the New York Stock Exchange or other applicable self-regulatory organization, or to holders of the Series A Subordinated Debentures, of the record or payment date of such related interest payment, but in any event not less than two Business Days prior to such record date. ADDITIONAL INTEREST So long as any Subordinated Debentures remain outstanding, if at any time Illinois Power Capital shall be required to pay any interest on dividends in arrears in respect of the Series A Preferred Securities pursuant to the terms thereof, then the Company will pay as interest to Illinois Power Capital as the holder of the Series A Subordinated Debentures ("Additional Interest") an amount equal to such interest on dividends in arrears. In addition, if Illinois Power Capital would be required to pay any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States, or any other taxing authority, then, in any such case, the Company also will pay as Additional Interest such amounts as shall be required so that the net amounts received and retained by Illinois Power Capital after paying any such taxes, duties, assessments or governmental charges will be not less than the amounts Illinois Power Capital would have received had no such taxes, duties, assessments or governmental charges been imposed. SET-OFF Notwithstanding anything to the contrary in the Indenture, the Company shall have the right to set-off any payment it is otherwise required to make thereunder with and to the extent the Company has theretofore made, or is concurrently on the date of such payment making, a payment under the Guarantee. EVENTS OF DEFAULT In the case any Event of Default (as defined in the Indenture) shall occur and be continuing, Illinois Power Capital will have the right to declare the principal of and the interest on the Series A Subordinated Debentures (including any Additional Interest) and any other amounts payable under the indenture to be forthwith due and payable and to enforce its other rights as a creditor with respect to the Series A Subordinated Debentures. See "Enforcement of Certain Rights by Special Representative" below for a discussion of certain rights available to holders of the Series A Preferred Securities upon the occurrence of an Event of Default. ENFORCEMENT OF CERTAIN RIGHTS BY SPECIAL REPRESENTATIVE If (i) Illinois Power Capital fails to pay dividends in full on the Series A Preferred Securities for 18 consecutive monthly dividend periods; (ii) an Event of Default occurs and is continuing on the Series A Subordinated Debentures; or (iii) the Company is in default on any of its payment or other obligations under the Guarantee, under the terms of the Series A Preferred Securities, the holders of outstanding Series A Preferred Securities will have the rights referred to under "Description of the Series A Preferred Securities - -- Voting Rights," including the right to appoint a Special Representative, which Special Representative shall be authorized to exercise Illinois Power Capital's right to accelerate the principal amount of the Series A Subordinated Debentures and to enforce Illinois Power Capital's other creditor rights under the Series A Subordinated Debentures. Notwithstanding the appointment of any such Special Representative, the Company shall continue as General Partner and shall retain all rights under S-18 21 the Indenture, including the right to extend the interest payment period from time to time to a period not exceeding 60 consecutive months. BOOK-ENTRY AND SETTLEMENT If distributed to holders of Series A Preferred Securities in connection with the dissolution of Illinois Power Capital as a result of the occurrence of a Special Event, the Series A Subordinated Debentures will be issued in the form of one or more global certificates (each, a "Global Security") registered in the name of a nominee of DTC. Except under the limited circumstances described below, Series A Subordinated Debentures represented by the Global Security will not be exchangeable for, and will not otherwise be issuable as, Series A Subordinated Debentures in definitive form. The Global Securities described above may not be transferred except by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or to a successor depository or its nominee. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of such securities in definitive form. Such laws may impair the ability to transfer beneficial interests in such a Global Security. Except as provided below, owners of beneficial interests in such a Global Security will not be entitled to receive physical delivery of Series A Subordinated Debentures in definitive form and will not be considered the Holders (as defined in the Indenture) thereof for any purpose under the Indenture, and no Global Security representing Series A Subordinated Debentures shall be exchangeable, except for another Global Security of like denomination and tenor to be registered in the name of DTC or its nominee or to a successor depository or its nominee. Accordingly, each beneficial owner must rely on the procedures of DTC and, if such person is not a Participant, on the procedures of the Participant through which such person owns its interest, to exercise any rights of a Holder under the Indenture. THE DEPOSITORY. DTC will act as security depository for the Series A Subordinated Debentures. For a description of DTC and the specific terms of the depository arrangements, see "Description of the Series A Preferred Securities - -- Book-Entry-Only Issuance -- The Depository Trust Company." As of the date of this Prospectus Supplement, the description therein of DTC's book-entry system and DTC's practices as they relate to purchases, transfers, notices and payments with respect to the Series A Preferred Securities apply in all material respects to any debt obligations represented by one or more Global Securities held by DTC. Neither the Company, the Trustee, any paying agent nor any other agent of the Company or the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in a Global Security for such Series A Subordinated Debentures or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. DISCONTINUANCE OF THE DEPOSITORY'S SERVICES. A Global Security shall be exchangeable for Series A Subordinated Debentures registered in the names of persons other than DTC or its nominee only if (i) DTC notifies the Company that it is unwilling or unable to continue as a depository for such Global Security and no successor depository shall have been appointed, or if any time DTC ceases to be a clearing agency registered under the Exchange Act at a time when DTC is required to be so registered to act as such depository, (ii) the Company in its sole discretion determines that such Global Security shall be so exchangeable or (iii) there shall have occurred an Event of Default with respect to such Series A Subordinated Debentures. Any Global Security that is exchangeable pursuant to the preceding sentence shall be exchangeable for Series A Subordinated Debentures registered in such names as the Depository shall direct. It is expected that such instructions will be based upon directions received by the Depository from its Participants with respect to ownership of beneficial interests in such Global Security. S-19 22 MISCELLANEOUS For restrictions on certain actions of the General Partner with respect to Series A Subordinated Debentures held by Illinois Power Capital, see "Description of the Series A Preferred Securities -- Voting Rights." EFFECT OF OBLIGATIONS UNDER THE SERIES A SUBORDINATED DEBENTURES AND THE GUARANTEE As set forth in the Partnership Agreement, the sole purpose of Illinois Power Capital is to issue partner interests in Illinois Power Capital, including, without limitation, the Series A Preferred Securities, and to use the proceeds thereof to purchase the Series A Subordinated Debentures or other similar debt securities of the Company. As long as payments of interest and other payments are made when due on the Series A Subordinated Debentures, such payments will be sufficient to cover dividends and payments due on the Series A Preferred Securities primarily because (i) the aggregate principal amount of Series A Subordinated Debentures will be equal to the sum of the aggregate liquidation preference of the Series A Preferred Securities and the General Partnership Payment; (ii) the interest rate and interest and other payment dates on the Series A Subordinated Debentures will match the dividend rate and dividend and other payment dates for the Series A Preferred Securities; (iii) the Partnership Agreement provides that the Company, as General Partner, shall pay for all, and Illinois Power Capital shall not be obligated to pay, directly or indirectly, for any, costs and expenses of Illinois Power Capital; and (iv) the Partnership Agreement further provides that the General Partner shall not cause or permit Illinois Power Capital to, among other things, engage in any activity that is not consistent with the purposes of Illinois Power Capital. If the Company fails to make interest or other payments on the Series A Subordinated Debentures when due, the Partnership Agreement provides a mechanism whereby the holders of the Series A Preferred Securities may enforce the rights of Illinois Power Capital under the Series A Subordinated Debentures through the appointment of a Special Representative. Payments of dividends and other payments due on the Series A Preferred Securities out of moneys held by Illinois Power Capital are guaranteed by the Company to the extent set forth under "Description of the Guarantee" in the accompanying Prospectus. The Partnership Agreement also provides, and the Company, under the Guarantee, acknowledges, that a Special Representative may be appointed to enforce the Guarantee if the Company is in default on any of its payment obligations under the Guarantee. In addition, if the General Partner or the Special Representative fails to enforce the Guarantee, a holder of a Series A Preferred Security may institute a legal proceeding directly against the Company to enforce its rights under the Guarantee without first instituting a legal proceeding against Illinois Power Capital or any other person or entity. The Company and Illinois Power Capital believe that the above mechanisms and obligations, taken together, are substantially equivalent to a full and unconditional guarantee by the Company of payments due on the Series A Preferred Securities. UNITED STATES TAXATION GENERAL This section is a summary of certain United States federal income tax considerations that may be relevant to prospective purchasers of Series A Preferred Securities and represents the opinion of Schiff Hardin & Waite, tax counsel to the Company and Illinois Power Capital, insofar as it relates to matters of law and legal conclusions. This section is based upon current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), existing and proposed regulations thereunder and current S-20 23 administrative rulings and court decisions, all of which are subject to change. Subsequent changes may cause tax consequences to vary substantially from the consequences described below. No attempt has been made in the following discussion to comment on all United States federal income tax matters affecting purchasers of Series A Preferred Securities. Moreover, the discussion focuses on holders of Series A Preferred Securities who are individual citizens or residents of the United States and has only limited application to corporations, estates, trusts or non-resident aliens. Accordingly, each prospective purchaser of Series A Preferred Securities should consult, and should depend on, his or her own tax advisor in analyzing the federal, state, local and foreign tax consequences of the purchase, ownership or disposition of Series A Preferred Securities. INCOME FROM SERIES A PREFERRED SECURITIES In the opinion of Schiff Hardin & Waite, Illinois Power Capital will be treated as a partnership for federal income tax purposes. Accordingly, each holder of Series A Preferred Securities (a "Preferred Securityholder") will be required to include in gross income such holder's distributive share of the net income of Illinois Power Capital. Such income will not exceed dividends received on such Series A Preferred Securities, except in limited circumstances as described below under "Potential Extension of Interest Payment Period." No portion of such income will be eligible for the dividends received deduction. DISPOSITION OF SERIES A PREFERRED SECURITIES Gain or loss will be recognized on a sale (including a redemption for cash) of Series A Preferred Securities in an amount equal to the difference between the amount realized and the Preferred Securityholder's tax basis for the Series A Preferred Securities sold. Gain or loss recognized by a Preferred Securityholder on the sale or exchange of a Series A Preferred Security held for more than one year will generally be taxable as long-term capital gain or loss. RECEIPT OF SERIES A SUBORDINATED DEBENTURES UPON DISSOLUTION OF ILLINOIS POWER CAPITAL Under certain circumstances, as described under the caption "Description of the Series A Preferred Securities -- Special Event Redemption or Distribution," Series A Subordinated Debentures may be distributed to the holders of the Series A Preferred Securities in connection with the dissolution of Illinois Power Capital. Under current United States federal income tax law, such a distribution would be treated as a non-taxable exchange to each holder of Series A Preferred Securities and would result in the holder of Series A Preferred Securities receiving an aggregate tax basis in the Series A Subordinated Debentures equal to such holder's aggregate tax basis in its Series A Preferred Securities. A holder's holding period in the Series A Subordinated Debentures so received in connection with the dissolution of Illinois Power Capital would include the period for which the Series A Preferred Securities were held by such holder. Under a change in law, a change in legal interpretation or the other circumstances giving rise to a Special Event, however, the dissolution of Illinois Power Capital and the distribution of Series A Subordinated Debentures in connection with the dissolution of Illinois Power Capital could be a taxable event to holders of the Series A Preferred Securities. In the judgment of tax counsel to the Company and Illinois Power Capital, the series of events which would result in the recognition of taxable gain by holders of the Series A Preferred Securities, by reason of a dissolution of Illinois Power Capital in response to a Special Event, is unlikely to occur. There can be no assurance in this regard, however. ILLINOIS POWER CAPITAL INFORMATION RETURNS AND AUDIT PROCEDURES The General Partner will furnish each Series A Preferred Securityholder with a Schedule K-1 each year setting forth such Preferred Securityholder's allocable share of income for the prior calendar year. The General Partner is required to furnish such schedules as soon as practicable following the end of the year, but in any event prior to March 31. Any person who holds Series A Preferred Securities as a nominee for another person is required to furnish to Illinois Power Capital (a) the name, address and taxpayer identification number of the S-21 24 beneficial owner and the nominee; (b) information as to whether the beneficial owner is (i) a person that is not a United States person, (ii) a foreign government, an international organization or any wholly owned agency or instrumentality of either of the foregoing, or (iii) a tax-exempt entity; (c) the amount and description of Series A Preferred Securities held, acquired or transferred for the beneficial owner; and (d) certain information including the dates of acquisitions and transfers, means of acquisitions and transfers, and acquisition cost for purchases, as well as the amount of net proceeds from sales. Brokers and financial institutions are required to furnish additional information, including whether they are United States persons and certain information on Series A Preferred Securities they acquire, hold or transfer for their own accounts. A penalty of $50 per failure (up to a maximum of $100,000 per calendar year) is imposed by the Code for failure to report such information to Illinois Power Capital. The nominee is required to supply the beneficial owners of Series A Preferred Securities with the information furnished to Illinois Power Capital. POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD Under the terms of the Indenture, the Company has the right to extend from time to time the interest payment period on the Series A Subordinated Debentures to a period not exceeding 60 consecutive months. In the event that the Company exercises this right, the Company may not, among other things, declare or pay dividends on any of its capital stock. The Company has no current intention of extending the interest payment period on the Series A Subordinated Debentures since it desires to continue the declaration and payment of dividends on its capital stock. In the event that the interest payment period is extended, Illinois Power Capital will continue to accrue income equal to the amount of the interest payment due at the end of the Extension Period pursuant to the Code and Treasury Regulation provisions applicable to original issue discount. Accrued income will be allocated, but not distributed, to holders of record on the Business Day preceding the last day of each calendar month. As a result, holders of record during an Extension Period will include interest in gross income in advance of the receipt of cash, and any such holders who dispose of Series A Preferred Securities prior to the record date for the payment of dividends following such Extension Period will include interest in gross income but will not receive any cash related thereto from Illinois Power Capital. The tax basis of a Series A Preferred Security will be increased by the amount of any interest that is included in income without a receipt of cash, and will be decreased when and if such cash is subsequently received from Illinois Power Capital. The subsequent receipt of such cash will not be includible in gross income. UNITED STATES ALIEN HOLDERS For purposes of this discussion, a "United States Alien Holder" is any holder who or which is (i) a nonresident alien individual or (ii) a foreign corporation, partnership, estate or trust, in either case not subject to United States federal income tax on a net income basis in respect of a Series A Preferred Security. Under current United States federal income tax law, subject to the discussion below with respect to backup withholding, and assuming satisfaction by the Company of its withholding tax obligations, if any: (i) Payments by Illinois Power Capital or any of its paying agents to any holder of a Series A Preferred Security who or which is a United States Alien Holder will not be subject to United States federal withholding tax provided that (a) the beneficial owner of the Series A Preferred Security does not actually or constructively own 10% or more of the total combined voting power of all classes of capital stock of the Company, (b) the beneficial owner of the Series A Preferred Security is not a controlled foreign corporation that is related to the Company or Illinois Power Capital through stock ownership, and (c) either: (x) the beneficial owner of the Series A Preferred Security certifies to Illinois Power Capital or its agent, under penalties of perjury, that it is a United States Alien Holder and provides its name and address or (y) the holder of the Series A Preferred Security is a securities clearing organization, bank or other financial institution that holds customers' securities in S-22 25 the ordinary course of its trade or business (a "financial institution"), and such holder certifies to Illinois Power Capital or its agent, under penalties of perjury, that such statement has been received from the beneficial owner by it or by a financial institution between it and the beneficial owner and furnishes Illinois Power Capital or its agent with a copy thereof; and (ii) a United States Alien Holder of a Series A Preferred Security will generally not be subject to United States federal withholding tax on any gain realized on the sale or exchange of a Series A Preferred Security unless such holder is present in the United States for 183 days or more in the taxable year of sale and either has a "tax home" in the United States or certain other requirements are met. BACKUP WITHHOLDING AND INFORMATION REPORTING In general, information reporting requirements will apply to payments of the proceeds of the sale of Series A Preferred Securities within the United States to noncorporate United States holders, and "backup withholding" at a rate of 31% will apply to such payments if the United States holder fails to provide an accurate taxpayer identification number. Payments of the proceeds from the sale by a United States Alien Holder of Series A Preferred Securities made to or through a foreign office of a broker will not be subject to information reporting or backup withholding, except that, if the broker is a United States person, a controlled foreign corporation for United States tax purposes or a foreign person 50% or more of whose gross income is effectively connected with a United States trade or business for a specified three-year period, information reporting may apply to such payments. Payments of the proceeds from the sale of Series A Preferred Securities to or through the United States office of a broker is subject to information reporting and backup withholding unless the holder or beneficial owner certifies as to its non-United States status or otherwise establishes an exemption from information reporting and backup withholding. S-23 26 UNDERWRITING Subject to the terms and conditions of the Underwriting Agreement, Illinois Power Capital has agreed to sell to each of the several Underwriters named below, and each of the Underwriters, for whom Goldman, Sachs & Co. and are acting as Representatives, has severally agreed to purchase from Illinois Power Capital the respective number of Series A Preferred Securities set forth opposite its name below:
NUMBER OF SERIES A PREFERRED UNDERWRITER SECURITIES ----------------------------------------------------- ------------- Goldman, Sachs & Co. ................................ ------------- Total...................................... =============
Under the terms and conditions of the Underwriting Agreement, the Underwriters are committed to take and pay for all such Series A Preferred Securities offered hereby, if any are taken. The Underwriters propose to offer the Series A Preferred Securities in part directly to the public at the initial public offering price set forth on the cover page of this Prospectus Supplement, and in part to certain securities dealers at such price less a concession of $ per Series A Preferred Security. The Underwriters may allow, and such dealers may reallow, a concession not in excess of $ per Series A Preferred Security to certain brokers and dealers. After the Series A Preferred Securities are released for sale to the public, the offering price and other selling terms may from time to time be varied by the Representatives. As the proceeds of the sale of the Series A Preferred Securities will be loaned to the Company, the Company has agreed in the Underwriting Agreement to pay to the Underwriters $ per Series A Preferred Security ($ per Series A Preferred Security sold to certain institutions) for the accounts of the several Underwriters. The Company and Illinois Power Capital have agreed, during the period beginning from the date of the Underwriting Agreement and continuing to and including the earlier of (i) the date, after the closing date, on which the distribution of the Series A Preferred Securities ceases, as determined by the Underwriters, or (ii) 30 days after the closing date, not to offer, sell, contract to sell, or otherwise dispose of any Series A Preferred Securities, any limited partner interests of Illinois Power Capital, or any preferred stock or any other securities of Illinois Power Capital or the Company which are substantially similar to the Series A Preferred Securities, or any securities convertible into or exchangeable for Series A Preferred Securities, limited partner interests, preferred stock or such substantially similar securities of either Illinois Power Capital or the Company without the prior written consent of the Underwriters. Prior to this offering, there has been no public market for the Series A Preferred Securities. In order to meet one of the requirements for listing the Series A Preferred Securities on the New York Stock Exchange, the Underwriters will undertake to sell lots of 100 or more Series A Preferred Securities to a minimum of 400 beneficial holders. Illinois Power Capital and the Company have agreed to indemnify the Underwriters against certain civil liabilities, including liabilities under the Securities Act. Certain of the Underwriters engage in transactions with, and from time to time have performed services for, the Company and its affiliates in the ordinary course of business. S-24 27 LEGAL OPINIONS Certain legal matters will be passed upon for the Company and Illinois Power Capital by Schiff Hardin & Waite, Chicago, Illinois, and for the Underwriters by Reid & Priest, New York, New York. Certain matters of Delaware law relating to the validity of the Series A Preferred Securities will be passed upon by Richards, Layton & Finger, P.A., Wilmington, Delaware, special Delaware counsel to the Company and Illinois Power Capital. Schiff Hardin & Waite and Reid & Priest may rely on the opinion of Richards, Layton & Finger, P.A. as to certain matters of Delaware law, Schiff Hardin & Waite may rely on the opinion of Reid & Priest as to all matters of New York law, and Reid & Priest may rely on the opinion of Schiff Hardin & Waite as to all matters of Illinois law. S-25 28 - ------------------------------------------------------ - ------------------------------------------------------ NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION. ------------------ TABLE OF CONTENTS PROSPECTUS SUPPLEMENT
PAGE ---- Certain Investment Considerations.... S-3 Illinois Power Company............... S-4 Illinois Power Capital............... S-4 Use of Proceeds...................... S-4 Summary Financial Information of the Company........................ S-5 Description of the Series A Preferred Securities......................... S-7 Description of the Series A Subordinated Debentures............ S-16 Effect of Obligations under the Series A Subordinated Debentures and the Guarantee.................. S-20 United States Taxation............... S-20 Underwriting......................... S-24 Legal Opinions....................... S-25 PROSPECTUS Available Information................ 2 Incorporation of Certain Documents by Reference.......................... 2 Illinois Power Company............... 3 Illinois Power Capital............... 3 Use of Proceeds...................... 3 Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividend Requirements.............. 4 Description of the Preferred Securities......................... 5 Description of the Guarantee......... 5 Description of the Subordinated Debentures......................... 7 Plan of Distribution................. 12 Legal Opinions....................... 13 Experts.............................. 13
- ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ PREFERRED SECURITIES ILLINOIS POWER CAPITAL GUARANTEED TO THE EXTENT ILLINOIS POWER CAPITAL HAS FUNDS AS SET FORTH HEREIN BY [IP LOGO] ILLINOIS POWER COMPANY % CUMULATIVE MONTHLY INCOME PREFERRED SECURITIES, SERIES A ------------------------ PROSPECTUS SUPPLEMENT ------------------------ GOLDMAN, SACHS & CO. REPRESENTATIVES OF THE UNDERWRITERS - ------------------------------------------------------ - ------------------------------------------------------ 29 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED AUGUST 19, 1994 PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED AUGUST , 1994 PREFERRED SECURITIES ILLINOIS POWER CAPITAL CUMULATIVE ADJUSTABLE RATE MONTHLY INCOME PREFERRED SECURITIES ("MIPS"*), SERIES A (LIQUIDATION PREFERENCE $25 PER PREFERRED SECURITY) GUARANTEED TO THE EXTENT ILLINOIS POWER CAPITAL HAS FUNDS AS SET FORTH HEREIN BY ILLINOIS POWER COMPANY ------------------------------ The Cumulative Adjustable Rate Monthly Income Preferred Securities, Series A (the "Series A Preferred Securities"), representing the limited partner interests offered hereby, are being issued by Illinois Power Capital, L.P., a limited partnership formed under the laws of the State of Delaware ("Illinois Power Capital"). All of the general partner interests in Illinois Power Capital are owned by Illinois Power Company, an Illinois corporation (the "Company"). Illinois Power Capital exists for the sole purpose of issuing its partner interests and using the proceeds thereof to purchase certain debt securities of the Company. The proceeds of the Series A Preferred Securities will be used by Illinois Power Capital to purchase the Company's Adjustable Rate Subordinated Deferrable Interest Debentures, Series A (the "Series A Subordinated Debentures"). The limited partner interests represented by the Series A Preferred Securities will have a preference with respect to cash distributions and amounts payable on liquidation over the general partner interests in Illinois Power Capital. Holders of the Series A Preferred Securities will be entitled to receive cumulative cash distributions accruing from the date of original issuance and payable monthly in arrears on the last day of each calendar month of each year, commencing , 1994 ("dividends"). The dividend rate will be adjusted quarterly. The rate for the initial period from the date of initial issuance to , 1994 will be % per annum, which is equivalent to $ per Series A Preferred Security per annum. Thereafter, dividends on the Series A Preferred Securities will be payable at the "Applicable Rate" from time to time in effect. The Applicable Rate for any quarter will be equal to % of the highest of the "Treasury Bill Rate," the "Ten Year Constant Maturity Rate" and the "Thirty Year Constant Maturity Rate" determined in advance of such quarter. The Applicable Rate for any quarter will not be less than % per annum nor greater than % per annum. See "Description of the Series A Preferred Securities -- Dividends." The payment of dividends and payments on liquidation of Illinois Power Capital or the redemption of Series A Preferred Securities, to the extent that Illinois Power Capital has sufficient cash on hand to permit such payments and funds legally available therefor, are guaranteed by the Company to the extent set forth herein and in the accompanying Prospectus (the "Guarantee"). See "Description of the Guarantee" in the accompanying Prospectus. If the Company fails to make interest payments on the Series A Subordinated Debentures purchased by Illinois Power Capital with the proceeds of this offering, Illinois Power Capital will have insufficient funds to pay dividends on the Series A Preferred Securities. The Guarantee does not provide for payment by the Company directly of dividends for which Illinois Power Capital does not have sufficient funds available. In such event, the remedy of a holder of Series A Preferred Securities is to enforce Illinois Power Capital's rights under the Series A Subordinated Debentures purchased by Illinois Power Capital from the Company. The obligations of the Company under the Guarantee are subordinate and junior in right of payment to all liabilities of the Company, and the Company's obligations under the Series A Subordinated Debentures are subordinate and junior in right of payment to all present and future Senior Indebtedness (as defined in the accompanying Prospectus) of the Company. At June 30, 1994, Senior Indebtedness of the Company aggregated approximately $2.2 billion. The Series A Preferred Securities are redeemable at the option of Illinois Power Capital, in whole or in part, from time to time, on or after , 1999, at $25 per Series A Preferred Security plus any accumulated and unpaid dividends thereon to the date fixed for redemption (the "Redemption Price"), and will be redeemed at such price from the proceeds of any repayment or redemption of the Series A Subordinated Debentures. See "Description of Series A Preferred Securities -- Optional Redemption" and "-- Mandatory Redemption." In addition, upon the occurrence of certain special events arising from a change in law or a change in legal interpretation, the Series A Preferred Securities are redeemable in whole at the Redemption Price at the option of the Company, in its capacity as the general partner of Illinois Power Capital (the "General Partner"), or the General Partner may dissolve Illinois Power Capital and cause Series A Subordinated Debentures to be distributed to the holders of the Series A Preferred Securities in liquidation of their interests in Illinois Power Capital. See "Description of Series A Preferred Securities -- Special Event Redemption or Distribution" and "Description of the Series A Subordinated Debentures." If the Series A Subordinated Debentures are so distributed, the Company will use its best efforts to have them listed on the same exchange on which the Series A Preferred Securities are then listed. In the event of the dissolution of Illinois Power Capital, the holders of Series A Preferred Securities will be entitled to a liquidation preference for each Series A Preferred Security of $25 plus any accumulated and unpaid dividends thereon to the date of payment, subject to certain limitations, unless, in connection with such dissolution, Series A Subordinated Debentures are distributed to the holders of the Series A Preferred Securities. See "Description of Series A Preferred Securities -- Liquidation Distribution Upon Dissolution." SEE "CERTAIN INVESTMENT CONSIDERATIONS" FOR CERTAIN CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE SERIES A PREFERRED SECURITIES, INCLUDING THE PERIOD DURING WHICH AND CIRCUMSTANCES UNDER WHICH PAYMENT OF DIVIDENDS ON THE SERIES A PREFERRED SECURITIES MAY BE DEFERRED. Application will be made to list the Series A Preferred Securities on the New York Stock Exchange. ------------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
INITIAL PUBLIC UNDERWRITING PROCEEDS TO ILLINOIS POWER OFFERING PRICE COMMISSION(1) CAPITAL(2)(3) -------------- ------------- -------------------------- Per Series A Preferred Security.................................. $ (2) $ Total............................................................ $ (2) $
- ------------------ (1) Illinois Power Capital and the Company have agreed to indemnify the several Underwriters against certain civil liabilities, including liabilities under the Securities Act of 1933, as amended. See "Underwriting." (2) As the proceeds of the sale of the Series A Preferred Securities will be loaned to the Company, the Company has agreed in the Underwriting Agreement to pay to the Underwriters $ per Series A Preferred Security (or $ in the aggregate); provided that such payment will be $ per Series A Preferred Security sold to certain institutions. Therefore, to the extent that Series A Preferred Securities are sold to such institutions, the actual amount of Underwriters' compensation will be less than the amount specified in the preceding sentence and the Proceeds to Illinois Power Capital will be greater than the amount set forth in the table above. See "Underwriting." (3) Expenses of the offering which are payable by the Company are estimated to be $ . ------------------------------ The Series A Preferred Securities offered hereby are offered severally by the Underwriters, as specified herein, subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part. It is expected that delivery of certificates for the Series A Preferred Securities will be made only in book-entry form through the facilities of The Depository Trust Company on or about , 1994. - ------------------ * An application has been filed by Goldman, Sachs & Co. with the United States Patent and Trademark Office for the registration of the MIPS servicemark. GOLDMAN, SACHS & CO. The date of this Prospectus Supplement is , 1994. 30 IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. S-2 31 CERTAIN INVESTMENT CONSIDERATIONS Prospective purchasers of Series A Preferred Securities should carefully review the information contained elsewhere in this Prospectus Supplement and in the accompanying Prospectus and should particularly consider the following matters. Capitalized terms used and not otherwise defined in this Prospectus Supplement shall have the meanings ascribed thereto in the accompanying Prospectus. SUBORDINATION OF GUARANTEE AND SERIES A SUBORDINATED DEBENTURES. The Company's obligations under the Guarantee are subordinate and junior in right of payment to all other liabilities of the Company. The obligations of the Company under the Series A Subordinated Debentures are subordinate and junior in right of payment to all present and future Senior Indebtedness of the Company. At June 30, 1994, Senior Indebtedness of the Company aggregated approximately $2.2 billion. There are no terms in the Series A Preferred Securities, the Series A Subordinated Debentures or the Guarantee that limit the Company's ability to incur additional indebtedness, including indebtedness that ranks senior to the Series A Junior Subordinated Debentures and the Guarantee. See "Description of the Guarantee -- Status of the Guarantee" and "Description of the Subordinated Debentures -- Subordination" in the accompanying Prospectus. OPTION TO EXTEND INTEREST PAYMENT PERIOD. The Company has the right under the Indenture to extend the interest payment period from time to time on the Series A Subordinated Debentures to a period not exceeding 60 consecutive months, and, as a consequence, monthly dividends on the Series A Preferred Securities would be deferred (but would continue to accrue with interest thereon) by Illinois Power Capital during any such extended interest payment period. In the event that the Company exercises this right, the Company may not declare or pay dividends on, or redeem, purchase or acquire, any of its capital stock until the deferred interest on the Series A Subordinated Debentures is paid in full. Prior to the termination of any such extension period, the Company may further extend the interest payment period, provided that such extension period together with all such previous and further extensions thereof may not exceed 60 consecutive months. Upon the termination of any extension period and the payment of all amounts then due, the Company may select a new extension period, subject to the above requirements. The Company has no current intention of extending the interest payment period on the Series A Subordinated Debentures since it desires to continue the declaration and payment of dividends on its capital stock. See "Description of the Series A Preferred Securities -- Dividends" and "Description of the Series A Subordinated Debentures -- Option to Extend Interest Payment Period." Should an extended interest payment period occur, Illinois Power Capital will continue to accrue income for United States federal income tax purposes which will be allocated, but not distributed, to holders of record of Series A Preferred Securities. As a result, such a holder will include such interest in gross income for United States federal income tax purposes in advance of the receipt of cash, and will not receive the cash from Illinois Power Capital related to such income if such a holder disposes of his or her Series A Preferred Securities prior to the record date for payment of dividends. See "United States Taxation -- Potential Extension of Interest Payment Period." SPECIAL EVENT REDEMPTION OR DISTRIBUTION. Upon the occurrence of a Special Event (as defined herein), the General Partner will elect to either (i) redeem the Series A Preferred Securities in whole or (ii) dissolve Illinois Power Capital and cause Series A Subordinated Debentures to be distributed to the holders of the Series A Preferred Securities in liquidation of their interests in Illinois Power Capital. The Series A Subordinated Debentures will initially be issued at face value as a Global Security (as defined herein) and will be limited in aggregate principal amount to approximately $ million, such amount being the sum of the aggregate liquidation preference of the Series A Preferred Securities and the General Partnership Payment (as defined herein). In the case of a Tax Event (as defined herein), the General Partner may also elect to cause the Series A Preferred Securities to remain outstanding. See "Description of the Series A Preferred Securities -- Special Event Redemption or Distribution" and "Description of the Series A Subordinated Debentures -- General." Under current United States federal income tax law, the distribution of Series A Subordinated Debentures in connection with the dissolution of Illinois Power Capital would not be a taxable event to S-3 32 holders of the Series A Preferred Securities. Under a change in law, a change in legal interpretation or the other circumstances giving rise to a Special Event, however, the dissolution of Illinois Power Capital and the distribution of Series A Subordinated Debentures in connection with the dissolution of Illinois Power Capital could be a taxable event to holders of the Series A Preferred Securities. In the judgment of tax counsel to the Company and Illinois Power Capital, the series of events which would result in the recognition of taxable gain by holders of the Series A Preferred Securities, by reason of a dissolution of Illinois Power Capital in response to a Special Event, is unlikely to occur. There can be no assurance in this regard, however. See "United States Taxation - -- Receipt of Series A Subordinated Debentures Upon Dissolution of Illinois Power Capital." ILLINOIS POWER COMPANY The Company was incorporated under the laws of the State of Illinois on May 25, 1923. Effective May 27, 1994, the Company became a subsidiary of Illinova Corporation, an exempt holding company under the Public Utility Holding Company Act of 1935, as amended, pursuant to a merger in which each outstanding share of the Company's Common Stock was converted into one share of common stock of Illinova Corporation. The Company is engaged in the generation, transmission, distribution and sale of electric energy and the distribution 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 309 incorporated municipalities, adjacent suburban and rural areas and numerous unincorporated municipalities having an aggregate population of approximately 1,283,000. Gas service is provided to 257 incorporated municipalities, adjacent suburban areas and numerous unincorporated municipalities having an aggregate population of approximately 935,000. 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). The executive offices of the Company are located at 500 South 27th Street, Decatur, Illinois 62525, and the Company's telephone number is (217) 424-6600. ILLINOIS POWER CAPITAL Illinois Power Capital is a limited partnership formed under the Delaware Revised Uniform Limited Partnership Act, as amended (the "Partnership Act"). Illinois Power Capital exists for the sole purpose of issuing its partner interests, including the Series A Preferred Securities, and using the proceeds thereof to purchase certain debt securities of the Company, including the Series A Subordinated Debentures. The Company is the sole general partner (the "General Partner") of Illinois Power Capital and will manage all of the business and affairs of Illinois Power Capital. Holders of Series A Preferred Securities will be limited partners of Illinois Power Capital. The Company, as the General Partner of Illinois Power Capital, will make capital contributions to Illinois Power Capital from time to time to the extent required so that the total contributions made by the General Partner shall at all times be at least equal to 3% of the total contributions made by all partners. The rights and obligations of the General Partner and the limited partners of Illinois Power Capital will be governed by the Partnership Act and by an Amended and Restated Agreement of Limited Partnership of Illinois Power Capital (the "Partnership Agreement") substantially in the form filed as an exhibit to the Registration Statement of which this Prospectus Supplement and the accompanying Prospectus form a part. USE OF PROCEEDS The proceeds to be received by Illinois Power Capital from the sale of the Series A Preferred Securities will be used to purchase Series A Subordinated Debentures of the Company and will be applied by the Company to the payment or provision for payment at maturity, the purchase or the redemption of outstanding securities of the Company and for general corporate purposes. S-4 33 SUMMARY FINANCIAL INFORMATION OF THE COMPANY (THOUSANDS EXCEPT PER SHARE AMOUNTS AND RATIOS)
12 MONTHS YEAR ENDED DECEMBER 31, ENDED -------------------------------------------------------------- JUNE 30, 1994 1989 1990 1991 1992 1993(A) (UNAUDITED)(A)(B) ---------- ---------- ---------- ---------- ---------- ----------------- INCOME STATEMENT DATA: Operating Revenues..... $1,393,778 $1,469,480 $1,474,905 $1,479,449 $1,581,190 $ 1,628,094 Net Income............. (288,432) (78,484) 109,244 122,088 (56,038) (42,031) Preferred Dividend Requirements......... 37,365 36,839 30,866 28,854 26,123 24,283 Net Income Applicable to Common Stock...... (325,797) (115,323) 78,378 93,234 (82,161) (66,314) Earnings Per Share of Common Stock......... (4.34) (1.53) 1.04 1.23 (1.08) (0.91) Ratio of Earnings to Fixed Charges(c)..... (0.52)(d) 0.70(d) 1.85 2.02 0.80(d) 0.91(d) Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividend Requirements(c)...... (0.45)(e) 0.60(e) 1.48 1.61 0.70(e) 0.82(e)
AMOUNT PERCENTAGE ---------- ---------- CAPITALIZATION AT JUNE 30, 1994: Long-Term Debt............................................................... $1,868,191 52.2% Preferred Stock (not subject to mandatory redemption)........................ 303,705 8.5 Preferred Stock (subject to mandatory redemption)............................ 36,000 1.0 Common Stock Equity.......................................................... 1,368,858 38.3 ---------- ---------- Total Capitalization..................................................... $3,576,754 100.0% ========= =========
- --------------- (a) Subsequent to the Company's merger with Illinova Corporation, net assets of Illinova Generating Company (formerly IP Group, Inc.) were transferred in the form of a dividend from the Company to Illinova Corporation. The income statement data contained herein has been restated to reflect the financial results of the Company's current operations. (b) In the opinion of the Company, all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the unaudited twelve-month period ended June 30, 1994, have been made. (c) Earnings used in the calculation of the ratio of earnings to fixed charges and the ratio of earnings to combined fixed charges and preferred stock dividend requirements include the allowance for funds used during construction and the deferred financing costs associated with the Company's Clinton Power Station, and are before deduction of income taxes and fixed charges. Fixed charges include interest on long-term debt, related amortization of debt discount, premium, and expense, other interest and that portion of rent expense which is estimated to be representative of the interest component. Preferred stock dividend requirements have been increased to an amount representing the pre-tax earnings required to cover such dividend requirements. (d) The ratios of earnings to fixed charges for the twelve months ended June 30, 1994 and for the years ended December 31, 1993, 1990 and 1989 of 0.93, 0.80, 0.70 and (0.52), respectively, indicate that earnings were inadequate to cover fixed charges. The dollar amounts of the coverage deficiency for the twelve months ended June 30, 1994, and for the years ended 1993, 1990 and 1989 were approximately $13 million, $37 million, $68 million and $375 million, respectively. Excluding the loss on disallowed plant costs of $200 million, net of income taxes, recorded in the S-5 34 third quarter of 1993, the ratio of earnings to fixed charges would have been 2.42 for the twelve months ended June 30, 1994 and 2.25 for the year ended 1993. Excluding the loss on disallowed plant costs of $137 million, net of income taxes, recorded in the fourth quarter of 1990, the ratio of earnings to fixed charges would have been 1.41 for the year ended 1990. Excluding the loss on disallowed plant costs of $346 million, net of income taxes, recorded in the first quarter of 1989, the ratio of earnings to fixed charges would have been 1.31 for the year ended 1989. (e) The ratios of earnings to combined fixed charges and preferred stock dividend requirements for the twelve months ended June 30, 1994 and for the years ended December 31, 1993, 1990 and 1989 of 0.82, 0.70, 0.60 and (0.45), respectively, indicate that earnings were inadequate to cover combined fixed charges and preferred stock dividend requirements. The dollar amounts of the coverage deficiency for the twelve months ended June 30, 1994, and for the years ended 1993, 1990 and 1989 were approximately $38 million, $63 million, $105 million and $412 million, respectively. Excluding the loss on disallowed plant costs of $200 million, net of income taxes, recorded in the third quarter of 1993, the ratio of earnings to combined fixed charges and preferred stock dividend requirements would have been 1.98 for the twelve months ended June 30, 1994 and 1.83 for the year ended 1993. Excluding the loss on disallowed plant costs of $137 million, net of income taxes, recorded in the fourth quarter of 1990, the ratio of earnings to combined fixed charges and preferred stock dividend requirements would have been 1.09 for the year ended 1990. Excluding the loss on disallowed plant costs of $346 million, net of income taxes, recorded in the first quarter of 1989, the ratio of earnings to combined fixed charges and preferred stock dividend requirements would have been 1.06 for the year ended 1989. S-6 35 DESCRIPTION OF THE SERIES A PREFERRED SECURITIES GENERAL All of the partnership interests in Illinois Power Capital, other than the Series A Preferred Securities offered hereby, are owned by the General Partner. The Partnership Agreement authorizes and creates the Series A Preferred Securities, which represent limited partner interests in Illinois Power Capital (the "Preferred Securities"). Preferred Securities may be issued from time to time in one or more series as described in the accompanying Prospectus. The limited partner interests represented by the Series A Preferred Securities will have a preference with respect to dividends and amounts payable on liquidation over the General Partner's interest in Illinois Power Capital. The Partnership Agreement does not permit the issuance of any Preferred Securities ranking, as to participation in profits and dividends and in the assets of Illinois Power Capital, senior or junior to the Series A Preferred Securities or the incurrence of any indebtedness by Illinois Power Capital. The summary of certain terms and provisions of the Series A Preferred Securities set forth below does not purport to be complete and is subject to, and qualified in its entirety by reference to, the Partnership Agreement and the Partnership Act. DIVIDENDS Dividends on the Series A Preferred Securities will be cumulative, will accrue from the date of initial issuance thereof and will be payable monthly in arrears, on the last day of each calendar month of each year, commencing , 1994, when, as and if available and determined to be so payable by the Company, as the General Partner, except as otherwise described below. Dividends in arrears for more than one month will bear interest thereon at the rate per annum equal to the dividend rate during the period of arrearage. The term "dividends" as used herein includes any such interest payable unless otherwise stated. The amount of dividends payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. The dividend rate will be adjusted quarterly. The rate for the initial period from the date of initial issuance to , 1994 will be % per annum, which is equivalent to $ per Series A Preferred Security per annum. Thereafter, dividends on the Series A Preferred Securities will be payable at the "Applicable Rate" (as defined below) from time to time in effect. The Company has the right under the Indenture to extend the interest payment period from time to time on the Series A Subordinated Debentures to a period not exceeding 60 consecutive months, and, as a consequence, monthly dividends on the Series A Preferred Securities would be deferred (but would continue to accrue with interest) by Illinois Power Capital during any such extended interest payment period. In the event that the Company exercises this right, the Company may not declare or pay dividends on, or redeem, purchase or acquire, any of its capital stock. Prior to the termination of any such extension period, the Company may further extend the interest payment period, provided that such extension period together with all such previous and further extensions thereof may not exceed 60 consecutive months. Upon the termination of any extension period and the payment of all amounts then due, the Company may select a new extension period, subject to the above requirements. See "Description of the Series A Subordinated Debentures -- Interest" and "-- Option to Extend Interest Payment Period." Dividends on the Series A Preferred Securities must be paid on the dates payable to the extent that Illinois Power Capital has (i) funds legally available for the payment of such dividends and (ii) cash on hand sufficient to permit such payments. It is anticipated that Illinois Power Capital's earnings available for distribution to the holders of the Series A Preferred Securities will be limited to payments under the Series A Subordinated Debentures in which Illinois Power Capital will invest the proceeds from the issuance and sale of the Series A Preferred Securities and the General Partner's capital contribution. See "Description of the Series A Subordinated Debentures." The payment of dividends, out of moneys held by Illinois Power Capital, are guaranteed by the Company as set forth under "Description of the Guarantee" in the accompanying Prospectus. S-7 36 Dividends on the Series A Preferred Securities will be payable to the holders thereof as they appear on the books and records of Illinois Power Capital on the relevant record dates, which, as long as the Series A Preferred Securities remain in book-entry-only form, will be one Business Day (as defined below) prior to the relevant payment dates. Subject to any applicable laws and regulations and the provisions of the Partnership Agreement, each such payment will be made as described under "Book-Entry-Only Issuance -- The Depository Trust Company" below. In the event the Series A Preferred Securities shall not continue to remain in book-entry-only form, the General Partner shall have the right to select relevant record dates which shall be more than one Business Day prior to the relevant payment dates. In the event that any date on which dividends are payable on the Series A Preferred Securities is not a Business Day, then payment of the dividend payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. A "Business Day" shall mean any day other than a day on which banking institutions in The City of New York are authorized or required by law to close. Except as provided below in this paragraph, the "Applicable Rate" for any quarter (other than the initial period) will be equal to % of the Effective Rate (as defined below), but not less than % per annum nor more than % per annum. The "Effective Rate" for any quarter will be equal to the highest of the Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Thirty Year Constant Maturity Rate (each as defined below) for such quarter. The Applicable Rate will be rounded to the nearest five hundredths of a percent. In the event that Illinois Power Capital determines in good faith that for any reason: (i) any one of the Treasury Bill Rate, the Ten Year Constant Maturity Rate or the Thirty Year Constant Maturity Rate cannot be determined for any quarter, then the Effective Rate for such quarter will be equal to the higher of whichever two of such rates can be so determined; (ii) only one of the Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Thirty Year Constant Maturity Rate can be determined for any quarter, then the Effective Rate for such quarter will be equal to whichever such rate can be so determined; or (iii) none of the Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Thirty Year Constant Maturity Rate can be determined for any quarter, then the Effective Rate for the preceding quarter will be continued for such quarter. Except as described below in this paragraph, the "Treasury Bill Rate" for each quarter will be the arithmetic average of the two most recent weekly per annum secondary market discount rates (or the one weekly per annum secondary market discount rate, if only one such rate is published during the relevant Calendar Period (as defined below)) for three-month U.S. Treasury bills, as published weekly by the Federal Reserve Board (as defined below) during the Calendar Period immediately preceding the last ten calendar days preceding the quarter for which the dividend rate on the Series A Preferred Securities is being determined. In the event that the Federal Reserve Board does not publish such a weekly per annum secondary market discount rate during any such Calendar Period, then the Treasury Bill Rate for such quarter will be the arithmetic average of the two most recent weekly per annum secondary market discount rates (or the one weekly per annum secondary market discount rate, if only one such rate is published during the relevant Calendar Period) for three-month U.S. Treasury bills, as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by Illinois Power Capital. In the event that a per annum secondary market discount rate for three-month U.S. Treasury bills is not published by the Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, then the Treasury Bill Rate for such quarter will be the arithmetic average of the two most recent weekly per annum secondary market discount rates (or the one weekly per annum secondary market discount rate, if only one such rate is published during the relevant Calendar Period) for all of the U.S. Treasury bills then having remaining maturities of not less than 80 nor more than 100 days, as published during S-8 37 such Calendar Period by the Federal Reserve Board, or if the Federal Reserve Board does not publish such rates, by any Federal Reserve Bank or by any U.S. Government department or agency selected by Illinois Power Capital. In the event that Illinois Power Capital determines in good faith that for any reason no such U.S. Treasury bill rates are published as provided above during such Calendar Period, then the Treasury Bill Rate for such quarter will be the arithmetic average of the per annum secondary market discount rates based upon the closing bids during such Calendar Period for each of the issues of marketable non-interest-bearing U.S. Treasury securities with a remaining maturity of not less than 80 nor more than 100 days from the date of each such quotation, as chosen and quoted daily for each business day in New York City (or less frequently if daily quotations are not generally available) to Illinois Power Capital by at least three recognized dealers in U.S. Government securities selected by Illinois Power Capital. In the event that Illinois Power Capital determines in good faith that for any reason Illinois Power Capital cannot determine the Treasury Bill Rate for any quarter as provided above in this paragraph, the Treasury Bill Rate for such quarter will be the arithmetic average of the per annum secondary market discount rate based upon the closing bids during such Calendar Period for each of the issues of marketable interest-bearing U.S. Treasury securities with a remaining maturity of not less than 80 nor more than 100 days, as chosen and quoted daily for each business day in New York City (or less frequently if daily quotations are not generally available) to Illinois Power Capital by at least three recognized dealers in U.S. Government securities selected by Illinois Power Capital. Except as described below in this paragraph, the "Ten Year Constant Maturity Rate" for each quarter will be the arithmetic average of the two most recent weekly per annum Ten Year Average Yields (as defined below) (or the one weekly per annum Ten Year Average Yield, if only one such yield is published during the relevant Calendar Period), as published weekly by the Federal Reserve Board during the Calendar Period immediately preceding the last ten calendar days preceding the quarter for which the dividend rate on the Series A Preferred Securities is being determined. In the event that the Federal Reserve Board does not publish such a weekly per annum Ten Year Average Yield during such Calendar Period, then the Ten Year Constant Maturity Rate for such quarter will be the arithmetic average of the two most recent weekly per annum Ten Year Average Yields (or the one weekly per annum Ten Year Average Yield, if only one such yield is published during the relevant Calendar Period), as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by Illinois Power Capital. In the event that a per annum Ten Year Average Yield is not published by the Federal Reserve Board or by the Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, then the Ten Year Constant Maturity Rate for such quarter will be the arithmetic average of the two most recent weekly per annum average yields to maturity (or the one weekly per annum average yield to maturity, if only one such yield is published during the relevant Calendar Period) for all of the actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities (as defined below)) then having remaining maturities of not less than eight nor more than twelve years, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board does not publish such yields, by any Federal Reserve Bank or by any U.S. Government department or agency selected by Illinois Power Capital. In the event that Illinois Power Capital determines in good faith that for any reason Illinois Power Capital cannot determine the Ten Year Constant Maturity Rate for any quarter as provided above in this paragraph, then the Ten Year Constant Maturity Rate for such quarter will be the arithmetic average of the per annum average yields to maturity based upon the closing bids during such Calendar Period for each of the issues of actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) with a final maturity date not less than eight or more than twelve years from the date of each such quotation, as chosen and quoted daily for each business day in New York City (or less frequently if daily quotations are not generally available) to Illinois Power Capital by at least three recognized dealers in U.S. Government securities selected by Illinois Power Capital. Except as described below in this paragraph, the "Thirty Year Constant Maturity Rate" for each quarter will be the arithmetic average of the two most recent weekly per annum Thirty Year Average Yields (as defined below) (or the one weekly per annum Thirty Year Average Yield, if only one such yield is published during the relevant Calendar Period), as published weekly by the Federal Reserve Board S-9 38 during the Calendar Period immediately preceding the last ten calendar days preceding the quarter for which the dividend rate on the Series A Preferred Securities is being determined. In the event that the Federal Reserve Board does not publish such a weekly per annum Thirty Year Average Yield during such Calendar Period, then the Thirty Year Constant Maturity Rate for such quarter will be the arithmetic average of the two most recent weekly per annum Thirty Year Average Yields (or the one weekly per annum Thirty Year Average Yield, if only one such yield is published during the relevant Calendar Period), as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by Illinois Power Capital. In the event that a per annum Thirty Year Average Yield is not published by the Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, then the Thirty Year Constant Maturity Rate for such quarter will be the arithmetic average of the two most recent weekly per annum average yields to maturity (or the one weekly per annum average yield to maturity, if only one such yield is published during the relevant Calendar Period) for all of the actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) then having remaining maturities of not less than twenty-eight nor more than thirty-two years, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board does not publish such yields, by any Federal Reserve Bank or by any U.S. Government department or agency selected by Illinois Power Capital. In the event that Illinois Power Capital determines in good faith that for any reason Illinois Power Capital cannot determine the Thirty Year Constant Maturity Rate for any quarter as provided above in this paragraph, then the Thirty Year Constant Maturity Rate for such quarter will be the arithmetic average of the per annum average yields to maturity based upon the closing bids during such Calendar Period for each of the issues of actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) with a final maturity date not less than twenty-eight nor more than thirty-two years from the date of each such quotation, as chosen and quoted daily for each business day in New York City (or less frequently if daily quotations are not generally available) to Illinois Power Capital by at least three recognized dealers in U.S. Government securities selected by Illinois Power Capital. The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Thirty Year Constant Maturity Rate will each be rounded to the nearest one hundredth of a percent. The Applicable Rate with respect to each quarter (other than the initial period) will be calculated as promptly as practicable by Illinois Power Capital according to the appropriate method described above. Illinois Power Capital will cause each Applicable Rate to be published in a newspaper of general circulation in New York City before the commencement of the quarter to which it applies and will cause notice of such Applicable Rate to be given to The Depository Trust Company (the "Depository" or "DTC"), New York, New York, the securities depository for the Series A Preferred Securities. See "Book-Entry-Only Issuance - -- The Depository Trust Company" below. As used above, the term "Calendar Period" means a period of fourteen calendar days; the term "Federal Reserve Board" means the Board of Governors of the Federal Reserve System; the term "Special Securities" means securities which can, at the option of the holder, be surrendered at face value in payment of any federal estate tax or which provide tax benefits to the holder and are priced to reflect such tax benefits or which were originally issued at a deep or substantial discount; the term "Ten Year Average Yield" means the average yield to maturity for actively traded marketable U.S. Treasury fixed interest rate securities adjusted to constant maturities of ten years; and the term "Thirty Year Average Yield" means the average yield to maturity for actively traded marketable U.S. Treasury fixed interest rate securities adjusted to constant maturities of thirty years. CERTAIN RESTRICTIONS ON ILLINOIS POWER CAPITAL If dividends have not been paid in full on the Series A Preferred Securities, Illinois Power Capital shall not: (i) pay, or set aside for payment, any dividends on any other series of Preferred Securities, unless the amount of any dividends declared on any other series of Preferred Securities is paid on S-10 39 such other series of Preferred Securities and the Series A Preferred Securities on a pro rata basis on the date such dividends are paid on such other series of Preferred Securities, so that (x) the aggregate amount of dividends paid on the Series A Preferred Securities bears to the aggregate amount of dividends paid on such other series of Preferred Securities the same ratio as (y) the aggregate of all accumulated and unpaid dividends in respect of the Series A Preferred Securities bears to the aggregate of all accumulated and unpaid dividends in respect of such other series of Preferred Securities; or (ii) redeem, purchase or otherwise acquire any other Preferred Securities; until, in each case, such time as all accumulated and unpaid dividends on the Series A Preferred Securities shall have been paid in full for all dividend periods terminating on or prior to, in the case of clause (i), such payment and, in the case of clause (ii), the date of such redemption, purchase or acquisition. As of the date of this Prospectus Supplement, there are no series of Preferred Securities outstanding. OPTIONAL REDEMPTION The Series A Preferred Securities are redeemable, at the option of Illinois Power Capital, in whole or in part, from time to time, on or after , 1999, upon not less than 30 nor more than 60 days' notice, at the Redemption Price. In the event that fewer than all the outstanding Series A Preferred Securities are to be so redeemed, the Series A Preferred Securities to be redeemed will be selected as described under "Book-Entry-Only Issuance -- The Depository Trust Company" below. If a partial redemption would result in the delisting of the Series A Preferred Securities, Illinois Power Capital may only redeem the Series A Preferred Securities in whole. SPECIAL EVENT REDEMPTION OR DISTRIBUTION If a Tax Event or an Investment Company Event (each, as defined below, and, each, a "Special Event") shall occur and be continuing, the General Partner shall elect to either (i) redeem the Series A Preferred Securities in whole (and not in part), upon not less than 30 or more than 60 days' notice at the Redemption Price within 90 days following the occurrence of such Special Event; provided, that, if at the time there is available to the General Partner the opportunity to eliminate, within such 90-day period, the Special Event by taking some ministerial action, such as filing a form or making an election, or pursuing some other similar reasonable measure, which has no adverse effect on Illinois Power Capital or the General Partner, the General Partner will pursue such measure in lieu of redemption, or (ii) dissolve Illinois Power Capital and, after satisfaction of liabilities of creditors as required by the Partnership Act, cause Series A Subordinated Debentures to be distributed to the holders of the Series A Preferred Securities in liquidation of their interests in Illinois Power Capital, within 90 days following the occurrence of such Special Event. In the case of a Tax Event, the General Partner may also elect to cause the Series A Preferred Securities to remain outstanding. "Tax Event" means that the General Partner shall have obtained an opinion of nationally recognized independent tax counsel experienced in such matters to the effect that, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, (b) any amendment to or change in an interpretation or application of such laws or regulations by any legislative body, court, governmental agency or regulatory authority (including the enactment of any legislation and the publication of any judicial decision or regulatory determination on or after such date) or (c) any interpretation or pronouncement that provides for a position with respect to such laws or regulations that differs from the generally accepted position on , 1994, which amendment or change is effective or such interpretation or pronouncement is announced on or after , 1994, there is more than an insubstantial risk that (i) Illinois Power Capital is subject to federal income tax with S-11 40 respect to interest received on the Series A Subordinated Debentures, (ii) interest payable to Illinois Power Capital on the Series A Subordinated Debentures will not be deductible for federal income tax purposes or (iii) Illinois Power Capital is subject to more than a de minimis amount of other taxes, duties or other governmental charges. "Investment Company Event" means the occurrence of a change in law or regulation or a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law") to the effect that Illinois Power Capital is or will be considered an "investment company" which is required to be registered under the Investment Company Act of 1940, as amended (the "1940 Act"), which Change in 1940 Act Law becomes effective on or after , 1994; provided, that no Investment Company Event shall be deemed to have occurred if the General Partner obtains a written opinion of nationally recognized independent counsel experienced in practice under the 1940 Act to the effect that the General Partner has successfully issued an additional or supplemental irrevocable and unconditional guarantee (x) of accrued and unpaid dividends (whether or not determined to be paid out of moneys legally available therefor) on the Series A Preferred Securities and (y) of the full amount of the Liquidation Distribution (as hereinafter defined) on the Series A Preferred Securities upon a liquidation of Illinois Power Capital (regardless of the amount of assets of Illinois Power Capital otherwise available for distribution in such liquidation) to avoid such Change in 1940 Act Law so that in the opinion of such counsel, notwithstanding such Change in 1940 Act Law, Illinois Power Capital is not required to be registered as an "investment company" within the meaning of the 1940 Act. After the date fixed for any distribution of Series A Subordinated Debentures, upon dissolution of Illinois Power Capital, (i) the Series A Preferred Securities will no longer be deemed to be outstanding, (ii) The Depository Trust Company (the "Depository" or "DTC") or its nominee, as the record holder of the Series A Preferred Securities, will receive a registered global certificate or certificates representing the Series A Subordinated Debentures to be delivered upon such distribution and (iii) any certificates representing Series A Preferred Securities not held by DTC or its nominee will be deemed to represent Series A Subordinated Debentures having a principal amount equal to the aggregate liquidation preference of such Series A Preferred Securities until such certificates are presented to the Company or its agent for transfer or reissuance. MANDATORY REDEMPTION Upon the repayment of the Series A Subordinated Debentures at maturity, the proceeds from such repayment will be applied to redeem the Series A Preferred Securities, in whole, upon not less than 30 nor more than 60 days' notice, at the Redemption Price. REDEMPTION PROCEDURES Illinois Power Capital may not redeem fewer than all the outstanding Series A Preferred Securities unless all accumulated and unpaid dividends have been paid on all Series A Preferred Securities for all monthly dividend periods terminating on or prior to the date of redemption. If Illinois Power Capital gives a notice of redemption in respect of Series A Preferred Securities (which notice will be irrevocable), then, by 12:00 noon, New York time, on the redemption date, Illinois Power Capital will irrevocably deposit with DTC funds sufficient to pay the applicable Redemption Price and will give DTC irrevocable instructions and authority to pay the Redemption Price to the holders of the Series A Preferred Securities. See "Book-Entry-Only Issuance -- The Depository Trust Company." If notice of redemption shall have been given and funds deposited as required, then upon the date of such deposit, all rights of holders of such Series A Preferred Securities so called for redemption will cease, except the right of the holders of such Series A Preferred Securities to receive the Redemption Price, but without interest on such Redemption Price. In the event that any date fixed for redemption of Series A Preferred Securities is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other S-12 41 payment in respect of any such delay), except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day. In the event that payment of the Redemption Price in respect of Series A Preferred Securities is improperly withheld or refused and not paid either by Illinois Power Capital or by the Company pursuant to the Guarantee described under "Description of the Guarantee" in the accompanying Prospectus, dividends on such Series A Preferred Securities will continue to accrue at the then applicable rate, from the original redemption date to the date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price. Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws), the Company or its subsidiaries may at any time and from time to time purchase outstanding Series A Preferred Securities by tender, in the open market or by private agreement. LIQUIDATION DISTRIBUTION UPON DISSOLUTION In the event of any voluntary or involuntary dissolution, winding-up or termination of Illinois Power Capital, the holders of the Series A Preferred Securities at the time will be entitled to receive out of the assets of Illinois Power Capital available for distribution to partners, after satisfaction of liabilities of creditors as required by the Partnership Act, before any distribution of assets is made to the General Partner, but together with the holders of every other series of Preferred Securities outstanding, an amount equal to, in the case of holders of Series A Preferred Securities, the aggregate of the liquidation preference of $25 per Series A Preferred Security and all accumulated and unpaid dividends thereon to the date of payment (the "Liquidation Distribution"), unless, in connection with such dissolution, winding-up or termination, Series A Subordinated Debentures in an aggregate principal amount equal to the Liquidation Distribution have been distributed on a pro rata basis to the holders of the Series A Preferred Securities. If, upon any such dissolution, the Liquidation Distribution can be paid only in part because Illinois Power Capital has insufficient assets available to pay in full the aggregate Liquidation Distribution and the aggregate maximum liquidation distributions on any other series of Preferred Securities, then the amounts payable directly by Illinois Power Capital on the Series A Preferred Securities and on such other series of Preferred Securities shall be paid on a pro rata basis, so that (i) the aggregate amount paid in respect of the Liquidation Distribution bears to the aggregate amount paid as liquidation distributions on the other series of Preferred Securities the same ratio as (ii) the aggregate Liquidation Distribution bears to the aggregate maximum liquidation distributions on the other series of Preferred Securities. Pursuant to the Partnership Agreement, Illinois Power Capital shall be dissolved and its affairs shall be wound up: (i) upon the expiration of the term of Illinois Power Capital on December 31, 2047, (ii) upon the bankruptcy or withdrawal of the General Partner, (iii) upon the assignment by the General Partner of its entire interest in Illinois Power Capital when the assignee is not admitted to Illinois Power Capital as a general partner of Illinois Power Capital in accordance with the Partnership Agreement, or the filing of a certificate of dissolution or its equivalent with respect to the General Partner, or the revocation of the General Partner's charter and the expiration of 90 days after the date of notice to the General Partner of revocation without a reinstatement of its charter, or any other event occurs which causes the General Partner to cease to be a general partner of Illinois Power Capital under the Partnership Act, unless the business of Illinois Power Capital is continued in accordance with the Partnership Act, (iv) in accordance with the provisions of the Series A Preferred Securities, (v) upon the entry of a decree of a judicial dissolution or (vi) upon the written consent of all partners of Illinois Power Capital. MERGER, CONSOLIDATION OR AMALGAMATION OF ILLINOIS POWER CAPITAL Illinois Power Capital may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other S-13 42 body, except as described below. Illinois Power Capital may, without the consent of the holders of the Series A Preferred Securities, consolidate, amalgamate, merge with or into, or be replaced by a limited partnership or a trust organized as such under the laws of any state of the United States; provided, that (i) such successor entity either (x) expressly assumes all of the obligations of Illinois Power Capital under the Series A Preferred Securities or (y) substitutes for the Series A Preferred Securities other securities having substantially the same terms as the Series A Preferred Securities (the "Successor Securities") so long as the Successor Securities rank, with respect to participation in the profits and dividends or in the assets of the successor entity, at least as high as the Series A Preferred Securities rank with respect to participation in the profits and dividends or in the assets of Illinois Power Capital, (ii) the Company expressly acknowledges such successor entity as the holder of the Series A Subordinated Debentures, (iii) the Series A Preferred Securities or any Successor Securities are listed, or any Successor Securities will be listed upon notification of issuance, on any national securities exchange or other organization on which the Series A Preferred Securities are then listed, (iv) such merger, consolidation, amalgamation or replacement does not cause the Series A Preferred Securities to be downgraded by any "nationally recognized statistical rating organization," as that term is defined by the Commission for purposes of Rule 436(g)(2) under the Securities Act, or cause any Successor Securities to be rated lower than the Series A Preferred Securities immediately prior to such merger, consolidation, amalgamation or replacement, (v) such merger, consolidation, amalgamation or replacement does not adversely affect the powers, preferences and other special rights of the holders of the Series A Preferred Securities in any material respect, (vi) such successor entity has a purpose substantially identical to that of Illinois Power Capital and (vii) prior to such merger, consolidation, amalgamation or replacement, the Company has received an opinion of nationally recognized independent counsel to Illinois Power Capital experienced in such matters to the effect that (x) such successor entity will be treated as a partnership for federal income tax purposes, (y) following such merger, consolidation, amalgamation or replacement, the Company and such successor entity will be in compliance with the 1940 Act without registering thereunder as an investment company and (z) such merger, consolidation, amalgamation or replacement will not adversely affect the limited liability of the holders of the Series A Preferred Securities. VOTING RIGHTS Except as provided below and under "Description of the Guarantee -- Amendments and Assignment" in the accompanying Prospectus and as otherwise required by law and the Partnership Agreement, the holders of the Series A Preferred Securities will have no voting rights. If (i) Illinois Power Capital fails to pay dividends in full on the Series A Preferred Securities for 18 consecutive monthly dividend periods; (ii) an Event of Default (as defined in the Indenture) occurs and is continuing on the Series A Subordinated Debentures; or (iii) the Company is in default on any of its payment or other obligations under the Guarantee (as described under "Description of the Guarantee -- Certain Covenants of the Company" in the accompanying Prospectus), then the holders of the Series A Preferred Securities, together with the holders of any other series of Preferred Securities having the right to vote for the appointment of a special representative of Illinois Power Capital and the limited partners (a "Special Representative") in such event, acting as a single class, will be entitled by the majority vote of such holders to appoint and authorize a Special Representative to enforce Illinois Power Capital's creditor rights under the Series A Subordinated Debentures, to enforce the rights of the holders of the Series A Preferred Securities under the Guarantee and to enforce the rights of the holders of the Series A Preferred Securities to receive dividends on the Series A Preferred Securities. The Special Representative shall not be admitted as a partner in Illinois Power Capital or otherwise be deemed to be a partner in Illinois Power Capital and shall have no liability for the debts, obligations or liabilities of Illinois Power Capital. For purposes of determining whether Illinois Power Capital has failed to pay dividends in full for 18 consecutive monthly dividend periods, dividends shall be deemed to remain in arrears, notwithstanding any payments in respect thereof, until full cumulative dividends have been or contemporaneously are paid with respect to all monthly dividend periods terminating on or prior to the date of payment of such full S-14 43 cumulative dividends. Not later than 30 days after such right to appoint a Special Representative arises, the General Partner will convene a meeting for the purpose of appointing a Special Representative. If the General Partner fails to convene such meeting within such 30-day period, the holders of 10% in liquidation preference of the outstanding Preferred Securities will be entitled to convene such meeting. The provisions of the Partnership Agreement relating to the convening and conduct of the meetings of the partners will apply with respect to any such meeting. Any Special Representative so appointed shall cease to be a Special Representative of Illinois Power Capital and the limited partners if Illinois Power Capital (or the Company pursuant to the Guarantee) shall have paid in full all accrued and unpaid dividends on the Preferred Securities or such default or breach, as the case may be, shall have been cured, and the General Partner shall continue the business of Illinois Power Capital without dissolution. Notwithstanding the appointment of any such Special Representative, the Company shall continue as General Partner and shall retain all rights under the Indenture, including the right to extend the interest payment period from time to time to a period not exceeding 60 consecutive months as provided under "Description of the Series A Subordinated Debentures -- Option to Extend Interest Payment Period." If any proposed amendment to the Partnership Agreement provides for, or the General Partner otherwise proposes to effect, (i) any action which would adversely affect the powers, preferences or special rights of the Series A Preferred Securities, whether by way of amendment to the Partnership Agreement or otherwise (including, without limitation, the authorization or issuance of any limited partner interests in Illinois Power Capital ranking, as to participation in the profits and dividends or in the assets of Illinois Power Capital, senior to the Series A Preferred Securities), or (ii) the dissolution, winding-up or termination of Illinois Power Capital, other than (x) in connection with the distribution of Series A Subordinated Debentures upon the occurrence of a Special Event or (y) as described under "Merger, Consolidation or Amalgamation of Illinois Power Capital" above, then the holders of outstanding Series A Preferred Securities will be entitled to vote on such amendment or proposal of the General Partner (but not on any other amendment or proposal) as a class with all other holders of series of Preferred Securities similarly affected, and such amendment or proposal shall not be effective except with the approval of the holders of 66 2/3% in liquidation preference of such outstanding Preferred Securities having a right to vote on the matter; provided, however, that no such approval shall be required if the dissolution, winding-up or termination of Illinois Power Capital is proposed or initiated upon the initiation of proceedings, or after proceedings have been initiated, for the dissolution, winding-up, liquidation or termination of the Company. The rights attached to the Series A Preferred Securities will be deemed not to be adversely affected by the creation or issue of, and no vote will be required for the creation of, any further limited partner interests of Illinois Power Capital ranking pari passu with the Series A Preferred Securities with regard to participation in the profits and dividends or in the assets of Illinois Power Capital. Holders of Series A Preferred Securities have no preemptive rights. So long as any Series A Subordinated Debentures are held by Illinois Power Capital, the General Partner shall not (i) direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or executing any trust or power conferred on the Trustee with respect to such series, (ii) waive any past default which is waivable under Section 6.06 of the Indenture, (iii) exercise any right to rescind or annul a declaration that the principal of all the Series A Subordinated Debentures shall be due and payable or (iv) consent to any amendment, modification or termination of the Indenture, where such consent shall be required, without, in each case, obtaining the prior approval of the holders of at least 66 2/3% in liquidation preference of all series of Preferred Securities affected thereby, acting as a single class; provided, however, that where a consent under the Indenture would require the consent of each holder affected thereby, no such consent shall be given by the General Partner without the prior consent of each holder of all series of Preferred Securities affected thereby. The General Partner shall not revoke any action previously authorized or approved by a vote of any series of Preferred Securities. The General Partner shall notify all holders of the Series A Preferred Securities of any notice of default received from the Trustee with respect to the Series A Subordinated Debentures. S-15 44 Any required approval of holders of Series A Preferred Securities may be given at a separate meeting of holders of Preferred Securities convened for such purpose, at a meeting of all of the partners in Illinois Power Capital or pursuant to written consent. Illinois Power Capital will cause a notice of any meeting at which holders of Series A Preferred Securities are entitled to vote, or of any matter upon which action by written consent of such holders is to be taken, to be mailed to each holder of record of Series A Preferred Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. No vote or consent of the holders of Series A Preferred Securities will be required for Illinois Power Capital to redeem and cancel Series A Preferred Securities in accordance with the Partnership Agreement. Notwithstanding that holders of Series A Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Series A Preferred Securities and any other series of Preferred Securities that are entitled to vote or consent with such Series A Preferred Securities as a single class at such time that are owned by the Company or any entity owned more than 50% by the Company, either directly or indirectly, shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if they were not outstanding. Holders of the Series A Preferred Securities will have no rights to remove or replace the General Partner. BOOK-ENTRY-ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY DTC will act as securities depository for the Series A Preferred Securities. The Series A Preferred Securities will be issued only as fully-registered securities registered in the name of Cede & Co. (DTC's nominee). One or more fully-registered global Series A Preferred Security certificates will be issued, representing in the aggregate the total number of Series A Preferred Securities, and will be deposited with DTC. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). DTC holds securities that its participants ("Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations ("Direct Participants"). DTC is owned by a number of its Direct Participants and by The New York Stock Exchange, Inc. (the "New York Stock Exchange"), the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The rules applicable to DTC and its Participants are on file with the Commission. Purchases of Series A Preferred Securities within the DTC system must be made by or through Direct Participants, which will receive a credit for the Series A Preferred Securities on DTC's records. The ownership interest of each actual purchaser of each Series A Preferred Security ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchases, but Beneficial Owners are expected to receive written confirmations providing details of the transactions, as well as periodic statements of their holdings, from the Direct or Indirect Participants through which the Beneficial Owners purchased Series A Preferred Securities. Transfers of ownership interests in the Series A Preferred Securities are to be accomplished S-16 45 by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Series A Preferred Securities, except in the event that use of the book-entry system for the Series A Preferred Securities is discontinued. DTC has no knowledge of the actual Beneficial Owners of the Series A Preferred Securities; DTC's records reflect only the identity of the Direct Participants to whose accounts such Series A Preferred Securities are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to Cede & Co. If less than all of the Series A Preferred Securities are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such series to be redeemed. Although voting with respect to the Series A Preferred Securities is limited, in those cases where a vote is required, neither DTC nor Cede & Co. will itself consent or vote with respect to Series A Preferred Securities. Under its usual procedures, DTC would mail an Omnibus Proxy to Illinois Power Capital as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Series A Preferred Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). Dividend payments on the Series A Preferred Securities will be made to DTC. DTC's practice is to credit Direct Participants' accounts on the relevant payment date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payments on such payment date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices and will be the responsibility of such Participant and not of DTC, Illinois Power Capital or the Company, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of dividends to DTC is the responsibility of Illinois Power Capital, disbursement of such payments to Direct Participants is the responsibility of DTC, and disbursement of such payments to the Beneficial Owners is the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Series A Preferred Securities at any time by giving reasonable notice to Illinois Power Capital. Under such circumstances, in the event that a successor securities depository is not obtained, Series A Preferred Security certificates are required to be printed and delivered. Additionally, Illinois Power Capital (with the consent of the Company) may decide to discontinue use of the system of book-entry transfers through DTC (or a successor depository). In that event, certificates for the Series A Preferred Securities will be printed and delivered. In each of the above circumstances, the General Partner will appoint a paying agent with respect to the Series A Preferred Securities. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that Illinois Power Capital believes to be reliable, but Illinois Power Capital takes no responsibility for the accuracy thereof. REGISTRAR AND TRANSFER AGENT The Company will act as registrar and transfer agent for the Series A Preferred Securities. Registration of transfers of Series A Preferred Securities will be effected without charge by or on behalf of Illinois Power Capital, but upon payment (with the giving of such indemnity as Illinois Power Capital or the Company may require) in respect of any tax or other government charges which may be imposed in relation to it. S-17 46 Illinois Power Capital will not be required to register or cause to be registered the transfer of Series A Preferred Securities after such Series A Preferred Securities have been called for redemption. MISCELLANEOUS Application will be made to list the Series A Preferred Securities on the New York Stock Exchange. The General Partner is authorized and directed to conduct its affairs and to operate Illinois Power Capital in such a way that (i) Illinois Power Capital will not be deemed to be an "investment company" required to be registered under the 1940 Act (ii) Illinois Power Capital will be taxed as a partnership for federal income tax purposes and (iii) the Series A Subordinated Debentures will be treated as indebtedness of the Company for federal income tax purposes. In this connection, the General Partner is authorized to take any action, not inconsistent with applicable law, the certificate of limited partnership or the Partnership Agreement, that the General Partner determines in its discretion to be necessary or desirable for such purposes, as long as such action does not adversely affect the interests of the holders of the Series A Preferred Securities. S-18 47 DESCRIPTION OF THE SERIES A SUBORDINATED DEBENTURES Set forth below is a description of the specific terms of the Series A Subordinated Debentures in which Illinois Power Capital will invest with the proceeds of the issuance and sale of (i) the Series A Preferred Securities and (ii) the General Partner's capital contribution with respect to the Series A Preferred Securities (the "General Partnership Payment"). This description supplements the description of the general terms and provisions of the Subordinated Debentures set forth in the accompanying Prospectus under the caption "Description of the Subordinated Debentures." The following description does not purport to be complete and is qualified in its entirety by reference to the description in the accompanying Prospectus and the Indenture between the Company and The First National Bank of Chicago, as Trustee, as supplemented by a First Supplemental Indenture (the Indenture, as so supplemented, is hereinafter referred to as the "Indenture"). Under certain circumstances involving the dissolution of Illinois Power Capital following the occurrence of a Special Event, Series A Subordinated Debentures may be distributed to the holders of the Series A Preferred Securities in liquidation of Illinois Power Capital. See "Description of the Series A Preferred Securities -- Special Event Redemption or Distribution." GENERAL The Series A Subordinated Debentures will be issued as a series of Subordinated Debentures under the Indenture. The Series A Subordinated Debentures will be limited in aggregate principal amount to approximately $ million, such amount being the sum of the aggregate liquidation preference of the Series A Preferred Securities and the General Partnership Payment. The entire principal amount of the Series A Subordinated Debentures will become due and payable, together with any accrued and unpaid interest thereon, including Additional Interest (as hereinafter defined), if any, on , 2043. The Series A Subordinated Debentures if distributed to holders of Series A Preferred Securities upon the dissolution of Illinois Power Capital will initially be so issued as a Global Security (as defined below). As described herein, under certain limited circumstances Series A Subordinated Debentures may be issued in certificated form in exchange for a Global Security. See "Book-Entry and Settlement" below. In the event that Series A Subordinated Debentures are issued in certificated form, such Series A Subordinated Debentures will be in denominations of $25 and integral multiples thereof and may be transferred or exchanged at the offices described below. Payments on Series A Subordinated Debentures issued as a Global Security will be made to DTC, as the depository for the Series A Subordinated Debentures. In the event Series A Subordinated Debentures are issued in certificated form, principal and interest will be payable, the transfer of the Series A Subordinated Debentures will be registrable and the Series A Subordinated Debentures will be exchangeable for Series A Subordinated Debentures of other denominations of a like aggregate principal amount at the corporate trust office of the Trustee in The City of New York; provided, that payment of interest may be made at the option of the Company by check mailed to the address of the persons entitled thereto. If the Series A Subordinated Debentures are distributed to the holders of Series A Preferred Securities upon the dissolution of Illinois Power Capital, the Company will use its best efforts to list the Series A Subordinated Debentures on the New York Stock Exchange or on such other exchange as the Series A Preferred Securities are then listed and traded on the same part of any such exchange. MANDATORY PREPAYMENT If Illinois Power Capital redeems Series A Preferred Securities in accordance with the terms thereof, the Series A Subordinated Debentures will become due and payable in a principal amount equal to the aggregate liquidation preference of the Series A Preferred Securities so redeemed, together with all accrued and unpaid interest, including Additional Interest, if any. Any payment pursuant to this provision S-19 48 shall be made prior to 12:00 noon, New York time, on the date of such redemption or at such other time on such earlier date as the parties thereto shall agree. OPTIONAL REDEMPTION If there shall be no Series A Preferred Securities outstanding, the Company shall have the right to redeem the Series A Subordinated Debentures, in whole or in part, from time to time, on or after , 1999, upon not less than 30 nor more than 60 days' notice, at a redemption price equal to 100% of the principal amount to be redeemed plus any accrued and unpaid interest, including Additional Interest, if any, to the redemption date. INTEREST Each Series A Subordinated Debenture shall bear interest at an interest rate which will be adjusted quarterly. The rate for the initial period from the date of initial issuance to , 1994 will be % per annum. Thereafter, interest on the Series A Subordinated Debentures will be payable at the "Applicable Rate" in effect from time to time. The Applicable Rate for any quarter will be equal to % of the highest of the "Treasury Bill Rate," the "Ten Year Constant Maturity Rate" and the "Thirty Year Constant Maturity Rate" determined in advance of such quarter. The Applicable Rate for any quarter will not be less % per annum nor greater than % per annum. The "Treasury Bill Rate," the "Ten Year Constant Maturity Rate" and the "Thirty Year Constant Maturity Rate" with respect to any quarter shall be determined by Illinois Power Capital in the same manner as, and consistent with its determinations with respect to, quarters for the purposes of dividends payable on the Series A Preferred Securities. See "Description of the Series A Preferred Securities -- Dividends." Such interest is payable monthly in arrears on the last day of each calendar month of each year (each, an "Interest Payment Date"), commencing , 1994, to the person in whose name such Series A Subordinated Debenture is registered, subject to certain exceptions, at the close of business on the Business Day next preceding such Interest Payment Date. In the event the Series A Subordinated Debentures shall not continue to remain in book-entry-only form, the Company shall have the right to select record dates which shall be more than one Business Day prior to the Interest Payment Date. The amount of interest payable for any period will be computed on the basis of a 360-day year of twelve 30-day months and for any period shorter than a full month, on the basis of actual days elapsed in such period. In the event that any date on which interest is payable on the Series A Subordinated Debentures is not a Business Day, then payment of the interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. OPTION TO EXTEND INTEREST PAYMENT PERIOD So long as the Company is not in default in the payment of interest on any series of Subordinated Debentures issued under the Indenture, the Company shall have the right at any time during the term of the Series A Subordinated Debentures to extend the interest payment period from time to time to a period not exceeding 60 consecutive months (the "Extension Period"), at the end of which Extension Period the Company shall pay all interest then accrued and unpaid (together with interest thereon at the rate specified for the Series A Subordinated Debentures to the extent permitted by applicable law); provided, that, during any such Extension Period, the Company shall not declare or pay any dividend on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock or make any guarantee payments with respect to the foregoing (other than payments on the Guarantee); and provided further that any such extended interest payment period may only be selected with respect to the Series A Subordinated Debentures if an extended interest payment period of identical length is simultaneously selected for all Subordinated Debentures then outstanding under the Indenture. Prior to the termination of any such S-20 49 Extension Period, the Company may further extend the interest payment period, provided that such Extension Period together with all such previous and further extensions thereof may not exceed 60 consecutive months. Upon the termination of any Extension Period and the payment of all amounts then due, the Company may select a new Extension Period, subject to the above requirements. No interest shall be due and payable during an Extension Period, except at the end thereof. If Illinois Power Capital shall be the sole holder of the Series A Subordinated Debentures, the Company shall give Illinois Power Capital notice of its selection of such Extension Period one Business Day prior to the earlier of (i) the next succeeding date on which the dividends on the Series A Preferred Securities are payable or (ii) the date Illinois Power Capital is required to give notice to the New York Stock Exchange or other applicable self-regulatory organization or to holders of the Series A Preferred Securities of the record date or the date such dividend is payable, but in any event not less than one Business Day prior to such record date. The Company shall cause Illinois Power Capital to give notice of the Company's selection of such Extension Period to the holders of the Series A Preferred Securities. If Illinois Power Capital shall not be the sole holder of the Series A Subordinated Debentures, the Company shall give the holders of the Series A Subordinated Debentures notice of its selection of such Extension Period ten Business Days prior to the earlier of (i) the next succeeding Interest Payment Date or (ii) the date the Company is required to give notice to the New York Stock Exchange or other applicable self- regulatory organization, or to holders of the Series A Subordinated Debentures, of the record or payment date of such related interest payment, but in any event not less than two Business Days prior to such record date. ADDITIONAL INTEREST So long as any Subordinated Debentures remain outstanding, if at any time Illinois Power Capital shall be required to pay any interest on dividends in arrears in respect of the Series A Preferred Securities pursuant to the terms thereof, then the Company will pay as interest to Illinois Power Capital as the holder of the Series A Subordinated Debentures ("Additional Interest") an amount equal to such interest on dividends in arrears. In addition, if Illinois Power Capital would be required to pay any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States, or any other taxing authority, then, in any such case, the Company also will pay as Additional Interest such amounts as shall be required so that the net amounts received and retained by Illinois Power Capital after paying any such taxes, duties, assessments or governmental charges will be not less than the amounts Illinois Power Capital would have received had no such taxes, duties, assessments or governmental charges been imposed. SET-OFF Notwithstanding anything to the contrary in the Indenture, the Company shall have the right to set-off any payment it is otherwise required to make thereunder with and to the extent the Company has theretofore made, or is concurrently on the date of such payment making, a payment under the Guarantee. EVENTS OF DEFAULT In the case any Event of Default (as defined in the Indenture) shall occur and be continuing, Illinois Power Capital will have the right to declare the principal of and the interest on the Series A Subordinated Debentures (including any Additional Interest) and any other amounts payable under the indenture to be forthwith due and payable and to enforce its other rights as a creditor with respect to the Series A Subordinated Debentures. See "Enforcement of Certain Rights by Special Representative" below for a discussion of certain rights available to holders of the Series A Preferred Securities upon the occurrence of an Event of Default. S-21 50 ENFORCEMENT OF CERTAIN RIGHTS BY SPECIAL REPRESENTATIVE If (i) Illinois Power Capital fails to pay dividends in full on the Series A Preferred Securities for 18 consecutive monthly dividend periods; (ii) an Event of Default occurs and is continuing on the Series A Subordinated Debentures; or (iii) the Company is in default on any of its payment or other obligations under the Guarantee, under the terms of the Series A Preferred Securities, the holders of outstanding Series A Preferred Securities will have the rights referred to under "Description of the Series A Preferred Securities - -- Voting Rights," including the right to appoint a Special Representative, which Special Representative shall be authorized to exercise Illinois Power Capital's right to accelerate the principal amount of the Series A Subordinated Debentures and to enforce Illinois Power Capital's other creditor rights under the Series A Subordinated Debentures. Notwithstanding the appointment of any such Special Representative, the Company shall continue as General Partner and shall retain all rights under the Indenture, including the right to extend the interest payment period from time to time to a period not exceeding 60 consecutive months. BOOK-ENTRY AND SETTLEMENT If distributed to holders of Series A Preferred Securities in connection with the dissolution of Illinois Power Capital as a result of the occurrence of a Special Event, the Series A Subordinated Debentures will be issued in the form of one or more global certificates (each, a "Global Security") registered in the name of a nominee of DTC. Except under the limited circumstances described below, Series A Subordinated Debentures represented by the Global Security will not be exchangeable for, and will not otherwise be issuable as, Series A Subordinated Debentures in definitive form. The Global Securities described above may not be transferred except by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or to a successor depository or its nominee. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of such securities in definitive form. Such laws may impair the ability to transfer beneficial interests in such a Global Security. Except as provided below, owners of beneficial interests in such a Global Security will not be entitled to receive physical delivery of Series A Subordinated Debentures in definitive form and will not be considered the Holders (as defined in the Indenture) thereof for any purpose under the Indenture, and no Global Security representing Series A Subordinated Debentures shall be exchangeable, except for another Global Security of like denomination and tenor to be registered in the name of DTC or its nominee or to a successor depository or its nominee. Accordingly, each beneficial owner must rely on the procedures of DTC and, if such person is not a Participant, on the procedures of the Participant through which such person owns its interest, to exercise any rights of a Holder under the Indenture. THE DEPOSITORY. DTC will act as security depository for the Series A Subordinated Debentures. For a description of DTC and the specific terms of the depository arrangements, see "Description of the Series A Preferred Securities - -- Book-Entry-Only Issuance -- The Depository Trust Company." As of the date of this Prospectus Supplement, the description therein of DTC's book-entry system and DTC's practices as they relate to purchases, transfers, notices and payments with respect to the Series A Preferred Securities apply in all material respects to any debt obligations represented by one or more Global Securities held by DTC. Neither the Company, the Trustee, any paying agent nor any other agent of the Company or the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in a Global Security for such Series A Subordinated Debentures or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. DISCONTINUANCE OF THE DEPOSITORY'S SERVICES. A Global Security shall be exchangeable for Series A Subordinated Debentures registered in the names of persons other than DTC or its nominee only if (i) DTC notifies the Company that it is unwilling or unable to continue as a depository for such Global S-22 51 Security and no successor depository shall have been appointed, or if any time DTC ceases to be a clearing agency registered under the Exchange Act at a time when DTC is required to be so registered to act as such depository, (ii) the Company in its sole discretion determines that such Global Security shall be so exchangeable or (iii) there shall have occurred an Event of Default with respect to such Series A Subordinated Debentures. Any Global Security that is exchangeable pursuant to the preceding sentence shall be exchangeable for Series A Subordinated Debentures registered in such names as the Depository shall direct. It is expected that such instructions will be based upon directions received by the Depository from its Participants with respect to ownership of beneficial interests in such Global Security. MISCELLANEOUS For restrictions on certain actions of the General Partner with respect to Series A Subordinated Debentures held by Illinois Power Capital, see "Description of the Series A Preferred Securities -- Voting Rights." EFFECT OF OBLIGATIONS UNDER THE SERIES A SUBORDINATED DEBENTURES AND THE GUARANTEE As set forth in the Partnership Agreement, the sole purpose of Illinois Power Capital is to issue partner interests in Illinois Power Capital, including, without limitation, the Series A Preferred Securities, and to use the proceeds thereof to purchase the Series A Subordinated Debentures or other similar debt securities of the Company. As long as payments of interest and other payments are made when due on the Series A Subordinated Debentures, such payments will be sufficient to cover dividends and payments due on the Series A Preferred Securities primarily because (i) the aggregate principal amount of Series A Subordinated Debentures will be equal to the sum of the aggregate liquidation preference of the Series A Preferred Securities and the General Partnership Payment; (ii) the interest rate and interest and other payment dates on the Series A Subordinated Debentures will match the dividend rate and dividend and other payment dates for the Series A Preferred Securities; (iii) the Partnership Agreement provides that the Company, as General Partner, shall pay for all, and Illinois Power Capital shall not be obligated to pay, directly or indirectly, for any, costs and expenses of Illinois Power Capital; and (iv) the Partnership Agreement further provides that the General Partner shall not cause or permit Illinois Power Capital to, among other things, engage in any activity that is not consistent with the purposes of Illinois Power Capital. If the Company fails to make interest or other payments on the Series A Subordinated Debentures when due, the Partnership Agreement provides a mechanism whereby the holders of the Series A Preferred Securities may enforce the rights of Illinois Power Capital under the Series A Subordinated Debentures through the appointment of a Special Representative. Payments of dividends and other payments due on the Series A Preferred Securities out of moneys held by Illinois Power Capital are guaranteed by the Company to the extent set forth under "Description of the Guarantee" in the accompanying Prospectus. The Partnership Agreement also provides, and the Company, under the Guarantee, acknowledges, that a Special Representative may be appointed to enforce the Guarantee if the Company is in default on any of its payment obligations under the Guarantee. In addition, if the General Partner or the Special Representative fails to enforce the Guarantee, a holder of a Series A Preferred Security may institute a legal proceeding directly against the Company to enforce its rights under the Guarantee without first instituting a legal proceeding against Illinois Power Capital or any other person or entity. The Company and Illinois Power Capital believe that the above mechanisms and obligations, taken together, are substantially equivalent to a full and unconditional guarantee by the Company of payments due on the Series A Preferred Securities. S-23 52 UNITED STATES TAXATION GENERAL This section is a summary of certain United States federal income tax considerations that may be relevant to prospective purchasers of Series A Preferred Securities and represents the opinion of Schiff Hardin & Waite, tax counsel to the Company and Illinois Power Capital, insofar as it relates to matters of law and legal conclusions. This section is based upon current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), existing and proposed regulations thereunder and current administrative rulings and court decisions, all of which are subject to change. Subsequent changes may cause tax consequences to vary substantially from the consequences described below. No attempt has been made in the following discussion to comment on all United States federal income tax matters affecting purchasers of Series A Preferred Securities. Moreover, the discussion focuses on holders of Series A Preferred Securities who are individual citizens or residents of the United States and has only limited application to corporations, estates, trusts or non-resident aliens. Accordingly, each prospective purchaser of Series A Preferred Securities should consult, and should depend on, his or her own tax advisor in analyzing the federal, state, local and foreign tax consequences of the purchase, ownership or disposition of Series A Preferred Securities. INCOME FROM SERIES A PREFERRED SECURITIES In the opinion of Schiff Hardin & Waite, Illinois Power Capital will be treated as a partnership for federal income tax purposes. Accordingly, each holder of Series A Preferred Securities (a "Preferred Securityholder") will be required to include in gross income such holder's distributive share of the net income of Illinois Power Capital. Such income will not exceed dividends received on such Series A Preferred Securities, except in limited circumstances as described below under "Potential Extension of Interest Payment Period." No portion of such income will be eligible for the dividends received deduction. DISPOSITION OF SERIES A PREFERRED SECURITIES Gain or loss will be recognized on a sale (including a redemption for cash) of Series A Preferred Securities in an amount equal to the difference between the amount realized and the Preferred Securityholder's tax basis for the Series A Preferred Securities sold. Gain or loss recognized by a Preferred Securityholder on the sale or exchange of a Series A Preferred Security held for more than one year will generally be taxable as long-term capital gain or loss. RECEIPT OF SERIES A SUBORDINATED DEBENTURES UPON DISSOLUTION OF ILLINOIS POWER CAPITAL Under certain circumstances, as described under the caption "Description of the Series A Preferred Securities -- Special Event Redemption or Distribution," Series A Subordinated Debentures may be distributed to the holders of the Series A Preferred Securities in connection with the dissolution of Illinois Power Capital. Under current United States federal income tax law, such a distribution would be treated as a non-taxable exchange to each holder of Series A Preferred Securities and would result in the holder of Series A Preferred Securities receiving an aggregate tax basis in the Series A Subordinated Debentures equal to such holder's aggregate tax basis in its Series A Preferred Securities. A holder's holding period in the Series A Subordinated Debentures so received in connection with the dissolution of Illinois Power Capital would include the period for which the Series A Preferred Securities were held by such holder. Under a change in law, a change in legal interpretation or the other circumstances giving rise to a Special Event, however, the dissolution of Illinois Power Capital and the distribution of Series A Subordinated Debentures in connection with the dissolution of Illinois Power Capital could be a taxable event to holders of the Series A Preferred Securities. In the judgment of tax counsel to the Company and Illinois Power Capital, the series of events which would result in the recognition of taxable gain by holders of the Series A Preferred Securities, by reason of a dissolution of Illinois Power Capital in response to a Special Event, is unlikely to occur. There can be no assurance in this regard, however. S-24 53 ILLINOIS POWER CAPITAL INFORMATION RETURNS AND AUDIT PROCEDURES The General Partner will furnish each Series A Preferred Securityholder with a Schedule K-1 each year setting forth such Preferred Securityholder's allocable share of income for the prior calendar year. The General Partner is required to furnish such schedules as soon as practicable following the end of the year, but in any event prior to March 31. Any person who holds Series A Preferred Securities as a nominee for another person is required to furnish to Illinois Power Capital (a) the name, address and taxpayer identification number of the beneficial owner and the nominee; (b) information as to whether the beneficial owner is (i) a person that is not a United States person, (ii) a foreign government, an international organization or any wholly owned agency or instrumentality of either of the foregoing, or (iii) a tax-exempt entity; (c) the amount and description of Series A Preferred Securities held, acquired or transferred for the beneficial owner; and (d) certain information including the dates of acquisitions and transfers, means of acquisitions and transfers, and acquisition cost for purchases, as well as the amount of net proceeds from sales. Brokers and financial institutions are required to furnish additional information, including whether they are United States persons and certain information on Series A Preferred Securities they acquire, hold or transfer for their own accounts. A penalty of $50 per failure (up to a maximum of $100,000 per calendar year) is imposed by the Code for failure to report such information to Illinois Power Capital. The nominee is required to supply the beneficial owners of Series A Preferred Securities with the information furnished to Illinois Power Capital. POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD Under the terms of the Indenture, the Company has the right to extend from time to time the interest payment period on the Series A Subordinated Debentures to a period not exceeding 60 consecutive months. In the event that the Company exercises this right, the Company may not, among other things, declare dividends on any of its capital stock. The Company has no current intention of extending the interest payment period on the Series A Subordinated Debentures since it desires to continue the declaration and payment of dividends on its capital stock. In the event that the interest payment period is extended, Illinois Power Capital will continue to accrue income equal to the amount of the interest payment due at the end of the Extension Period pursuant to the Code and Treasury Regulation provisions applicable to original issue discount. Accrued income will be allocated, but not distributed, to holders of record on the Business Day preceding the last day of each calendar month. As a result, holders of record during an Extension Period will include interest in gross income in advance of the receipt of cash, and any such holders who dispose of Series A Preferred Securities prior to the record date for the payment of dividends following such Extension Period will include interest in gross income but will not receive any cash related thereto from Illinois Power Capital. The tax basis of a Series A Preferred Security will be increased by the amount of any interest that is included in income without a receipt of cash, and will be decreased when and if such cash is subsequently received from Illinois Power Capital. The subsequent receipt of such cash will not be includible in gross income. UNITED STATES ALIEN HOLDERS For purposes of this discussion, a "United States Alien Holder" is any holder who or which is (i) a nonresident alien individual or (ii) a foreign corporation, partnership, estate or trust, in either case not subject to United States federal income tax on a net income basis in respect of a Series A Preferred Security. Under current United States federal income tax law, subject to the discussion below with respect to backup withholding, and assuming satisfaction by the Company of its withholding tax obligations, if any: (i) Payments by Illinois Power Capital or any of its paying agents to any holder of a Series A Preferred Security who or which is a United States Alien Holder will not be subject to United States S-25 54 federal withholding tax provided that (a) the beneficial owner of the Series A Preferred Security does not actually or constructively own 10% or more of the total combined voting power of all classes of capital stock of the Company,(b) the beneficial owner of the Series A Preferred Security is not a controlled foreign corporation that is related to the Company or Illinois Power Capital through stock ownership, and (c) either: (x) the beneficial owner of the Series A Preferred Security certifies to Illinois Power Capital or its agent, under penalties of perjury, that it is a United States Alien Holder and provides its name and address or (y) the holder of the Series A Preferred Security is a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business (a "financial institution"), and such holder certifies to Illinois Power Capital or its agent, under penalties of perjury, that such statement has been received from the beneficial owner by it or by a financial institution between it and the beneficial owner and furnishes Illinois Power Capital or its agent with a copy thereof; and (ii) a United States Alien Holder of a Series A Preferred Security will generally not be subject to United States federal withholding tax on any gain realized on the sale or exchange of a Series A Preferred Security unless such holder is present in the United States for 183 days or more in the taxable year of sale and either has a "tax home" in the United States or certain other requirements are met. BACKUP WITHHOLDING AND INFORMATION REPORTING In general, information reporting requirements will apply to payments of the proceeds of the sale of Series A Preferred Securities within the United States to noncorporate United States holders, and "backup withholding" at a rate of 31% will apply to such payments if the United States holder fails to provide an accurate taxpayer identification number. Payments of the proceeds from the sale by a United States Alien Holder of Series A Preferred Securities made to or through a foreign office of a broker will not be subject to information reporting or backup withholding, except that, if the broker is a United States person, a controlled foreign corporation for United States tax purposes or a foreign person 50% or more of whose gross income is effectively connected with a United States trade or business for a specified three-year period, information reporting may apply to such payments. Payments of the proceeds from the sale of Series A Preferred Securities to or through the United States office of a broker is subject to information reporting and backup withholding unless the holder or beneficial owner certifies as to its non-United States status or otherwise establishes an exemption from information reporting and backup withholding. S-26 55 UNDERWRITING Subject to the terms and conditions of the Underwriting Agreement, Illinois Power Capital has agreed to sell to each of the several Underwriters named below, and each of the Underwriters, for whom Goldman, Sachs & Co. and are acting as Representatives, has severally agreed to purchase from Illinois Power Capital the respective number of Series A Preferred Securities set forth opposite its name below:
NUMBER OF SERIES A PREFERRED UNDERWRITER SECURITIES ----------------------------------------------------- ------------- Goldman, Sachs & Co. ................................ ------------- Total...................................... =============
Under the terms and conditions of the Underwriting Agreement, the Underwriters are committed to take and pay for all such Series A Preferred Securities offered hereby, if any are taken. The Underwriters propose to offer the Series A Preferred Securities in part directly to the public at the initial public offering price set forth on the cover page of this Prospectus Supplement, and in part to certain securities dealers at such price less a concession of $ per Series A Preferred Security. The Underwriters may allow, and such dealers may reallow, a concession not in excess of $ per Series A Preferred Security to certain brokers and dealers. After the Series A Preferred Securities are released for sale to the public, the offering price and other selling terms may from time to time be varied by the Representatives. As the proceeds of the sale of the Series A Preferred Securities will be loaned to the Company, the Company has agreed in the Underwriting Agreement to pay to the Underwriters $ per Series A Preferred Security ($ per Series A Preferred Security sold to certain institutions) for the accounts of the several Underwriters. The Company and Illinois Power Capital have agreed, during the period beginning from the date of the Underwriting Agreement and continuing to and including the earlier of (i) the date, after the closing date, on which the distribution of the Series A Preferred Securities ceases, as determined by the Underwriters, or (ii) 30 days after the closing date, not to offer, sell, contract to sell, or otherwise dispose of any Series A Preferred Securities, any limited partner interests of Illinois Power Capital, or any preferred stock or any other securities of Illinois Power Capital or the Company which are substantially similar to the Series A Preferred Securities, or any securities convertible into or exchangeable for Series A Preferred Securities, limited partner interests, preferred stock or such substantially similar securities of either Illinois Power Capital or the Company without the prior written consent of the Underwriters. Prior to this offering, there has been no public market for the Series A Preferred Securities. In order to meet one of the requirements for listing the Series A Preferred Securities on the New York Stock Exchange, the Underwriters will undertake to sell lots of 100 or more Series A Preferred Securities to a minimum of 400 beneficial holders. Illinois Power Capital and the Company have agreed to indemnify the Underwriters against certain civil liabilities, including liabilities under the Securities Act. Certain of the Underwriters engage in transactions with, and from time to time have performed services for, the Company and its affiliates in the ordinary course of business. S-27 56 LEGAL OPINIONS Certain legal matters will be passed upon for the Company and Illinois Power Capital by Schiff Hardin & Waite, Chicago, Illinois, and for the Underwriters by Reid & Priest, New York, New York. Certain matters of Delaware law relating to the validity of the Series A Preferred Securities will be passed upon by Richards, Layton & Finger, P.A., Wilmington, Delaware, special Delaware counsel to the Company and Illinois Power Capital. Schiff Hardin & Waite and Reid & Priest may rely on the opinion of Richards, Layton & Finger, P.A. as to certain matters of Delaware law. Schiff Hardin & Waite may rely on the opinion of Reid & Priest as to all matters of New York law, and Reid & Priest may rely on the opinion of Schiff Hardin & Waite as to all matters of Illinois law. S-28 57 - ------------------------------------------------------ - ------------------------------------------------------ NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION. ------------------ TABLE OF CONTENTS PROSPECTUS SUPPLEMENT
PAGE ---- Certain Investment Considerations.... S-3 Illinois Power Company............... S-4 Illinois Power Capital............... S-4 Use of Proceeds...................... S-4 Summary Financial Information of the Company........................ S-5 Description of the Series A Preferred Securities......................... S-7 Description of the Series A Subordinated Debentures............ S-19 Effect of Obligations under the Series A Subordinated Debentures and the Guarantee.................. S-23 United States Taxation............... S-24 Underwriting......................... S-27 Legal Opinions....................... S-28 PROSPECTUS Available Information................ 2 Incorporation of Certain Documents by Reference.......................... 2 Illinois Power Company............... 3 Illinois Power Capital............... 3 Use of Proceeds...................... 3 Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividend Requirements.............. 4 Description of the Preferred Securities......................... 5 Description of the Guarantee......... 5 Description of the Subordinated Debentures......................... 7 Plan of Distribution................. 12 Legal Opinions....................... 13 Experts.............................. 13
- ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ PREFERRED SECURITIES ILLINOIS POWER CAPITAL GUARANTEED TO THE EXTENT ILLINOIS POWER CAPITAL HAS FUNDS AS SET FORTH HEREIN BY [IP LOGO] ILLINOIS POWER COMPANY CUMULATIVE ADJUSTABLE RATE MONTHLY INCOME PREFERRED SECURITIES, SERIES A ------------------------ PROSPECTUS SUPPLEMENT ------------------------ GOLDMAN, SACHS & CO. REPRESENTATIVES OF THE UNDERWRITERS - ------------------------------------------------------ - ------------------------------------------------------ 58 Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there by any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. PROSPECTUS SUBJECT TO COMPLETION, DATED AUGUST 19, 1994 $100,000,000 ILLINOIS POWER CAPITAL PREFERRED SECURITIES GUARANTEED TO THE EXTENT ILLINOIS POWER CAPITAL HAS FUNDS AS SET FORTH HEREIN BY ILLINOIS POWER COMPANY ------------------ Illinois Power Capital, L.P. ("Illinois Power Capital"), a Delaware limited partnership, all of the general partner interests in which are owned by Illinois Power Company (the "Company"), may offer, from time to time, its preferred securities, representing limited partner interests ("Preferred Securities"), in one or more series. The payment of periodic cash distributions ("dividends") with respect to Preferred Securities of any series, out of funds held by Illinois Power Capital and legally available therefor, and payments on liquidation or redemption with respect to the Preferred Securities are guaranteed by the Company to the extent described herein (the "Guarantee"). The Company's obligations under the Guarantee are subordinate and junior in right of payment to all other liabilities of the Company. Subordinated Deferrable Interest Debentures of the Company ("Subordinated Debentures") will also be issued and sold from time to time in one or more series by the Company to Illinois Power Capital in connection with the investment of the proceeds from the offering of Preferred Securities. Subordinated Debentures subsequently may be distributed to holders of Preferred Securities in connection with a dissolution of Illinois Power Capital upon the occurrence of certain events as may be described in an accompanying Prospectus Supplement (a "Prospectus Supplement"). The Subordinated Debentures will be unsecured and subordinate and junior in right of payment to all present and future Senior Indebtedness of the Company. The specific designation, number of Preferred Securities, dividend rate (or method of determination thereof), and any other rights, preferences, privileges, limitations and restrictions relating to the Preferred Securities of the particular series in respect of which this Prospectus is being delivered will be set forth in a Prospectus Supplement pertaining to such series. The Preferred Securities may be offered in amounts, at prices and on terms to be determined at the time of offering; provided, however, that the aggregate initial public offering price of all Preferred Securities offered hereby shall not exceed $100,000,000. ------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------ The Preferred Securities may be sold to or through underwriters or dealers as designated from time to time. See "Plan of Distribution." The names of any such underwriters or dealers involved in the sale of the Preferred Securities of the particular series in respect of which this Prospectus is being delivered, the number of Preferred Securities to be purchased by any such underwriters or dealers and any applicable commissions or discounts will be set forth in the Prospectus Supplement. The net proceeds to the Company will also be set forth in the Prospectus Supplement. ------------------ The date of this Prospectus is August , 1994. 59 AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Reports, proxy statements and other information filed by the Company with the Commission may be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices located at Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661 and at 13th Floor, Seven World Trade Center, New York, New York 10048. Copies of such material may be obtained from the public reference section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Such reports, proxy statements and other information concerning the Company may also be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005 and the Chicago Stock Exchange, 440 South LaSalle Street, Chicago, Illinois 60605, on which exchanges certain of the Company's securities are listed. In addition, such reports, proxy statements and other information concerning the Company can be inspected at the principal office of the Company, 500 South 27th Street, Decatur, Illinois 62525. This Prospectus does not contain all the information set forth in the Registration Statement on Form S-3 (together with all amendments and exhibits thereto, the "Registration Statement"), which the Company and Illinois Power Capital have filed with the Commission under the Securities Act of 1933, as amended (the "Securities Act"). Statements contained or incorporated by reference herein concerning the provisions of documents are necessarily summaries of such documents, and each statement is qualified in its entirety by reference to the Registration Statement. No separate financial statements of Illinois Power Capital have been included herein. The Company and Illinois Power Capital do not consider that such financial statements would be material to holders of Preferred Securities because Illinois Power Capital is a newly formed special purpose entity, has no operating history and no independent operations and is not engaged in, and does not propose to engage in, any activity other than as set forth below. See "Illinois Power Capital." INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents heretofore filed by the Company with the Commission pursuant to the Exchange Act are incorporated herein by reference: 1. The Company's Annual Report on Form 10-K for the year ended December 31, 1993; 2. The Company's Current Reports on Form 8-K dated February 9, 1994 and May 27, 1994; and 3. The Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1994 and June 30, 1994. All documents subsequently filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to the termination of the offering of the Preferred Securities offered hereby, shall be deemed to be incorporated by reference in this Prospectus 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 Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein or in the Prospectus Supplement 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 Prospectus. THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM A COPY OF THIS PROSPECTUS HAS BEEN DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL OF THE DOCUMENTS REFERRED TO ABOVE WHICH HAVE BEEN OR MAY BE INCORPORATED IN THIS PROSPECTUS BY REFERENCE, OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE INTO THE INFORMATION THAT THE PROSPECTUS INCORPORATES. REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO MR. ALEC G. DREYER, CONTROLLER, ILLINOIS POWER COMPANY, 500 SOUTH 27TH STREET, DECATUR, ILLINOIS 62525, TELEPHONE NUMBER: (217) 424-6600. 2 60 ILLINOIS POWER COMPANY The Company was incorporated under the laws of the State of Illinois on May 25, 1923. Effective May 27, 1994, the Company became a subsidiary of Illinova Corporation, an exempt holding company under the Public Utility Holding Company Act of 1935, as amended, pursuant to a merger in which each outstanding share of the Company's Common Stock was converted into one share of common stock of Illinova Corporation. The Company is engaged in the generation, transmission, distribution and sale of electric energy and the distribution 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 309 incorporated municipalities, adjacent suburban and rural areas and numerous unincorporated municipalities having an aggregate population of approximately 1,283,000. Gas service is provided to 257 incorporated municipalities, adjacent suburban areas and numerous unincorporated municipalities having an aggregate population of approximately 935,000. 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). The executive offices of the Company are located at 500 South 27th Street, Decatur, Illinois 62525, and the Company's telephone number is (217) 424-6600. ILLINOIS POWER CAPITAL Illinois Power Capital is a limited partnership formed under the Delaware Revised Uniform Limited Partnership Act, as amended (the "Partnership Act"). Illinois Power Capital exists for the sole purpose of issuing its partner interests and using the proceeds thereof to purchase certain debt securities of the Company. The Company is the sole general partner (the "General Partner") of Illinois Power Capital and will manage all of the business and affairs of Illinois Power Capital. Holders of Preferred Securities will be limited partners of Illinois Power Capital. The Company, as the General Partner of Illinois Power Capital, will make capital contributions to Illinois Power Capital from time to time to the extent required so that the total contributions made by the General Partner shall at all times be at least equal to 3% of the total contributions made by all partners. The rights and obligations of the General Partner and the limited partners of Illinois Power Capital will be governed by the Partnership Act and by an Amended and Restated Agreement of Limited Partnership of Illinois Power Capital (the "Partnership Agreement") substantially in the form filed as an exhibit to the Registration Statement of which this Prospectus and the accompanying Prospectus Supplement form a part. Illinois Power Capital's principal place of business and registered office in the State of Delaware is c/o The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801, telephone: (302) 658-7581. USE OF PROCEEDS The proceeds to be received by Illinois Power Capital from the sale of the Preferred Securities will be used to purchase Subordinated Debentures of the Company and, unless otherwise specified in any Prospectus Supplement, will be applied by the Company to the payment or provision for payment at maturity, the purchase or the redemption of outstanding securities of the Company and for general corporate purposes. 3 61 RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDEND REQUIREMENTS
YEAR ENDED DECEMBER 31, 12 MONTHS ------------------------------------------------ ENDED 1989 1990 1991 1992 1993(A) JUNE 30, 1994(A) ----- ---- ---- ---- ------- ---------------- Ratio of Earnings to Fixed Charges(b).................. (0.52)(c) 0.70(c) 1.85 2.02 0.80(c) 0.93(c) Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividend Requirements(b)............. (0.45)(d) 0.60(d) 1.48 1.61 0.70(d) 0.82(d)
- --------------- (a) Subsequent to the Company's merger with Illinova Corporation, net assets of Illinova Generating Company (formerly IP Group, Inc.) were transferred in the form of a dividend from the Company to Illinova Corporation. The information contained herein has been restated to reflect the financial results of the Company's current operations. (b) Earnings used in the calculation of the ratio of earnings to fixed charges and the ratio of earnings to combined fixed charges and preferred stock dividend requirements include the allowance for funds used during construction and the deferred financing costs associated with the Company's Clinton Power Station, and are before deduction of income taxes and fixed charges. Fixed charges include interest on long-term debt, related amortization of debt discount, premium, and expense, other interest and that portion of rent expense which is estimated to be representative of the interest component. Preferred stock dividend requirements have been increased to an amount representing the pre-tax earnings required to cover such dividend requirements. (c) The ratios of earnings to fixed charges for the twelve months ended June 30, 1994 and for the years ended December 31, 1993, 1990 and 1989 of 0.93, 0.80, 0.70 and (0.52), respectively, indicate that earnings were inadequate to cover fixed charges. The dollar amounts of the coverage deficiency for the twelve months ended June 30, 1994, and for the years ended 1993, 1990 and 1989 were approximately $13 million, $37 million, $68 million and $375 million, respectively. Excluding the loss on disallowed plant costs of $200 million, net of income taxes, recorded in the third quarter of 1993, the ratio of earnings to fixed charges would have been 2.42 for the twelve months ended June 30, 1994 and 2.25 for the year ended 1993. Excluding the loss on disallowed plant costs of $137 million, net of income taxes, recorded in the fourth quarter of 1990, the ratio of earnings to fixed charges would have been 1.41 for the year ended 1990. Excluding the loss on disallowed plant costs of $346 million, net of income taxes, recorded in the first quarter of 1989, the ratio of earnings to fixed charges would have been 1.31 for the year ended 1989. (d) The ratios of earnings to combined fixed charges and preferred stock dividend requirements for the twelve months ended June 30, 1994 and for the years ended December 31, 1993, 1990 and 1989 of 0.82, 0.70, 0.60 and (0.45), respectively, indicate that earnings were inadequate to cover combined fixed charges and preferred stock dividend requirements. The dollar amounts of the coverage deficiency for the twelve months ended June 30, 1994, and for the years ended 1993, 1990 and 1989 were approximately $38 million, $63 million, $105 million and $412 million, respectively. Excluding the loss on disallowed plant costs of $200 million, net of income taxes, recorded in the third quarter of 1993, the ratio of earnings to combined fixed charges and preferred stock dividend requirements would have been 1.98 for the twelve months ended June 30, 1994 and 1.83 for the year ended 1993. Excluding the loss on disallowed plant costs of $137 million, net of income taxes, recorded in the fourth quarter of 1990, the ratio of earnings to combined fixed charges and preferred stock dividend requirements would have been 1.09 for the year ended 1990. Excluding the loss on disallowed plant costs of $346 million, net of income taxes, recorded in the first quarter of 1989, the ratio of earnings to combined fixed charges and preferred stock dividend requirements would have been 1.06 for the year ended 1989. 4 62 DESCRIPTION OF THE PREFERRED SECURITIES Illinois Power Capital may issue, from time to time, Preferred Securities, in one or more series, having terms described in the Prospectus Supplement relating thereto. The limited partnership agreement of Illinois Power Capital will be amended and restated (as so amended and restated, the "Partnership Agreement") to authorize the establishment of one or more series of Preferred Securities, having such terms, including dividends, redemption, voting, liquidation rights and such other preferred, deferred or other special rights or such restrictions as shall be set forth therein or otherwise established by the General Partner pursuant thereto. Reference is made to the Prospectus Supplement relating to the Preferred Securities of a particular series for specific terms, including (i) the distinctive designation of such series which shall distinguish it from other series; (ii) the number of Preferred Securities included in such series, which number may be increased or decreased from time to time unless otherwise provided by the General Partner in creating the series; (iii) the annual dividend rate (or method of determining such rate) for Preferred Securities of such series and the date or dates upon which such dividends shall be payable; provided, however, dividends on any series of Preferred Securities shall be payable on a monthly basis to holders of such series of Preferred Securities as of a record date in each month during which such series of Preferred Securities are outstanding; (iv) whether dividends on Preferred Securities of such series shall be cumulative, and, in the case of Preferred Securities of any series having cumulative dividend rights, the date or dates or method of determining the date or dates from which dividends on Preferred Securities of such series shall be cumulative; (v) the amount or amounts which shall be paid out of the assets of Illinois Power Capital to the holders of Preferred Securities of such series upon voluntary or involuntary dissolution, winding-up or termination of Illinois Power Capital; (vi) the price or prices at which, the period or periods within which and the terms and conditions upon which Preferred Securities of such series may be redeemed or purchased, in whole or in part, at the option of Illinois Power Capital or the General Partner; (vii) the obligation, if any, of Illinois Power Capital to purchase or redeem Preferred Securities of such series and the price or prices at which, the period or periods within which and the terms and conditions upon which Preferred Securities of such series shall be purchased or redeemed, in whole or in part, pursuant to such obligation; (viii) the voting rights, if any, of Preferred Securities of such series in addition to those required by law, including the number of votes per Preferred Security and any requirement for the approval by the holders of Preferred Securities, or of Preferred Securities of one or more series, or of both, as a condition to specified action or amendments to the Partnership Agreement; and (ix) any other relative rights, preferences, privileges, limitations or restrictions of Preferred Securities of the series not inconsistent with the Partnership Agreement or with applicable law. All Preferred Securities offered hereby will be guaranteed by the Company to the extent set forth below under "Description of the Guarantee." Any applicable federal income tax considerations applicable to any offering of Preferred Securities will be described in the Prospectus Supplement relating thereto. DESCRIPTION OF THE GUARANTEE Set forth below is a summary of information concerning the Guarantee which will be executed and delivered by the Company for the benefit of the holders from time to time of Preferred Securities. The summary does not purport to be complete and is subject in all respects to the provisions of, and is qualified in its entirety by reference to, the Guarantee, which is filed as an exhibit to the Registration Statement of which this Prospectus forms a part. GENERAL The Company will irrevocably and unconditionally agree, to the extent set forth herein, to pay in full, to the holders of the Preferred Securities of each series, the Guarantee Payments (as defined below) (except to the extent paid by Illinois Power Capital), as and when due, regardless of any defense, right of set-off or counterclaim which Illinois Power Capital may have or assert. The following payments with respect to any series of Preferred Securities to the extent not paid by Illinois Power Capital (the "Guarantee Payments") will be subject to the Guarantee (without duplication): (i) any accumulated and unpaid dividends which are required to be paid on the Preferred Securities of such series, to the 5 63 extent Illinois Power Capital shall have sufficient cash on hand to permit such payment and funds legally available therefor, (ii) the redemption price, including all accumulated and unpaid dividends (the "Redemption Price"), payable with respect to any Preferred Securities called for redemption by Illinois Power Capital to the extent Illinois Power Capital shall have sufficient cash on hand to permit such payment and funds legally available therefor, and (iii) upon a liquidation of Illinois Power Capital, the lesser of (a) the aggregate of the liquidation preference and all accumulated and unpaid dividends on the Preferred Securities of such series to the date of payment and (b) the amount of assets of Illinois Power Capital remaining available for distribution to holders of Preferred Securities of such series in liquidation of Illinois Power Capital. The Company's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Company to the holders of Preferred Securities or by causing Illinois Power Capital to pay such amounts to such holders. CERTAIN COVENANTS OF THE COMPANY In the Guarantee, the Company will covenant that, so long as any Preferred Securities remain outstanding, the Company will not declare or pay any dividend on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock or make any guarantee payment with respect to the foregoing if at such time the Company shall be in default with respect to its payment or other obligations under the Guarantee or there shall have occurred and is continuing any event that would constitute an Event of Default under the Indenture. AMENDMENTS AND ASSIGNMENT Except with respect to any changes which do not adversely affect the rights of holders of Preferred Securities (in which case no vote will be required), the Guarantee may be changed only with the prior approval of the holders of not less than 66 2/3% in liquidation preference of the outstanding Preferred Securities of each affected series (voting together as one class). The manner of obtaining any such approval of holders of the Preferred Securities of each series will be as set forth in an accompanying Prospectus Supplement. All guarantees and agreements contained in the Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Company and shall inure to the benefit of the holders of the Preferred Securities then outstanding. TERMINATION OF THE GUARANTEE The Guarantee will terminate and be of no further force and effect as to the Preferred Securities of any series upon full payment of the Redemption Price of all Preferred Securities of such series, and will terminate completely upon full payment of the amounts payable upon liquidation of Illinois Power Capital. The Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any holder of Preferred Securities of any series must restore payment of any sums paid under such series of Preferred Securities or the Guarantee. STATUS OF THE GUARANTEE The Guarantee will constitute an unsecured obligation of the Company and will rank (i) subordinate and junior in right of payment to all liabilities of the Company, (ii) pari passu with the most senior preferred or preference stock now or hereafter issued by the Company and with any guarantee now or hereafter entered into by the Company in respect of any preferred or preference stock of any affiliate of the Company and (iii) senior to the Company's common stock. The Partnership Agreement provides that each holder of Preferred Securities by acceptance thereof agrees to the subordination provisions and other terms of the Guarantee. The Guarantee will constitute a guarantee of payment and not of collection. The Guarantee will be deposited with the General Partner to be held for the benefit of the holders of each series of the Preferred Securities. In the event of the appointment of a Special Representative to, among other things, enforce the Guarantee, the Special Representative may take possession of the Guarantee for such purpose. If no 6 64 Special Representative has been appointed to enforce the Guarantee, the General Partner has the right to enforce the Guarantee on behalf of the holders of each series of the Preferred Securities. The holders of not less than 10% in aggregate liquidation preference of the Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available in respect of the Guarantee, including the giving of directions to the General Partner or the Special Representative, as the case may be. If the General Partner or the Special Representative fails to enforce the Guarantee as above provided, any holder of Preferred Securities may institute a legal proceeding directly against the Company to enforce its rights under the Guarantee, without first instituting a legal proceeding against Illinois Power Capital or any other person or entity. The Guarantee will not be discharged except by payment of the Guarantee Payments in full to the extent not paid by Illinois Power Capital and by complete performance of all obligations under the Guarantee. GOVERNING LAW The Guarantee will be governed by and construed in accordance with the laws of the State of Illinois. DESCRIPTION OF THE SUBORDINATED DEBENTURES Subordinated Debentures may be issued from time to time in one or more series under an Indenture, (the "Indenture"), between the Company and The First National Bank of Chicago, as Trustee (the "Trustee"). The following summary does not purport to be complete and is subject in all respects to the provisions of, and is qualified in its entirety by reference to, the Indenture, which is filed as an exhibit to the Registration Statement of which this Prospectus forms a part. Whenever particular provisions or defined terms in the Indenture are referred to herein, such provisions or defined terms are incorporated by reference herein. Section and Article references used herein are references to provisions of the Indenture unless otherwise noted. GENERAL The Subordinated Debentures will be unsecured, subordinated obligations of the Company. The Indenture does not limit the aggregate principal amount of Subordinated Debentures which may be issued thereunder and provides that the Subordinated Debentures may be issued thereunder from time to time in one or more series. The Subordinated Debentures are issuable in one or more series pursuant to an indenture supplemental to the Indenture or a resolution of the Company's Board of Directors or an authorized committee thereof (each, a "Supplemental Indenture"). The aggregate principal amount of Subordinated Debentures relating to Preferred Securities of any series will be set forth in the Prospectus Supplement for such series and will be equal to the sum of the aggregate liquidation preference of the Preferred Securities for such series and the General Partner's capital contribution with respect to the Preferred Securities for such series. Subordinated Debentures relating to Preferred Securities of any series subsequently may be distributed pro rata to holders of Preferred Securities of such series in connection with the dissolution of Illinois Power Capital upon the occurrence of certain events described in the Prospectus Supplement relating to the Preferred Securities of such series. The Restated Articles of Incorporation, as amended, of the Company limit the amount of unsecured indebtedness that the Company may issue or assume, without the consent of the holders of a majority of the total number of shares of preferred stock then outstanding, to 20% of the aggregate of the total principal amount of all outstanding bonds or other securities representing secured indebtedness of the Company and the capital and surplus of the Company as then stated on the Company's books. At July 31, 1994, the Company could have issued approximately $210 million of unsecured indebtedness (such as the Subordinated Debentures) without violating this provision. Reference is made to the Prospectus Supplement which will accompany this Prospectus for the following terms of the series of Subordinated Debentures being offered thereby: (i) the specific title of 7 65 such Subordinated Debentures; (ii) any limit on the aggregate principal amount of such Subordinated Debentures; (iii) the date or dates on which the principal of such Subordinated Debentures is payable or the method of determination of such date or dates; (iv) the rate or rates at which such Subordinated Debentures will bear interest or the method of determination of such rate or rates (including the rates at which overdue principal shall bear interest, if different, and, if applicable, the rate or rates at which overdue premiums or interest shall bear interest, if any); (v) the date or dates from which such interest shall accrue, the interest payment dates on which such interest will be payable or the manner of determination of such interest payment dates and the record dates for the determination of holders to whom interest is payable on any such interest payment dates; (vi) the right, if any, to extend the interest payment periods and the maximum duration of any such extension; (vii) the period or periods within which, the price or prices at which and the terms and conditions upon which such Subordinated Debentures may be redeemed, in whole or in part, at the option of the Company; (viii) the obligation, if any, of the Company to redeem or purchase such Subordinated Debentures pursuant to any sinking fund or analogous provisions or at the option of the holder thereof and the period or periods, the price or prices at which, and the terms and conditions upon which, such Subordinated Debentures shall be redeemed or purchased, in whole or part, pursuant to such obligation; (ix) the form of such Subordinated Debentures; (x) if other than denominations of $25 or any integral multiple thereof, the denominations in which such Subordinated Debentures shall be issuable; (xi) any and all other terms with respect to such series; and (xii) whether such Subordinated Debentures are issuable as a global security, and in such case, the identity of the depository. The Indenture does not contain any provisions that afford holders of Subordinated Debentures protection in the event of a highly leveraged transaction involving the Company. SUBORDINATION The Indenture provides that the Subordinated Debentures are subordinate and junior in right of payment to all Senior Indebtedness (as defined below) of the Company as provided in the Indenture. No payment of principal of (including redemption and sinking fund payments), premium, if any, or interest on, the Subordinated Debentures may be made if any Senior Indebtedness is not paid when due, any applicable grace period with respect to such default has ended and such default has not been cured or waived or has ceased to exist, or if the maturity of any Senior Indebtedness has been accelerated because of a default. Upon any distribution of assets of the Company to creditors upon any dissolution, winding-up, liquidation or reorganization, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all principal of, and premium, if any, and interest due or to become due on, all Senior Indebtedness must be paid in full before the holders of the Subordinated Debentures are entitled to receive or retain any payment. The rights of the holders of the Subordinated Debentures will be subrogated to the rights of the holders of Senior Indebtedness to receive payments or distributions applicable to Senior Indebtedness until all amounts owing on the Subordinated Debentures are paid in full. The term "Senior Indebtedness" shall mean the principal of, premium, if any, interest on and any other payment due pursuant to any of the following, whether outstanding at the date of execution of the Indenture or thereafter incurred, created or assumed: (a) all indebtedness of the Company (other than non-recourse indebtedness and indebtedness issued under the Indenture) evidenced by notes, debentures, bonds or other securities sold by the Company for money; (b) all indebtedness of others of the kinds described in the preceding clause (a) assumed by or guaranteed in any manner by the Company (other than the Guarantee) or in effect guaranteed by the Company by an agreement to purchase, contingent or otherwise; and (c) all renewals, extensions or refundings of indebtedness of the kinds described in any of the preceding clauses (a) and (b) unless, in the case of any particular indebtedness, renewal, extension or refunding, the instrument creating or evidencing the same or the assumption or 8 66 guarantee of the same expressly provides that such indebtedness, renewal, extension or refunding is not superior in right of payment to or is pari passu with the Subordinated Debentures. Such Senior Indebtedness shall continue to be Senior Indebtedness and to be entitled to the benefits of the subordination provisions irrespective of any amendment, modification or waiver of any term of such Senior Indebtedness. The Indenture does not limit the aggregate amount of Senior Indebtedness which may be issued. As of June 30, 1994, Senior Indebtedness of the Company aggregated approximately $2.2 billion. CERTAIN COVENANTS OF THE COMPANY The Company will covenant that it will not declare or pay any dividend on, or redeem, purchase, acquire or make a distribution or liquidation payment with respect to, any of its capital stock, if at such time (i) there shall have occurred and be continuing any event that would constitute an Event of Default under any Indenture, (ii) the Company shall be in default with respect to its payment or any obligations under the Guarantee or (iii) the Company shall have given notice of its selection of an extended interest payment period as provided in the Indenture and such period, or any extension thereof, shall be continuing. The Company will also covenant (i) to remain the sole general partner of Illinois Power Capital and maintain 100% ownership of the general partner interests thereof; provided that any permitted successor of the Company under the Indenture may succeed to the Company's duties as General Partner, (ii) to contribute capital to the extent required to maintain its capital at an amount equal to at least 3% of the total capital contributions to Illinois Power Capital, (iii) not to voluntarily dissolve, wind-up or terminate Illinois Power Capital, except in connection with the distribution of Subordinated Debentures to the holders of Preferred Securities in liquidation of Illinois Power Capital and in connection with certain mergers, consolidations or amalgamations permitted by the Partnership Agreement, (iv) to timely perform all of its duties as the general partner in Illinois Power Capital (including the duty to pay dividends on the Preferred Securities) and (v) to use its reasonable efforts to cause Illinois Power Capital to remain a limited partnership and otherwise continue to be treated as a partnership for United States federal income tax purposes. FORM, EXCHANGE, REGISTRATION AND TRANSFER Subordinated Debentures of each series will be issued in registered form and either in certificated form or will be represented by one or more global securities. If not represented by one or more global securities, Subordinated Debentures may be presented for registration of transfer (with the form of transfer endorsed thereon duly executed) or exchange, at the office of the Debenture Registrar, without service charge and upon payment of any taxes and other governmental charges. Such transfer or exchange will be effected upon the Company or the Debenture Registrar being satisfied with the documents of title and identity of the person making the request. The Company has appointed the Trustee as Debenture Registrar with respect to the Subordinated Debentures. The Company shall not be required to (i) issue, register the transfer of or exchange any Subordinated Debenture during a period beginning at the opening of business 15 days before any mailing of Notice of Redemption of less than all the outstanding Subordinated Debentures of the series of which such Subordinated Debenture is a part, and ending at the close of business on the day of such mailing or (ii) register the transfer of or exchange any Subordinated Debentures called for redemption. PAYMENT AND PAYING AGENTS Payment of principal of and premium, if any, on any Subordinated Debenture will be made only against surrender to the Paying Agent of such Subordinated Debenture. Principal of and any premium and interest, if any, on Subordinated Debentures will be payable, subject to any applicable laws and regulations, at the office of such Paying Agent or Paying Agents as the Company may designate from time to time, except that at the option of the Company payment of any interest may be made by check mailed to the address of the person entitled thereto as such address shall appear in the Debenture 9 67 Register with respect to such Subordinated Debentures. Payment of interest on a Subordinated Debenture on any Interest Payment Date will be made to the person in whose name such Subordinated Debenture (or Predecessor Security) is registered at the close of business on the Regular Record Date for such interest payment. The Company will act as Paying Agent with respect to the Subordinated Debentures. The Company may at any time designate additional Paying Agents or rescind the designation of any Paying Agents or approve a change in the office through which any Paying Agent acts, except that the Company will be required to maintain a Paying Agent in each Place of Payment for each series of the respective Subordinated Debentures. All moneys paid by the Company to a Paying Agent for the payment of the principal of or premium or interest, if any, on any Subordinated Debenture of any series which remain unclaimed at the end of two years after such principal, premium, if any, or interest shall have become due and payable will be repaid to the Company and the holder of such Subordinated Debenture will thereafter look only to the Company for payment thereof. GLOBAL DEBENTURES If any Subordinated Debentures of a series are represented by one or more global securities, the applicable Prospectus Supplement will describe the circumstances, if any, under which beneficial owners of interests in any such Global Debenture may exchange such interests for Subordinated Debentures of such series and of like tenor and principal amount in any authorized form and denomination. Principal of and any premium and interest on a Global Debenture will be payable in the manner described in the applicable Prospectus Supplement. The specific terms of the depository arrangement with respect to any portion of a series of Subordinated Debentures to be represented by a Global Debenture will be described in the applicable Prospectus Supplement. MODIFICATION OF THE INDENTURE The Indenture contains provisions permitting the Company and the Trustee, with consent of the holders of not less than a majority in principal amount of the Subordinated Debentures of each series which are affected by the modification, to modify the Indenture or any Supplemental Indenture affecting that series or the rights of the holders of that series of Subordinated Debentures; provided, that no such modification may, without the consent of the holder of each outstanding Subordinated Debenture affected thereby, (i) extend the fixed maturity of any Subordinated Debentures of any series, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any premium payable upon the redemption thereof, without the consent of the holder of each Subordinated Debenture so affected or (ii) reduce the percentage of Subordinated Debentures, the holders of which are required to consent to any such supplemental indenture, without the consent of the holders of each Subordinated Debenture then outstanding and affected thereby. In addition, the Company and the Trustee may execute, without the consent of any holder of Subordinated Debentures, any Supplemental Indenture for certain other usual purposes including the creation of any new series of Subordinated Debentures. 10 68 EVENTS OF DEFAULT The Indenture provides that any one or more of the following described events, which has occurred and is continuing, constitutes an "Event of Default" with respect to each series of Subordinated Debentures: (a) failure for 10 days to pay interest on the Subordinated Debentures of that series, including any Additional Interest in respect thereof, when due, provided that a valid extension of an interest payment period by the Company in accordance with a Supplemental Indenture shall not constitute a failure to pay interest for this purpose; or (b) failure to pay principal or premium, if any, on the Subordinated Debentures of that series when due, whether at maturity, upon redemption by declaration or otherwise, or to make any sinking fund payment with respect to that series; or (c) failure to observe or perform any other covenant (other than those specifically relating to another series) contained in the Indenture for 90 days after notice; or (d) the dissolution, winding-up or termination of Illinois Power Capital, except in connection with the distribution of Subordinated Debentures to the holders of Preferred Securities in liquidation of Illinois Power Capital and in connection with certain mergers, consolidations or amalgamations permitted by the Partnership Agreement; or (e) certain events in bankruptcy, insolvency or reorganization of the Company or Illinois Power Capital. The holders of a majority in aggregate outstanding principal amount of any series of the Subordinated Debentures have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee for that series. The Trustee or the holders of not less than 25% in aggregate outstanding principal amount of any particular series of the Subordinated Debentures (unless the principal of all of the Subordinated Debentures of that series have been declared due and payable) may declare the principal due and payable immediately on default with respect to such series, but the holders of a majority in aggregate outstanding principal amount of such series may annul such declaration and waive the default if the default has been cured and a sum sufficient to pay all matured installments of interest and principal and any premium has been deposited with the Trustee. The holders of a majority in aggregate outstanding principal amount of all series of the Subordinated Debentures affected thereby may, on behalf of the holders of all the Subordinated Debentures of such series, waive any past default, except a default in the payment of principal, premium, if any, or interest. The Company is required to file annually with the Trustee a certificate as to whether or not the Company is in compliance with all the conditions and covenants under the Indenture. CONSOLIDATION, MERGER AND SALE The Indenture does not contain any covenant which restricts the Company's ability to merge or consolidate with or into any other corporation, sell or convey all or substantially all of its assets to any person, firm or corporation or otherwise engage in restructuring transactions. DEFEASANCE AND DISCHARGE Under the terms of the Indenture, the Company will be discharged from any and all obligations in respect of the Subordinated Debentures of any series (except in each case for certain obligations to register the transfer or exchange of Subordinated Debentures, replace stolen, lost or mutilated Subordinated Debentures, maintain paying agencies and hold moneys for payment in trust) if the Company deposits with the Trustee, in trust, moneys or Government Obligations, in an amount sufficient to pay all the principal of, and interest on, the Subordinated Debentures of such series on the dates such payments are due in accordance with the terms of such Subordinated Debentures. 11 69 GOVERNING LAW The Indenture and the Subordinated Debentures will be governed by, and construed in accordance with, the laws of the State of New York. INFORMATION CONCERNING THE TRUSTEE The Trustee shall have and be subject to all the duties and responsibilities specified with respect to an indenture trustee under the Trust Indenture Act. Subject to such provision, the Trustee is under no obligation to exercise any of the powers vested in it by the Indenture at the request of any holder of Subordinated Debentures, unless offered reasonable indemnity by such holder against the costs, expenses and liabilities which might be incurred thereby. The Trustee is not required to expand or risk its own funds or otherwise incur personal financial liability in the performance of its duties if the Trustee reasonably believes that repayment or adequate indemnity is not reasonably assured to it. The Company maintains a deposit account and banking relationship with the Trustee. MISCELLANEOUS The Company will have the right at all times to assign any of its rights or obligations under the Indenture to a direct or indirect wholly-owned subsidiary of the Company; provided, that, in the event of any such assignment, the Company will remain liable for all such obligations. Subject to the foregoing, the Indenture will be binding upon and inure to the benefit of the parties thereto and their respective successors and assigns. The Indenture provides that it may not otherwise be assigned by the parties thereto. PLAN OF DISTRIBUTION Illinois Power Capital may offer or sell Preferred Securities to one or more underwriters for public offering and sale by them. Illinois Power Capital may sell Preferred Securities as soon as practicable after effectiveness of the Registration Statement, provided that favorable market conditions exist. Any such underwriter involved in the offer and sale of the Preferred Securities will be named in an applicable Prospectus Supplement. Underwriters may offer and sell the Preferred Securities at a fixed price or prices, which may be changed, or from time to time at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. In connection with the sale of Preferred Securities, underwriters may be deemed to have received compensation from the Company and/or Illinois Power Capital in the form of underwriting discounts or commissions. Underwriters may sell Preferred Securities to or through dealers, and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters. Any underwriting compensation paid by the Company and/or Illinois Power Capital to underwriters in connection with the offering of Preferred Securities, and any discounts, concessions or commissions allowed by underwriters to participating dealers, will be set forth in an applicable Prospectus Supplement. Underwriters and dealers participating in the distribution of the Preferred Securities may be deemed to be underwriters, and any discounts and commissions received by them and any profit realized by them on resale of the Preferred Securities may be deemed to be underwriting discounts and commissions, under the Securities Act. Underwriters and dealers may be entitled, under agreement with the Company or Illinois Power Capital, to indemnification against and contribution toward certain civil liabilities, including liabilities under the Securities Act, and to reimbursement by the Company and/or Illinois Power Capital for certain expenses. Underwriters and dealers may engage in transactions with, or perform services for, the Company and/or Illinois Power Capital and/or any of their affiliates in the ordinary course of business. 12 70 Each series of Preferred Securities will be a new issue of securities and will have no established trading market. Any underwriters to whom Preferred Securities are sold by Illinois Power Capital for public offering and sale may make a market in such Preferred Securities, but such underwriters will not be obligated to do so and may discontinue any market making at any time without notice. The Preferred Securities may or may not be listed on a national securities exchange. No assurance can be given as to the liquidity of or the trading markets for any Preferred Securities. LEGAL OPINIONS Certain legal matters will be passed upon for the Company and Illinois Power Capital by Schiff Hardin & Waite, Chicago, Illinois, and for any underwriters by Reid & Priest, New York, New York. Certain matters of Delaware law relating to the validity of the Preferred Securities will be passed upon by Richards, Layton & Finger, P.A., Wilmington, Delaware, special Delaware counsel to the Company and Illinois Power Capital. Schiff Hardin & Waite and Reid & Priest may rely on the opinion of Richards, Layton & Finger, P.A. as to certain matters of Delaware law. Schiff Hardin & Waite may rely on the opinion of Reid & Priest as to all matters of New York law, and Reid & Priest may rely on the opinion of Schiff Hardin & Waite as to all matters of Illinois law. EXPERTS The financial statements incorporated in this Prospectus by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1993 have been so incorporated in reliance on the report (which contains an explanatory paragraph relating to the Company's change in its method of accounting for income taxes, as discussed in Note 1 to the financial statements) of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. 13 71 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. Securities and Exchange Commission registration fee........................ $ 34,483* New York Stock Exchange listing fees....................................... 45,000 Printing expenses.......................................................... 50,000 Legal fees and expenses.................................................... 125,000 Independent accountant's fees and expenses................................. 15,000 Blue Sky and legal investment fees and expenses............................ 15,000 Rating agencies fees and expenses.......................................... 50,000 Indenture Trustee fees and expenses........................................ 5,000 Miscellaneous.............................................................. 10,517 -------- Total.................................................................... $350,000 ========
- --------------- * Actual. All other expenses are estimated. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Under Section 8.75 of the Illinois Business Corporation Act of 1983, the Company is empowered, subject to the procedures and limitations stated therein, to indemnify any person against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any threatened, pending or completed action, suit or proceeding to which such person is made a party or threatened to be made a party by reason of such person being or having been a director, officer, employee or agent of the Company, or serving or having served at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise. Section 8.75 further provides that indemnification pursuant to its provisions is not exclusive of other rights of indemnification to which a person may be entitled under any by-law, agreement, vote of stockholders or disinterested directors, or otherwise, and that such indemnification shall continue as to a director, officer, employee or agent of the Company who has ceased to serve in such capacity, and shall inure to the benefit of the heirs, executors and administrators of such a person. The Company's By-Laws provide, in substance, that the Company shall indemnify any person against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, to which such person is made a party or threatened to be made a party by reason of such person being or having been a director, officer, employee or agent of the Company, or serving or having served at the request of the Company in one or more of the foregoing capacities with another corporation, partnership, joint venture, trust or other enterprise. The indemnification is not exclusive of other rights and shall continue as to a person who has ceased to be a director, officer, employer or agent and shall inure to the benefit of his heirs, executors and administrators. The Company presently has an insurance policy which, among other things, includes liability insurance coverage for officers and directors under which officers and directors are covered against any "loss" arising from any claim or claims made against them by reason of any "wrongful act" in their respective capacities of directors or officers. "Loss" is specifically defined to exclude fines and penalties, as well as matters deemed uninsurable under the law pursuant to which the insurance policy shall be construed. The policy also contains other specific exclusions, including illegally obtained personal profit or advantages, and dishonesty. The policy also provides for reimbursement to the Company for loss 72 incurred by having indemnified officers or directors as authorized by state statute, the Company's By-Laws or any other agreement. The Partnership Agreement provides, in part, as follows: "Section 9.6 Indemnification. To the fullest extent permitted by applicable law, the Partnership shall indemnify and hold harmless each Indemnified Person from and against any loss, damage or claim incurred by such Indemnified Person by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Partnership and in a manner reasonably believed to be within the scope of authority conferred on such Indemnified Person by this Agreement, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of gross negligence or willful misconduct, with respect to such acts or omissions; provided, however, that any indemnity under this Section 9.6 shall be provided out of and to the extent of Partnership assets only, and no Covered Person shall have any personal liability on account thereof. To the fullest extent permitted by applicable law, expenses (including legal fees) incurred by an Indemnified Person in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Partnership prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Partnership of an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall be determined that the Indemnified Person is not entitled to be indemnified as authorized in Section 9.6." Applicable Delaware partnership law provides authority for limited partnerships to indemnify under certain circumstances any partner or other person from and against any and all claims and demands. The foregoing rights of indemnification shall apply to any liability of any director or officer, partner or other person (or his legal representatives) arising under any of the provisions of the Securities Act of 1933, as amended, only to the extent that such rights of indemnification may be determined to be valid by a court of competent jurisdiction. ITEM 16. LIST OF EXHIBITS. The exhibits to this Registration Statement are listed in the Exhibit Index elsewhere herein. ITEM 17. UNDERTAKINGS. The undersigned registrants hereby undertake: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (a) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the "Securities Act"); (b) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement; and (c) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; provided, however, that paragraphs 1(a) and 1(b) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the registrants pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") that are incorporated by reference in this Registration Statement; II-2 73 (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; and (4) That for purposes of determining any liability under the Securities Act, each filing of the Company's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrants pursuant to the provisions referred to in Item 15 above, or otherwise, the registrants have been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrants of expenses incurred or paid by a director, officer or controlling person of the registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrants will, unless in the opinion of their counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned registrants hereby further undertake that: (1) for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrants pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective; and (2) for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-3 74 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, Illinois Power Company certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Decatur, and State of Illinois on the 19th day of August, 1994. ILLINOIS POWER COMPANY (Registrant) By: /s/ LARRY D. HAAB ----------------------------------- Larry D. Haab Chairman, President and Chief Executive Officer II-4 75 Pursuant to the requirements of the Securities Act of 1933, Illinois Power Capital, L.P. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Decatur, and State of Illinois on the 19th day of August, 1994. ILLINOIS POWER CAPITAL, L.P. (Registrant) By: Illinois Power Company, its general partner By: /s/ LARRY D. HAAB ----------------------------------- Larry D. Haab Chairman, President and Chief Executive Officer II-5 76 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that Illinois Power Company, Illinois Power Capital, L.P. and each of the undersigned officers and directors of Illinois Power Company hereby constitute and appoint each of Larry D. Haab, Larry F. Altenbaumer and Alec G. Dreyer the true and lawful attorney-in-fact and agent of the undersigned, with full power of substitution and resubstitution for and in the name, place and stead of the undersigned, in any and all capacities, to sign all or any amendments (including post-effective amendments) of and supplements to this Registration Statement on Form S-3 and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, to all intents and purposes and as fully as said corporation itself and each said officer or director might or could do in person, hereby ratifying and confirming all that each such attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below on behalf of each of Illinois Power Company and Illinois Power Capital, L.P. by the following persons in their capacities as officers or directors, as indicated below, of Illinois Power Company and on the dates indicated.
SIGNATURE TITLE DATE - ------------------------------------- ------------------------------------- ---------------- /s/ LARRY D. HAAB Chairman, President, Chief Executive - ------------------------------------- Officer and Director Larry D. Haab (Principal Executive Officer) /s/ LARRY F. ALTENBAUMER Senior Vice President and Chief - ------------------------------------- Financial Officer Larry F. Altenbaumer (Principal Financial Officer) August 19, 1994 /s/ ALEC G. DREYER Controller - ------------------------------------- Alec G. Dreyer (Controller) /s/ RICHARD R. BERRY Director - ------------------------------------- Richard R. Berry /s/ DONALD E. LASATER Director - ------------------------------------- Donald E. Lasater /s/ DONALD S. PERKINS Director - ------------------------------------- Donald S. Perkins
II-6 77
SIGNATURE TITLE DATE - ------------------------------------- ------------------------------------- ---------------- /s/ ROBERT M. POWERS Director - ------------------------------------- Robert M. Powers /s/ WALTER D. SCOTT Director - ------------------------------------- Walter D. Scott /s/ RONALD L. THOMPSON Director - ------------------------------------- Ronald L. Thompson /s/ WALTER M. VANNOY Director - ------------------------------------- Walter M. Vannoy August 19, 1994 /s/ MARILOU VON FERSTEL Director - ------------------------------------- Marilou von Ferstel /s/ CHARLES W. WELLS Director - ------------------------------------- Charles W. Wells /s/ JOHN D. ZEGLIS Director - ------------------------------------- John D. Zeglis Director - ------------------------------------- Vernon K. Zimmerman
II-7 78 EXHIBIT INDEX
EXHIBITS DESCRIPTION PAGE --------- ------------------------------------------------------------------- ---- 1 Form of Underwriting Agreement.* 3(a) Restated Articles of Incorporation of the Company, as amended through April 19, 1984. Filed as Exhibit 19 to the Company's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1984. File No. 1-3004.** 3(b) Amendment to the Restated Articles of Incorporation of the Company dated April 19, 1989. Filed as Exhibit 19 to the Company's Quarterly Report on Form 10-Q for the Quarter Ended March 31, 1989. File No. 1-3004.** 3(c) Statement of Resolution Establishing the Series of Serial Preferred Stock, without par value, designated as Cumulative Preferred Stock, Adjustable Rate Series B. Filed as Exhibit 4(b) to the Company's Quarterly Report on Form 10-Q for the Quarter Ended March 31, 1985. File No. 1-3004.** 3(d) Statement of Resolution Establishing the Series of Serial Preferred Stock, $50 par value, designated as 8.00% Cumulative Preferred Stock. Filed as Exhibit 3(f) to the Company's Annual Report on Form 10-K for the Year Ended December 31, 1986. File No. 1-3004.** 3(e) Statement of Resolution Establishing the Series of Serial Preferred Stock, $50 par value, designated as 7.75% Cumulative Preferred Stock. Filed as Exhibit 3(g) to the Company's Annual Report on Form 10-K for the Year Ended December 31, 1986. File No. 1-3004.** 3(f) By-Laws of the Company, as amended. Filed as Exhibit 3(f) to the Company's Quarterly Report on Form 10-Q for the Quarter Ended March 31, 1993. File No. 1-3004.** 4(a) Certificate of Limited Partnership of Illinois Power Capital, L.P. 4(b) Agreement of Limited Partnership of Illinois Power Capital, L.P. 4(c) Form of Amended and Restated Agreement of Limited Partnership of Illinois Power Capital, L.P. 4(d) Form of Action of the Company, as the General Partner of Illinois Power Capital, L.P., Creating Series A Preferred Securities. 4(e) Form of Indenture between the Company and The First National Bank of Chicago. 4(e)(1) Cross-reference sheet showing the location in the Indenture of the provisions of Sections 310 through 318(a) of the Trust Indenture Act of 1939, as amended. 4(f) Form of Supplemental Indenture to Indenture to be used in connection with the issuance of Subordinated Debentures and fixed rate Preferred Securities. 4(g) Form of Supplemental Indenture to Indenture to be used in connection with the issuance of Subordinated Debentures and adjustable rate Preferred Securities. 4(h) Form of Preferred Security Certificate (contained in the Form of Amended and Restated Agreement of Limited Partnership of Illinois Power Capital filed as Exhibit 4(c) to this Registration Statement).
- --------------- * To be filed by amendment. ** Incorporated herein by reference. 79 4(i) Form of Subordinated Debenture (contained in the Form of Indenture filed as Exhibit 4(e) to this Registration Statement). 4(j) Form of Guarantee Agreement with respect to the Preferred Securities. 5(a) Opinion of Schiff Hardin & Waite. 5(b) Opinion of Richards, Layton & Finger, P.A. 8 Tax opinion of Schiff Hardin & Waite (contained in its opinion filed as Exhibit 5(a) to this Registration Statement). 12 Statement of Computations of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividend Requirements. 23(a) Consent of Schiff Hardin & Waite (contained in its opinion filed as Exhibit 5(a) to this Registration Statement). 23(b) Consent of Richards, Layton & Finger, P.A. (contained in its opinion filed as Exhibit 5(b) to this Registration Statement). 23(c) Consent of Price Waterhouse, LLP. 24 Powers of Attorney (set forth on the signature page of this Registration Statement). 25 Statement of Eligibility of Trustee under the Trust Indenture Act of 1939, as amended.
EX-4.A 2 CERTIFICATE OF LTD. PARTNERSHIP 1 EXHIBIT 4(A) CERTIFICATE OF LIMITED PARTNERSHIP OF ILLINOIS POWER CAPITAL, L.P. This Certificate of Limited Partnership of Illinois Power Capital, L.P. (the "Partnership"), dated as of August 17, 1994 is being duly executed and filed by Illinois Power Company, an Illinois corporation, as general partner, to form a limited partnership under the Delaware Revised Uniform Limited Partnership Act (6 Del.C. Section 17-101, et seq.), as amended from time to time. 1. Name. The name of the limited partnership formed hereby is Illinois Power Capital, L.P. 2. Registered Office. The address of the registered office of the Partnership in the State of Delaware is c/o The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. 3. Registered Agent. The name and address of the registered agent for service of process on the Partnership in the State of Delaware is The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. 4. General Partner. The name and the business address of the sole general partner of the Partnership is: Illinois Power Company 500 South 27th Street Decatur, Illinois 62525 IN WITNESS WHEREOF, the undersigned has executed this Certificate of Limited Partnership as of the date first above written. ILLINOIS POWER COMPANY By: /s/ Alec G. Dreyer Name: Alec G. Dreyer Title: Controller EX-4.B 3 AGREEMENT OF LTD. PARTNERSHIP 1 EXHIBIT 4(B) AGREEMENT OF LIMITED PARTNERSHIP OF ILLINOIS POWER CAPITAL, L.P. This Agreement of Limited Partnership of Illinois Power Capital, L.P. (the "Agreement"), is entered into by and between Illinois Power Company, an Illinois corporation, as general partner (the "General Partner"), and Illinova Corporation, an Illinois corporation, as limited partner (the "Initial Limited Partner"). The General Partner and the Initial Limited Partner hereby form a limited partnership pursuant to and in accordance with the Delaware Revised Uniform Limited Partnership Act (6 Del.C. Section 17-101, et seq.), as amended from time to time (the "Act"), and hereby agree as follows: 1. Name. The name of the limited partnership formed hereby is Illinois Power Capital, L.P. (the "Partnership"). 2. Purpose. The Partnership is organized for the sole purpose of issuing its interests in the Partnership, including, without limitation, its general partner interests and its limited partner interests (the latter, the "Limited Partner Interests"), and using the proceeds thereof to purchase certain debt securities ("Debentures") of the General Partner, and to engage in any and all activities necessary, advisable or incidental thereto. 3. Registered Office. The registered office of the Partnership in the State of Delaware is c/o The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. 4. Registered Agent. The name and address of the registered agent for service of process on the Partnership in the State of Delaware is The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. 5. Partners. The names and the business addresses of the General Partner and the Initial Limited Partner are as follows: General Partner: Illinois Power Company 500 South 27th Street Decatur, Illinois 62525 Initial Limited Partner: Illinova Corporation 500 South 27th Street Decatur, Illinois 62525 2 6. Powers. The powers of the General Partner include all powers, statutory and otherwise, possessed by general partners under the laws of the State of Delaware. 7. Dissolution. The Partnership shall dissolve, and its affairs shall be wound up, on December 31, 2044, or at such earlier time as (a) all of the partners of the Partnership approve in writing, (b) an event of withdrawal of the General Partner has occurred under the Act, or (c) an entry of a decree of judicial dissolution has occurred under Section 17-802 of the Act. 8. Capital Contributions. The partners of the Partnership have contributed the following amounts, in cash, and no other property, to the Partnership: General Partner: $1.00 Initial Limited Partner: $1.00 9. Additional Contributions. No partner of the Partnership is required to make any additional capital contribution to the Partnership. 10. Allocation of Profits and Losses. The Partnership's profits and losses shall be allocated in proportion to the capital contributions of the partners of the Partnership. 11. Distributions. Distributions shall be made to the partners of the Partnership at the time and in the aggregate amounts determined by the General Partner, but at least once during each fiscal year of the Partnership the General Partner shall cause the Partnership to distribute any cash held by it which is not reasonably necessary for the operation of the Partnership. Distributions shall be allocated among the partners of the Partnership in the same proportion as their then capital account balances. 12. Assignments. (a) The Initial Limited Partner may assign all or any part of its Limited Partner interest in the Partnership and may withdraw from the Partnership only with the consent of the General Partner. The Initial Limited Partner has no right to grant an assignee of its Limited Partner Interest the right to become a substituted limited partner in the Partnership. (b) The General Partner may not assign its interest in the Partnership in whole or in any part under any circumstances, except to a permitted successor of the General Partner under any instrument under which Debentures are issued. 13. Withdrawal. Except to the extent set forth in Section 12, no right is given to any partner of the Partnership to withdraw from the Partnership. -2- 3 14. Additional Partners. (a) Without the approval of the Initial Limited Partner, the General Partner may admit additional limited partners to the Partnership. (b) After the admission of any additional limited partners to the Partnership pursuant to this Section 14, the Partnership shall continue as a limited partnership under the Act. (c) The admission of any additional limited partners to the Partnership pursuant to this Section 14 shall be accomplished by the amendment of this Agreement. 15. Liability of Initial Limited Partner. The Initial Limited Partner shall not have any liability for the obligations or liabilities of the Partnership except to the extent provided in the Act. 16. Governing Law. This Agreement shall be governed by, and construed under, the laws of the State of Delaware, all rights and remedies being governed by said laws. 17. Counterparts. The Agreement may be executed in one or more counterparts, each of which counterparts shall be an original and all of which together shall constitute one and the same Agreement. IN WITNESS WHEREOF, the undersigned, intending to be legally bound hereby, have duly executed this Agreement of Limited Partnership as of the 17th day of August, 1994. General Partner: ILLINOIS POWER COMPANY By: Name: Title: Initial Limited Partner: ILLINOVA CORPORATION By: Name: Title: -3- EX-4.C 4 AMD AND RESTATED AGREEMENT OF LTD. PARTNERSHIP 1 EXHIBIT 4(C) AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF ILLINOIS POWER CAPITAL, L.P. 2 TABLE OF CONTENTS ARTICLE I FORMATION AND CONTINUATION OF THE PARTNERSHIP; ADMISSION OF PREFERRED SECURITY HOLDERS; RETURN OF INITIAL LIMITED PARTNER'S CAPITAL CONTRIBUTION Section 1.1. Formation and Continuation of the Partnership . . . . . . 1 Section 1.2. Name . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 1.3. Business of the Partnership . . . . . . . . . . . . . . . 2 Section 1.4. Term . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 1.5. Registered Agent and Office . . . . . . . . . . . . . . . 2 Section 1.6. Principal Place of Business . . . . . . . . . . . . . . . 2 Section 1.7. Name and Business Address of General Partner . . . . . . 2 Section 1.8. Admission of Holders of Preferred Securities . . . . . . 2 ARTICLE II DEFINED TERMS Section 2.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . 3 Section 2.2. Headings . . . . . . . . . . . . . . . . . . . . . . . . 8 ARTICLE III CAPITAL CONTRIBUTIONS, REPRESENTATION OF PREFERRED SECURITY HOLDER'S INTEREST; CAPITAL ACCOUNTS Section 3.1. Capital Contributions . . . . . . . . . . . . . . . . . . 8 Section 3.2. Preferred Security Holder's Interest Represented by Preferred Securities . . . . . . . . . . . . . . . . . . 8 Section 3.3. Capital Accounts . . . . . . . . . . . . . . . . . . . . 9 Section 3.4. Interest on Capital Contributions . . . . . . . . . . . . 9 Section 3.5. Withdrawal and Return of Capital Contributions . . . . . 9 ARTICLE IV ALLOCATIONS Section 4.1. Profits and Losses . . . . . . . . . . . . . . . . . . . 9 Section 4.2. Other Allocation Provisions . . . . . . . . . . . . . . . 10 Section 4.3. Allocations for Income Tax Purposes . . . . . . . . . . . 11 Section 4.4. Withholding . . . . . . . . . . . . . . . . . . . . . . . 11 -i- 3 ARTICLE V DIVIDENDS Section 5.1. Dividends . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 5.2. Limitations on Distributions . . . . . . . . . . . . . . 12 ARTICLE VI ISSUANCE OF PREFERRED SECURITIES Section 6.1. General Provisions Regarding Preferred Securities . . . . 12 Section 6.2. Voting Rights . . . . . . . . . . . . . . . . . . . . . . 15 Section 6.3. Mergers . . . . . . . . . . . . . . . . . . . . . . . . . 17 ARTICLE VII BOOKS OF ACCOUNT, RECORDS AND REPORTS Section 7.1. Books and Records . . . . . . . . . . . . . . . . . . . . 17 Section 7.2. Accounting Method . . . . . . . . . . . . . . . . . . . . 18 ARTICLE VIII POWERS, RIGHTS AND DUTIES OF THE LIMITED PARTNERS Section 8.1. Limitations . . . . . . . . . . . . . . . . . . . . . . . 18 Section 8.2. Liability . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 8.3. Priority . . . . . . . . . . . . . . . . . . . . . . . . 18 ARTICLE IX POWERS, RIGHTS AND DUTIES OF THE GENERAL PARTNER Section 9.1. Authority . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 9.2. Powers and Duties of General Partner . . . . . . . . . . 19 Section 9.3. Liability . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 9.4. Exculpation . . . . . . . . . . . . . . . . . . . . . . . 20 Section 9.5. Fiduciary Duty . . . . . . . . . . . . . . . . . . . . . 20 Section 9.6. Indemnification . . . . . . . . . . . . . . . . . . . . . 21 Section 9.7. Outside Businesses . . . . . . . . . . . . . . . . . . . 21 Section 9.8. Limits on General Partner's Powers . . . . . . . . . . . 22 Section 9.9. Tax Matters Partner . . . . . . . . . . . . . . . . . . . 22 Section 9.10. Expenses . . . . . . . . . . . . . . . . . . . . . . . 22 -ii- 4 ARTICLE X TRANSFERS OF INTERESTS BY PARTNERS Section 10.1. Transfer of Interests . . . . . . . . . . . . . . . . . 23 Section 10.2. Transfer of LP Certificates . . . . . . . . . . . . . . 23 Section 10.3. Persons Deemed Preferred Security Holders . . . . . . . 23 Section 10.4. Book Entry Interests . . . . . . . . . . . . . . . . . 24 Section 10.5. Notices to Clearing Agency . . . . . . . . . . . . . . 24 Section 10.6. Appointment of Successor Clearing Agency . . . . . . . 24 Section 10.7. Definitive LP Certificates; Appointment of Paying Agent(s) . . . . . . . . . . . . . . . . . . . . . . . 24 ARTICLE XI WITHDRAWAL; DISSOLUTION; LIQUIDATION AND DISTRIBUTION OF ASSETS Section 11.1. Withdrawal of Partners . . . . . . . . . . . . . . . . 25 Section 11.2. Dissolution of the Partnership . . . . . . . . . . . . 25 Section 11.3. Liquidation . . . . . . . . . . . . . . . . . . . . . . 26 Section 11.4. Distribution in Liquidation . . . . . . . . . . . . . . 27 Section 11.5. Rights of Limited Partners . . . . . . . . . . . . . . 27 Section 11.6. Termination . . . . . . . . . . . . . . . . . . . . . . 27 ARTICLE XII AMENDMENTS AND MEETINGS Section 12.1. Amendments . . . . . . . . . . . . . . . . . . . . . . 27 Section 12.2. Amendment of Certificate . . . . . . . . . . . . . . . 27 Section 12.3. Meetings of the Partners . . . . . . . . . . . . . . . 27 ARTICLE XIII MISCELLANEOUS Section 13.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 13.2. Entire Agreement . . . . . . . . . . . . . . . . . . . 29 Section 13.3. Governing Law . . . . . . . . . . . . . . . . . . . . . 29 Section 13.4. Effect . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 13.5. Pronouns and Number . . . . . . . . . . . . . . . . . . 29 Section 13.6. Captions . . . . . . . . . . . . . . . . . . . . . . . 29 Section 13.7. Partial Enforceability . . . . . . . . . . . . . . . . 29 Section 13.8. Counterparts . . . . . . . . . . . . . . . . . . . . . 30 Section 13.9. Waiver of Partition . . . . . . . . . . . . . . . . . . 30 Section 13.10. Remedies . . . . . . . . . . . . . . . . . . . . . . . 30 -iii- 5 AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF ILLINOIS POWER CAPITAL, L.P. This AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP of Illinois Power Capital, L.P. (the "Partnership"), dated as of , 1994, among Illinois Power Company, an Illinois corporation ("Illinois Power"), as the general partner, Illinova Corporation, an Illinois corporation, as the initial limited partner (the "Initial Limited Partner") and such other Persons (as defined herein) who become Limited Partners (as defined herein) as provided herein; WITNESSETH: WHEREAS, Illinois Power and the Initial Limited Partner entered into an Agreement of Limited Partnership, dated as of August 17, 1994, (the "Original Limited Partnership Agreement"); WHEREAS, the Certificate of Limited Partnership of the Partnership was filed with the Office of the Secretary of State of the State of Delaware on August 17, 1994; and WHEREAS, the Partners (as defined herein) desire to continue the Partnership as a limited partnership under the Act (as defined herein) and to amend and restate the Original Limited Partnership Agreement in its entirety; NOW, THEREFORE, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, receipt and sufficiency of which are hereby acknowledged, the parties hereto agree to amend and restate the Original Limited Partnership Agreement in its entirety and hereby agree as follows: ARTICLE I FORMATION AND CONTINUATION OF THE PARTNERSHIP; ADMISSION OF PREFERRED SECURITY HOLDERS; RETURN OF INITIAL LIMITED PARTNER'S CAPITAL CONTRIBUTION Section 1.1. Formation and Continuation of the Partnership. The Partnership was formed as a limited partnership under the Act by the filing by the General Partner (as defined herein) of the Certificate (as defined herein) with the Office of the Secretary of State of the State of Delaware on August 17, 1994 and the entering into by the General Partner and the Initial Limited Partner of the Original Limited Partnership Agreement. The parties hereto agree to continue the Partnership as a limited partnership under the Act. The General Partner, for itself and as agent for the Limited Partners, shall make every reasonable effort to assure that all certificates and documents are properly executed and shall accomplish all filing, recording, publishing and other acts necessary or appropriate for compliance with all the requirements for the continuation of the Partnership as a limited partnership under the Act and under all other laws of -1- 6 the State of Delaware or such other jurisdictions in which the General Partner determines that the Partnership may conduct business. The rights, liabilities and duties of the Partners shall be as provided in the Act except as modified by this Agreement. Where not otherwise specified in this Agreement, the Act governs the rights and obligations of the parties to this Agreement. Section 1.2. Name. The name of the Partnership is "Illinois Power Capital, L.P.", as such name may be modified from time to time by the General Partner following written notice to the Limited Partners. The Partnership business may be conducted under the name of the Partnership or any other name deemed advisable by the General Partner. Section 1.3. Business of the Partnership. The sole purpose of the Partnership is (a) to issue partnership interests in the Partnership, including, without limitation, Preferred Securities (as defined herein), and to use the proceeds thereof to purchase Subordinated Debentures (as defined herein) or other similar debt securities of Illinois Power and (b) except as otherwise limited herein, to enter into, make and perform all contracts and other undertakings, and engage in all activities and transactions as the General Partner may reasonably deem necessary or advisable to the carrying out of the foregoing purpose of the Partnership. Section 1.4. Term. The term of the Partnership commenced on the date the Certificate was filed with the Secretary of State of the State of Delaware and shall continue until December 31, 2047, unless the Partnership is dissolved before such date in accordance with the provisions of this Agreement. Section 1.5. Registered Agent and Office. The Partnership's registered agent and office in the State of Delaware shall be The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. At any time, and from time to time, the General Partner may designate another registered agent and/or registered office. Section 1.6. Principal Place of Business. The principal place of business of the Partnership shall be at c/o The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. Upon 10 days written notice to the Limited Partners, the General Partner may change the location of the Partnership's principal place of business. Section 1.7. Name and Business Address of General Partner. The name and business address of the General Partner are as follows: Illinois Power Company 500 South 27th Street Decatur, Illinois 62525 Attention: President The General Partner may change its name or business address from time to time, in which event the General Partner shall promptly notify the Limited Partners of any such change. Section 1.8. Admission of Holders of Preferred Securities. (a) Without the necessity of executing this Agreement, upon receipt by a Person of an LP Certificate (as defined herein) and payment of the Purchase Price (as defined herein) for the Preferred Securities represented by such LP Certificate in connection with the initial issuance -2- 7 by the Partnership of such Preferred Securities, which shall be deemed to constitute a request by such Person that the books and records of the Partnership reflect such Person's admission as a Limited Partner, such Person shall be admitted to the Partnership as a Limited Partner and shall become bound by this Agreement. (b) Following the first admission of a Preferred Security Holder (as defined herein) to the Partnership as a Limited Partner pursuant to paragraph (a) above, the Initial Limited Partner shall receive the return of his capital contribution without interest or deduction, but will continue to be a limited partner of the Partnership. While the Initial Limited Partner shall continue to be a limited partner of the Partnership, the Initial Limited Partner shall only have such rights, if any, as are expressly provided to the Initial Limited Partner pursuant to this Agreement. (c) The name and mailing address of each Partner and the amount contributed by such Partner to the capital of the Partnership shall be listed on the books and records of the Partnership. The General Partner shall be required to update the books and records from time to time as necessary to accurately reflect the information therein. ARTICLE II DEFINED TERMS Section 2.1. Definitions. Unless the context otherwise requires, the terms defined in this Article II shall, for the purposes of this Agreement, have the meanings herein specified. "Act" means the Delaware Revised Uniform Limited Partnership Act, 6 Del.C. Section 17-101, et seq., as amended from time to time. "Action" has the meaning set forth in Section 6.1(b). "Adjusted Capital Account" has the meaning set forth in Section 4.2(d)(i). "Affiliate" means, with respect to a specified Person, (a) any Person directly or indirectly owning, controlling or holding with power to vote 10% or more of the outstanding voting securities or other ownership interests of the specified Person, (b) any Person 10% or more of whose outstanding voting securities or other ownership interests are directly or indirectly owned, controlled or held with power to vote by the specified Person, (c) any Person directly or indirectly controlling, controlled by, or under common control with the specified Person, (d) a partnership in which the specified Person is a general partner, (e) any officer or director of the specified Person, and (f) if the specified Person is an officer, director, general partner or employee, any other entity for which the specified Person acts in any such capacity. "Agreement" means this Amended and Restated Agreement of Limited Partnership of the Partnership, as amended, modified, supplemented or restated from time to time. "Book Entry Interests" means a beneficial interest in the LP Certificates, ownership and transfers of which shall be made through book entries by a Clearing Agency as described in Section 10.4. -3- 8 "Business Day" means any day other than a day on which banking institutions in The City of New York are authorized or required by law to close. "Capital Account" has the meaning set forth in Section 3.3. "Certificate" means the Certificate of Limited Partnership of the Partnership filed with the Secretary of State of the State of Delaware on August 17, 1994, and any and all amendments thereto and restatements thereof. "Clearing Agency" means an organization registered as a "Clearing Agency" pursuant to Section 17A of the Exchange Act that is acting as depository for the Preferred Securities and in whose name shall be registered a global LP Certificate and which shall undertake to effect book entry transfers and pledges of the Preferred Securities. "Clearing Agency Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time the Clearing Agency effects book entry transfers and pledges of securities deposited with the Clearing Agency. "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any corresponding federal tax statute enacted after the date of this Agreement. A reference to a specific section (Section) of the Code refers not only to such specific section but also to any corresponding provision of any federal tax statute enacted after the date of this Agreement, as such specific section or corresponding provision is in effect on the date of application of the provisions of this Agreement containing such reference. "Covered Person" means any Partner, any Affiliate of a Partner or any officers, directors, shareholders, partners, members, employees, representatives or agents of a Partner or its respective Affiliates, or any employee or agent of the Partnership or its Affiliates or any Special Representative. "Definitive LP Certificates" has the meaning set forth in Section 10.4. "Dividends" means the distributions of income paid or payable to any Limited Partner who is a Preferred Security Holder pursuant to the terms of the Preferred Securities held by such Limited Partner, including any interest payable in respect of arrears. "DTC" means The Depository Trust Company, the initial Clearing Agency. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Fiscal Year" means (i) the period commencing upon the formation of the Partnership and ending on December 31, 1994, and (ii) any subsequent twelve (12) month period commencing on January 1 and ending on December 31. "General Partner" means Illinois Power, in its capacity as general partner of the Partnership, and any additional or successor general partner in the Partnership admitted as a general partner of the Partnership pursuant to this Agreement. "Guarantee" means the Guarantee Agreement dated as of ________________, 1994 of Illinois Power in respect of the Preferred Securities. -4- 9 "Holders" means, with respect to a series of Preferred Securities, Preferred Security Holders in whose name an LP Certificate representing Preferred Securities of such series is registered. "Illinois Power" has the meaning set forth in the forepart of this Agreement. "Indemnified Person" means the General Partner, any Special Representative, any Affiliate of the General Partner or any Special Representative, or any officers, directors, shareholders, partners, members, employees, representatives or agents of the General Partner or any Special Representative, or any employee or agent of the Partnership or its Affiliates. "Indenture" means the Indenture dated as of _____________, 1994 between Illinois Power and The First National Bank of Chicago, as trustee (the "Trustee"), pursuant to which the Subordinated Debentures are issued in one or more series. "Initial Limited Partner" means Illinova Corporation. "Initial Preferred Limited Partners" means the Persons admitted as Limited Partners pursuant to Section 1.8(a) in connection with the initial issuance by the Partnership of Preferred Securities. "Interest" means the entire ownership interest of a Partner in the Partnership at any particular time, including, without limitation, its interest in the capital, profits, losses and distributions of the Partnership. "Investment Company Event" means the occurrence of a change in law or regulation or a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 40 Act Law") to the effect that the Partnership is or will be considered an "investment company" which is required to be registered under the Investment Company Act of 1940, as amended (the "1940 Act"), which Change in 40 Act Law becomes effective on or after __________________, 1994; provided, however, that no Investment Company Event shall be deemed to have occurred if the General Partner obtains a written opinion of nationally recognized independent counsel to the Partnership experienced in practice under the 1940 Act to the effect that the General Partner has successfully issued an additional or supplemental irrevocable and unconditional guarantee (i) of accrued and unpaid dividends (whether or not determined to be paid out of monies legally available therefor) on the Preferred Securities and (ii) of the full amount of the Liquidation Distribution on the Preferred Securities upon a liquidation of the Partnership (regardless of the amount of assets of the Partnership otherwise available for distribution in such liquidation) to avoid such Change in 40 Act Law so that in the opinion of such counsel, notwithstanding such Change in 40 Act Law, the Partnership is not required to be registered as an "investment company" within the meaning of the 1940 Act. "Limited Partner" means any Person who is admitted to the Partnership as a limited partner of the Partnership pursuant to the terms of this Agreement, including the Preferred Security Holders, in each such Person's capacity as a limited partner of the Partnership. "Liquidation Distribution" has the meaning set forth in the applicable Action relating to a series of Preferred Securities. -5- 10 "Loss Carried Forward Amount" means as of the first day of any month for any series, an amount equal to the excess of (x) all Net Loss allocated to the Holders of such series of Preferred Securities from the date of issuance of such series of Preferred Securities through and including the day prior to the first day of such month pursuant to Section 4.1(b)(ii) over (y) the amount of Net Income allocated to the Holders of such series of Preferred Securities pursuant to Section 4.1(a)(ii) in all prior calendar months. "LP Certificate" means a certificate of partnership interest substantially in the form attached hereto as Annex A, evidencing the Preferred Securities held by a Limited Partner, with such modifications to such form as may be necessary to reflect the specific terms and provisions of a particular series of Preferred Securities. "Majority in liquidation preference of the Preferred Securities" means Holder(s) of a series of Preferred Securities or, as the context may require, Holder(s) of more than one series of Preferred Securities voting as a class, who are the record owners of Preferred Securities whose liquidation preference (including the preference amount that would be paid on redemption or maturity, plus accumulated and unpaid dividends, whether or not declared, to the date upon which the voting percentages are determined) represents more than 50% of the above liquidation preference of all Preferred Securities of such series or, as applicable, multiple series. "Net Income" and "Net Loss", respectively, for any period means the income and loss, respectively, of the Partnership for such period as determined in accordance with the method of accounting followed by the Partnership for federal income tax purposes, including, for all purposes, any income exempt from tax and any expenditures of the Partnership which are described in Code Section 705(a)(2)(B); provided, however, that any item allocated under Section 4.2 shall be excluded from the computation of Net Income and Net Loss. "Partners" means the General Partner and the Limited Partners, collectively, where no distinction is required by the context in which the term is used. "Partnership" means the limited partnership heretofore formed and continued under this Agreement under the name "Illinois Power Capital, L.P." "Paying Agent" has the meaning set forth in Section 10.7. "Person" means any individual, corporation, limited liability company, association, partnership, trust or other entity. "Preferred Securities" means the limited partner interests in the Partnership described in Article VI. "Preferred Security Holder" has the meaning set forth in Section 10.3. "Preferred Security Owner" means, with respect to a Book Entry Interest, a Person who is the beneficial owner of such Book Entry Interest, as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly as a Clearing Agency Participant or as an indirect participant, in each case in accordance with the rules of such Clearing Agency). -6- 11 "Purchase Price" for any Preferred Security means the amount paid for such Preferred Security in the initial sale by the Partnership of such Preferred Security. "Regulations" means the income tax regulations, including temporary regulations, promulgated under the Code, as such regulations may be amended from time to time. "Securities Act" means the Securities Act of 1933, as amended. "66-2/3% in liquidation preference of the Preferred Securities" means Holder(s) of a series of Preferred Securities or, as the context may require, Holder(s) of more than one series of Preferred Securities voting as a class, who are the record owners of Preferred Securities whose liquidation preference (including the preference amount that would be paid on redemption or maturity, plus accumulated and unpaid dividends, whether or not declared, to the date upon which the voting percentages are determined) represents more than 66-2/3% of the above liquidation preference of all Preferred Securities of such series or, as applicable, multiple series. "Special Event" means a Tax Event or an Investment Company Act Event. "Special Representative" has the meaning specified in Section 6.2. "Subordinated Debentures" means any series of subordinated debentures issued by Illinois Power under the Indenture. "Successor Securities" has the meaning specified in Section 6.3. "Tax Event" means that the General Partner shall have obtained an opinion of nationally recognized independent tax counsel experienced in such matters to the effect that, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, (b) any amendment to or change in an interpretation or application of such laws or regulations by any legislative body, court, governmental agency or regulatory authority (including the enactment of any legislation and the publication of any judicial decision or regulatory determination on or after such date), or (c) any interpretation or pronouncement that provides for a position with respect to such laws or regulations that differs from the generally accepted position on _______ , 1994, which amendment or change is effective or such interpretation or pronouncement is announced on or after _____ , 1994, there is more than an insubstantial risk that (i) the Partnership is subject to federal income tax with respect to interest received on the Subordinated Debentures, (ii) interest payable to the Partnership on the Subordinated Debentures will not be deductible by the payor for federal income tax purposes or (iii) the Partnership is subject to more than a de minimus amount of other taxes, duties or other governmental charges. "Tax Matters Partner" means the General Partner designated as such in Section 9.9. "10% in liquidation preference of the Preferred Securities" means Holders(s) of a series of Preferred Securities or, as the context may require, Holder(s) of more than one series of Preferred Securities voting as a class, who are the record owners of Preferred Securities whose liquidation preference (including the preference amount that would be paid on redemption or maturity, plus accumulated and unpaid dividends, whether or not declared, to the date upon which the voting percentages are determined) represents more than 10% of the above liquidation preference of all Preferred Securities of such series or, as applicable, multiple series. -7- 12 "Underwriting Agreement" means an Underwriting Agreement among the Partnership and the underwriters named therein relating to the issuance and sale of the Preferred Securities. Section 2.2. Headings. The headings and subheadings in this Agreement are included for convenience and identification only and are in no way intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or any provision hereof. ARTICLE III CAPITAL CONTRIBUTIONS, REPRESENTATION OF PREFERRED SECURITY HOLDER'S INTEREST; CAPITAL ACCOUNTS Section 3.1. Capital Contributions. (a) The General Partner has, on or prior to the date hereof, contributed an aggregate of $______________ to the capital of the Partnership, which amount is equal to at least 3% of the total capital contributions to the Partnership on the date hereof, after taking into account the contribution of the Initial Preferred Limited Partners referred to in paragraph (c) of this Section 3.1. Subject to Section 4.1(c), the General Partner shall from time to time make such additional capital contributions as are necessary to maintain its Capital Account balance at least equal to 3% of the aggregate positive Capital Account balances of all Partners. (b) The Initial Limited Partner has, prior to the date hereof, contributed the amount of $1 to the capital of the Partnership which amount is being returned to the Initial Limited Partner. (c) Each of the Initial Preferred Limited Partners has, on the date hereof, contributed to the capital of the Partnership an amount equal to the Purchase Price for the Preferred Securities acquired by it. (d) Each Person who acquires a Preferred Security after the date hereof in connection with the initial issuance by the Partnership of such Preferred Security shall, in connection with the acquisition of such Preferred Security, contribute to the capital of the Partnership an amount equal to the Purchase Price for such Preferred Security. (e) No Limited Partner shall at any time be required to make any additional capital contributions to the Partnership. Section 3.2. Preferred Security Holder's Interest Represented by Preferred Securities. A Preferred Security Holder's interest in the Partnership shall be represented by the Preferred Securities held by such Preferred Security Holder. Each Preferred Security Holder's respective Preferred Securities shall be set forth on the books and records of the Partnership. Each Limited Partner, including a Preferred Security Holder, hereby agrees that its interest in the Partnership and in its Preferred Securities shall for all purposes be personal property. No Limited Partner, including a Preferred Security Holder, shall have an interest in specific Partnership property. -8- 13 Section 3.3. Capital Accounts. An individual capital account (a "Capital Account") shall be established and maintained on the books of the Partnership for each Partner in compliance with Section Section 1.704-1(b)(2)(iv) and 1.704-2 of the Regulations. Subject to the preceding sentence, each Capital Account will be credited with the capital contributions made and the profits allocated to such Partner (or predecessor in interest) and debited by the distributions made and losses allocated to the Partner (or predecessor thereof). Section 3.4. Interest on Capital Contributions. No Partner shall be entitled to interest on or with respect to any capital contribution to the Partnership. Section 3.5. Withdrawal and Return of Capital Contributions. No Partner shall be entitled to withdraw any part of such Partner's capital contribution to the Partnership or to receive any distributions from the Partnership, except as provided in this Agreement. ARTICLE IV ALLOCATIONS Section 4.1. Profits and Losses. Except as provided in Section 4.2, (a) the Partnership's Net Income for each calendar month shall be allocated as follows: (i) First, to the Holders of each series of Preferred Securities as of the record date in such calendar month for the payment of Dividends on such series of Preferred Securities in an amount equal to the excess of (x) all Dividends accumulated on such series of Preferred Securities (in accordance with the Action creating such series) from their date of issuance through and including the close of such calendar month over (y) the amount of Net Income allocated to the Holders of such series of Preferred Securities pursuant to this Section 4.1(a)(i) in all prior calendar months; provided, however, that (A) as to any series of Preferred Securities as to which Dividends are not cumulative, no Dividend shall be deemed to accumulate until the Partnership has actually paid (or set aside money to pay) such Dividend and (B) Dividends as to Preferred Securities that are cumulative and are not payable at the end of each calendar month shall be deemed to accumulate in a manner consistent with the Action creating such Preferred Securities. Amounts allocated to all Holders of any series of Preferred Securities shall be allocated among such Holders in proportion to the number of Preferred Securities of such series held by such Holders. (ii) Second, 100% to the Holders of any series of Preferred Securities up to an amount equal to the Loss Carried Forward Amount for such series as of the first day of such month. Amounts allocated to all Holders of any series of Preferred Securities shall be allocated among such Holders in proportion to the number of Preferred Securities of such series held by such Holders. (iii) Any remaining Net Income shall be allocated to the General Partner. (b) The Partnership's Net Loss for any Fiscal Year shall be allocated as follows: -9- 14 (i) First, to the General Partner until the General Partner's Capital Account is reduced to zero; provided, however, that the aggregate amount of Net Losses allocated to the General Partner pursuant to this Section 4.1(b)(i) shall not exceed the sum of 3% of the total capital contributions of all Partners plus the aggregate Net Income allocated to the General Partner pursuant to Section 4.1. (ii) Second, to the Holders of each series of Preferred Securities in proportion to the aggregate Capital Account balances of the Holders of such series of Preferred Securities (calculated taking into account only contributions, distributions and allocations related to such series), until the Capital Account balances of such Holders are reduced to zero; provided, however, that the General Partner shall make appropriate adjustments in these allocations, in accordance with Section 4.1(c) with respect to any Preferred Securities as to which Net Income has been allocated with respect to Dividends that accrued but were not paid. Amounts allocated to the Holders of any series of Preferred Securities shall be allocated among such Holders in proportion to the number of Preferred Securities of such series held by such Holders. (iii) Any remaining Net Loss shall be allocated to the General Partner. (c) The General Partner shall make such changes to the allocations in Sections 4.1(a) and 4.1(b) in the year of the Partnership's liquidation as it deems reasonably necessary so that amounts distributed to the Preferred Security Holders in such year in accordance with Section 11.4(a)(ii) shall equal their Liquidation Distributions; provided, however, that no allocation pursuant to this Section 4.1(c) may result in the General Partner being required to make any Capital Contributions pursuant to Section 3.1. Section 4.2. Other Allocation Provisions. (a) For purposes of determining the profits, losses or any other items allocable to any period, profits, losses and any such other items shall be determined on a daily, monthly or other basis, as determined by the General Partner using any method that is permissible under Section 706 of the Code and the Regulations. (b) The Partners are aware of the income tax consequences of the allocations made by this Article IV and hereby agree to be bound by the provisions of this Article IV in reporting their shares of Partnership income and loss for income tax purposes. (c) Notwithstanding anything to the contrary that may be expressed or implied in this Article IV, the interest of the General Partner in each item of income, gain, loss, deduction and credit will be equal to at least (i) at any time that aggregate capital contributions to the Partnership are equal to or less than $50,000,000, 1% of each such item and (ii) at any time that aggregate capital contributions to the Partnership are greater than $50,000,000, at least 1%, multiplied by a fraction (not exceeding one and not less than 0.2), the numerator of which is $50,000,000 and the denominator of which is the lesser of the aggregate Capital Account balances of the Capital Accounts of all Partners at such time and the aggregate capital contributions to the Partnership of all Partners at such time, of such item. (d) (i) If during any taxable year, a Partner unexpectedly receives an adjustment, allocation or distribution described in Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Regulations, which causes or increases a deficit balance in the Partner's Adjusted Capital Account -10- 15 (as defined below), there shall be allocated to the Partner items of Partnership income and gain (consisting of a pro rata portion of each item of Partnership income, including gross income and gain for such year) in an amount and manner sufficient to eliminate such deficit. The foregoing is intended to be a "qualified income offset" provision as described in Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted and applied in all respects in accordance with that Regulation. A Partner's "Adjusted Capital Account" at any time shall equal the Partner's Capital Account at such time (x) increased by the sum of (A) the amount of the Partner's share of Partnership minimum gain (as defined in Section Section 1.704-2(g)(1) and (3) of the Regulations) and (B) the amount of the Partner's share of the minimum gain attributable to a "partner non-recourse debt" (as defined in Regulations Section 1.704-2(i)(5)) and (y) decreased by reasonably excepted adjustments, allocations and distributions described in Section Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations. (ii) While this Agreement does not contain certain provisions required by Section Section 1.704-1(b) and 1.704-2 of the Regulations because those provisions apply to transactions that are not expected to occur, the Partners intend that the allocations under Section 4.1 conform to Section Section 1.704-1(b) and 1.704-2 of the Regulations (including, without limitation, the minimum gain chargeback, chargeback of partner nonrecourse debt minimum gain and partner nonrecourse debt provisions of such Regulation), and the General Partner shall make such changes in the allocations under Section 4.1 as it believes are reasonably necessary to meet the requirements of such Regulations. (e) Solely for the purpose of adjusting the Capital Accounts of the Partners, and not for tax purposes, if any property is distributed in kind to any Partner, the difference between its fair market value and its book value at the time of distribution shall be treated as gain or loss recognized by the Partnership and allocated pursuant to the provisions of Section 4.1; provided, however, that Net Income and Net Loss allocated as a result of the distribution of any series of Subordinated Debentures to the Holders of any series of Preferred Securities or to the General Partner (or both) shall be allocated to the Partner receiving the Subordinated Debentures in proportion to the amount of Subordinated Debentures distributed to them. For this purpose, the fair market value of any property shall be determined by the General Partner in its sole discretion, provided, however, that the value of any Subordinated Debenture shall at all times be treated as equal to the value of any Preferred Security if the interest rate on and principal amount of the Subordinated Debenture is the same as the Dividend payable on and the liquidation preference with respect to the Preferred Security. Section 4.3. Allocations for Income Tax Purposes. The income, gains, losses, deductions and credits of the Partnership shall be allocated in the same manner as the items entering into the computation of Net Income and Net Loss were allocated under Sections 4.1 and 4.2; provided, however, that solely for federal, state and local income and franchise tax purposes and not for book or Capital Account purposes, income, gain, loss and deduction with respect to any property properly carried on the Partnership's books at a value other than the tax basis of such property shall be allocated in a manner determined in the General Partner's discretion, so as to take into account (consistently with Code Section 704(c) principles) the difference between such property's book value and its tax basis. Section 4.4. Withholding. The Partnership shall comply with withholding requirements under federal, state and local law and shall remit amounts withheld to and file required forms with applicable jurisdictions. To the extent that the Partnership is required to -11- 16 withhold and pay over any amounts to any authority with respect to distributions or allocations to any Partner, the amount withheld shall be deemed to be a distribution in the amount of the withholding to the Partner. In the event of any claimed over-withholding, Partners shall be limited to an action against the applicable jurisdiction. If the amount withheld was not withheld from actual distributions, the Partnership may reduce subsequent distributions by the amount of such withholding. Each Partner agrees to furnish the Partnership with any representations and forms as shall reasonably be requested by the Partnership to assist it in determining the extent of, and in fulfilling, its withholding obligations. ARTICLE V DIVIDENDS Section 5.1. Dividends. Limited Partners shall receive periodic Dividends, if any, redemption payments and Liquidation Distributions in accordance with the applicable terms of the Preferred Securities. Subject to the rights of the Preferred Securities, all remaining cash shall be distributed to the General Partner at such time as the General Partner shall determine. Section 5.2. Limitations on Distributions. Notwithstanding any provision to the contrary contained in this Agreement, the Partnership shall not make a distribution to any Partner on account of its interest in the Partnership if such distribution would violate Section 17-607 of the Act or other applicable law. ARTICLE VI ISSUANCE OF PREFERRED SECURITIES Section 6.1. General Provisions Regarding Preferred Securities. (a) The aggregate number of Preferred Securities which the Partnership shall have authority to issue is unlimited. (b) The designations, powers, rights, preferences, privileges, limitations and other terms and provisions of the Preferred Securities shall be as follows: (i) The payment of Dividends and payments on dissolution of the Partnership or on redemption in respect of Preferred Securities shall be guaranteed by Illinois Power pursuant to the Guarantee. The Preferred Security Holders hereby authorize the General Partner to hold the Guarantee on behalf of the Preferred Security Holders. In the event of the appointment of a Special Representative to, among other things, enforce the Guarantee, the Special Representative may take possession of the Guarantee for such purpose. If no Special Representative has been appointed to enforce the Guarantee, the General Partner has the right to enforce the Guarantee on behalf of the Preferred Security Holders. The Holders of not less than 10% in liquidation preference of the Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available in respect of the Guarantee including the giving of directions to the General Partner or the Special Representative, as the case may be. If the General Partner or the Special Representative fails to enforce the Guarantee as above provided, a -12- 17 Preferred Security Holder may institute a legal proceeding directly against the Guarantor to enforce its rights under the Guarantee, without first instituting a legal proceeding against the Partnership or any other Person. The Preferred Security Holders, by acceptance of such Preferred Securities, hereby agree to the subordination provisions and other terms of the Guarantee; (ii) The General Partner on behalf of the Partnership is authorized to issue from time to time limited partner interests in the Partnership (the "Preferred Securities") in one or more series having such designations, powers, rights, preferences, privileges, limitations and other terms and provisions as may from time to time be established in the written action or actions (each, an "Action") of the General Partner providing for the issue of that series. In connection with the foregoing, the General Partner is expressly authorized, prior to issuance, to set forth in an Action or Actions providing for the issue of such series, the following: (A) the distinctive designation of such series which shall distinguish it from other series; (B) the number of Preferred Securities included in such series, which number may be increased or decreased from time to time unless otherwise provided by the General Partner in creating the series; (C) the annual Dividend rate (or method of determining such rate) for Preferred Securities of such series and the date or dates upon which such Dividends shall be payable, provided, however, Dividends on any series of Preferred Securities shall be payable on a monthly basis to Holders of such series of Preferred Securities as of a record date in each month during which such series of Preferred Securities are outstanding; (D) whether Dividends on the Preferred Securities of such series shall be cumulative, and, in the case of Preferred Securities of any series having cumulative Dividend rights, the date or dates or method of determining the date or dates from which Dividends on the Preferred Securities of such series shall be cumulative; (E) the amount or amounts which shall be paid out of the assets of the Partnership to the Holders of the Preferred Securities of such series upon voluntary or involuntary dissolution, winding up or termination of the Partnership; (F) the price or prices at which, the period or periods within which and the terms and conditions upon which the Preferred Securities of such series may be redeemed or purchased, in whole or in part, at the option of the Partnership or the General Partner; (G) the obligation, if any, of the Partnership to purchase or redeem Preferred Securities of such series and the price or prices at which, the period or periods within which and the terms and conditions upon which the Preferred Securities of such series shall be purchased or redeemed, in whole or in part, pursuant to such obligation; -13- 18 (H) the voting rights, if any, of the Preferred Securities of such series in addition to those required by law, including the number of votes per Preferred Security and any requirement for the approval by the Holders of Preferred Securities, or of the Preferred Securities of one or more series, or of both, as a condition to specified action or amendments to this Agreement; and (I) any other relative rights, powers, preferences or limitations of the Preferred Securities of the series not inconsistent with this Agreement or with applicable law. In connection with the foregoing and without limiting the generality thereof, the General Partner is hereby expressly authorized, without the vote or approval of any Preferred Security Holder, (i) to take any Action to create under the provisions of this Agreement a series of Preferred Securities that was not previously outstanding and (ii) to admit Preferred Security Holders as limited partners of the Partnership. Without the vote or approval of any Preferred Security Holder, the General Partner may execute, swear to, acknowledge, deliver, file and record whatever documents may be required in connection with the issue from time to time of Preferred Securities in one or more series as shall be necessary, convenient or desirable to reflect the issue of such series. The General Partner shall do all things it deems to be appropriate or necessary to comply with the Act and is authorized and directed to do all things it deems to be necessary or permissible in connection with any future issuance, including compliance with any statute, rule, regulation or guideline of any federal, state or other governmental agency or any securities exchange. Any Action or Actions taken by the General Partner pursuant to the provisions of this paragraph (ii) shall be deemed an amendment and supplement to and part of this Agreement. (iii) The proceeds received by the Partnership from the issuance of any series of Preferred Securities, together with the proceeds of any capital contribution of the General Partner made at the time of such issuance, shall be invested by the Partnership in Subordinated Debentures with (A) an aggregate principal amount equal to such aggregate proceeds and (B) an interest rate equal to the Dividend rate of such series of Preferred Securities. (iv) So long as any series of Subordinated Debentures are held by the Partnership, the General Partner shall not (i) direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee with respect to such series, (ii) waive any past default which is waivable under Section 6.06 of the Indenture, (iii) exercise any right to rescind or annul a declaration that the principal of all the Subordinated Debentures of such series shall be due and payable or (iv) consent to any amendment, modification or termination of the Indenture without, in each case, obtaining the prior approval of the Holders of at least 66 2/3% in liquidation preference of all series of Preferred Securities affected thereby, acting as a single class; provided, however, that where a consent under the Indenture would require the consent of each holder of Subordinated Debentures affected thereby, no such consent shall be given by the General Partner without the prior consent of each Holder of all series of Preferred Securities affected thereby. The General Partner shall not revoke any action previously authorized or approved by a vote of any series of Preferred Securities affected thereby. The General Partner shall notify all Holders of any series of Preferred Securities -14- 19 of any notice of default received from the Trustee with respect to the related series of Subordinated Debentures. (v) The Partnership may not issue any limited partner interests in the Partnership, unless such series of Preferred Securities ranks pari passu with each other series of Preferred Securities then outstanding as regards (A) participation in profits and Dividends of the Partnership and (B) participation in the assets of the Partnership. All Preferred Securities shall rank senior to the General Partner's Interest in respect of the right to receive Dividends and the right to receive payments out of the assets of the Partnership upon voluntary or involuntary dissolution, winding up or termination of the Partnership. All Preferred Securities redeemed, purchased or otherwise acquired by the Partnership (including Preferred Securities surrendered for conversion or exchange) shall be canceled. (vi) No Holder of a Preferred Security shall be entitled as a matter of right to subscribe for or purchase, or have any preemptive right with respect to, any part of any new or additional issue of Preferred Securities of any class whatsoever, or of securities convertible into any Preferred Securities of any class whatsoever, whether now or hereafter authorized and whether issued for cash or other consideration or by way of a Dividend. Section 6.2. Voting Rights. If (i) the Partnership fails to pay Dividends in full on the Preferred Securities for 18 consecutive monthly Dividend periods, (ii) an event of default occurs and is continuing on the Subordinated Debentures or (iii) Illinois Power is in default on any of its payment or other obligations under the Guarantee, then the Holders of any series of the Preferred Securities having the right to vote for the appointment of a special representative of the Partnership and the Limited Partners (the "Special Representative") in such event, acting as a single class, will be entitled by the majority vote of such Holders to appoint and authorize a Special Representative to enforce the Partnership's creditor rights under the Subordinated Debentures, enforce the rights of the Preferred Security Holders under the Guarantee and enforce the rights of the Preferred Security Holders to receive Dividends on Preferred Securities. Illinois Power agrees to execute and deliver such documents as may be necessary, appropriate or convenient for the Special Representative to enforce such rights and obligations. In furtherance of the foregoing, and without limiting the powers of any Special Representative so appointed and for the avoidance of any doubt concerning the powers of the Special Representative, any Special Representative, in its own name and as Special Representative of the Partnership, may institute a proceeding, including, without limitation, any suit in equity, an action at law or other judicial or administrative proceeding, to enforce the Partnership's rights directly against Illinois Power, or any other obligor on behalf of the Partnership, and may prosecute such proceeding to judgment or final decree, and enforce the same against Illinois Power or any other obligor and collect, out of the property, wherever situated, of Illinois Power or any such other obligor upon its obligations, the monies adjudged or decreed to be payable in the manner provided by law. The Special Representative shall not be admitted as a Partner or otherwise be deemed to be a Partner and shall have no liability for the debts, obligations or liabilities of the Partnership. For purposes of determining whether the Partnership has failed to pay Dividends in full for 18 consecutive monthly Dividend periods, Dividends shall be deemed to remain in arrears, notwithstanding any payments in respect thereof, until full cumulative Dividends have been or contemporaneously are declared and paid with respect to all monthly Dividend periods terminating on or prior to the date of payment of such full cumulative Dividends. Not later than -15- 20 30 days after such right to appoint a Special Representative arises, the General Partner will convene a meeting for the purpose of appointing a Special Representative. If the General Partner fails to convene such meeting within such 30-day period, the Holders of 10% in liquidation preference of the Preferred Securities will be entitled to convene such meeting. The provisions of Section 12.3 relating to the convening and conduct of meetings of the Partners will apply with respect to any such meeting. Any Special Representative so appointed shall cease to be a representative of the Partnership and the Limited Partners if the Partnership (or Illinois Power pursuant to the Guarantee) shall have paid in full all accumulated and unpaid Dividends on the Preferred Securities or such default or breach, as the case may be, shall have been cured, and Illinois Power, as the General Partner, is hereby authorized to and shall continue the business of the Partnership without dissolution. Notwithstanding the appointment of any such Special Representative, Illinois Power retains all rights under the Indenture, including the right to extend the interest payment period, and shall continue to be a General Partner. If any proposed amendment of this Agreement provides for, or the General Partner otherwise proposes to effect (pursuant to an Action or otherwise), (x) any action which would adversely affect the powers, preferences or special rights of the Preferred Securities, whether by way of amendment of this Agreement or otherwise (including, without limitation, the authorization or issuance of any interests ranking, as to participation in the profits and Dividends or in the assets of the Partnership, senior or junior to the Preferred Securities), or (y) the dissolution, winding up or termination of the Partnership, other than (A) a dissolution, winding up or termination in connection with which the Partnership distributes the Subordinated Debentures to the Preferred Security Holders upon the occurrence of a Special Event or (B) as described in Section 6.3 below, then the Preferred Security Holders will be entitled to vote on such amendment or proposal of the General Partner (but not on any other amendment or proposal) as a class with all other Holders of Preferred Securities similarly affected, and such amendment or proposal shall not be effective except with the approval of Holders of 66 2/3% in liquidation preference of such Preferred Securities having a right to vote on the matter; provided however, that no such approval shall be required if the dissolution, winding up or termination of the Partnership is proposed or initiated pursuant to Section 11.2 hereof or upon the initiation of proceedings, or after proceedings have been initiated, for the dissolution, winding up or termination of Illinois Power. The rights attached to the Preferred Securities will be deemed not to be adversely affected by the creation or issue of, and no vote will be required for the creation of, any further Preferred Securities ranking pari passu with, the Preferred Securities with regard to participation in the profits and Dividends or in the assets of the Partnership. Any required approval of Holders of Preferred Securities may be given at a separate meeting of such Holders convened for such purpose, at a meeting of all of the Partners or pursuant to written consent. The Partnership will cause a notice of any meeting at which Limited Partners holding Preferred Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of Preferred Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any matter on which such Holders are entitled to vote or upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. No vote or consent of the Holders of Preferred Securities will be required for the Partnership to redeem and cancel Preferred Securities in accordance with this Agreement. Notwithstanding that Holders of Preferred Securities are entitled to vote or consent under any of the circumstances described above, any series of Preferred Securities that is owned -16- 21 by Illinois Power or any entity owned more than 50% by Illinois Power, either directly or indirectly, shall not be entitled to vote or consent and shall, for the purposes of such vote or consent, be treated as if it were not outstanding. Section 6.3. Mergers. The Partnership shall not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other body, except as described below. The Partnership may, without the consent of the Holders of the Preferred Securities, consolidate, amalgamate, merge with or into, or be replaced by a limited liability company, a limited partnership or a trust organized as such under the laws of any state of the United States; provided, that (i) such successor entity either (x) expressly assumes all of the obligations of the Partnership under the Preferred Securities or (y) substitutes for the Preferred Securities other securities having substantially the same terms as the Preferred Securities (the "Successor Securities") so long as the Successor Securities rank, with respect to participation in the profits and Dividends or in the assets of the successor entity, at least as high as the Preferred Securities rank with respect to participation in the profits and Dividends or in the assets of the Partnership, (ii) Illinois Power expressly acknowledges such successor entity as the Holder of the Subordinated Debentures, (iii) the Preferred Securities or the Successor Securities are listed, or will be listed on notification of issuance, on any national securities exchange or other organization on which the Preferred Securities are then listed, (iv) such merger, consolidation, amalgamation or replacement does not cause the Preferred Securities to be downgraded by any nationally recognized statistical rating organization, as that term is defined by the Securities and Exchange Commission for purposes of Rule 436(g)(2) under the Securities Act, or cause any Successor Securities to be rated lower than the Preferred Securities immediately prior to such merger, consolidation, amalgamation or replacement, (v) such merger, consolidation, amalgamation or replacement does not adversely affect the powers, preferences and special rights of Holders of Preferred Securities in any material respect, (vi) such successor entity has a purpose substantially identical to that of the Partnership and (vii) prior to such merger, consolidation, amalgamation or replacement, Illinois Power has received an opinion of nationally recognized independent counsel to the Partnership experienced in such matters to the effect that (x) such successor entity will be treated as a partnership for Federal income tax purposes, (y) following such merger, consolidation, amalgamation or replacement, Illinois Power and such successor entity will be in compliance with the 1940 Act without registering thereunder as an investment company, and (z) such merger, consolidation, amalgamation or replacement will not adversely affect the limited liability of Holders of Preferred Securities. ARTICLE VII BOOKS OF ACCOUNT, RECORDS AND REPORTS Section 7.1. Books and Records. (a) Proper and complete records and books of account of the Partnership shall be kept by the General Partner in which shall be entered fully and accurately all transactions and other matters relative to the Partnership's business as are usually entered into records and books of account maintained by Persons engaged in businesses of a like character, including a Capital Account for each Partner. The books and records of the Partnership, together with a copy of this Agreement and a certified copy of the Certificate, shall at all times be maintained at the principal office of the Partnership and shall be open to the inspection and examination of the Limited -17- 22 Partners or their duly authorized representatives for any purpose reasonably related to their Interests during reasonable business hours. (b) Notwithstanding any other provision of this Agreement, the General Partner may, to the maximum extent permitted by applicable law, keep confidential from the Partners any information the disclosure of which the General Partner reasonably believes is not in the best interests of the Partnership or is adverse to the interests of the Partnership or which the Partnership or the General Partner is required by law or by an agreement with any Person to keep confidential. (c) Within three months after the close of each Fiscal Year, the General Partner shall transmit to each Partner, a statement indicating such Partner's share of each item of Partnership income, gain, loss, deduction or credit for such Fiscal Year for federal income tax purposes. Section 7.2. Accounting Method. For both financial and tax reporting purposes and for purposes of determining profits and losses, the books and records of the Partnership shall be kept on the accrual method of accounting applied in a consistent manner and shall reflect all Partnership transactions and be appropriate and adequate for the Partnership's business. ARTICLE VIII POWERS, RIGHTS AND DUTIES OF THE LIMITED PARTNERS Section 8.1. Limitations. The Limited Partners shall not participate in the management or control of the Partnership's business, property or other assets nor shall the Limited Partners transact any business for the Partnership, nor shall the Limited Partners have the power to act for or bind the Partnership, said powers being vested solely and exclusively in the General partner. The Limited Partners shall have such rights as are set forth in this Agreement or in any Action, and as are set forth in the Guarantee and the Indenture. The Limited Partners shall have no interest in the properties or assets of the General Partner, or any equity therein, or in any proceeds of any sales thereof (which sales shall not be restricted in any respect), by virtue of acquiring or owning an Interest. Section 8.2. Liability. Subject to the provisions of the Act, no Limited Partner shall be liable for the repayment, satisfaction or discharge of any debts or other obligations of the Partnership in excess of the Capital Account balance of such Limited Partner. Section 8.3. Priority. No Limited Partner shall have priority over any other Limited Partner as to Partnership allocations or distributions. -18- 23 ARTICLE IX POWERS, RIGHTS AND DUTIES OF THE GENERAL PARTNER Section 9.1. Authority. Subject to the limitations provided in this Agreement, the General Partner shall have exclusive and complete authority and discretion to manage the operations and affairs of the Partnership and to make all decisions regarding the business of the Partnership. Any action taken by the General Partner shall constitute the act of and serve to bind the Partnership. In dealing with the General Partner acting on behalf of the Partnership, no Person shall be required to inquire into the authority of the General Partner to bind the Partnership. Persons dealing with the Partnership are entitled to rely conclusively on the power and authority of the General Partner as set forth in this Agreement. Section 9.2. Powers and Duties of General Partner. Except as otherwise specifically provided herein, the General Partner shall have all rights and powers of a general partner under the Act, and shall have all authority, rights and powers in the management of the Partnership business to do any and all other acts and things necessary, proper, convenient or advisable to effectuate the purposes of this Agreement, including by way of illustration but not by way of limitation, the following: (a) to secure the necessary goods and services required in performing the General Partner's duties for the Partnership; (b) to exercise all powers of the Partnership, on behalf of the Partnership, in connection with enforcing the Partnership's rights and interest under the Subordinated Debentures and the Guarantee; (c) to issue Preferred Securities, and series thereof, in accordance with this Agreement; (d) to establish a record date with respect to all actions to be taken hereunder that require a record date be established, including with respect to Dividends and voting rights and to make determinations as to the payment of Dividends, and make all other required payments to Preferred Security Holders and to the General Partner as the Partnership's paying agent; (e) to open, maintain and close bank accounts and to draw checks and other orders for the payment of money; (f) to bring or defend, pay, collect, compromise, arbitrate, resort to legal action, or otherwise adjust claims or demands of or against the Partnership; (g) to deposit, withdraw, invest, pay, retain and distribute the Partnership's funds in a manner consistent with the provisions of this Agreement; (h) to take all action which may be necessary or appropriate for the preservation and the continuation of the Partnership's valid existence, rights, franchises and privileges as a limited partnership under the laws of the State of Delaware and of each other jurisdiction in which such existence is necessary to protect the limited liability of the Limited Partners or to enable the Partnership to conduct the business in which it is engaged; -19- 24 (i) to take all action not inconsistent with applicable law, the Certificate or this Agreement as long as such action does not adversely affect the interests of the Preferred Security Holders, necessary to conduct its affairs and to operate the Partnership in such a way that (x) the Partnership would not be deemed an "investment company" required to be registered under the 1940 Act, (y) the Partnership will be taxed as a partnership for federal income tax purposes, and (z) the Subordinated Debentures will be treated as indebtedness of Illinois Power for federal income tax purposes; (j) to cause the Partnership to enter into and perform, on behalf of the Partnership Underwriting Agreements and to cause the Partnership to purchase the Subordinated Debentures without any further act, vote or approval of any Partner; and (k) to execute and deliver any and all documents or instruments, perform all duties and powers and do all things for and on behalf of the Partnership in all matters necessary or desirable or incidental to the foregoing. Section 9.3. Liability. Except as expressly set forth in this Agreement, (a) the General Partner shall not be personally liable for the return of any portion of the capital contributions (or any return thereon) of the Limited Partners; (b) the return of such capital contributions (or any return thereon) shall be made solely from assets of the Partnership; and (c) the General Partner shall not be required to pay to the Partnership or to any Limited Partner any deficit in any Limited Partner's Capital Account upon dissolution or otherwise. Section 9.4. Exculpation. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Partnership or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Partnership and in a manner reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Agreement or by law except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's gross negligence or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Partnership and upon such information, opinions, reports or statements presented to the Partnership by any Person as to matters the Indemnified Person reasonably believes are within such other Persons's professional or expert competence and who has been selected with reasonable care by or on behalf of the Partnership, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which distributions to Partners might properly be paid. Section 9.5. Fiduciary Duty. (a) To the extent that, at law or in equity, an Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the Partnership or to any other Covered Person, an Indemnified Person acting under this Agreement shall not be liable to the Partnership or to any other Covered Person for its good faith reliance on the provisions of this Agreement. The provisions of this Agreement, to the extent that they restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity, are agreed by the parties hereto to replace such other duties and liabilities of such Indemnified Person. -20- 25 (b) Unless otherwise expressly provided herein, (i) whenever a conflict of interest exists or arises between Covered Persons, or (ii) whenever this Agreement or any other agreement contemplated herein or therein provides that an Indemnified Person shall act in a manner that is, or provides terms that are, fair and reasonable to the Partnership or any Partner, the Indemnified Person shall resolve such conflict of interest, take such action or provide such terms, considering in each case the relative interest of each party (including its own interest) to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interests, any customary or accepted industry practices, and any applicable generally accepted accounting practices or principles. In the absence of bad faith by the Indemnified Person, the resolution, action or term so made, taken or provided by the Indemnified Person shall not constitute a breach of this Agreement or any other agreement contemplated herein or of any duty or obligation of the Indemnified Person at law or in equity or otherwise. (c) Whenever in this Agreement an Indemnified Person is permitted or required to make a decision (i) in its "discretion" or under a grant of similar authority, the Indemnified Person shall be entitled to consider only such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Partnership or any other Person, or (ii) in its "good faith" or under another express standard, the Indemnified Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Agreement or other applicable law. Section 9.6. Indemnification. (a) To the fullest extent permitted by applicable law, the Partnership shall indemnify and hold harmless each Indemnified Person from and against any loss, damage or claim incurred by such Indemnified Person by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Partnership and in a manner reasonably believed to be within the scope of authority conferred on such Indemnified Person by this Agreement, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of gross negligence or willful misconduct with respect to such acts or omissions; provided, however, that any indemnity under this Section 9.6 shall be provided out of and to the extent of Partnership assets only, and no Covered Person shall have any personal liability on account thereof. (b) To the fullest extent permitted by applicable law, expenses (including legal fees) incurred by an Indemnified Person in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Partnership prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Partnership of an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall be determined that the Indemnified Person is not entitled to be indemnified as authorized in Section 9.6(a). Section 9.7. Outside Businesses. Any Covered Person may engage in or possess an interest in other business ventures of any nature of description, independently or with others, similar or dissimilar to the business of the Partnership, and the Partnership and the Partners shall have no rights by virtue of this Agreement in and to such independent ventures or the income or profits derived therefrom and the pursuit of any such venture, even if competitive with the business of the Partnership, shall not be deemed wrongful or improper. No Covered Person shall be obligated to present any particular investment opportunity to the Partnership even if such opportunity is of a character that, if presented to the Partnership, could be taken by the Partnership, -21- 26 and any Covered Person shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment opportunity. Section 9.8. Limits on General Partner's Powers. Anything in this Agreement to the contrary notwithstanding, the General Partner shall not cause or permit the Partnership to (a) acquire any assets other than as expressly provided herein, (b) possess Partnership property for other than a Partnership purpose; (c) admit a Person as a Partner, except as expressly provided in this Agreement; (d) make any loans to the General Partner or its Affiliates, other than loans represented by the Subordinated Debentures or other similar debt instruments of Illinois Power; (e) perform any act that would subject any Limited Partner to liability as a general partner in any jurisdiction; (f) engage in any activity that is not consistent with the purposes of the Partnership, as set forth in Section 1.3; (g) confess a judgment against the Partnership; (h) without the written consent of 66-2/3% in liquidation preference of the Preferred Securities have an order for relief entered with respect to the Partnership or commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of the Partnership's property, or make any assignment for the benefit of creditors of the Partnership; it being understood that nothing in this paragraph (h) is to effect the ability of the Partnership to dissolve pursuant to this Agreement; or (i) subject to Section 1.3, borrow money or become liable for the borrowings of any third party or to engage in any financial or other trade or business. Section 9.9. Tax Matters Partner. (a) For purposes of Code Section 6231(a)(7), the "Tax Matters Partner" shall be Illinois Power as long as it remains the general partner of the Partnership. The Tax Matters Partner shall keep the Limited Partners fully informed of any inquiry, examination or proceeding involving any taxing authority. (b) The General Partner shall not make an election in accordance with Section 754 of the Code. (c) The General Partner and the Preferred Security Holders acknowledge that they intend, for United States federal income tax purposes, that the Partnership shall be treated as a partnership and that the General Partner and the Preferred Security Holders shall be treated as Partners of such Partnership for such purposes. Section 9.10. Expenses. The General Partner shall pay for all, and the Partnership shall not be obligated to pay, directly or indirectly, for any, costs and expenses of the Partnership -22- 27 (including, but not limited to, costs and expenses relating to the organization of, and offering of limited partner interests in, the Partnership and costs and expenses relating to the operation of the Partnership, including without limitation, costs and expenses of accountants, attorneys, statistical or bookkeeping services and computing or accounting equipment, paying agent(s), registrar(s), transfer agent(s), duplicating, travel and telephone and costs and expenses incurred in connection with the acquisition, financing, and disposition of Partnership assets). ARTICLE X TRANSFERS OF INTERESTS BY PARTNERS Section 10.1. Transfer of Interests. (a) Preferred Securities shall be freely transferable by a Preferred Security Holder. (b) The General Partner may not assign its interest in the Partnership in whole or in part under any circumstances except to a successor of Illinois Power by virtue of operation of law and, even then, only to the extent permitted by the Indenture. The admission of such successor as a general partner of the Partnership shall be effective upon the filing of an amendment to the Certificate with the Secretary of State of the State of Delaware which indicates that such successor has been admitted as a general partner in the Partnership. If the General Partner assigns its entire Interest to a successor of Illinois Power in accordance with this Agreement, the General Partner shall cease to be a general partner in the Partnership simultaneously with the admission of the successor as a general partner in the Partnership. Any such successor general partner in the Partnership is hereby authorized to and shall continue the business of the Partnership without dissolution. (c) No Interest shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Agreement. Any transfer or purported transfer of any Interest not made in accordance with this Agreement shall be null and void. Section 10.2. Transfer of LP Certificates. The General Partner shall provide for the registration of LP Certificates and of transfers of LP Certificates. Upon surrender for registration of transfer of any LP Certificate, the General Partner shall cause one or more new LP Certificates to be issued in the name of the designated transferee or transferees. Every LP Certificate surrendered for registration of transfer shall be accompanied by a written instrument of transfer in form satisfactory to the General Partner duly executed by the Preferred Security Holder or his or her attorney duly authorized in writing. Each LP Certificate surrendered for registration of transfer shall be canceled by the General Partner. A transferee of an LP Certificate shall be admitted to the Partnership as a Limited Partner and shall be entitled to the rights and subject to the obligations of a Preferred Security Holder hereunder upon the receipt by a transferee of an LP Certificate. By acceptance of an LP Certificate, each transferee shall be deemed to have requested admission as a Limited Partner and to have agreed to be bound by this Agreement. The transferor of an LP Certificate, in whole, shall cease to be a Limited Partner at the time that the transferee of such LP Certificate is admitted to the Partnership as a Limited Partner in accordance with this Section 10.2. Section 10.3. Persons Deemed Preferred Security Holders. The Partnership may treat the Person in whose name any LP Certificate shall be registered on the books and records of the Partnership as the sole holder of such LP Certificate and of the Preferred Securities represented -23- 28 by such LP Certificate (the "Preferred Security Holder") for purposes of receiving Dividends and for all other purposes whatsoever and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such LP Certificate or in the Preferred Securities represented by such LP Certificate on the part of any other Person, whether or not the Partnership shall have actual or other notice thereof. Section 10.4. Book Entry Interests. The LP Certificates, on original issuance, will be issued in the form of a global LP Certificate or LP Certificates representing the Book Entry Interests, to be delivered to DTC, the initial Clearing Agency, by, or on behalf of, the Partnership. Such LP Certificate or LP Certificates shall initially be registered on the books and records of the Partnership in the name of Cede & Co., the nominee of DTC, and no Preferred Security Owner will receive a definitive LP Certificate representing such Preferred Security Owner's interests in such LP Certificate, except as provided in Section 10.7. Unless and until definitive, fully registered LP Certificates (the "Definitive LP Certificates") have been issued to the Preferred Security Owners pursuant to Section 10.7: (i) The provisions of this Section shall be in full force and effect; (ii) The Partnership and the General Partner shall be entitled to deal with the Clearing Agency for all purposes of this Agreement (including the payment of Dividends on the LP Certificates and receiving approvals, votes or consents hereunder) as the Preferred Security Holder and the sole holder of the LP Certificates and shall have no obligation to the Preferred Security Owners; (iii) To the extent that the provisions of this Section conflict with any other provisions of this Agreement, the provisions of this Section shall control; and (iv) The rights of the Preferred Security Owners shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such Preferred Security Owners and the Clearing Agency and/or the Clearing Agency Participants. DTC will make book entry transfers among the Clearing Agency Participants and receive and transmit payments of Dividends on the LP Certificates to such Clearing Agency Participants. Section 10.5. Notices to Clearing Agency. Whenever a notice or other communication to the Preferred Security Holders is required under this Agreement, unless and until Definitive LP Certificates shall have been issued to the Preferred Security Owners pursuant to Section 10.7, the General Partner shall give all such notices and communications specified herein to be given to the Preferred Security Holders to the Clearing Agency, and shall have no obligations to the Preferred Security Owners. Section 10.6. Appointment of Successor Clearing Agency. If any Clearing Agency elects to discontinue its services as securities depository with respect to the Preferred Securities, the General Partner may, in its sole discretion, appoint a successor Clearing Agency with respect to the Preferred Securities. Section 10.7. Definitive LP Certificates; Appointment of Paying Agent(s). If (i) a Clearing Agency elects to discontinue its services as securities depository with respect to the Preferred Securities and a successor Clearing Agency is not appointed within 90 days after such discontinuance pursuant to Section 10.6 or (ii) the Partnership elects to terminate the book entry -24- 29 system through the Clearing Agency, then (a) Definitive LP Certificates shall be prepared by the Partnership and (b) the General Partner shall authorize one or more Persons (each, a "Paying Agent") to pay Dividends, redemption payments or liquidation payments on behalf of the Partnership with respect to the Preferred Securities. Upon surrender of the global LP Certificate or LP Certificates representing the Book Entry Interests by the Clearing Agency, accompanied by registration instructions, the General Partner shall cause Definitive LP Certificates to be delivered to Preferred Security Owners in accordance with the instructions of the Clearing Agency. Neither the General Partner nor the Partnership shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. Any Person receiving a Definitive LP Certificate in accordance with this Article X shall be admitted to the Partnership as a Limited Partner upon receipt of such Definitive LP Certificate and shall be registered on the books and records of the Partnership as a Preferred Security Holder. The Clearing Agency or the nominee of the Clearing Agency, as the case may be, shall cease to be a Limited Partner under this Section 10.7 at the time that at least one additional Person is admitted to the Partnership as a Limited Partner in accordance with this Section 10.7. The Definitive LP Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the General Partner, as evidenced by its execution thereof. ARTICLE XI WITHDRAWAL; DISSOLUTION; LIQUIDATION AND DISTRIBUTION OF ASSETS Section 11.1. Withdrawal of Partners. Subject to the further provisions of this Section 11.1 and except as provided in Article X, no Partner shall at any time withdraw from the Partnership. Any Partner withdrawing in contravention of this Section 11.1, shall indemnify, defend and hold harmless the Partnership and the other Partners from and against any losses, expenses, judgments, fines, settlements or damages suffered or incurred by the Partnership or such other Partners arising out of or resulting from such withdrawal. No permitted transfer of all or any portion of a Partner' s Interest in the Partnership in accordance with Article X shall constitute a withdrawal in violation of this Section 11.1. Further, the withdrawal of a Holder in connection with the redemption of its entire Interest in the Partnership, in accordance with the terms hereof, or of an Action, shall not constitute a violation of this Section 11.1. Section 11.2. Dissolution of the Partnership. (a) The Partnership shall not be dissolved by the admission of additional or successor Partners in accordance with the terms of this Agreement. The death, withdrawal, bankruptcy or dissolution of a Limited Partner, or the occurrence of any other event which terminates the Interest of a Limited Partner in the Partnership, shall not, in and of itself, cause the Partnership to be dissolved and its affairs wound up. To the fullest extent permitted by applicable law, upon the occurrence of such event, the General Partner may, without any further act, vote or approval of any Partner, admit any Person to the Partnership as an additional or substitute limited partner in the Partnership, which admission shall be effective as of the date of the occurrence of such event, and the business of the Partnership shall be continued without dissolution. (b) The Partnership shall be dissolved and its affairs shall be wound up upon the occurrence of any of the following events: -25- 30 (i) The expiration of the term of the Partnership, as provided in Section 1.4 hereof; (ii) Upon the bankruptcy or withdrawal of the General Partner; (iii) Upon the assignment by the General Partner of its entire interest in the Partnership when the assignee is not admitted to the Partnership as a general partner of the Partnership in accordance with Section 10.1, or the filing of a certificate of dissolution or its equivalent with respect to the General Partner, or the revocation of the General Partner's charter and the expiration of 90 days after the date of notice to the General Partner of revocation without a reinstatement of its charter, or any other event occurs which causes the General Partner to cease to be a general partner of the Partnership under the Act, unless the business of the Partnership is continued in accordance with the Act (any remaining general partner of the Partnership is hereby authorized to and shall continue the business of the Partnership without dissolution); (iv) In accordance with any Action; (v) the entry of a decree of judicial dissolution under Section 17-802 of the Act; or (vi) the written consent of all Partners. (c) Upon dissolution of the Partnership, the Liquidator (as defined below) shall promptly notify the Partners of such dissolution. Section 11.3. Liquidation. (a) In the event of the dissolution of the Partnership for any reason, the General Partner (or, if the Partnership is dissolved pursuant to Section 11.2(b)(ii) or (iii), then a liquidating trustee appointed by 66 2/3% in liquidation preference of the Preferred Securities (the General Partner or such Person so appointed is hereinafter referred to as the "Liquidator")), shall commence to wind up the affairs of the Partnership and to liquidate the Partnership's assets; provided, however, that a reasonable time shall be allowed for the orderly liquidation of the assets of the Partnership and the satisfaction of liabilities to creditors so as to enable the Partners to minimize the normal losses attendant upon liquidation. The Partners shall continue to share all income, losses and distributions during the period of liquidation in accordance with Articles IV and V. Subject to the provisions of this Article XI, the Liquidator shall have full right and unlimited discretion to determine the time, manner and terms of any sale or sales of Partnership property pursuant to such liquidation, giving due regard to the activity and condition of the relevant market and general financial and economic conditions. (b) The Liquidator shall have all of the rights and powers with respect to the assets and liabilities of the Partnership in connection with the liquidation and termination of the Partnership that the General Partner would have with respect to the assets and liabilities of the Partnership during the term of the Partnership, and the Liquidator is hereby expressly authorized and empowered to execute any and all documents necessary or desirable to effectuate the liquidation and termination of the Partnership and the transfer of any assets. (c) Notwithstanding the foregoing, a Liquidator which is not the General Partner shall not be deemed a Partner in the Partnership and shall not have any of the economic interests in the Partnership of a Partner; and such Liquidator may be compensated for its services to the -26- 31 Partnership at normal, customary and competitive rates for its services to the Partnership as reasonably determined by a majority in liquidation preference of the Preferred Securities. Section 11.4. Distribution in Liquidation. (a) Upon the winding up of the Partnership, the assets of the Partnership shall be distributed in the following order of priority: (i) to creditors of the Partnership, including Preferred Security Holders who are creditors, to the extent permitted by law, in satisfaction of the liabilities of the Partnership (whether by payment or the making of reasonable provision for payment thereof); and (ii) to the Partners in proportion to the Partners' positive Capital Account balances. Section 11.5. Rights of Limited Partners. Each Limited Partner shall look solely to the assets of the Partnership for all distributions with respect to the Partnership and such Partner's capital contribution (including return thereof), and such Partner's share of profits or losses thereof, and shall have no recourse therefor (upon dissolution or otherwise) against the General Partner. No Partner shall have any right to demand or receive property other than cash upon dissolution and termination of the Partnership. Section 11.6. Termination. The Partnership shall terminate when all of the assets of the Partnership shall have been disposed of and the assets shall have been distributed as provided in Section 11.4, and the Liquidator has executed and caused to be filed a certificate of cancellation of the Certificate. ARTICLE XII AMENDMENTS AND MEETINGS Section 12.1. Amendments. Except as otherwise provided in this Agreement or by any applicable terms of any Action establishing a series of Preferred Securities, this Agreement may be amended by, and only by, a written instrument executed by the General Partner; provided, however, that (i) no amendment shall be made, and any such purported amendment shall be void and ineffective, to the extent the result thereof would be to cause the Partnership to be treated as anything other than a partnership for purposes of United States income taxation and (ii) any amendment which would adversely affect the powers, preferences or special rights of any series of Preferred Securities may be effected only as permitted by the terms of such series of Preferred Securities. Section 12.2. Amendment of Certificate. In the event this Agreement shall be amended pursuant to Section 12.1, the General Partner shall amend the Certificate to reflect such change if it deems such amendment of the Certificate to be necessary or appropriate. Section 12.3. Meetings of the Partners. (a) Meetings of the Limited Partners who are Holders of any series or, in the case of a class vote, of multiple series of Preferred Securities may be called at any time by the -27- 32 General Partner (or as provided in any Action establishing a series of Preferred Securities) to consider and act on any matter on which Limited Partners are entitled to act under the terms of this Agreement or the Act. The General Partner shall call a meeting of Holders of any series or, in the case of a class vote, multiple series, if directed to do so by Holders of not less than 10% in liquidation preference of the Preferred Securities of that series entitled to vote at the meeting. Such direction shall be given by delivering to the General Partner one or more calls in writing stating that the signing Limited Partners wish to call a meeting and indicating the general or specific purpose for which the meeting is to be called. Any Limited Partner calling a meeting shall specify in a writing the LP Certificates held by the Limited Partners exercising the right to call a meeting and only those specified Interests shall be counted for purposes of determining whether the required percentage set forth in the proceeding sentence has been met. Except to the extent otherwise provided in any such Action, the following provisions shall apply to meetings of Partners. (b) Notice of any such meeting shall be given to all Limited Partners having a right to vote thereat not less than seven Business Days nor more than 60 days prior to the date of such meeting. Whenever a vote, consent or approval of Limited Partners is permitted or required under this Agreement, such vote, consent or approval may be given at a meeting of Limited Partners. Further, any action that may be taken at a meeting of the Limited Partners may be taken without a meeting if a consent in writing setting forth the action so taken is signed by Limited Partners owning not less than the minimum Interests that would be necessary to authorize or take such action at a meeting at which all Limited Partners having a right to vote thereon were present and voting. Prompt notice of the taking of action without a meeting shall be given to the Limited Partners entitled to vote who have not consented in writing. The General Partner may specify that any written ballot submitted to the Limited Partners for the purpose of taking any action without a meeting shall be returned to the Partnership within the time specified by the General Partner. (c) Each Limited Partner may authorize any Person to act for it by proxy on all matters in which a Limited Partner is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Limited Partner executing it. Except as otherwise provided herein, in any Action or pursuant to Section 12.3(e), all matters relating to the giving, voting or validity of proxies shall be governed by the General Corporation Law of the State of Delaware relating to proxies, and judicial interpretations thereunder, as if the Partnership were a Delaware corporation and the Limited Partners were stockholders of a Delaware corporation. (d) Each meeting of Partners shall be conducted by the General Partner or by such other Person that the General Partner may designate. (e) The General Partner, in its sole discretion, shall establish all other provisions relating to meetings of Limited Partners, including notice of the time, place or purpose of any meeting at which any matter is to be voted on by any Limited Partners, waiver of any such notice, action by consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote. -28- 33 ARTICLE XIII MISCELLANEOUS Section 13.1. Notices. All notices provided for in this Agreement shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by registered or certified mail, as follows: (a) if given to the Partnership, in care of the General Partner at the Partnership's mailing address set forth below: (b) if given to the General Partner, at its mailing address set forth below: Illinois Power Company 500 South 27th Street Decatur, Illinois 62525 Attention: President (c) if given to any other Partner at the address for such Partner set forth on the books and records of the Partnership. All such notices shall be deemed to have been given when sent. Section 13.2. Entire Agreement. This Agreement constitutes the entire agreement among the parties. It supersedes any prior agreement or understandings among them, and it may not be modified or amended in any manner other than as set forth herein. Section 13.3. Governing Law. This Agreement and the rights of the parties hereunder shall be governed by and interpreted in accordance with the law of the State of Delaware and all rights and remedies shall be governed by such laws without regard to principles of conflict of laws. Section 13.4. Effect. Except as herein otherwise specifically provided, this Agreement shall be binding upon and inure to the benefit of the parties and their legal representatives, successors and assigns. Section 13.5. Pronouns and Number. Wherever from the context it appears appropriate, each term stated in either the singular or the plural shall include the singular and the plural, and pronouns stated in either the masculine, feminine or neuter shall include the masculine, feminine and neuter. Section 13.6. Captions. Captions contained in this Agreement are inserted only as a matter of convenience and in no way define, limit or extend the scope or intent of this Agreement or any provision hereof. Section 13.7. Partial Enforceability. If any provision of this Agreement, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Agreement, or the application of such provision to Persons or circumstances other than those to which it is held invalid, shall not be affected thereby. -29- 34 Section 13.8. Counterparts. This Agreement may contain more than one counterpart of the signature page and this Agreement may be executed by the affixing of the signature of each of the Partners to one of such counterpart signature pages. All of such counterpart signatures pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page. Section 13.9. Waiver of Partition. Each Partner hereby irrevocably waives any and all rights (if any) that such Partner may have to maintain any action for partition of any of the Partnership's property. Section 13.10. Remedies. The failure of any party to seek redress for violation of, or to insist upon the strict performance of, any provision of this Agreement shall not prevent a subsequent act, which would have originally constituted a violation, from having the effect of an original violation. The rights and remedies provided by this Agreement are cumulative and the use of any one right or remedy by any party shall not preclude or waive its right to use any or all other remedies. Said rights and remedies are given in addition to any other rights the parties may have by law, statute, ordinance or otherwise. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above stated. General Partner: ILLINOIS POWER COMPANY, an Illinois corporation By:______________________ Name: Title: Initial Limited Partner: ILLINOVA CORPORATION, an Illinois corporation By:_______________________ Name: Title: -30- 35 Annex A Certificate Number R-1 CUSIP NO. Certificate Evidencing Preferred Securities of Illinois Power Capital, L.P.* ________________ Monthly Income Preferred Securities, Series _______ (liquidation preference $25 per Preferred Security) Illinois Power Capital, L.P., a limited partnership formed under the laws of the State of Delaware (the "Partnership"), hereby certifies that __________ (the "Holder") is the registered owner of _______ (____) preferred securities of the Partnership representing limited partner interests in the Partnership of a series designated the ______________ Monthly Income Preferred Securities, Series _____ (liquidation preference $25 per Preferred Security) (the "Preferred Securities"). The Preferred Securities are fully paid and nonassessable limited partner interests in the Partnership, as to which the limited partners in the Partnership who hold the Preferred Securities (the "Preferred Security Holders"), as limited partners in the Partnership, will, assuming such Preferred Security Holders do not participate in the control of the business of the Partnership, have no liability in excess of their obligations to make payments provided for in the Limited Partnership Agreement (as defined below) and their share of the Partnership's assets and undistributed profits (subject to the obligation of a Preferred Security Holder to repay any funds wrongfully distributed to it) and are transferable on the books and records of the Partnership, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The powers, preferences and special rights and limitations of the Preferred Securities are set forth in, and this certificate and the Preferred Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Agreement of Limited Partnership of the Partnership dated as of __________ 1994, as the same may be amended from time to time (the "Limited Partnership Agreement"), and the Action of the General Partner taken pursuant thereto authorizing the issuance of the Preferred Securities and determining the designations, powers, rights, preferences, privileges, limitations and other terms and provisions, regarding Dividends, voting, return of capital and otherwise, and other matters relating to the Preferred Securities. Capitalized terms used herein but not defined shall have the meaning given them in the Limited Partnership Agreement or the Action. The Holder is entitled to the benefits of the Guarantee Agreement of Illinois Power Company, an Illinois corporation ("Illinois Power"), dated as of ____________________, 1994 (the "Guarantee"), and the Subordinated Debentures of Illinois Power issued pursuant to the Indenture dated as of ______________, 1994 _______________ *The form of this Certificate may be modified to reflect the specific terms and provisions of a particular series of Preferred Securities. 36 between Illinois Power and The First National Bank of Chicago, as Trustee (the "Indenture"), in each case to the extent provided therein. The Partnership will furnish a copy of the Limited Partnership Agreement, the Action, the Guarantee and the Subordinated Debentures to the Holder without charge upon written request to the Partnership at its principal place of business or registered office. The Holder, by accepting this certificate, is deemed to have agreed that (i) the Subordinated Debentures acquired by the Partnership with the proceeds from the issuance of the Preferred Securities are subordinate and junior in right of payment to all Senior Indebtedness of Illinois Power as and to the extent provided in the Indenture, and (ii) the Guarantee ranks subordinate and junior in right of payment to all liabilities of Illinois Power, pari passu with the most senior preferred or preference stock now or hereafter issued by Illinois Power and with any guarantee now or hereafter issued by Illinois Power in respect of any preferred or preference stock of any Affiliate of Illinois Power, and senior to Illinois Power's common stock, as and to the extent provided in the Guarantee. Upon receipt of this certificate, the Holder is admitted to the Partnership as a Limited Partner, is bound by the Limited Partnership Agreement and the Action and is entitled to the benefits thereunder. IN WITNESS WHEREOF, the Partnership has executed this certificate this day of ___________, 199__ ILLINOIS POWER CAPITAL, L.P. By: ILLINOIS POWER COMPANY, its General Partner By:_________________________ -2- EX-4.D 5 FORM OF ACTION OF THE COMPANY 1 EXHIBIT 4(D) ACTION OF GENERAL PARTNER ILLINOIS POWER COMPANY, an Illinois corporation ("Illinois Power"), as General Partner of Illinois Power Capital, L.P., a Delaware limited partnership (the "Partnership"), in accordance with Section 6.1(b)(ii) of the Amended and Restated Agreement of Limited Partnership of the Partnership dated as of _________________, 1994 (the "Partnership Agreement"), does hereby establish a new series of Preferred Securities having the following designation, powers, rights, preferences, privileges, limitations and other terms and provisions (capitalized terms used herein without definition having the meanings specified in the Partnership Agreement): (a) Designation. __________ (_____________) Preferred Securities, with a liquidation preference of $25 per Preferred Security, are hereby designated as ["_____% Cumulative Monthly Income Preferred Securities, Series A"] ["Cumulative Adjustable Rate Monthly Income Preferred Securities, Series A"] (the "Series A Preferred Securities"). (b) Dividends. (i) The Limited Partners who hold the Series A Preferred Securities shall be entitled to receive, when, as and if available and determined to be so distributed by the General Partner (the General Partner's discretion to be subject to (b)(ii) below), cumulative dividends at a [rate per annum of ____% of the liquidation preference of $25 per Preferred Security, calculated on the basis of a 360-day year of twelve 30-day months,] [rate per annum of ___% from the date of initial issuance to _________________, 1994, and thereafter at the Applicable Rate (as defined in the Prospectus Supplement relating to the offering of the Series A Preferred Securities) from time to time in effect], and payable in United States dollars monthly in arrears on the last day of each calendar month of each year, commencing _________________, 1994. Such Dividends will accumulate and be cumulative whether or not they have been determined to be made and whether or not there are funds of the Partnership legally available for the payment of Dividends. Dividends on the Series A Preferred Securities shall be cumulative from the date of original issue, and the cumulative portion from such date to _________________, 1994 shall be payable on _________________, 1994. In the event that any date on which Dividends are payable on the Series A Preferred Securities is not a Business Day, then payment of the Dividends payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. [Dividends in arrears for more than one month will bear interest thereon at the rate per annum of ____% thereof.] (ii) Dividends on the Series A Preferred Securities must be paid on the date such Dividends are payable to the extent that the Partnership has, on the date such Dividends are payable, (x) funds legally available for the payment of such Dividends and (y) cash on hand sufficient to permit such payments. Dividends will be payable to the Preferred Security Holders as they appear on the books and records of the Partnership on the relevant record dates, which, as long as the Series A Preferred Securities remain in book-entry-only form, will be one Business Day prior to the relevant payment dates. In the event the Series A Preferred Securities shall not continue to remain in book-entry-only form, the General Partner shall have the right to select relevant record dates which shall be more than one Business Day prior to the relevant payment dates. 2 (iii) The Partnership shall not: (A) pay, or set aside for payment, any Dividends with respect to any other Preferred Securities, unless the amount of any Dividends declared on such other Preferred Securities is paid on such other such Preferred Securities and the Series A Preferred Securities on a pro rata basis on the date such dividends are paid on such other Preferred Securities, so that (x) the aggregate amount of Dividends paid on the Series A Preferred Securities bears to the aggregate amount of Dividends paid on such other Preferred Securities the same ratio as (y) the aggregate of all accumulated and unpaid Dividends in respect of the Series A Preferred Securities bears to the aggregate of all accumulated and unpaid Dividends in respect of such other Preferred Securities; or (B) redeem, purchase or otherwise acquire any other Preferred Securities; until, in each case, such time as all accumulated and unpaid Dividends on the Series A Preferred Securities shall have been paid in full for all Dividend periods terminating on or prior to , in the case of clause (A), such payment and, in the case of clause (B), the date of such redemption, purchase or acquisition. (c) Redemption. (i) The Series A Preferred Securities are redeemable, at the option of the Partnership, in whole or in part from time to time, on or after _____, 1999, upon not less than 30 nor more than 60 days' notice, at the Redemption Price (as hereinafter defined). If a partial redemption would result in a delisting of the Series A Preferred Securities, the Partnership may only redeem the Series A Preferred Securities in whole. (ii) Upon repayment of the Series A Subordinated Debentures at maturity or earlier, the proceeds from such repayment shall be applied to redeem the Series A Preferred Securities, in whole, at the redemption price of $25 per Preferred Security plus accumulated and unpaid Dividends (whether or not declared) to the date fixed for redemption (the "Redemption Price") upon not less than 30 nor more than 60 days' notice. (iii) If a Special Event shall occur and be continuing, the General Partner shall elect to either (A) redeem the Series A Preferred Securities in whole (and not in part), upon not less than 30 or more than 60 days' notice at the Redemption Price within 90 days following the occurrence of such Special Event; provided, that if at the time there is available to the General Partner the opportunity to eliminate, within such 90-day period, the Special Event by taking some ministerial action, such as filing a form or making an election, or pursuing some other similar reasonable measure which has no adverse effect on the Partnership or the General Partner, the General Partner will pursue such measure in lieu of redemption, or (B) dissolve the Partnership and, after satisfaction of liabilities of creditors as required by the Partnership Act, cause to be distributed to Series A Preferred Security Holders in liquidation of the Partnership, within 90 days following the occurrence of such Special Event, Series A Subordinated Debentures having a -2- 3 principal amount equal to the aggregate liquidation preference of the outstanding Series A Preferred Securities and with accrued interest in an amount equal to any unpaid Dividends on the Series A Preferred Securities. In the case of a Tax Event, the General Partner may also elect to cause the Series A Preferred Securities to remain outstanding. After the date fixed for any distribution of Series A Subordinated Debentures upon dissolution of the Partnership, (i) the Series A Preferred Securities will no longer be deemed to be outstanding, (ii) DTC or its nominee, as the record Holder of the Series A Preferred Securities, will receive a registered global certificate or certificates representing the Series A Subordinated Debentures to be delivered upon such distribution, and (iii) any certificates representing Series A Preferred Securities not held by DTC or its nominee will be deemed to represent Series A Subordinated Debentures having a principal amount equal to the aggregate liquidation preference of such Series A Preferred Securities until such certificates are presented to the General Partner or its agent for transfer or reissuance. (d) Redemption Procedures. (i) Notice of any redemption (a "Notice of Redemption") of the Series A Preferred Securities will be given by the Partnership by mail to each record Holder to be redeemed not fewer than 30 nor more than 60 days prior to the date fixed for redemption thereof. For purposes of the calculation of the date of redemption and the dates on which notices are given pursuant to this paragraph (d)(i), a Notice of Redemption shall be deemed to be given on the day such notice is first mailed by first-class mail, postage prepared, to Preferred Security Holders who hold Series A Preferred Securities. Each Notice of Redemption shall be addressed to the Preferred Security Holders who hold Series A Preferred Securities at the address of the Holder appearing in the books and records of the Partnership. No defect in the Notice of Redemption or in the mailing thereof or publication of its contents shall affect the validity of the redemption proceedings. (ii) In the event that fewer than all the outstanding Series A Preferred Securities are to be redeemed in the case of a redemption pursuant to (c)(i) above, the Series A Preferred Securities to be redeemed will be selected in accordance with paragraph (d)(iv) hereof. The Partnership may not redeem fewer than all the outstanding Series A Preferred Securities unless all accumulated and unpaid Dividends have been paid on all Series A Preferred Securities for all monthly Dividend periods terminating on or prior to the date of redemption. (iii) If the Partnership gives a Notice of Redemption in respect of Series A Preferred Securities, then, (A) by 12:00 noon, New York time, on the redemption date in the case of Clauses (I) and (II) below, or (B) prior to the close of business on the Business Day immediately preceding the redemption date in the case of Clause (III) below, the Partnership will irrevocably deposit with (I) DTC, is the Clearing Agency on the date such Notice of Redemption is given, (II) such other Person which is the Clearing Agency on the date such Notice of Redemption is given, or (III) if there is no Clearing Agency with respect to the Series A Preferred Securities on the date such Notice of Redemption is given, the Paying Agent or Paying Agents appointed by the General Partner pursuant to Section 10.7 of the Partnership Agreement, funds sufficient to pay the applicable Redemption Price and will give DTC, such other Clearing Agency or the Paying Agent or Paying Agents, as the case may be, irrevocable instructions and authority to pay the Redemption Price to the Holders of the Series A Preferred Securities. If Notice of Redemption shall have been given and funds deposited as required, then upon the date of such deposit, all rights of the Preferred Security Holders who hold such Series A Preferred Securities so called for redemption -3- 4 will cease, except the right of the Holders of such securities to receive the Redemption Price, but without interest on such Redemption Price. In the event that any date fixed for redemption of Series A Preferred Securities is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day which is a Business Day (and without interest or other payment in respect of any such delay), except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day. In the event that payment of the Redemption Price in respect of Series A Preferred Securities is improperly withheld or refused and not paid either by the Partnership or by Illinois Power pursuant to the Guarantee, Dividends on such Series A Preferred Securities will continue to accumulate at the then applicable rate, from the original redemption date to the date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price. (iv) Notices of Redemption shall be sent to (A) Cede & Co. or any successor nominee of DTC, in either case so long as DTC is the Clearing Agency, (B) the nominee of any Clearing Agency other than DTC or (C) any Paying Agent or Paying Agents appointed by the General Partner pursuant to Section 10.7 of the Partnership Agreement. If less than all the Series A Preferred Securities are being redeemed, interests to be redeemed shall be determined as follows: (x) in accordance with DTC's practice, as long as DTC is the Clearing Agency, (y) in accordance with the practice of any other Clearing Agency or (z) if, at the time such redemption notice is sent, there is no Clearing Agency, the Paying Agent or Paying Agents shall select, by lot or in such other manner as the Paying Agent or Paying Agents shall deem appropriate and fair, in their discretion, the Series A Preferred Securities to be redeemed. (e) Liquidation Distribution. In the event of any voluntary or involuntary dissolution, winding up or termination of the Partnership, Preferred Security Holders who hold the Series A Preferred Securities at the time will be entitled to receive out of the assets of the Partnership available for distribution to Partners, after satisfaction of liabilities of creditors as required by the Partnership Act, before any distribution of assets is made to the General Partner, but together with the Holders of every other series of Preferred Securities outstanding, if any, an amount equal to, in the case of Holders of Series A Preferred Securities, the aggregate of the liquidation preference of $25 per Preferred Security and accumulated and unpaid Dividends thereon (whether or not declared) to the date of payment (the "Liquidation Distribution"), unless in connection with such dissolution, winding up or termination, Series A Subordinated Debentures in an aggregate principal amount equal to the Liquidation Distribution have been distributed on a pro rata basis to the Holders of the Series A Preferred Securities. If, upon any such dissolution, the Liquidation Distribution can be paid only in part because the Partnership has insufficient assets available to pay in full the aggregate Liquidation Distribution and the aggregate maximum liquidation distributions on any other series of Preferred Securities, then the amounts payable directly by the Partnership on the Series A Preferred Securities and on such other series of Preferred Securities shall be paid on a pro rata basis, so that (i) the aggregate amount paid in respect of the Liquidation Distribution bears to the aggregate amount paid as liquidation distributions on such other series of Preferred Securities the same ratio as (ii) the aggregate Liquidation Distribution bears to the aggregate maximum liquidation distributions on such other series of Preferred Securities. -4- 5 * * * * This written Action of General Partner shall constitute an Action within the meaning of Section 6.1(b)(ii) of the Partnership Agreement. IN WITNESS WHEREOF, the undersigned has executed this Action of General Partner this ____ day of ___________, 1994. GENERAL PARTNER Illinois Power Company By: Name: Title: -5- EX-4.E 6 INDENTURE - COMPANY AND FNB 1 EXHIBIT 4(e) INDENTURE BETWEEN ILLINOIS POWER COMPANY AND THE FIRST NATIONAL BANK OF CHICAGO RELATING TO THE ISSUANCE OF UNSECURED SUBORDINATED DEBENTURES Dated as of __________ 1, 1994 2 TABLE OF CONTENTS Page ARTICLE ONE -- Definitions . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE TWO -- Issue, Description, Terms, Execution, Registration and Exchange of Debentures . . . . . . . . . . . . . . . . . . . . . 8 ARTICLE THREE -- Redemption of Debentures and Sinking Fund Provisions . . . . . . . . . . . . . . . . . . 16 ARTICLE FOUR -- Particular Covenants of the Company . . . . . . . . . 19 ARTICLE FIVE -- Debentureholders' Lists and Reports by the Company and the Trustee . . . . . . . . . . . 21 ARTICLE SIX -- Remedies of the Trustee and Debentureholders on Event of Default . . . . . . . . . . . . . . . . . . . . . . . 21 ARTICLE SEVEN -- Concerning the Trustee . . . . . . . . . . . . . . . 28 ARTICLE EIGHT -- Concerning the Debentureholders . . . . . . . . . . . 35 ARTICLE NINE -- Supplemental Indentures . . . . . . . . . . . . . . . 37 ARTICLE TEN -- Consolidation, Merger and Sale . . . . . . . . . . . 39 ARTICLE ELEVEN -- Satisfaction and Discharge of Indenture; Unclaimed Moneys . . . . . . . . . . . . . 40 ARTICLE TWELVE -- Immunity of Incorporators, Stockholders, Officers and Directors . . . . . . . . . . . . . . . . . . . . . . 44 ARTICLE THIRTEEN -- Miscellaneous Provisions . . . . . . . . . . . . . . 44 ARTICLE FOURTEEN -- Subordination of Debentures . . . . . . . . . . . . . 46 - i - 3 THIS INDENTURE, dated as of the 1st day of ________, 1994, between ILLINOIS POWER COMPANY, a corporation duly organized and existing under the laws of the State of Illinois (the "Company"), and THE FIRST NATIONAL BANK OF CHICAGO, a national banking association organized and existing under the laws of the United States of America, as trustee (the "Trustee"): WHEREAS, for its lawful corporate purposes, the Company has duly authorized the execution and delivery of this Indenture to provide for the issuance of unsecured debentures (the "Debentures"), in an unlimited aggregate principal amount to be issued from time to time in one or more series as in this Indenture provided as registered Debentures without coupons, to be authenticated by the certificate of the Trustee; WHEREAS, to provide the terms and conditions upon which the Debentures are to be authenticated, issued and delivered, the Company has duly authorized the execution of this Indenture; WHEREAS, the Debentures and the certificate of authentication to be borne by the Debentures (the "Certificate of Authentication") are to be substantially in such forms as may be approved by the Board of Directors (as defined below) or set forth in any indenture supplemental to this Indenture; AND WHEREAS, all acts and things necessary to make the Debentures issued pursuant to this Indenture, when executed by the Company and authenticated and delivered by the Trustee as in this Indenture provided, the valid, binding and legal obligations of the Company, and to constitute these presents a valid indenture and agreement according to its terms, have been done and performed or will be done and performed prior to the issuance of such Debentures, and the execution of this Indenture and the issuance under this Indenture of the Debentures have been or will be prior to issuance in all respects duly authorized, and the Company, in the exercise of the legal right and power in it vested, executes this Indenture and proposes to make, execute, issue and deliver the Debentures; NOW, THEREFORE, THIS INDENTURE WITNESSETH: That in order to declare the terms and conditions upon which the Debentures are and are to be authenticated, issued and delivered, and in consideration of the premises, of the purchase and acceptance of the Debentures by their holders and of the sum of one dollar ($1.00) to it duly paid by the Trustee at the execution of these presents, the receipt of which is hereby acknowledged, the Company covenants and agrees with the Trustee, for the equal and proportionate benefit (subject to the provisions of this Indenture) of the respective holders from time to time of the Debentures, without any discrimination, preference or priority of any one Debenture over any other by reason of priority in the time of issue, sale or negotiation of the Debentures, or otherwise, except as provided in this Indenture, as follows: ARTICLE ONE DEFINITIONS The terms defined in this Article (except as in this Indenture otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture, any 4 resolution of the Board of Directors of the Company and of any indenture supplemental to this Indenture shall have the respective meanings specified in this Section. All other terms used in this Indenture which are defined in the Trust Indenture Act, or which are by reference in such Act defined in the Securities Act (except as otherwise expressly provided in this Indenture or unless the context otherwise requires, shall have the meanings assigned to such terms in the Trust Indenture Act and in the Securities Act as in force at the date of the execution of this instrument. ADDITIONAL INTEREST: The term "Additional Interest" shall have the meaning ascribed to such term in Section 2.13. AFFILIATE: The term "Affiliate" of the Company shall mean any company at least a majority of whose outstanding voting stock shall at the time be owned by the Company, or by one or more direct or indirect subsidiaries of or by the Company and one or more direct or indirect subsidiaries of the Company. For the purposes only of this definition of the term "Affiliate," the term "voting stock," as applied to the stock of any company, shall mean stock of any class or classes having ordinary voting power for the election of a majority of the directors of such company, other than stock having such power only by reason of the occurrence of a contingency. AUTHENTICATING AGENT: The term "Authenticating Agent" means an authenticating agent with respect to all or any of the series of Debentures, as the case may be, appointed with respect to all or any series of the Debentures, as the case may be, by the Trustee pursuant to Section 2.10. BOARD OF DIRECTORS: The term "Board of Directors" shall mean the Board of Directors of the Company, or any duly authorized committee of such Board. BOARD RESOLUTION: The term "Board Resolution" shall mean a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors or any duly authorized committee of such Board and to be in full force and effect on the date of such certification. BUSINESS DAY: The term "business day," with respect to any series of Debentures, shall mean any day other than a day on which banking institutions in New York, New York are authorized or obligated by law or executive order to close. - 2 - 5 CERTIFICATE: The term "Certificate" shall mean a certificate signed by the principal executive officer, the President, any Vice President, the Treasurer, any Assistant Treasurer, the principal financial officer or the principal accounting officer of the Company. The Certificate need not comply with the provisions of Section 13.06. COMMISSION: The term "Commission" shall mean the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or, if at any time of the date of execution and delivery of this Indenture the Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body, if any, performing such duties at such time. COMPANY: The term "Company" shall mean Illinois Power Company, a corporation duly organized and existing under the laws of the State of Illinois, and, subject to the provisions of Article Ten, shall also include its successors and assigns. CORPORATE TRUST OFFICE: The term "Corporate Trust Office" shall mean the office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office at the date of the execution of this Indenture is located at One First National Plaza, Suite 0126, Chicago, Illinois 60670, Attention: Corporate Trust Services Department. DEBENTURE OR DEBENTURES: The term "Debenture" or "Debentures" shall mean any Debenture or Debentures, as the case may be, authenticated and delivered under this Indenture. DEBENTUREHOLDER: The term "Debentureholder," "holder of Debentures," "registered holder" or other similar term shall mean the person or persons in whose name or names a particular Debenture shall be registered on the books of the Company kept for that purpose in accordance with the terms of this Indenture. DEBENTURE REGISTER: The term "Debenture Register" shall have the meaning ascribed to such term in Section 2.05(b). - 3 - 6 DEBENTURE REGISTRAR: The term "Debenture Registrar" shall have the meaning ascribed to such term in Section 2.05(b). DEFAULT: The term "Default" shall mean any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. DEFAULTED INTEREST: The term "Defaulted Interest" shall have the meaning ascribed to such term in Section 2.03. DEPOSITORY: The term "Depository" shall mean, with respect to Debentures of any series for which the Company shall determine that such Debentures will be issued as a Global Debenture, The Depository Trust Company, New York, New York, another clearing agency, or any successor registered as a clearing agency under the Exchange Act, or other applicable statute or regulation, which in each case, shall be designated by the Company pursuant to either Section 2.01 or 2.11. EVENT OF DEFAULT: The term "Event of Default" with respect to Debentures of a particular series shall mean any event specified in Section 6.01, continued for the period of time, if any, designated in that Section. EXCHANGE ACT: The term "Exchange Act" shall mean the Securities and Exchange Act of 1934, as amended. GLOBAL DEBENTURE: The term "Global Debenture" shall mean, with respect to any series of Debentures, a Debenture executed by the Company and delivered by the Trustee to the Depository or pursuant to the Depository's instruction, all in accordance with the Indenture, which shall be registered in the name of the Depository or its nominee. GOVERNMENTAL OBLIGATIONS: The term "Governmental Obligations" shall mean securities that are (i) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (ii) obligations of a person controlled by, supervised by and acting as an agency or instrumentality of the United States of America, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer of such obligations, and shall also include - 4 - 7 a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any such Governmental Obligation or a specific payment of principal of or interest on any such Governmental Obligation held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from any amount received by the custodian in respect of the Governmental Obligation or the specific payment of principal of or interest on the Governmental Obligation evidenced by such depositary receipt. GUARANTEE: The term "Guarantee" shall mean any guarantee that the Company may enter into with Illinois Power Capital or other persons directly or indirectly for the benefit of holders of limited partnership interests issued by Illinois Power Capital. INDENTURE: The term "Indenture" shall mean this instrument as originally executed, or, if amended or supplemented as provided in this Indenture, as so amended or supplemented. INTEREST PAYMENT DATE: The term "Interest Payment Date" when used with respect to any installment of interest on a Debenture of a particular series shall mean the date specified in such Debenture or in a Board Resolution or in an indenture supplemental to this Indenture with respect to such series as the fixed date on which an installment of interest with respect to Debentures of that series is due and payable. ILLINOIS POWER CAPITAL: The term "Illinois Power Capital" shall mean Illinois Power Capital, L.P., a Delaware limited partnership. LIMITED PARTNERSHIP AGREEMENT: "Limited Partnership Agreement" shall mean the Amended and Restated Agreement of Limited Partnership of Illinois Power Capital, dated __________, as amended from time to time. NOTICE OF DEFAULT: The term "Notice of Default" shall have the meaning ascribed to such term in Section 6.01(a)(3). OFFICERS' CERTIFICATE: The term "Officers' Certificate" shall mean a certificate signed (i) by the President or a Vice President and (ii) the Treasurer or an Assistant Treasurer or the Controller or an Assistant Controller or the Secretary or an Assistant Secretary of the Company. Each such certificate - 5 - 8 shall include the statements provided for in Section 13.06, if and to the extent required by the provisions of that Section. OPINION OF COUNSEL: The term "Opinion of Counsel" shall mean an opinion in writing signed by legal counsel, who may be an employee of or counsel for the Company. Each such opinion shall include the statements provided for in Section 13.06, if and to the extent required by the provisions of that Section. OUTSTANDING: The term "outstanding," when used with reference to Debentures of any series, shall, subject to the provisions of Section 8.04, mean, as of any particular time, all Debentures of that series previously authenticated and delivered by the Trustee under this Indenture, except (a) Debentures previously canceled by the Trustee or any paying agent, or delivered to the Trustee or any paying agent for cancellation or which have previously been canceled; (b) Debentures or portions of Debentures for the payment or redemption of which moneys or Governmental Obligations in the necessary amount shall have been deposited in trust with the Trustee or with any paying agent (other than the Company) or shall have been set aside and segregated in trust by the Company (if the Company shall act as its own paying agent); provided, however, that if such Debentures or portions of such Debentures are to be redeemed prior to their maturity, notice of such redemption shall have been given as in Article Three provided, or provision satisfactory to the Trustee shall have been made for giving such notice; and (c) Debentures in lieu of or in substitution for which other Debentures shall have been authenticated and delivered pursuant to the terms of Section 2.07. PREDECESSOR DEBENTURE: The term "Predecessor Debenture" of any particular Debenture shall mean every previous Debenture evidencing all or a portion of the same debt as that evidenced by such particular Debenture; and, for the purposes of this definition, any Debenture authenticated and delivered under Section 2.07 in lieu of a lost, destroyed or stolen Debenture shall be deemed to evidence the same debt as the lost, destroyed or stolen Debenture. PREFERRED SECURITIES: The term "Preferred Securities" shall mean any limited partnership interests issued by Illinois Power Capital or similar securities issued by a permitted successor to Illinois Power Capital in accordance with the Limited Partnership Agreement. RESPONSIBLE OFFICER: The term "Responsible Officer" when used with respect to the Trustee shall mean any officer of the Trustee assigned by the Trustee to administer its corporate trust matters. - 6 - 9 SECURITIES ACT: The term "Securities Act" shall mean the Securities Act of 1933, as amended. SENIOR INDEBTEDNESS: The term "Senior Indebtedness" of the Company shall mean the principal of, premium, if any, interest on and any other payment due pursuant to any of the following, whether outstanding at the date of execution of this Indenture or thereafter incurred, created or assumed: (a) all indebtedness of the Company (other than non-recourse indebtedness and indebtedness issued under this Indenture) evidenced by notes, debentures, bonds or other securities sold by the Company for money, (b) all indebtedness of others of the kinds described in the preceding clause (a) assumed by or guaranteed in any manner by the Company (other than any Guarantee) or in effect guaranteed by the Company through an agreement to purchase, contingent or otherwise, and (c) all renewals, extensions or refundings of indebtedness of the kinds described in any of the preceding clauses (a) and (b) unless, in the case of any particular indebtedness, renewal, extension or refunding, the instrument creating or evidencing the same or the assumption or guarantee of the same expressly provides that such indebtedness, renewal, extension or refunding is not superior in right of payment to or is pari passu with the Debentures. SUBSIDIARY: The term "Subsidiary" shall mean any corporation at least a majority of whose outstanding voting stock shall at the time be owned by the Company or by one or more Subsidiaries or by the Company and one or more Subsidiaries. For the purposes only of this definition of the term "Subsidiary," the term "voting stock," as applied to the stock of any corporation, shall mean stock of any class or classes having ordinary voting power for the election of a majority of the directors of such corporation, other than stock having such power only by reason of the occurrence of a contingency. TRUSTEE: The term "Trustee" shall mean The First National Bank of Chicago and, subject to the provisions of Article Seven, shall also include its successors and assigns, and, if at any time there is more than one person acting in such capacity under this Indenture, "Trustee" shall mean each such person. The term "Trustee" as used with respect to a particular series of the Debentures shall mean the trustee with respect to that series. TRUST INDENTURE ACT: The term "Trust Indenture Act" shall mean, as of any time, the Trust Indenture Act of 1939, or any successor statute, as in effect at such time. - 7 - 10 ARTICLE TWO ISSUE, DESCRIPTION, TERMS, EXECUTION, REGISTRATION AND EXCHANGE OF DEBENTURES SECTION 2.01. The aggregate principal amount of Debentures which may be authenticated and delivered under this Indenture is unlimited. The Debentures may be issued in one or more series up to the aggregate principal amount of Debentures of that series from time to time authorized by or pursuant to a Board Resolution or pursuant to one or more indentures supplemental to this Indenture adopted or executed prior to the initial issuance of Debentures of a particular series. Prior to the initial issuance of Debentures of any series, there shall be established in or pursuant to a Board Resolution, and set forth in an Officers' Certificate, or established in one or more indentures supplemental to this Indenture: (1) the title of the Debentures of the series (which shall distinguish the Debentures of the series from all other Debentures); (2) any limit upon the aggregate principal amount of the Debentures of that series which may be authenticated and delivered under this Indenture (except for Debentures authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Debentures of that series); (3) the date or dates on which the principal of the Debentures of the series is payable or any formulary or other method or means by which such date or dates will be determined, by reference or otherwise (without regard to any provision for redemption, prepayment, acceleration, purchase or extension); (4) the rate or rates at which the Debentures of the series shall bear interest or the manner of calculation of such rate or rates, if any (including the rate or rates at which overdue principal shall bear interest, if different from the rate or rates at which such Debentures shall bear interest prior to maturity, and, if applicable, the rate or rates at which overdue premium or interest shall bear interest, if any); (5) the date or dates from which such interest shall accrue, the Interest Payment Dates on which such interest will be payable or the manner of determination of such Interest Payment Dates and the record date for the determination of holders to whom interest is payable on any such Interest Payment Dates; (6) the right, if any, to extend the interest payment periods and the maximum duration of any such extension; (7) the period or periods within which, the price or prices at which and the terms and conditions upon which, Debentures of the series may be redeemed, in whole or in part, at the option of the Company; - 8 - 11 (8) the obligation, if any, of the Company to redeem or purchase Debentures of the series pursuant to any sinking fund or analogous provisions (including payments made in cash in anticipation of future sinking fund obligations) or at the option of a holder of Debentures and the period or periods within which, the price or prices at which, and the terms and conditions upon which, Debentures of the series shall be redeemed or purchased, in whole or in part, pursuant to such obligation; (9) the form of the Debentures of the series including the form of the Certificate of Authentication for such series. (10) if other than denominations of $25 or any integral multiple of $25, the denominations in which the Debentures of the series shall be issuable; (11) any and all other terms with respect to such series (which terms shall not be inconsistent with the terms of this Indenture); and (12) whether the Debentures are issuable as a Global Debenture and, in such case, the identity for the Depository for such series. All Debentures of any one series shall be substantially identical except as to denomination and except as may otherwise be provided in or pursuant to any such Board Resolution or in any indentures supplemental to this Indenture. If any of the terms of the series are established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Officers' Certificate setting forth the terms of the series. SECTION 2.02. The Debentures of any series and the Trustee's certificate of authentication to be borne by such Debentures shall be substantially of the tenor and purport as set forth in one or more indentures supplemental to this Indenture or as provided in a Board Resolution and as set forth in an Officers' Certificate, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements printed, lithographed or engraved thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Indenture, or as may be required to comply with any law or with any rule or regulation made pursuant to such law or with any rule or regulation of any stock exchange on which Debentures of that series may be listed, or to conform to usage. SECTION 2.03. The Debentures shall be issuable as registered Debentures and in the denominations of $25 or any integral multiple of $25, subject to Section 2.01(10). The Debentures of a particular series shall bear interest payable on the dates and at the rate specified with respect to that series. The principal of and the interest on the Debentures of any series, as well as any premium on such Debentures in case of their redemption prior to maturity, shall be payable in the coin or currency of the United States of America which at the time is legal tender for public and private debt, at the office or agency of the Company maintained for that purpose in Decatur, Illinois. Each Debenture shall be dated the date of its authentication, subject to Section 2.01. - 9 - 12 The interest installment on any Debenture which is payable, and is punctually paid or duly provided for, on any Interest Payment Date for Debentures of that series shall be paid to the person in whose name said Debenture (or one or more Predecessor Debentures) is registered at the close of business on the regular record date for such interest installment. In the event that any Debenture of a particular series or portion of such Debenture is called for redemption and the redemption date is subsequent to a regular record date with respect to any Interest Payment Date and prior to such Interest Payment Date, interest on such Debenture will be paid upon presentation and surrender of such Debenture as provided in Section 3.03. Any interest on any Debenture which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date for Debentures of the same series ("Defaulted Interest") shall immediately cease to be payable to the registered holder on the relevant regular record date by virtue of having been such holder; and such Defaulted Interest shall be paid by the Company, at its election, as provided in clause (1) or clause (2) below: (1) The Company may make payment of any Defaulted Interest on Debentures to the persons in whose names such Debentures (or their respective Predecessor Debentures) are registered at the close of business on a special record date for the payment of such Defaulted Interest, which shall be fixed in the following manner: the Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each such Debenture and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the persons entitled to such Defaulted Interest as in this clause provided. Upon satisfaction of the conditions set forth in the immediately preceding sentence, the Trustee shall fix a special record date for the payment of such Defaulted Interest which shall not be more than 15 nor less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee promptly shall notify the Company of such special record date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the special record date for such payment to be mailed, first class postage prepaid, to each Debentureholder at such Debentureholder's address as it appears in the Debenture Register (as defined below), not less than 10 days prior to such special record date. Notice of the proposed payment of such Defaulted Interest and the special record date for such payment having been mailed as provided above, such Defaulted Interest shall be paid to the persons in whose names such Debentures (or their respective Predecessor Debentures) are registered on such special record date and shall be no longer payable pursuant following clause (2). (2) The Company may make payment of any Defaulted Interest on any Debentures in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Debentures may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. - 10 - 13 Unless otherwise set forth in a Board Resolution or one or more indentures supplemental to this Indenture establishing the terms of any series of Debentures pursuant to Section 2.01, the term "regular record date" as used in this Section with respect to a series of Debentures with respect to any Interest Payment Date for such series shall mean either the fifteenth day of the month immediately preceding the month in which an Interest Payment Date established for such series pursuant to Section 2.01 shall occur, if such Interest Payment Date is the first day of a month, or the last day of the month immediately preceding the month in which an Interest Payment Date established for such series pursuant to Section 2.01 shall occur, if such Interest Payment Date is the fifteenth day of a month, whether or not such date is a Business Day. Subject to the foregoing provisions of this Section, each Debenture of a series delivered under this Indenture upon transfer of or in exchange for or in lieu of any other Debenture of such series shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Debenture. SECTION 2.04. The Debentures shall, subject to the provisions of Section 2.06, be printed on steel engraved borders or fully or partially engraved, or legibly typed, as the proper officers of the Company may determine, and shall be signed on behalf of the Company by its Chairman or one of its Vice Presidents, under its corporate seal attested by its Secretary or one of its Assistant Secretaries. The signature of the Chairman or a Vice President and/or the signature of the Secretary or an Assistant Secretary in attestation of the corporate seal, upon the Debentures, may be in the form of a facsimile signature of a present or any future Chairman or Vice President and of a present or any future Secretary or Assistant Secretary and may be imprinted or otherwise reproduced on the Debentures and for that purpose the Company may use the facsimile signature of any person who shall have been a Chairman or Vice President, or of any person who shall have been a Secretary or Assistant Secretary, notwithstanding the fact that at the time the Debentures shall be authenticated and delivered or disposed of such person shall have ceased to be the Chairman or a Vice President, or the Secretary or an Assistant Secretary, of the Company, as the case may be. The seal of the Company may be in the form of a facsimile of the seal of the Company and may be impressed, affixed, imprinted or otherwise reproduced on the Debenture. Only such Debentures as shall bear on them a Certificate of Authentication substantially in the form established for such Debentures, executed manually by an authorized signatory of the Trustee, or by any Authenticating Agent with respect to such Debentures, shall be entitled to the benefits of this Indenture or be valid or obligatory for any purpose. Such certificate executed by the Trustee, or by any Authenticating Agent appointed by the Trustee with respect to such Debentures, upon any Debenture executed by the Company shall be conclusive evidence that the Debenture so authenticated has been duly authenticated and delivered under this Indenture and that the holder is entitled to the benefits of this Indenture. In authenticating such Debentures and accepting the additional responsibilities under this Indenture in relation to such Debentures, the Trustee shall be entitled to receive, and (subject to Section 7.01) shall be fully protected in relying upon, an Opinion of Counsel stating that the form and terms of such Debentures have been established in conformity with the provisions of this Indenture. - 11 - 14 The Trustee shall not be required to authenticate such Debentures if the issue of such Debentures pursuant to this Indenture will affect the Trustee's own rights, duties or immunities under the Debentures and this Indenture or otherwise in a manner which not reasonably acceptable to the Trustee. SECTION 2.05. (a) Debentures of any series may be exchanged upon their presentation at the office or agency of the Company designated for such purpose in Decatur, Illinois, for other Debentures of such series of authorized denominations, and for a like aggregate principal amount, upon payment of a sum sufficient to cover any tax or other governmental charge in relation to such exchange, all as provided in this Section. In respect of any Debentures so surrendered for exchange, the Company shall execute, the Trustee shall authenticate and such office or agency shall deliver in exchange for the Debenture or Debentures so surrendered a Debenture or Debentures of the same series which the Debentureholder making the exchange shall be entitled to receive, bearing numbers not contemporaneously outstanding. (b) The Company shall keep, or cause to be kept, at its office or agency designated for such purpose in Decatur, Illinois, or such other location designated by the Company, a register or registers (the "Debenture Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall register the Debentures and the transfers of Debentures as in this Article provided and which at all reasonable times shall be open for inspection by the Trustee. The registrar for the purpose of registering Debentures and transfer of Debentures as provided in this Indenture shall be the Trustee or such other registrar as may be appointed pursuant to a Board Resolution (the "Debenture Registrar"). Upon surrender for transfer of any Debenture at the office or agency of the Company designated for such purpose in Decatur, Illinois, the Company shall execute, the Trustee shall authenticate and such office or agency shall deliver in the name of the transferee or transferees a new Debenture or Debentures of the same series as the Debenture presented for a like aggregate principal amount. All Debentures presented or surrendered for exchange or registration of transfer, as provided in this Section, shall be accompanied (if so required by the Company or the Debenture Registrar) by a written instrument or instruments of transfer, in form satisfactory to the Company or the Debenture Registrar, duly executed by the registered holder or by his duly authorized attorney in writing. (c) No service charge shall be made for any exchange or registration of transfer of Debentures, or issue of new Debentures in case of partial redemption of any series, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge in relation to such exchange, registration or issue, other than exchanges pursuant to Section 2.06, the second paragraph of Section 3.03 and Section 9.04 not involving any transfer. (d) The Company shall not be required (i) to issue, exchange or register the transfer of any Debentures during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of less than all the outstanding Debentures of the same series and ending at the close of business on the day of such mailing or (ii) to register - 12 - 15 the transfer of or exchange any Debentures of any series or portions of such Debentures called for redemption. The provisions of this Section are, with respect to any Global Debenture, subject to Section 2.11. SECTION 2.06. Pending the preparation of definitive Debentures of any series, the Company may execute, and the Trustee shall authenticate and deliver, temporary Debentures (printed, lithographed or typewritten) of any authorized denomination, and substantially in the form of the definitive Debentures in lieu of which they are issued, but with such omissions, insertions and variations as may be appropriate for temporary Debentures, all as may be determined by the Company. Every temporary Debenture of any series shall be executed by the Company and be authenticated by the Trustee upon the same conditions and in substantially the same manner, and with like effect, as the definitive Debentures of such series. Without unnecessary delay the Company will execute and will furnish definitive Debentures of such series and after that any or all temporary Debentures of such series may be surrendered in exchange of such definitive Debentures (without charge to the holders), at the office or agency of the Company designated for the purpose in Decatur, Illinois, and the Trustee shall authenticate and such office or agency shall deliver in exchange for such temporary Debentures an equal aggregate principal amount of definitive Debentures of such series, unless the Company advises the Trustee to the effect that definitive Debentures need not be executed and furnished until further notice from the Company. Until so exchanged, the temporary Debentures of such series shall be entitled to the same benefits under this Indenture as definitive Debentures of such series authenticated and delivered under this Indenture. SECTION 2.07. In case any temporary or definitive Debenture shall become mutilated or be destroyed, lost or stolen, the Company (subject to the next succeeding sentence) shall execute, and upon its request the Trustee (subject as aforesaid) shall authenticate and deliver, a new Debenture of the same series bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated Debenture, or in lieu of and in substitution for the Debenture so destroyed, lost or stolen. In every case the applicant for a substituted Debenture shall furnish to the Company and to the Trustee such security or indemnity as may be required by them to save each of them harmless, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Company and to the Trustee evidence to their satisfaction of the destruction, loss or theft of the applicant's Debenture and of the ownership of such Debentures. The Trustee may authenticate any such substituted Debenture and deliver the same upon the written request or authorization of any officer of the Company. Upon the issuance of any substituted Debenture, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation to such issuance and any other expenses (including the fees and expenses of the Trustee) connected with such issuance. In case any Debenture which has matured or is about to mature shall become mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a substitute Debenture, pay or authorize the payment of the same (without surrender of that Debenture except in the case of a mutilated Debenture) if the applicant for such payment shall furnish to the Company and to the Trustee such security or indemnity as they may require to save them harmless, and, in case of destruction, loss or theft, evidence to the satisfaction of the Company and the Trustee of the destruction, loss or theft of such Debenture and of the ownership of such Debenture. - 13 - 16 Every Debenture issued pursuant to the provisions of this Section in substitution for any Debenture which is mutilated, destroyed, lost or stolen shall constitute an additional contractual obligation of the Company, whether or not the mutilated, destroyed, lost or stolen Debenture shall be found at any time, or be enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Debentures of the same series duly issued under this Indenture. All Debentures shall be held and owned upon the express condition that the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Debentures, and shall preclude (to the extent lawful) any and all other rights or remedies, notwithstanding any law or statute now existing or enacted after the date of this Indenture to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. SECTION 2.08. All Debentures surrendered for the purpose of payment, redemption, exchange or registration of transfer shall, if surrendered to the Company or any paying agent, be delivered to the Trustee for cancellation, or, if surrendered to the Trustee, shall be canceled by it, and no Debentures shall be issued in lieu of such Debentures except as expressly required or permitted by any of the provisions of this Indenture. On request of the Company, the Trustee shall deliver to the Company canceled Debentures held by the Trustee. In the absence of such request the Trustee may dispose of canceled Debentures in accordance with its standard procedures and deliver a certificate of disposition to the Company. If the Company shall otherwise acquire any of the Debentures, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Debentures unless and until the same are delivered to the Trustee for cancellation. SECTION 2.09. Nothing in this Indenture or in the Debentures, express or implied, shall give or be construed to give to any person, firm or corporation, other than the parties to this Indenture and the holders of the Debentures, any legal or equitable right, remedy or claim under or in respect of this Indenture, or under any covenant, condition or provision contained in this Indenture; all such covenants, conditions and provisions being for the sole benefit of the parties to this Indenture and of the holders of the Debentures. SECTION 2.10. So long as any of the Debentures of any series remain outstanding there may be an Authenticating Agent for any or all such series of Debentures which the Trustee shall have the right to appoint. Said Authenticating Agent shall be authorized to act on behalf of the Trustee to authenticate Debentures of such series issued upon their exchange, transfer or partial redemption, and Debentures so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee under this Indenture. All references in this Indenture to the authentication of Debentures by the Trustee shall be deemed to include authentication by an Authenticating Agent for such series except for authentication upon original issuance or pursuant to Section 2.07. Each Authenticating Agent shall be acceptable to the Company and shall be a corporation which has a combined capital and surplus, as most recently reported or determined by it, sufficient under the laws of any jurisdiction under which it is organized or in which it is doing business to conduct a trust business, and which is otherwise authorized under such laws to conduct such business and is subject to supervision or examination by federal or state authorities. If at any time any Authenticating Agent shall cease to be eligible in accordance with these provisions, it shall resign immediately. - 14 - 17 Any Authenticating Agent may at any time resign by giving written notice of resignation to the Trustee and to the Company. The Trustee may at any time (and upon request by the Company shall) terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent and to the Company. Upon resignation, termination or cessation of eligibility of any Authenticating Agent, the Trustee may appoint an eligible successor Authenticating Agent acceptable to the Company. Any successor Authenticating Agent, upon acceptance of its appointment under this Indenture, shall become vested with all the rights, powers and duties of its predecessor under this Indenture as if originally named as an Authenticating Agent pursuant to this Section. SECTION 2.11. (a) If the Company shall establish pursuant to Section 2.01 that the Debentures of a particular series are to be issued as a Global Debenture, then the Company shall execute and the Trustee shall, in accordance with Section 2.04, authenticate and deliver, a Global Debenture which (i) shall represent, and shall be denominated in an amount equal to the aggregate principal amount of, all of the Outstanding Debentures of such series, (ii) shall be registered in the name of the Depository or its nominee, (iii) shall be delivered by the Trustee to the Depository or pursuant to the Depository's instruction and (iv) shall bear a legend substantially to the following effect: "Except as otherwise provided in Section 2.11 of the Indenture, this Debenture may be transferred, in whole but not in part, only to another nominee of the Depository or to a successor Depository or to a nominee of such successor Depository." (b) Notwithstanding the provisions of Section 2.05, the Global Debenture of a series may be transferred, in whole but not in part and in the manner provided in Section 2.05, only to another nominee of the Depository for such series, or to a successor Depository for such series selected or approved by the Company or to a nominee of such successor Depository. (c) If at any time the Depository for a series of Debentures notifies the Company that it is unwilling or unable to continue as Depository for such series or if at any time the Depository for such series shall no longer be registered or in good standing under the Exchange Act, or other applicable statute or regulation and a successor Depository for such series is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such condition, as the case may be, this Section 2.11 shall no longer be applicable to the Debentures of such series and the Company will execute, and subject to Section 2.05, the Trustee will authenticate and deliver Debentures of such series in definitive registered form without coupons, in authorized denominations, and in an aggregate principal amount equal to the principal amount of the Global Debenture of such series in exchange for such Global Debenture. In addition, the Company may at any time determine that the Debentures of any series shall no longer be represented by a Global Debenture and that the provisions of this Section 2.11 shall no longer apply to the Debentures of such series. In such event the Company will execute and subject to Section 2.05, the Trustee, upon receipt of an Officers' Certificate evidencing such determination by the Company, will authenticate and deliver Debentures of such series in definitive registered form without coupons, in authorized denominations, and in an aggregate principal amount equal to the principal amount of the Global Debenture of such series in exchange for such Global Debenture. Upon the exchange of the Global Debenture for such Debentures in definitive registered form without coupons, in authorized denominations, the Global Debenture shall be canceled by the Trustee. Such Debentures in definitive registered form issued in exchange - 15 - 18 for the Global Debenture pursuant to this Section 2.11(c) shall be registered in such names and in such authorized denominations as the Depository, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Debentures to the Depository for delivery to the persons in whose names such Debentures are so registered. SECTION 2.12. Except as otherwise specified as contemplated by Section 2.01 for Debentures of any series, interest payable on the Debentures of each series for any period will be computed on the basis of a 360-day year consisting of twelve 30-day months and for any period shorter than a full month, on the basis of actual number of days elapsed in such period. In the event that any date on which interest is payable on any series of Debentures is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. SECTION 2.13. So long as any Debentures remain outstanding, if Illinois Power Capital shall be required to pay any interest on dividends in arrears in respect of Debentures of any series pursuant to the terms of such Debentures, then the Company will pay as interest ("Additional Interest") an amount equal to such interest on dividends in arrears. In addition, if Illinois Power Capital would be required to pay any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States, or any other taxing authority, then, in any such case, the Company shall also pay as Additional Interest such amounts as shall be required so that the net amount received and retained by Illinois Power Capital after paying any such taxes, duties, assessments or governmental charges will not be less than the amounts Illinois Power Capital would have received had no such taxes, duties, assessments or governmental charges been imposed. ARTICLE THREE REDEMPTION OF DEBENTURES AND SINKING FUND PROVISIONS SECTION 3.01. The Company may redeem the Debentures of any series issued under this Indenture on and after the dates and in accordance with the terms established for such series pursuant to Section 2.01. SECTION 3.02. (a) In case the Company shall desire to exercise such right to redeem all or, as the case may be, a portion of the Debentures of any series in accordance with the right reserved so to do, it shall give notice of such redemption to holders of the Debentures of such series to be redeemed by mailing, first class postage prepaid, a notice of such redemption not less than 30 days and not more than 60 days before the date fixed for redemption of that series to such holders at their last addresses as they shall appear upon the Debenture Register. Any notice which is mailed in the manner provided in this Indenture shall be conclusively presumed to have been duly given, whether or not the registered holder receives the notice. In any case, failure duly to give such notice to the holder of any Debenture of any series designated for redemption in whole or in part, or any defect in the - 16 - 19 notice, shall not affect the validity of the proceedings for the redemption of any other Debentures of such series or any other series. In the case of any redemption of Debentures prior to the expiration of any restriction on such redemption provided in the terms of such Debentures or elsewhere in this Indenture, the Company shall furnish the Trustee with an Officers' Certificate evidencing compliance with any such restriction. Each such notice of redemption shall specify the date fixed for redemption and the redemption price at which Debentures of that series are to be redeemed, and shall state that payment of the redemption price of such Debentures to be redeemed will be made at the office or agency of the Company in Decatur, Illinois, upon presentation and surrender of such Debentures, that interest accrued to the date fixed for redemption will be paid as specified in said notice, that from and after said date interest will cease to accrue and that the redemption is for a sinking fund, if such is the case. If less than all the Debentures of a series are to be redeemed, the notice to the holders of Debentures of that series to be redeemed in whole or in part shall specify the particular Debentures to be so redeemed. In case any Debenture is to be redeemed in part only, the notice which relates to such Debenture shall state the portion of the principal amount of such Debenture to be redeemed, and shall state that on and after the redemption date, upon surrender of such Debenture, a new Debenture or Debentures of such series in principal amount equal to the unredeemed portion of such Debenture or Debentures will be issued. (b) If less than all the Debentures of a series are to be redeemed, the Company shall give the Trustee at least 45 days' notice in advance of the date fixed for redemption as to the aggregate principal amount of Debentures of the series to be redeemed, and upon receipt of such notice the Trustee shall select, by lot or in such other manner as it shall deem appropriate and fair in its discretion and which may provide for the selection of a portion or portions (equal to $25 or any integral multiple of $25, subject to Section 2.01(10)) of the principal amount of such Debentures of a denomination larger than $25 (subject to Section 2.01(10)), the Debentures to be redeemed and promptly shall notify the Company in writing of the numbers of the Debentures to be redeemed, in whole or in part. The Company may, if and whenever it shall so elect, by delivery of instructions signed on its behalf by its Chairman or any Vice President, instruct the Trustee or any paying agent to call all or any part of the Debentures of a particular series for redemption and to give notice of redemption in the manner set forth in this Section, such notice to be in the name of the Company or its own name as the Trustee or such paying agent may deem advisable. In any case in which notice of redemption is to be given by the Trustee or any such paying agent, the Company shall deliver or cause to be delivered to, or permit to remain with, the Trustee or such paying agent, as the case may be, such Debenture Register, transfer books or other records, or suitable copies or extracts from the Debenture Register, sufficient to enable the Trustee or such paying agent to give any notice by mail that may be required under the provisions of this Section. SECTION 3.03. (a) If the giving of notice of redemption shall have been completed as provided above, the Debentures or portions of Debentures of the series to be redeemed specified in such notice shall become due and payable on the date and at the place stated in such notice at the applicable redemption price, together with interest accrued to the date fixed for redemption and interest on such Debentures or portions of Debentures shall - 17 - 20 cease to accrue on and after the date fixed for redemption, unless the Company shall default in the payment of such redemption price and accrued interest with respect to any such Debentures or portion of such Debentures. On presentation and surrender of such Debentures on or after the date fixed for redemption at the place of payment specified in the notice, said Debentures shall be paid and redeemed at the applicable redemption price for such series, together with interest accrued on them to the date fixed for redemption (but if the date fixed for redemption is an interest payment date, the interest installment payable on such date shall be payable to the registered holder at the close of business on the applicable record date pursuant to Section 2.03). (b) Upon presentation of any Debenture of such series which is to be redeemed in part only, the Company shall execute and the Trustee shall authenticate and the office or agency where the Debenture is presented shall deliver to the holder of such Debenture, at the expense of the Company, a new Debenture or Debentures of the same series, of authorized denominations in principal amount equal to the unredeemed portion of the Debenture so presented. SECTION 3.04. The provisions of Sections 3.04, 3.05 and 3.06 shall be applicable to any sinking fund for the retirement of Debentures of a series, except as otherwise specified as contemplated by Section 2.01 for Debentures of such series. The minimum amount of any sinking fund payment provided for by the terms of Debentures of any series is a "mandatory sinking fund payment," and any payment in excess of such minimum amount provided for by the terms of Debentures of any series is an "optional sinking fund payment." If provided for by the terms of Debentures of any series, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 3.05. Each sinking fund payment shall be applied to the redemption of Debentures of any series as provided for by the terms of Debentures of such series. SECTION 3.05. The Company (i) may deliver Outstanding Debentures of a series (other than any previous called for redemption) and (ii) may apply as a credit Debentures of a series which have been redeemed either at the election of the Company pursuant to the terms of such Debentures or through the application of permitted optional sinking fund payments pursuant to the terms of such Debentures, in each case in satisfaction of all or any part of any sinking fund payment with respect to the Debentures of such series required to be made pursuant to the terms of such Debentures; provided that such Debentures have not been previously so credited. Such Debentures shall be received and credited for such purpose by the Trustee at the redemption price specified in such Debentures for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly. SECTION 3.06. Not less than 45 days prior to each sinking fund payment date for any series of Debentures, the Company will deliver to the Trustee an Officers' Certificate specifying the amount of the next ensuing sinking fund payment for that series pursuant to the terms of that series, the portion of such payment, if any, which is to be satisfied by delivering and crediting Debentures of that series pursuant to Section 3.05 and the basis for such credit and will, together with such Officers' Certificate, deliver to the Trustee any Debentures to be so delivered. Not less than 30 days before each such sinking fund payment - 18 - 21 date the Trustee shall select the Debentures to be redeemed upon such sinking fund payment date in the manner specified in Section 3.02 and cause notice of the redemption of such Debentures to be given in the name of and at the expense of the Company in the manner provided in Section 3.02. Such notice having been duly given, the redemption of such Debentures shall be made upon the terms and in the manner stated in Section 3.03. ARTICLE FOUR PARTICULAR COVENANTS OF THE COMPANY The Company covenants and agrees for each series of the Debentures as follows: SECTION 4.01. The Company will duly and punctually pay or cause to be paid the principal of (and premium, if any) and interest on the Debentures of that series at the time and place and in the manner provided in this Indenture and established with respect to such Debentures. SECTION 4.02. So long as any series of the Debentures remains outstanding, the Company agrees to maintain an office or agency in Decatur, Illinois, with respect to each such series and at such other location or locations as may be designated as provided in this Section 4.02, where (i) Debentures of that series may be presented for payment, (ii) Debentures of that series may be presented as authorized above for registration of transfer and exchange, and (iii) notices and demands to or upon the Company in respect of the Debentures of that series and this Indenture may be given or served, such designation to continue with respect to such office or agency until the Company shall, by written notice signed by its President or a Vice President and delivered to the Trustee, designate some other office or agency for such purposes or any of them. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address of such office, such presentations, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, notices and demands. SECTION 4.03. (a) If the Company shall appoint one or more paying agents for all or any series of the Debentures, other than the Trustee, the Company will cause each such paying agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provisions of this Section: (1) that it will hold all sums held by it as such agent for the payment of the principal of (and premium, any) or interest on the Debentures of that series (whether such sums have been paid to it by the Company or by any other obligor of such Debentures) in trust for the benefit of the persons entitled thereto; (2) that it will give the Trustee notice of any failure by the Company (or by any other obligor of such Debentures) to make any payment of the principal of (and premium, if any) or interest on the Debentures of that series when the same shall be due and payable; - 19 - 22 (3) that it will, at any time during the continuance of any failure referred to in clause (2) above, upon the written request of the Trustee, immediately pay to the Trustee all sums so held in trust by such paying agent; and (4) that it will perform all other duties of paying agent as set forth in this Indenture. (b) If the Company shall act as its own paying agent with respect to any series of the Debentures, it will on or before each due date of the principal of (and premium, if any) or interest on Debentures of that series, set aside, segregate and hold in trust for the benefit of the persons entitled to receive such principal, premium or interest, a sum sufficient to pay such principal (and premium, if any) or interest so becoming due on Debentures of that series until such sums shall be paid to such persons or otherwise disposed of as provided in this Indenture and will promptly notify the Trustee of such action, or any failure (by it or any other obligor on such Debentures) to take such action. Whenever the Company shall have one or more paying agents for any series of Debentures, it will, prior to each due date of the principal of (and premium, if any) or interest on any Debentures of that series, deposit with the paying agent a sum sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held, in trust for the benefit of the persons entitled to such principal, premium or interest, and (unless such paying agent is the Trustee) the Company promptly will notify the Trustee of its action or failure so to act. (c) Anything in this Section to the contrary notwithstanding, (i) the agreement to hold sums in trust as provided in this Section is subject to the provisions of Section 11.05, and (ii) the Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or direct any paying agent to pay, to the Trustee all sums held in trust by the Company or such paying agent, such sums to be held by the Trustee upon the same terms and conditions as those upon which such sums were held by the Company or such paying agent; and, upon such payment by any paying agent to the Trustee, such paying agent shall be released from all further liability with respect to such money. SECTION 4.04. The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 7.10, a Trustee, so that there shall at all times be a Trustee under this Indenture. SECTION 4.05. The Company will not, while any of the Debentures remain outstanding, consolidate with, or merge into, or merge into itself, or sell or convey all or substantially all of its property to any other company unless the provisions of Article Ten are complied with. SECTION 4.06. The Company will not declare or pay any dividend on, or redeem, purchase, acquire or make a distribution or liquidation payment with respect to, any of its capital stock if at such time (i) there shall have occurred and be continuing any event that would constitute an Event of Default under the Indenture, (ii) the Company shall be in default with respect to its payment of any obligations under any Guarantee, if issued or (iii) the Company shall have given notice of its selection of an extended interest payment period as - 20 - 23 provided in Section 2.01 of this Indenture and such period, or any extension of such period, shall be continuing. ARTICLE FIVE DEBENTUREHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE SECTION 5.01. Semiannually, not later than June 30 and December 1 in each year, commencing __________ ___, 199__, and at such other times as the Trustee may request in writing, the Company will furnish or cause to be furnished to the Trustee a list, in such form as the Trustee may reasonably require, of the names and addresses of the holders of each series of Debentures as of such regular record date, provided, that the Company shall not be obligated to furnish or cause to be furnished such list at any time that the list shall not differ in any respect from the most recent list furnished to the Trustee by the Company; provided, further, that no such list need be furnished for any series of Debentures for which the Trustee shall be the Debenture Registrar. SECTION 5.02. Not later than December 31 in each year, the Trustee shall transmit to the Debentureholders and the Commission a report with respect to any events and other matters described in Section 313(a) of the Trust Indenture Act, in such manner and to the extent required by the Trust Indenture Act. The Trustee shall transmit to the Debentureholders and the Commission, and the Company shall file with the Trustee (within 30 days after filing with the Commission in the case of reports which pursuant to the Trust Indenture Act must be filed with the Commission and furnished to the Trustee) and transmit to the Debentureholders, such other information, reports and other documents, if any, at such times and in such manner, as shall be required by the Trust Indenture Act. ARTICLE SIX REMEDIES OF THE TRUSTEE AND DEBENTUREHOLDERS ON EVENT OF DEFAULT SECTION 6.01. (a) Whenever used in this Indenture with respect to Debentures of a particular series, "Event of Default" means any one or more of the following events which has occurred and is continuing: (1) default in the payment of any installment of interest, including any Additional Interest, upon any of the Debentures of that series, as and when the same shall become due and payable, and continuance of such default for a period of 10 days (whether or not payment is prohibited by the provisions of Article Fourteen of this Indenture); provided, however, that a valid extension of the interest payment period by the Company pursuant to Section 2.01(6) shall not constitute a failure to pay interest for this purpose; - 21 - 24 (2) default in the payment of the principal of (or premium, if any, on) any of the Debentures of that series as and when the same shall become due and payable whether at maturity, upon redemption, by declaration or otherwise, or in any payment required by any sinking or analogous fund established with respect to that series (whether or not payment is prohibited by the provisions of Article Fourteen of this Indenture); (3) failure on the part of the Company duly to observe or perform any other of the covenants or agreements on the part of the Company with respect to that series contained in such Debentures or otherwise established with respect to that series of Debentures pursuant to Section 2.01 or contained in this Indenture (other than a covenant or agreement which has been expressly included in this Indenture solely for the benefit of one or more series of Debentures other than such series) for a period of 90 days after the date on which written notice of such failure, requiring the same to be remedied and stating that such notice is a "Notice of Default" under this Indenture, shall have been given to the Company by the Trustee, by registered or certified mail, or to the Company and the Trustee by the holders of at least 25% in principal amount of the Debentures of that series at the time outstanding; (4) a decree or order by a court having jurisdiction in the premises shall have been entered adjudging the Company or Illinois Power Capital a bankrupt or insolvent, or approving as properly filed a petition seeking liquidation or reorganization of the Company under the Federal Bankruptcy Code or any other similar applicable federal or state law, and such decree or order shall have continued unvacated and unstayed for a period of 90 consecutive days; or an involuntary case shall be commenced under such Code in respect of the Company or Illinois Power Capital and shall continue undismissed for a period of 90 days or an order for relief in such case shall have been entered; or a decree or order of a court having jurisdiction in the premises shall have been entered for the appointment on the ground of insolvency or bankruptcy of a receiver or custodian or liquidator or trustee or assignee in bankruptcy or insolvency of the Company or Illinois Power Capital or a substantial portion of its property, or for the winding up or liquidation of its affairs, and such decree or order shall have remained in force unvacated and unstayed for a period of 90 consecutive days; (5) the Company or Illinois Power Capital shall institute proceedings to be adjudicated a voluntary bankrupt, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking liquidation or reorganization under the Federal Bankruptcy Code or any other similar applicable federal or state law, or shall consent to the filing of any such petition, or shall consent to the appointment on the ground of insolvency or bankruptcy of a receiver or custodian or liquidator or trustee or assignee in bankruptcy or insolvency of it or of its property, or shall make an assignment for the benefit of creditors; or (6) so long as any series of Debentures issued in connection with the application of the proceeds from the issuance and sale of a series of Preferred Securities of Illinois Power Capital remain outstanding, Illinois Power Capital shall have dissolved, wound up its business or otherwise terminated its existence except in connection with the distribution of Debentures to limited partners of Illinois Power - 22 - 25 Capital in liquidation of their interests in Illinois Power Capital and in connection with certain mergers, consolidations or amalgamations permitted by the Limited Partnership Agreement. (b) In each and every such case, unless the principal of all the Debentures of that series shall have already become due and payable, either the Trustee or the holders of not less than 25% in aggregate principal amount of the Debentures of that series then outstanding under this Indenture, by notice in writing to the Company (and to the Trustee if given by such Debentureholders), may declare the principal of all the Debentures of that series to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, anything contained in this Indenture or in the Debentures of that series or established with respect to that series pursuant to Section 2.01 to the contrary notwithstanding. (c) This provision, however, is subject to the condition that if, at any time after the principal of the Debentures of that series shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as provided below, the Company shall pay or shall deposit with the Trustee a sum sufficient to pay all matured installments of interest upon all the Debentures of that series and the principal of (and premium, if any, on) any and all Debentures of that series which shall have become due otherwise than by acceleration (with interest upon such principal and premium, if any, and, to the extent that such payment is enforceable under applicable law, upon overdue installments of interest, at the rate per annum expressed in the Debentures of that series to the date of such payment or deposit) and the amount payable to the Trustee under Section 7.06, and any and all defaults under the Indenture, other than the nonpayment of principal on Debentures of that series which shall not have become due by their terms, shall have been remedied or waived as provided in Section 6.06 then and in every such case the holders of a majority in aggregate principal amount of the Debentures of that series then outstanding, by written notice to the Company and to the Trustee, may rescind and annul such declaration and its consequences; but no such rescission and annulment shall extend to or shall affect any subsequent default, or shall impair any right consequent thereon. (d) In case the Trustee shall have proceeded to enforce any right with respect to Debentures of that series under this Indenture and such proceedings shall have been discontinued or abandoned because of such rescission or annulment or for any other reason or shall have been determined adversely to the Trustee; then and in every such case the Company and the Trustee shall be restored respectively to their former positions and rights under this Indenture, and all rights, remedies and powers of the Company and the Trustee shall continue as though no such proceedings had been taken. SECTION 6.02. (a) The Company covenants that (1) in case default shall be made in the payment of any installment of interest on any of the Debentures of a series, or any payment required by any sinking or analogous fund established with respect to that series as and when the same shall have become due and payable, and such default shall have continued for a period of 10 Business Days or (2) in case default shall be made in the payment of the principal of (or premium, if any, on) any of the Debentures of a series when the same shall have become due and payable, whether upon maturity of the Debentures of a series or upon redemption or upon declaration or otherwise, then, upon demand of the Trustee, the - 23 - 26 Company will pay to the Trustee, for the benefit of the holders of the Debentures of that series, the whole amount that then shall have become due and payable on all such Debentures for principal (and premium, if any) or interest, or both, as the case may be, with interest upon the overdue principal (and premium, if any) and (to the extent that payment of such interest is enforceable under applicable law) upon overdue installments of interest at the rate per annum expressed in the Debentures of that series; and, in addition to the foregoing amounts, such further amount as shall be sufficient to cover the costs and expenses of collection, and the amount payable to the Trustee under Section 7.06. (b) In case the Company shall fail immediately to pay such amounts upon such demand, the Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any action or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceeding to judgment or final decree, and may enforce any such judgment or final decree against the Company or other obligor upon the Debentures of that series and collect in the manner provided by law out of the property of the Company or other obligor upon the Debentures of that series wherever situated the moneys adjudged or decreed to be payable. (c) In case of any receivership, insolvency, liquidation, bankruptcy, reorganization, readjustment, arrangement, composition or other judicial proceedings affecting the Company, any other obligor on such Debentures, or the creditors or property of either, the Trustee shall have power to intervene in such proceedings and take any action in such proceedings that may be permitted by the court and shall (except as may be otherwise provided by law) be entitled to file such proofs of claim and other papers and documents as may be necessary or advisable in order to have the claims of the Trustee and of the holders of Debentures of such series allowed for the entire amount due and payable by the Company or such other obligor under the Indenture at the date of institution of such proceedings and for any additional amount which may become due and payable by the Company or such other obligor after such date, and to collect and receive any moneys or other property payable or deliverable on any such claim, and to distribute the same after the deduction of the amount payable to the Trustee under Section 7.06; and any receiver, assignee or trustee in bankruptcy or reorganization is authorized by each of the holders of Debentures of such series to make such payments to the Trustee, and, in the event that the Trustee shall consent to the making of such payments directly to such Debentureholders, to pay to the Trustee any amount due it under Section 7.06. (d) All rights of action and of asserting claims under this Indenture, or under any of the terms established with respect to Debentures of that series, may be enforced by the Trustee without the possession of any of such Debentures, or the production of such Debentures at any trial or other proceeding relative to such Debentures, and any such suit or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for payment to the Trustee of any amounts due under Section 7.06, be for the ratable benefit of the holders of the Debentures of such series. In case of an Event of Default under this Indenture, the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of - 24 - 27 such rights, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in the Indenture or in aid of the exercise of any power granted in this Indenture, or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law. Nothing contained in this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Debentureholder any plan of reorganization, arrangement, adjustment or composition affecting the Debentures of that series or the rights of any holder of such Debentures or to authorize the Trustee to vote in respect of the claim of any Debentureholder in any such proceeding. SECTION 6.03. Any moneys collected by the Trustee pursuant to Section 6.02 with respect to a particular series of Debentures shall be applied in the order following, at the date or dates fixed by the Trustee and, in case of the distribution of such moneys on account of principal (or premium, if any) or interest, upon presentation of the several Debentures of that series, and stamping thereon the payment, if only partially paid, and upon surrender of such Debenture if fully paid: FIRST: To the payment of costs and expenses of collection and of all amounts payable to the Trustee under Section 7.06; and SECOND: To the payment of the amounts then due and unpaid upon Debentures of such series for principal (and premium, if any) and interest, in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Debentures for principal (and premium, if any) and interest, respectively. SECTION 6.04. No holder of any Debenture of any series shall have any right by virtue of or by availing of any provision of this Indenture to institute any suit, action or proceeding in equity or at law upon or under or with respect to this Indenture or for the appointment of a receiver or trustee, or for any other remedy under this Indenture, unless such holder previously shall have given to the Trustee written notice of an Event of Default and of the continuance of such Event of Default with respect to Debentures of such series specifying such Event of Default, as provided above, and unless also the holders of not less than 25% in aggregate principal amount of the Debentures of such series then outstanding shall have made written request upon the Trustee to institute such action, suit or proceeding in its own name as trustee under this Indenture and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred in such action, suit or proceeding, and the Trustee for 60 days after its receipt of such notice, request and offer of indemnity, shall have failed to institute any such action, suit or proceeding; it being understood and intended, and being expressly covenanted by the taker and holder of every Debenture of such series with every other such taker and holder and the Trustee, that no one or more holders of Debentures of such series shall have any right in any manner whatsoever by virtue or by availing of any provision of this Indenture to affect, disturb or prejudice the rights of the holders of any other of such Debentures, or to obtain or seek to obtain priority over or preference to any other such holder, or to enforce any right under this Indenture, except in the manner provided in this Indenture and for the equal, ratable and common benefit of all holders of Debentures of such series. For the protection and - 25 - 28 enforcement of the provisions of this Section, each and every Debentureholder and the Trustee shall be entitled to such relief as can be given either at law or in equity. Notwithstanding any other provisions of this Indenture, however, the right of any holder of any Debenture to receive payment of the principal of (and premium, if any) and interest on such Debenture, as provided in such Debenture, on or after the respective due dates expressed in such Debenture (or in the case of redemption, on the redemption date), or to institute suit for the enforcement of any such payment on or after such respective dates or redemption date, shall not be impaired or affected without the consent of such holder. SECTION 6.05. (a) All powers and remedies given by this Article to the Trustee or to the Debentureholders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any other of such powers and remedies or of any other powers and remedies available to the Trustee or the holders of the Debentures, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Indenture or otherwise established with respect to such Debentures. (b) No delay or omission of the Trustee or of any holder of any of the Debentures to exercise any right or power accruing upon any Event of Default occurring and continuing as aforesaid shall impair any such right or power, or shall be construed to be a waiver of any such default or an acquiescence in such default; and, subject to the provisions of Section 6.04, every power and remedy given by this Article or by law to the Trustee or to the Debentureholders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Debentureholders. SECTION 6.06. The holders of a majority in a principal amount of the Debentures of any series at the time outstanding, determined in accordance with Section 8.04, shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee with respect to such series; provided, however, that such direction shall not be in conflict with any rule of law or with this Indenture or unduly prejudicial to the rights of holders of Debentures of any other series at the time outstanding determined in accordance with Section 8.04 not parties to such proceeding. Subject to the provisions of Section 7.01 the Trustee shall have the right to decline to follow any such direction if the Trustee in good faith shall, by a Responsible Officer or Officers of the Trustee, determine that the proceeding so directed would involve the Trustee in personal liability. The holders of a majority in aggregate principal amount of the Debentures of all series at the time outstanding affected by such waiver, determined in accordance with Section 8.04, may on behalf of the holders of all of the Debentures of such series waive any past default in the performance of any of the covenants contained in this Indenture or established pursuant to Section 2.01 with respect to such series and its consequences, except a default in the payment of the principal of, or premium, if any, or interest on, any of the Debentures of that series as and when the same shall become due by the terms of such Debentures or a call for redemption of Debentures of that series. Upon any such waiver, the default covered by such waiver shall be deemed to be cured for all purposes of this Indenture and the Company, the Trustee and the holders of the Debentures of such series shall be restored to their former positions and rights under this Indenture, - 26 - 29 respectively; but no such waiver shall extend to any subsequent or other default or impair any right consequent on such waiver. SECTION 6.07. The Trustee shall, within 90 days after the occurrence of a default with respect to a particular series, transmit by mail, first class postage prepaid, to the holders of Debentures of that series, as their names and addresses appear upon the Debenture Register, notice of all defaults with respect to that series known to the Trustee, unless such defaults shall have been cured before the giving of such notice (the term "defaults" for the purposes of this Section being the events specified in subsections (1), (2), (3), (4), (5) and (6) of Section 6.01(a), not including any periods of grace provided for in Section 6.01(a) and irrespective of the giving of notice provided for by subsection (3) of Section 6.01(a)); provided, that, except in the case of default in the payment of the principal of (or premium, if any) or interest on any of the Debentures of that series or in the payment of any sinking fund installment established with respect to that series, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors and/or Responsible Officers, of the Trustee in good faith determine that the withholding of such notice is in the interests of the holders of Debentures of that series; provided further, that in the case of any default of the character specified in Section 6.01(a)(3) with respect to Debentures of such series no such notice to the holders of the Debentures of that series shall be given until at least 30 days after the occurrence of such default. The Trustee shall not be deemed to have knowledge of any default, except (i) a default under Section 6.01 (a)(1) or (a)(2) as long as the Trustee is acting as paying agent for such series of Debentures or (ii) any default as to which the Trustee shall have received written notice or a Responsible Officer charged with the administration of this Indenture shall have obtained written notice. SECTION 6.08. All parties to this Indenture agree, and each holder of any Debentures by his or her acceptance of such Debenture shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by, any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Trustee, to any suit instituted by any Debentureholder, or group of Debentureholders, holding more than 10% in aggregate principal amount of the outstanding Debentures of any series, or to any suit instituted by any Debentureholder for the enforcement of the payment of the, principal of (or premium, if any) or interest on any Debenture of such series, on or after the respective due dates expressed in such Debenture or established pursuant to this Indenture. - 27 - 30 ARTICLE SEVEN CONCERNING THE TRUSTEE SECTION 7.01. (a) The Trustee shall have and be subject to all the duties and responsibilities specified with respect to an indenture trustee under the Trust Indenture Act. (b) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) prior to the occurrence of an Event of Default with respect to Debentures of a series and after the curing or waiving of all such Events of Default with respect to that series which may have occurred: (i) the duties and obligations of the Trustee shall with respect to Debentures of such series be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable with respect to Debentures of such series except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on the part of the Trustee, the Trustee may with respect to Debentures of such series conclusively rely, as to the truth of the statements and the correctness of the opinions expressed in such Debenture, upon any certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of and such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (3) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the holders of not less than a majority in principal amount of the Debentures of any series at the time outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under this Indenture with respect to the Debentures of that series; and (4) None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if there is reasonable ground for believing that the repayment of such funds or liability - 28 - 31 is not reasonably assured to it under the terms of this Indenture or adequate indemnity against such risk is not reasonably assured to it. SECTION 7.02. Except as otherwise provided in Section 7.01 and in the Trust Indenture Act: (a) The Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, security or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) Any request, direction, order or demand of the Company mentioned in this Indenture shall be sufficiently evidenced by a Board Resolution or an instrument signed in the name of the Company by the Chairman or any Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer (unless other evidence in respect such request, direction, order or demand is specifically prescribed in this Indenture); (c) The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted under this Indenture in good faith and in reliance on such advice or opinion; (d) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Debentureholders, pursuant to the provisions of this Indenture, unless such Debentureholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred in the exercise of such rights or power; nothing contained in this Indenture shall, however, relieve the Trustee of the obligation, upon the occurrence of an Event of Default with respect to a series of the Debentures (which has not been cured or waived) to exercise with respect to Debentures of that series such of the rights and powers vested in it by this Indenture, and to use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs; (e) The Trustee shall not be liable for any action taken or omitted to be taken by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; (f) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, security, or other papers or documents, unless requested in writing so to do by the holders of not less than a majority in principal amount of the outstanding Debentures of the particular series affected by such facts or matters (determined as provided in Section 8.04); provided, however, that if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity against such costs, expenses or liabilities as a condition to so - 29 - 32 proceeding. The reasonable expense of every such examination shall be paid by the Company or, if paid by the Trustee, shall be repaid by the Company upon demand; and (g) The Trustee may execute any of the trusts or powers under this Indenture or perform any duties under this Indenture either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it under this Indenture. SECTION 7.03. (a) The recitals contained in this Indenture and in the Debentures (other than the Certificate of Authentication on the Debentures) shall be taken as the statements of the Company, and the Trustee assumes no responsibility for the correctness of the same. (b) The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Debentures. (c) The Trustee shall not be accountable for the use or application by the Company of any of the Debentures or of the proceeds of such Debentures, or for the use or application of any moneys paid over by the Trustee in accordance with any provision of this Indenture or established pursuant to Section 2.01, or for the use or application of any moneys received by any paying agent other than the Trustee. SECTION 7.04. The Trustee or any paying agent or Debenture Registrar, in its individual or any other capacity, may become the owner or pledgee of Debentures and, subject to Sections 7.08 and 7.13, may otherwise deal with the Company with the same rights it would have if it were not the Trustee, paying agent or Debenture Registrar. SECTION 7.05. Subject to the provisions of Section 11.03, all money received by the Trustee shall, until used or applied as provided in this Indenture, be held in trust for the purposes for which it was received, but need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it under this Indenture except such as it may agree with the Company to pay on such money. SECTION 7.06. (a) The Company covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to, reasonable compensation (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) for all services rendered by it in the execution of the trusts created by this Indenture and in the exercise and performance of any of the powers and duties of the Trustee under this Indenture, and the Company will pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its negligence or bad faith. The Company also covenants to indemnify the Trustee (and its officers, agents, directors and employees) for, and to hold it harmless against, any loss, liability or expense incurred without negligence, willful misconduct or bad faith on the part of the Trustee and arising out of or in connection with the acceptance or administration of this - 30 - 33 trust, including the costs and expenses of defending itself against any claim of liability in the premises. (b) The obligations of the Company under this Section to compensate and indemnify the Trustee and to pay or reimburse the Trustee for expenses, disbursements and advances shall constitute additional indebtedness under this Indenture. Such additional indebtedness shall be secured by a lien prior to that of the Debentures upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the holders of particular Debentures. SECTION 7.07. Except as otherwise provided in Section 7.01, whenever in the administration of the provisions of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering or omitting to take any action under this Indenture, such matter (unless other evidence in respect of such matter be specifically prescribed in this Indenture) may, in the absence of negligence or bad faith on the part of the Trustee, be deemed to be conclusively proved and established by an Officers' Certificate delivered to the Trustee and such certificate, in the absence of negligence or bad faith on the part of the Trustee, shall be full warrant to the Trustee for any action taken, suffered or omitted to be taken by it under the provisions of this Indenture upon the faith of such Officers' Certificate. SECTION 7.08. If the Trustee has or shall acquire any conflicting interest within the meaning of the Trust Indenture Act, it shall either eliminate such conflicting interests or resign to the extent, in the manner and with the effect, and subject to the conditions, provided in the Trust Indenture Act or this Indenture. For purposes of Section 310(b)(1) of the Trust Indenture Act and to the extent permitted by that Section, the Trustee, in its capacity as trustee in respect of the Debentures of any series, shall not be deemed to have a conflicting interest arising from its capacity as trustee in respect of the Debentures of any other series. SECTION 7.09. There shall at all times be a Trustee with respect to the Debentures issued under this Indenture which shall at all times be a corporation organized and doing business under the laws of the United States of America or any state or territory of the United States or of the District of Columbia, or a corporation or other person permitted to act as trustee by the Commission, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million dollars, subject to supervision or examination by federal, state, territorial, or District of Columbia authority and qualified and eligible under the Trust Indenture Act. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of such supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. The Company may not, nor may any person directly or indirectly controlling, controlled by, or under common control with the Company, serve as Trustee. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, the Trustee shall resign immediately in the manner and with the effect specified in Section 7.10. SECTION 7.10. (a) The Trustee or any successor hereafter appointed, may at any time resign with respect to the Debentures of one or more series by giving written notice - 31 - 34 of such resignation to the Company and by transmitting notice of resignation by mail, first class postage prepaid, to the Debentureholders of such series, as their names and addresses appear upon the Debenture Register. Upon receiving such notice of resignation, the Company shall by Board Resolution promptly appoint a successor trustee with respect to Debentures of such series. If no successor trustee shall have been so appointed and have accepted appointment within 30 days after the mailing of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor trustee with respect to Debentures of such series, or any Debentureholder of that series who has been a bona fide holder of a Debenture or Debentures for at least six months may, subject to the provisions of Section 6.08, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor trustee. Such court may thereupon after such notice, if any, as it may deem proper and prescribe, appoint a successor trustee. (b) If at any time: (1) the Trustee shall fail to comply with the provisions of subsection (a) of Section 7.08 after written request therefor by the Company or by any Debentureholder who has been a bona fide holder of a Debenture or Debentures for at least six months; or (2) the Trustee shall cease to be eligible in accordance with the provisions of Section 7.09 and shall fail to resign after written request therefor by the Company or by any such Debentureholder of Debentures; or (3) the Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then, in any such case, the Company by a Board Resolution may remove the Trustee with respect to all Debentures and appoint a successor trustee, or, subject to the provisions of Section 6.08, unless the Trustee's duty to resign is stayed as provided in this Indenture, any Debentureholder who has been a bona fide holder of a Debenture or Debentures for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor trustee. Such court may thereupon after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor trustee. (c) The holders of a majority in aggregate principal amount of the Debentures of any series at the time outstanding may at any time remove the Trustee with respect to such series and appoint a successor trustee. (d) No resignation or removal of the Trustee and no appointment of a successor trustee with respect to the Debentures of a series pursuant to any of the provisions of this Section shall become effective until acceptance of appointment by the successor trustee as provided in Section 7.11. - 32 - 35 (e) Any successor trustee appointed pursuant to this Section may be appointed with respect to the Debentures of one or more series or all of such series, and at any time there shall be only one Trustee with respect to the Debentures of any particular series. (f) The Company shall give notice of such resignation with respect to the Debentures of any series and each appointment of a successor trustee with respect to the Debentures of any series by mailing written notice of such event by first-class mail, postage prepaid, to all Debentureholders of such series as their names and addresses appear in the Debenture Register. Each notice shall include the name of the successor trustee with respect to the Debentures of such series and the address of its corporate trust office. If the Company fails to transmit such notice within ten days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be transmitted at the expense of the Company. SECTION 7.11. (a) In case of the appointment under this Indenture of a successor trustee with respect to all Debentures, every such successor trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and upon such delivery the resignation or removal of the retiring Trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor trustee all the rights, powers, and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor trustee all property and money held by such retiring Trustee under this Indenture. (b) In case of the appointment under this Indenture of a successor trustee with respect to the Debentures of one or more (but not all) series, the Company, the retiring Trustee and each successor trustee with respect to the Debentures of one or more series shall execute and deliver an indenture supplemental to this Indenture in which each successor trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Debentures of that or those series to which the appointment of such successor trustee relates, (2) shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Debentures of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts under this Indenture by more than one Trustee, it being understood that nothing in this Indenture or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust, that each such Trustee shall be trustee of a trust or trusts under this Indenture separate and apart from any trust or trusts under this Indenture administered by any other such Trustee and that no Trustee shall be responsible for any act or failure to act on the part of any other Trustee under this Indenture; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided in such supplemental indenture, such retiring Trustee shall with respect to the Debentures of that or those series to which the appointment of such successor trustee relates have no further - 33 - 36 responsibility for the exercise of rights and powers or for the performance of the duties and obligations vested in the Trustee under this Indenture, and each such successor trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Debentures of that or those series to which the appointment of such successor trustee relates; but, on request of the Company or any successor trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor trustee, to the extent contemplated by such supplemental indenture, the property and money held by such retiring Trustee under this Indenture with respect to the Debentures of that or those series to which the appointment of such successor trustee relates. (c) Upon request of any such successor trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor trustee all such rights, powers and trusts referred to in paragraph (a) or (b) of this Section, as the case may be. (d) No successor trustee shall accept its appointment unless at the time of such acceptance such successor trustee shall be qualified and eligible under this Article. SECTION 7.12. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to the corporate trust business of the Trustee, shall be the successor of the Trustee under this Indenture; provided such corporation shall be qualified under the provisions of Section 7.08 and eligible under the provisions of Section 7.09, without the execution or filing of any paper or any further act on the part of any of the parties to this Indenture, anything in this Indenture to the contrary notwithstanding. In case any Debentures shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Debentures so authenticated with the same effect as if such successor Trustee had itself authenticated such Debentures. SECTION 7.13. If the Trustee shall be or shall become a creditor, directly or indirectly, secured or unsecured, of the Company or any other obligor upon the Debentures (other than by reason of a relationship described in Section 311(b) of the Trust Indenture Act), the Trustee shall be subject to any and all applicable provisions of the Trust Indenture Act regarding the collection of claims against the Company or such other obligor. For purposes of Section 311(b) of the Trust Indenture Act: (a) the term "cash transaction" shall mean any transaction in which full payment for goods or securities sold is made within seven days after delivery of the goods or securities in currency or in checks or other orders drawn upon banks or bankers and payable upon demand; and (b) the term "self-liquidating paper" shall mean any draft, bill of exchange, acceptance or obligation which is made, drawn, negotiated or incurred by the Company for the purpose of financing the purchase, processing, manufacture, shipment, storage or sale of goods, wares or merchandise and which is secured by documents evidencing title to, possession of, or a lien upon, the goods, wares or merchandise or the - 34 - 37 receivables or proceeds arising from the sale of the goods, wares or merchandise previously constituting the security, provided the security is received by the Trustee simultaneously with the creation of the creditor relationship with the Company arising from the making, drawing, negotiating or incurring of the draft, bill of exchange, acceptance or obligation. ARTICLE EIGHT CONCERNING THE DEBENTUREHOLDERS SECTION 8.01. Whenever in this Indenture it is provided that the holders of a majority or specified percentage in aggregate principal amount of the Debentures of a particular series may take any action (including the making of any demand or request, the giving of any notice, consent or waiver or the taking of any other action), the fact that at the time of taking any such action the holders of such majority or specified percentage of that series have joined in such action may be evidenced by any instrument or any number of instruments of similar tenor executed by such holders of Debentures of that series in person or by agent or proxy appointed in writing. If the Company shall solicit from the Debentureholders of any series any request, demand, authorization, direction, notice, consent, waiver or other action, the Company may, at its option, as evidenced by an Officers' Certificate, fix in advance a record date for such series for the determination of Debentureholders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other action, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other action may be given before or after the record date, but only the Debentureholders of record at the close of business on the record date shall be deemed to be Debentureholders for the purposes of determining whether Debentureholders of the requisite proportion of outstanding Debentures of that series have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other action, and for that purpose the outstanding Debentures of that series shall be computed as of the record date; provided that no such authorization, agreement or consent by such Debentureholders on the record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date. SECTION 8.02. Subject to the provisions of Section 7.01, proof of the execution of any instrument by a Debentureholder (such proof will not require notarization) or his agent or proxy and proof of the holding by any person of any of the Debentures shall be sufficient if made in the following manner: (a) The fact and date of the execution by any such person of any instrument may be proved in any reasonable manner acceptable to the Trustee. (b) The ownership of Debentures shall be proved by the Debenture Register of such Debentures or by a certificate of the Debenture Registrar of such ownership. - 35 - 38 (c) The Trustee may require such additional proof of any matter referred to in this Section as it shall deem necessary. SECTION 8.03. Prior to the due presentment for registration of transfer of any Debenture, the Company, the Trustee, any paying agent and any Debenture Registrar may deem and treat the person in whose name such Debenture shall be registered upon the books of the Company as the absolute owner of such Debenture (whether or not such Debenture shall be overdue and notwithstanding any notice of ownership or writing on such Debenture made by anyone other than the Debenture Registrar) for the purpose of receiving payment of or on account of the principal of, premium, if any, and (subject to Section 2.03) interest on such Debenture and for all other purposes; and neither the Company nor the Trustee nor any paying agent nor any Debenture Registrar shall be affected by any notice to the contrary. SECTION 8.04. In determining whether the holders of the requisite aggregate principal amount of Debentures of a particular series have concurred in any direction, consent or waiver under this Indenture, Debentures of that series which are owned by the Company or any other obligor on the Debentures of that series or by any person directly or indirectly controlling or controlled by or under common control with the Company or any other obligor on the Debentures of that series (unless the Company or such other obligor or person directly or indirectly controlling or controlled by or under common control with the Company or such other obligor owns all Debentures outstanding or all Debentures of such series, as the case may be) shall be disregarded and deemed not to be outstanding for the purpose of any such determination, except that for the purpose of determining whether the Trustee shall be protected in relying on any such direction, consent or waiver, only Debentures of such series which the Trustee actually knows are so owned shall be so disregarded. Debentures so owned which have been pledged in good faith may be regarded as outstanding for the purposes of this Section, if the pledgee shall establish to the satisfaction of the Trustee the pledgee's right so to act with respect to such Debentures and that the pledgee is not a person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any such other obligor. In case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee. SECTION 8.05. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 8.01, of the taking of any action by the holders of the majority or percentage in aggregate principal amount of the Debentures of a particular series specified in this Indenture in connection with such action, any holder of a Debenture of that series which is shown by the evidence to be included in the Debentures the holders of which have consented to such action may, by filing written notice with the Trustee, and upon proof of holding as provided in Section 8.02, revoke such action so far as concerns such Debenture. Except as aforesaid any such action taken by the holder of any Debenture shall be conclusive and binding upon such holder and upon all future holders and owners of such Debenture, and of any Debenture issued in exchange for such Debenture, on registration of transfer of such Debenture or in place of such Debenture, irrespective of whether or not any notation in regard to such Debenture is made upon such Debenture. Any action taken by the holders of the majority or percentage in aggregate principal amount of the Debentures of a particular series specified in this Indenture in connection with such action shall be conclusively binding upon the Company, the Trustee and the holders of all the Debentures of that series. - 36 - 39 ARTICLE NINE SUPPLEMENTAL INDENTURES SECTION 9.01. In addition to any supplemental indenture otherwise authorized by this Indenture, the Company, when authorized by a Board Resolution, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental to this Indenture (which shall conform to the provisions of the Trust Indenture Act), without the consent of the Debentureholders, for one or more of the following purposes: (a) to evidence the succession of another corporation to the Company, and the assumption by any such successor of the covenants of the Company contained in this Indenture or otherwise established with respect to the Debentures; or (b) to add to the covenants of the Company such further covenants, restrictions, conditions or provisions for the protection of the holders of the Debentures of all or any series as the Board of Directors and the Trustee shall consider to be for the protection of the holders of Debentures of all or any series, and to make the occurrence, or the occurrence and continuance, of a default in any of such additional covenants, restrictions, conditions or provisions a default or an Event of Default with respect to such series permitting the enforcement of all or any of the several remedies provided in this Indenture as set forth in it; provided, however, that in respect of any such additional covenant, restriction, condition or provision such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available to the Trustee upon such default or may limit the right of the holders of a majority in aggregate principal amount of the Debentures of such series to waive such default; or (c) to cure any ambiguity or to correct or supplement any provision contained in this Indenture or in any supplemental indenture which may be defective or inconsistent with any other provision contained in this Indenture or in any supplemental indenture, or to make such other provisions in regard to matters or questions arising under this Indenture as shall not be inconsistent with the provisions of this Indenture and shall not adversely affect the interests of the holders of the Debentures of any series; or (d) to change or date any of the provisions of this Indenture, provided that any such change or elimination shall become effective only when there is no Debenture outstanding of any series created prior to the execution of such supplemental indenture which is entitled to the benefit of such provision. The Trustee is authorized to join with the Company in the execution of any such supplemental indenture, and to make any further appropriate agreements and stipulations which may be contained in such supplemental indenture, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. - 37 - 40 Any supplemental indenture authorized by the provisions of this Section may be executed by the Company and the Trustee without the consent of the holders of any of the Debentures at the time outstanding, notwithstanding any of the provisions of Section 9.02. SECTION 9.02. With the consent (evidenced as provided in Section 8.01) of the holders of not less than a majority in aggregate principal amount, of the Debentures of each series affected by such supplemental indenture or indentures at the time outstanding, the Company, when authorized by a Board Resolution, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental to this Indenture (which shall conform to the provisions of the Trust Indenture Act) for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the holders of the Debentures of such series under this Indenture; provided, however, that no such supplemental indenture shall (i) extend the fixed maturity of any Debentures of any series, or reduce the principal amount of such Debenture, or reduce the rate or extend the time of payment of interest on such Debenture, or reduce any premium payable upon the redemption of such Debenture, without the consent of the holder of each Debenture so affected or (ii) reduce the aforesaid percentage of Debentures, the holders of which are required to consent to any such supplemental indenture, without the consent of the holders of each Debenture then outstanding and so affected. Upon the request of the Company, accompanied by a Board Resolution authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Debentureholders required to consent to such supplemental indenture as provided above, the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion but shall not be obligated to enter into such supplemental indenture. It shall not be necessary for the consent of the Debentureholders of any series affected by a supplemental indenture under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance of such supplemental indenture. Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of this Section, the Trustee shall transmit by mail, first class postage prepaid, a notice, setting forth in general terms the substance of such supplemental indenture, to the Debentureholders of all series affected by such supplemental indenture as their names and addresses appear upon the Debenture Register. Any failure of the Trustee to mail such notice, or any defect in such notice, shall not, however, in any way impair or affect the validity of any such supplemental indenture. SECTION 9.03. Upon the execution of any supplemental indenture pursuant to the provisions of this Article or of Section 10.01, this Indenture shall, with respect to such series, be and be deemed to be modified and amended in accordance with such supplemental indenture and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and the holders of Debentures of the series affected by such supplemental indenture shall thereafter be determined, exercised and - 38 - 41 enforced under this Indenture subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. SECTION 9.04. Debentures of any series affected by a supplemental indenture, authenticated and delivered after the execution of such supplemental indenture pursuant to the provisions of this Article or of Section 10.01, may bear a notation in form approved by the Company, provided such form meets the requirements of any exchange upon which such series may be listed, as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Debentures of that series so modified as to conform, in the opinion of the Board of Directors, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Company, authenticated by the Trustee and delivered in exchange for the Debentures of that series then outstanding. SECTION 9.05. The Trustee, subject to the provisions of Section 7.01, may receive an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant to this Article is authorized or permitted by, and conforms to, the terms of this Article and that it is proper for the Trustee under the provisions of this Article to join in the execution such supplemental indenture. ARTICLE TEN CONSOLIDATION, MERGER AND SALE SECTION 10.01. Nothing contained in this Indenture or in any of the Debentures shall prevent any consolidation or merger of the Company with or into any other corporation or corporations (whether or not affiliated with the Company), or successive consolidations or mergers in which the Company or its successor or successors shall be a party or parties, or shall prevent any sale, conveyance, transfer or other disposition of the property of the Company or its successor or successors as an entirety, or substantially as an entirety, to any other corporation (whether or not affiliated with the Company or its successor or successors) authorized to acquire and operate the same; provided, however, the Company hereby covenants and agrees that, upon any such consolidation, merger, sale, conveyance, transfer or other disposition, the due and punctual payment of the principal of (premium, if any) and interest on all of the Debentures of all series in accordance with the terms of each series, according to their tenor, and the due and punctual performance and observance of all the covenants and conditions of this Indenture with respect to each series or established with respect to such series pursuant to Section 2.01 to be kept or performed by the Company, shall be expressly assumed, by supplemental indenture (which shall conform to the provisions of the Trust Indenture Act) satisfactory in form to the Trustee executed and delivered to the Trustee by the entity formed by such consolidation, or into which the Company shall have been merged, or by the entity which shall have acquired such property. SECTION 10.02. (a) In case of any such consolidation, merger, sale, conveyance, transfer or other disposition and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the due and punctual payment of the principal of, premium, if any, - 39 - 42 and interest on all of the Debentures of all series outstanding and the due and punctual performance of all of the covenants and conditions of this Indenture or established with respect to each series of the Debentures, pursuant to Section 2.01 to be performed by the Company with respect to each series, such successor corporation shall succeed to and be substituted for the Company, with the same effect as if it had been named in this Indenture as the party of the first part, and upon satisfaction of the foregoing conditions the predecessor corporation shall be relieved of all obligations and covenants under this Indenture and the Debentures. Such successor corporation may cause to be signed, and may issue either in its own name or in the name of the Company or any other predecessor obligor on the Debentures, any or all of the Debentures issuable under this Indenture which prior to that time shall not have been signed by the Company and delivered to the Trustee; and, upon the order of such successor company, instead of the Company, and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Debentures which previously shall have been signed and delivered by the officers of the predecessor Company to the Trustee for authentication, and any Debentures which such successor corporation shall after that cause to be signed and delivered to the Trustee for that purpose. All the Debentures so issued shall in all respects have the same legal rank and benefit under this Indenture as the Debentures previously or thereafter issued in accordance with the terms of this Indenture as though all of such Debentures had been issued at the date of the execution of this Indenture. (b) In case of any such consolidation, merger, sale, conveyance, transfer or other disposition such changes in phraseology and form (but not in substance) may be made in the Debentures thereafter to be issued as may be appropriate. (c) Nothing contained in this Indenture or in any of the Debentures shall prevent the Company from merging into itself or acquiring by purchase or otherwise all or any part of the property of any other corporation (whether or not affiliated with the Company). SECTION 10.03. The Trustee, subject to the provisions of Section 7.01, may receive an Opinion of Counsel as conclusive evidence that any such consolidation, merger, sale, conveyance, transfer or other disposition, and any such assumption, comply with the provisions of this Article. ARTICLE ELEVEN SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS SECTION 11.01. Any Debenture or Debentures, or any portion of the principal amount of any Debenture or Debentures, shall be deemed to have been paid for all purposes of this Indenture, and the entire indebtedness of the Company in respect of any Debenture or Debentures shall be deemed to have been satisfied and discharged, if there shall have been irrevocably deposited with the Trustee or any paying agent (other than the Company), in trust: (a) money in an amount which shall be sufficient, or - 40 - 43 (b) in the case of a deposit made prior to the Stated Maturity of such Debentures or portions of such Debentures, Governmental Obligations, which shall not contain provisions permitting the redemption or other prepayment of such Governmental Obligations at the option of the issuer of such Governmental Obligations, the principal of and the interest on which when due, without any regard to reinvestment of such Governmental Obligations, will provide moneys which, together with the money deposited with or held by the Trustee or such paying agent, shall be sufficient or (c) a combination of (a) or (b) which shall be sufficient, to pay when due the principal of and premium, if any, and interest, if any, due and to become due on such Debentures or portions of such Debentures on or prior to Stated Maturity; provided, however, that in the case of the provision for payment or redemption of less than all the Debentures of any series, such Debentures or portions of such Debentures shall have been selected by the Debenture Registrar as provided in this Indenture and, in the case of a redemption, the notice requisite to the validity of such redemption shall have been given or irrevocable authority shall have been given by the Company to the Trustee to give such notice, under arrangements satisfactory to the Trustee; and provided, further, that the Company shall have delivered to the Trustee and such paying agent: (x) if such deposit shall have been made prior to the Stated Maturity of such Debentures, a Certificate stating that the money and Governmental Obligations deposited in accordance with this Section shall be held in trust, as provided in Section 11.03; and (y) if Governmental Obligations shall have been deposited, an Opinion of Counsel that the obligations so deposited constitute Governmental Obligations and do not contain provisions permitting the redemption or other prepayment at the option of the issuer of such Governmental Obligations, and an opinion of an independent public accountant of nationally recognized standing, selected by the Company, to the effect that the requirements set forth in clause (b) above have been satisfied; and (z) if such deposit shall have been made prior to the Stated Maturity of such Debentures, an Opinion of Counsel to the effect that the holders of such Debentures will not recognize income, gain or loss for federal income tax purposes as a result of the satisfaction and discharge of the Company's indebtedness in respect of such Debentures, and such holders will be subject to federal income taxation on the same amounts and in the same manner and at the same times as if such satisfaction and discharge had not occurred. Upon the deposit of money or Governmental Obligations, or both, in accordance with this Section, together with the documents required by clauses (x), (y) and (z) above, the Trustee shall, upon receipt of a Certificate, acknowledge in writing that the Debenture or Debentures or portions of such Debenture or Debentures with respect to which such deposit was made are deemed to have been paid for all purposes of this Indenture and that the entire indebtedness of the Company in respect of such Debenture or Debentures has been satisfied and discharged as contemplated in this Section. In the event that all of the conditions set forth in the preceding paragraph shall have been satisfied in respect of any Debentures or - 41 - 44 portions of such Debentures except that, for any reason, the Opinion of Counsel specified in clause (z) shall not have been delivered, such Debentures or portions of such Debentures shall nevertheless be deemed to have been paid for all purposes of this Indenture, and the holders of such Debentures or portions of such Debentures shall nevertheless be no longer entitled to the benefits of this Indenture or of any of the covenants of the Company under Article Four (except the covenants contained in Sections 4.02 and 4.03 or any other covenants made in respect of such Debentures or portions of such Debentures as contemplated by Section 2.01, but the indebtedness of the Company in respect of such Debentures or portions of such Debentures shall not be deemed to have been satisfied and discharged prior to Stated Maturity for any other purposes, and the holders of such Debentures or portions of such Debentures shall continue to be entitled to look to the Company for payment of the indebtedness represented by such Debentures; and, upon receipt of a Certificate, the Trustee shall acknowledge in writing that such Debentures or portions of such Debentures are deemed to have been paid for all purposes of this Indenture. If payment at Stated Maturity of less than all of the Debentures of any series is to be provided for in the manner and with the effect provided in this Section, the Debenture Registrar shall select such Debentures, or portions of principal amount of such Debentures, in the manner specified by Section 3.02(b) for selection for redemption of less than all the Debentures of a series. In the event that Debentures which shall be deemed to have been paid for purposes of this Indenture, and, if such is the case, in respect of which the Company's indebtedness shall have been satisfied and discharged, all as provided in this Section, do not mature and are not to be redeemed within the sixty (60) day period commencing with the date of the deposit of moneys or Governmental Obligations, as provided above, the Company shall, as promptly as practicable, give a notice, in the same manner as a notice of redemption with respect to such Debentures, to the holders of such Debentures to the effect that such deposit has been made and the effect of such deposit. Notwithstanding that any Debentures shall be deemed to have been paid for purposes of this Indenture, as provided above, the obligations of the Company and the Trustee in respect of such Debentures under Sections 2.04, 2.05, 2.06, 2.07, 2.08, 2.10, 3.02, 3.04, 3.05, 4.01, 4.03 and 7.06 and this Article Eleven shall survive. The Company shall pay, and shall indemnify the Trustee or any paying agent with which Governmental Obligations shall have been deposited as provided in this Section against, any tax, fee or other charge imposed on or assessed against such Governmental Obligations or the principal or interest received in respect of such Governmental Obligations, including, but not limited to, any such tax payable by any entity deemed, for tax purposes, to have been created as a result of such deposit. Anything herein to the contrary notwithstanding, (a) if, at any time after a Debenture would be deemed to have been paid for purposes of this Indenture, and, if such is the case, the Company's indebtedness in respect of such Debenture would be deemed to have been satisfied and discharged, pursuant to this Section (without regard to the provisions of this paragraph), the Trustee or any paying agent, as the case may be, shall be required to return the money or Governmental Obligations, or combination of such money or Governmental - 42 - 45 Obligations, deposited with it as provided below to the Company or its representative under any applicable federal or state bankruptcy, insolvency or other similar law, such Debenture shall thereupon be deemed retroactively not to have been paid and any satisfaction and discharge of the Company's indebtedness in respect of such Debenture shall retroactively be deemed not to have been effected, and such Debenture shall be deemed to remain outstanding and (b) any satisfaction and discharge of the Company's indebtedness in respect of any Debenture shall be subject to the provisions of the last paragraph of Section 4.03. SECTION 11.02. SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture shall upon receipt of a Certificate cease to be of further effect (except as expressly provided below), and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (a) no Debentures remain outstanding under this Indenture; and (b) the Company has paid or caused to be paid all other sums payable under this Indenture by the Company; provided, however, that if, in accordance with the last paragraph of Section 11.01, any Debenture, previously deemed to have been paid for purposes of this Indenture, shall be deemed retroactively not to have been so paid, this Indenture shall thereupon be deemed retroactively not to have been satisfied and discharged, as provided above, and to remain in full force and effect, and the Company shall execute and deliver such instruments as the Trustee shall reasonably request to evidence and acknowledge the same. Notwithstanding the satisfaction and discharge of this Indenture as provided above, the obligations of the Company and the Trustee under Sections 2.04, 2.05, 2.06, 2.07, 2.08, 2.10, 3.02, 3.04, 3.05, 4.01, 4.03 and 7.06 and this Article Eleven shall survive. Upon satisfaction and discharge of this Indenture as provided in this Section, the Trustee shall assign, transfer and turn over to the Company, subject to the lien provided by Section 7.06, any and all money, securities and other property then held by the Trustee for the benefit of the holders of the Debentures other than money and Governmental Obligations held by the Trustee pursuant to Section 4.03. SECTION 11.03. APPLICATION OF TRUST MONEY. Neither the Governmental Obligations nor the money deposited pursuant to Section 11.01, nor the principal or interest payments on any such Governmental Obligations, shall be withdrawn or used for any purpose other than, and shall be held in trust for, the payment of the principal of and premium, if any, and interest, if any, on the Debentures or portions of principal amount of such Debentures in respect of which such deposit was made, all subject, however, to the provisions of Section 4.03; provided, however, that, so long as there shall not have occurred and be continuing an Event of Default any cash received from such principal or interest payments on such Governmental Obligations, if not then needed for such purpose, shall, to the extent practicable, be invested in Governmental Obligations of the type described in clause (b) in the first paragraph of Section 11.01 maturing at such times and - 43 - 46 in such amounts as shall be sufficient to pay when due the principal of and premium, if any, and interest, if any, due and to become due on such Debentures or portions of such Debentures on and prior to the Stated Maturity of such Debentures, and interest earned from such reinvestment shall be paid over to the Company as received, free and clear of any trust, lien or pledge under this Indenture except the lien provided by Section 7.06; and provided, further, that, so long as there shall not have occurred and be continuing an Event of Default, any moneys held in accordance with this Section on the Stated Maturity of all such Debentures in excess of the amount required to pay the principal of and premium, if any, and interest, if any, then due on such Debentures shall be paid over to the Company free and clear of any trust, lien or pledge under this Indenture except the lien provided by Section 7.06; and provided, further, that if an Event of Default shall have occurred and be continuing, moneys to be paid over to the Company pursuant to this Section shall be held until such Event of Default shall have been waived or cured. ARTICLE TWELVE IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS SECTION 12.01. No recourse under or upon any obligation, covenant or agreement of this Indenture, or of any Debenture, or for any claim based on such obligation, covenant or agreement or otherwise in respect thereof, shall be had against any incorporator, stockholder, officer or director, past, present or future as such, of the Company or of any predecessor or successor corporation, either directly or through the Company or any such predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that this Indenture and the obligations issued under this Indenture are solely corporate obligations, and that no such personal liability whatever shall attach to, or is or shall be incurred by, the incorporators, stockholders, officers or directors as such, of the Company or of an predecessor or successor corporation, or any of them, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or in any of the Debentures or implied therefrom; and that any and all such personal liability of every name and nature, either at common law or in equity or by constitution or statute, of, and any and all such rights and claims against, every such incorporator, stockholder, officer or director as such, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or in any of the Debentures or implied therefrom, are hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issuance of such Debentures. - 44 - 47 ARTICLE THIRTEEN MISCELLANEOUS PROVISIONS SECTION 13.01. All the covenants, stipulations, promises and agreements in this Indenture contained by or on behalf of the Company shall bind its successors and assigns, whether so expressed or not. SECTION 13.02. Any act or proceeding by any provision of this Indenture authorized or required to be done or performed by any board, committee or officer of the Company shall and may be done and performed with like force and effect by the corresponding board, committee or officer of any corporation that shall at the time be the lawful sole successor of the Company. SECTION 13.03. The Company by instrument in writing executed by authority of two-thirds of its Board of Directors and delivered to the Trustee may surrender any of the powers reserved to the Company and thereupon such power so surrendered shall terminate both as to the Company and as to any successor corporation. SECTION 13.04. Except, as otherwise expressly provided in this Indenture any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the holders of Debentures to or on the Company may be given or served by being deposited first class postage prepaid in a post-office letterbox addressed (until another address is filed in writing by the Company with the Trustee), as follows: Illinois Power Company, 500 South 27th Street, Decatur, Illinois 62525, Attention: Secretary. Any notice, election, request or demand by the Company or any Debentureholder to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at the Corporate Trust Office of the Trustee. SECTION 13.05. This Indenture and each Debenture shall be deemed to be a contract made under the laws of the State of New York, and for all purposes shall be construed in accordance with the internal laws of said state. SECTION 13.06. (a) Upon any application or demand by the Company to the Trustee to take any action under any of the provisions of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent have been complied with, except that in the case of any such application or demand as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished. (b) Each certificate or opinion provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant in this Indenture (other than the certificate provided pursuant to Section 5.03(d) of this Indenture) shall include (1) a statement that the person making such certificate or opinion has read such covenant or condition; (2) a, brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) - 45 - 48 a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with. SECTION 13.07. Except as provided pursuant to Section 2.01 pursuant to a Board Resolution, and as set forth in an Officers' Certificate, or established in one or more indentures supplemental to the Indenture, in any case where the date of maturity of interest or principal of any Debenture or the date of redemption of any Debenture shall not be a Business Day then payment of interest or principal (and premium, if any) may be made on the next succeeding Business Day with the same force and effect as if made on the nominal date of maturity or redemption, and no interest shall accrue for the period after such nominal date. SECTION 13.08. If and to the extent that any provision of this Indenture limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act such imposed duties shall control. SECTION 13.09. This Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. SECTION 13.10. In case any one or more of the provisions contained in this Indenture or in the Debentures of any series shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Indenture or of such Debentures, but this Indenture and such Debentures shall be construed as if such invalid or illegal or unenforceable provision had never been contained in this Indenture or in such Debentures. SECTION 13.11. The Company will have the right at all times to assign any of its rights or obligations under the Indenture to a direct or indirect wholly owned subsidiary of the Company; provided that, in the event of, any such assignment, the Company will remain liable for all such obligations. Subject to the foregoing, this Indenture is binding upon and inures to the benefit of the parties to it and their respective successors and assigns. This Indenture may not otherwise be assigned by the parties to it. ARTICLE FOURTEEN SUBORDINATION OF DEBENTURES SECTION 14.01. The Company covenants and agrees, and each Holder of Debentures issued under this Indenture by such Holder's acceptance of such Debentures likewise covenants and agrees, that all Debentures shall be issued subject to the provisions of this Article Fourteen; and each Holder of a Debenture, whether upon original issue or upon transfer or assignment of such Debenture, accepts and agrees to be bound by such provisions. The payment of the principal of, premium, if any, and interest on all Debentures issued under this Indenture shall, to the extent and in the manner set forth below, be subordinated - 46 - 49 and subject in right of payment to the prior payment in full of all Senior Indebtedness, whether outstanding at the date of this Indenture or incurred after such date. No provision of this Article Fourteen shall prevent the occurrence of any default or Event of Default under this Indenture. SECTION 14.02. In the event and during the continuation of any default in the payment of principal, premium, interest or any other payment due on any Senior Indebtedness continuing beyond the period of grace, if any, specified in the instrument evidencing such Senior Indebtedness, unless and until such default shall have been cured or waived or shall have ceased to exist, and in the event that the maturity of any Senior Indebtedness has been accelerated because of a default, then no payment shall be made by the Company with respect to the principal (including redemption and sinking fund payments) of, or premium, if any, or interest on the Debentures. In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee or any holder when such payment is prohibited by the preceding paragraphs of this Section 14.02, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, but only to the extent that the holders of the Senior Indebtedness (or their representative or representatives or a trustee) notify the Trustee within 90 days of such payment of the amounts then due and owing on the Senior Indebtedness and only the amounts specified in such notice to the Trustee shall be paid to the holders of Senior Indebtedness. SECTION 14.03. Upon any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due or to become due upon all Senior Indebtedness shall first be paid in full, or payment of such Senior Indebtedness provided for in money in accordance with its terms, before any payment is made on account of the principal (and premium, if any) or interest on the Debentures; and upon any such dissolution or liquidation or reorganization any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holders of the Debenture or the Trustee would be entitled, except for the provisions of this Article Fourteen, shall by paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, or by the Holders of the Debentures or by the Trustee under this Indenture if received by them or it, directly to the holders of Senior Indebtedness (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay all Senior Indebtedness in full, in money or money's worth, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness, before any payment or distribution is made to the holders of Debentures or to the Trustee. - 47 - 50 In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, prohibited by the foregoing, shall be received by the Trustee or the holders of the Debentures before all Senior Indebtedness is paid in full, or provision is made for such payment in money in accordance with its terms, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any Senior Indebtedness may have been issued, as their respective interests may appear, for application to the payment of all Senior Indebtedness remaining unpaid to the extent necessary to pay all Senior Indebtedness in full in money in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness. For purposes of this Article Fourteen, the words, "cash, property or securities" shall not be deemed to include shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated at least to the extent provided in this Article Fourteen with respect to the Debentures to the payment of all Senior Indebtedness which may at the time be outstanding; provided that (i) the Senior Indebtedness is assumed by the new corporation, if any, resulting from any such reorganization or readjustment, and (ii) the rights of the holders of the Senior Indebtedness are not, without the consent of such holders, altered by such reorganization or readjustment. The consolidation of the Company with, or the merger of the Company into, another corporation or the liquidation or dissolution of the Company following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided for in Article Ten hereof shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section 14.03 if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article Ten hereof. Nothing in Section 14.02 or in this Section 14.03 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.06. SECTION 14.04. Subject to the payment in full of all Senior Indebtedness, the rights of the holders of the Debentures shall be subrogated to the rights of the holders of Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company applicable to the Senior Indebtedness until the principal of (and premium, if any) and interest on the Debentures shall be paid in full; and, for the purposes of such subrogation, no payments or distributions to the holders of the Senior Indebtedness of any cash, property or securities to which the holders of the Debentures or the Trustee would be entitled except for the provisions of this Article Fourteen, and no payment over pursuant to the provisions of this Article Fourteen, to or for the benefit of the holders of Senior Indebtedness by holders of the Debentures or the Trustee, shall, as between the Company, its creditors other than holders of Senior Indebtedness, and the Holders of the Debentures, be deemed to be a payment by the Company to or on account of the Senior Indebtedness. It is understood that the provisions of this Article Fourteen are and are intended solely for the purposes of defining the relative rights of the holders of the Debentures, on the one hand, and the holders of the Senior Indebtedness on the other hand. - 48 - 51 Nothing contained in this Article Fourteen or elsewhere in this Indenture or in the Debentures is intended to or shall impair, as between the Company, its creditors other than the holders of Senior Indebtedness, and the holders of the Debentures, the obligation of the Company, which is absolute and unconditional, to pay to the holders of the Debentures the principal of (and premium, if any) and interest on the Debentures as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the holders of the Debentures and creditors of the Company other than the holders of the Senior Indebtedness, nor shall anything in this Indenture or in such Debentures prevent the Trustee or the holder of any Debenture from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article Fourteen of the holders of Senior Indebtedness in respect of cash, property or securities of the Company received upon the exercise of any such remedy. Upon any payment of distribution of assets of the Company referred to in this Article Fourteen, the Trustee, subject to the provision of Section 7.01, and the holders of the Debentures shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which such dissolution, winding-up, liquidation or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent or other person making such payment or distribution, delivered to the Trustee or to the Holders of the Debentures, for the purposes of ascertaining the persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other indebtedness of the Company, the amount hereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Fourteen. SECTION 14.05. Each Holder of a Debenture by his acceptance of such Debenture authorizes and directs the Trustee in his behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article Fourteen and appoints the Trustee his attorney-in-fact for any and all such purposes. SECTION 14.06. The Company shall give prompt written notice to a Responsible Officer of the Trustee of any fact known to the Company which would prohibit the making of any payment of monies to or by the Trustee in respect of the Debentures pursuant to the provisions of this Article Fourteen. Notwithstanding the provisions of this Article Fourteen or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment of monies to or by the Trustee in respect of the Debentures pursuant to the provisions of this Article Fourteen, unless and until a Responsible Officer of the Trustee shall have received written notice of such acts at the Principal Office of the Trustee from the Company or a holder or holders of Senior Indebtedness or from any trustee therefor; and before the receipt of any such written notice, the Trustee, subject to the provisions of Section 7.01, shall be entitled in all respects to assume that no such facts exist; provided that if the Trustee shall not have received the notice provided for in this Section 14.06 at least two Business Days prior to the date upon which by the terms hereof any money may become, payable for any purpose (including, without limitation, the payment of the principal of (or premium, if any) or interest on any Debenture), then, anything contained in this Indenture to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purposes for which they were received, and shall not be affected by any notice to the contrary which may be received by it within two Business Days prior to such date. - 49 - 52 The Trustee, subject to the provisions of Section 7.01, shall be entitled to rely on the delivery to it of a written notice by a person representing himself to be a holder of Senior Indebtedness (or a trustee on behalf of such holder) to establish that such notice has been given by a holder of Senior Indebtedness or a trustee on behalf of any such holder or holders. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article Fourteen, the Trustee may request such person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such person, the extent to which such person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such person under this Article Fourteen, and if such evidence is not furnished the Trustee may defer any payment to such person pending judicial determination as to the right of such person to receive such payment. SECTION 14.07. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article Fourteen in respect of any Senior Indebtedness at any time held by it, to the same extent as and other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article Fourteen, and no implied covenants or obligations with respect to the holders of Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and, subject to the provisions of Section 7.01, the Trustee shall not be liable to any holder of Senior Indebtedness if it shall pay over or deliver to holders of Debentures, the Company or any other person money or assets to which any holder of Senior Indebtedness shall be entitled by virtue of this Article Fourteen or otherwise. SECTION 14.08. No right of any present or future holder of any Senior Indebtedness to enforce subordination as provided in this Indenture shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge of such act or failure to act which any such holder may have or otherwise be charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the holders of the Debentures, without incurring responsibility to the holders of the Debentures and without impairing or releasing the subordination provided in this Article or the obligations under this Indenture of the holders of the Debentures to the holders of Senior Indebtedness, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness, or otherwise amend or supplement in any manner Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (iii) release any person liable in any manner for the collection - 50 - 53 of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights against the Company and any other person. The First National Bank of Chicago, as Trustee hereby accepts the trusts in this Indenture declared and provided, upon the terms and conditions set forth above. - 51 - 54 IN WITNESS WHEREOF, the parties to this Indenture have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. ILLINOIS POWER COMPANY By_______________________________ Vice President Attest: By____________________________________ Secretary THE FIRST NATIONAL BANK OF CHICAGO as Trustee By_______________________________ Vice President Attest: By____________________________________ Trust Officer - 52 - 55 STATE OF ILLINOIS ) ss.: COUNTY OF MACON ) On ___________ ____, 1994 before me, ________________, Notary Public, personally appeared _________________ and ________________. / / personally known to me - OR - / / proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. ______________________________________ Signature of Notary CAPACITY CLAIMED BY SIGNER / / INDIVIDUAL(S) ________________ / / CORPORATE OFFICER(S)___________ / / PARTNER(S) / / ATTORNEY-IN-FACT / / TRUSTEE(S) / / GUARDIAN/CONSERVATOR / / OTHER: SIGNER IS REPRESENTING: NAME OF PERSON(S) OR ENTITY(IES) ILLINOIS POWER COMPANY - 53 - 56 STATE OF ILLINOIS ) ss.: COUNTY OF C O O K ) On ___________ ____, 1994 before me, ________________, Notary Public, personally appeared ________________ and _________________. / / personally known to me - OR - / / proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. ______________________________________ Signature of Notary CAPACITY CLAIMED BY SIGNER / / INDIVIDUAL(S) ________________ / / CORPORATE OFFICER(S) TRUST OFFICER / / PARTNER(S) / / ATTORNEY-IN-FACT / / TRUSTEE(S) / / GUARDIAN/CONSERVATOR / / OTHER: SIGNER IS REPRESENTING: NAME OF PERSON(S) OR ENTITY(IES) THE FIRST NATIONAL BANK OF CHICAGO - 54 - EX-4.E.1 7 CROSS REFERENCE SHEET - INDENTURE 1 EXHIBIT 4(e)(1) ILLINOIS POWER COMPANY CROSS-REFERENCE TABLE
Section of Trust Indenture Act Section of of 1939, as amended Indenture - ------------------- --------- 310(a) . . . . . . . . . . . . . . . . . . . . 7.09 310(b) . . . . . . . . . . . . . . . . . . . . 7.08 7.10 310(c) . . . . . . . . . . . . . . . . . . . . Inapplicable 311(a) . . . . . . . . . . . . . . . . . . . . 7.13 311(b) . . . . . . . . . . . . . . . . . . . . 7.13 311(c) . . . . . . . . . . . . . . . . . . . . 7.13 312(a) . . . . . . . . . . . . . . . . . . . . 5.01 312(b) . . . . . . . . . . . . . . . . . . . . 5.01 312(c) . . . . . . . . . . . . . . . . . . . . 5.01 313(a) . . . . . . . . . . . . . . . . . . . . 5.02 313(b) . . . . . . . . . . . . . . . . . . . . 5.02 313(c) . . . . . . . . . . . . . . . . . . . . 5.02 313(d) . . . . . . . . . . . . . . . . . . . . 5.02 314(a) . . . . . . . . . . . . . . . . . . . . 5.02 314(b) . . . . . . . . . . . . . . . . . . . . Inapplicable 314(c) . . . . . . . . . . . . . . . . . . . . 13.06 314(d) . . . . . . . . . . . . . . . . . . . . Inapplicable 314(e) . . . . . . . . . . . . . . . . . . . . 13.06 314(f) . . . . . . . . . . . . . . . . . . . . Inapplicable 315(a) . . . . . . . . . . . . . . . . . . . . 7.01(a) 7.02 315(b) . . . . . . . . . . . . . . . . . . . . 6.07 315(c) . . . . . . . . . . . . . . . . . . . . 7.01 315(d) . . . . . . . . . . . . . . . . . . . . 7.01 315(e) . . . . . . . . . . . . . . . . . . . . 6.08 316(a) . . . . . . . . . . . . . . . . . . . . 6.06 8.04 316(b) . . . . . . . . . . . . . . . . . . . . 6.04 316(c) . . . . . . . . . . . . . . . . . . . . 8.01 317(a) . . . . . . . . . . . . . . . . . . . . 6.02 317(b) . . . . . . . . . . . . . . . . . . . . 4.03 318(a) . . . . . . . . . . . . . . . . . . . . 13.08
EX-4.F 8 SUPPLEMENT INDENTURE TO INDENTURE (FIXED RATE) 1 EXHIBIT 4(f) ILLINOIS POWER COMPANY AND THE FIRST NATIONAL BANK OF CHICAGO, AS TRUSTEE ________________ FIRST SUPPLEMENTAL INDENTURE DATED AS OF ____________ ___, 1994 TO INDENTURE DATED AS OF ___________ 1, 1994 _________________ ____% SUBORDINATED DEBENTURES, SERIES A, DUE ________ 2 THIS FIRST SUPPLEMENTAL INDENTURE, dated as of the _____ day of ___________, 1994 (this "First Supplemental Indenture"), between ILLINOIS POWER COMPANY, a corporation duly organized and existing under the laws of the State of Illinois (the "Company"), and THE FIRST NATIONAL BANK OF CHICAGO, a national banking association organized and existing under the laws of the United States of America, as trustee (the "Trustee") under the Indenture dated as of ________ 1, 1994 between the Company and the Trustee (the "Indenture"). All terms used and not defined this First Supplemental Indenture are used as defined in the Indenture. WHEREAS, the Company executed and delivered the Indenture to the Trustee to provide for the future issuance of its subordinated debentures (the "Debentures"), said Debentures to be issued from time to time in series as might be determined by the Company under the Indenture, in an unlimited aggregate principal amount which may be authenticated and delivered under the Indenture as provided in the Indenture; and WHEREAS, pursuant to the terms of the Indenture, the Company desires to provide for the establishment of a new series of its Debentures to be known as its ____% Subordinated Debentures, Series A, due _____ (the "Series A Debentures"), the form and substance of such Series A Debentures and the terms, provisions and conditions of such Series A Debentures to be set forth as provided in the Indenture and this First Supplemental Indenture; and WHEREAS, Illinois Power Capital, L.P., a Delaware limited partnership ("Illinois Power Capital"), has offered to the public its ____% Cumulative Monthly Income Preferred Securities, Series A (the "Series A Preferred Securities"), representing limited partnership interests in Illinois Power Capital and proposes to invest the proceeds from such offering in the Series A Debentures; and WHEREAS, upon the occurrence of a Special Event (as defined in the Amended and Restated Agreement of Limited Partnership of Illinois Power Capital, dated ____________ ___, 1994 (the "Limited Partnership Agreement")), the Company may dissolve Illinois Power Capital and cause to be distributed to the holders of the Series A Preferred Securities, on a pro rata basis, Series A Debentures (a "Dissolution Event"); and WHEREAS, the Company desires and has requested the Trustee to join with it in the execution and delivery of this First Supplemental Indenture, and all requirements necessary to make this First Supplemental Indenture a valid instrument, in accordance with its terms, and to make the Series A Debentures, when executed by the Company and authenticated and delivered by the Trustee, the valid obligations of the Company, have been performed and fulfilled, and the execution and delivery of this First Supplemental Indenture have been in all respects duly authorized: NOW THEREFORE, in consideration of the purchase and acceptance of the Series A Debentures by their holders, and for the purpose of setting forth, as provided in the Indenture, the form and substance of the Series A Debentures and the terms, provisions and conditions of them, the Company covenants and agrees with the Trustee as follows: - 1 - 3 ARTICLE ONE GENERAL TERMS AND CONDITIONS OF THE SERIES A DEBENTURES SECTION 1.01. There shall be and is authorized a series of Debentures designated the "_____% Subordinated Debentures, Series A, Due ____", limited in aggregate principal amount to (i) $________ plus (ii) the amount of capital contributions made by the Company from time to time as general partner of Illinois Power Capital, which amount shall be as set forth in any written order of the Company for the authentication and delivery of Series A Debentures. The Series A Debentures shall mature and the principal shall be due and payable together with all accrued and unpaid interest on them, including Additional Interest (as defined below) on __________ ___, ____, and shall be issued in the form of registered Series A Debentures without coupons. SECTION 1.02. Except as provided in Section 1.03, the Series A Debentures shall be issued in certificated form. Principal of and interest on the Series A Debentures issued in certificated form will be payable, the transfer of such Series A Debentures will be registrable and such Series A Debentures will be exchangeable for the Series A Debentures bearing identical terms and provisions at the office or agency of the Company in Decatur, Illinois; provided, however, that payment of interest may be made at the option of the Company by check mailed to the registered holder at such address as shall appear in the Debenture Register. Notwithstanding the foregoing, so long as the holder of the Series A Debentures is Illinois Power Capital, the payment of the principal of and interest (including Additional Interest, if any) on the Series A Debentures will be made at such place and to such account as may be designated by Illinois Power Capital. SECTION 1.03. In connection with a Dissolution Event, the Series A Debentures in certificated form may be presented to the Trustee by Illinois Power Capital in exchange for a Global Debenture in an aggregate principal amount equal to all Outstanding Series A Debentures, to be registered in the name of the Depository, or its nominee, and delivered by the Trustee to the Depository for crediting to the accounts of its participants. The Company upon any such presentation shall execute a Global Debenture in such aggregate principal amount and deliver the same to the Trustee for authentication and delivery as provided above and in the Indenture. Payments on the Series A Debentures issued as a Global Debenture will be made to the Depository. The Depository for the Series A Debentures shall be The Depository Trust Company, New York, New York. SECTION 1.04. Each Series A Debenture will bear interest at the rate of _____% per annum from the original date of issuance until the principal of such Series A Debenture becomes due and payable, and on any overdue principal and (to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the same rate per annum, payable monthly in arrears on the last day of each calendar month of each year (each, an "Interest Payment Date," commencing on ___________, 1994), to the person in whose name such Series A Debenture or any predecessor Series A Debenture is registered, at the close of business on the regular record date for such interest installment, which shall be the close of business on the Business Day next preceding that Interest Payment Date. If pursuant to the provisions of Section 2.11(c) of the Indenture the Series A - 2 - 4 Subordinated Debentures are no longer represented by a Global Debenture, the Company may select a regular record date for such interest installment which shall be any date not later than fifteen days preceding an Interest Payment Date. Any such interest (including Additional Interest) not punctually paid or duly provided for shall immediately cease to be payable to the registered holders on such regular record date, and may be paid to the person in whose name the Series A Debenture (or one or more Predecessor Debentures) is registered at the close of business on a special record date to be fixed by the Trustee for the payment of such defaulted interest, notice of which special record date shall be given to the registered holders of the Series A Debentures not less than 10 days prior to such special record date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Series A Debentures may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. ARTICLE TWO MANDATORY PREPAYMENT AND OPTIONAL REDEMPTION OF THE SERIES A DEBENTURES SECTION 2.01. If Illinois Power Capital redeems the Series A Preferred Securities in accordance with their terms, the Series A Debentures will become due and payable in a principal amount equal to the aggregate liquidation preference of the Series A Preferred Securities so redeemed, together with all accrued and unpaid interest on them, including Additional Interest, if any (the "Mandatory Prepayment Price"). Any payment pursuant to this provision shall be made prior to 12:00 noon, New York time, on the date of such redemption or at such earlier time as the Company and Illinois Power Capital shall agree. SECTION 2.02. At such time as there are no Series A Preferred Securities remaining outstanding and subject to the terms of Article Three of the Indenture, the Company shall have the right to redeem the Series A Debentures, in whole or in part, from time to time, on or after ___________, 1999, at a redemption price equal to 100% of the principal amount to be redeemed plus any accrued and unpaid interest on them, including any Additional Interest, if any, to the date of such redemption (the "Optional Redemption Price"). Any redemption pursuant to this paragraph will be made upon not less than 30 nor more than 60 days' notice, at the Optional Redemption Price. If the Series A Debentures are only partially redeemed pursuant to this Section, the Debentures will be redeemed pro rata or by lot or by any other method utilized by the Trustee; provided, that if at the time of redemption, the Series A Debentures are registered as a Global Debenture, the Depository shall determine by lot the principal amount of such Series A Debentures held by each Series A Debentureholder to be redeemed. ARTICLE THREE EXTENSION OF INTEREST PAYMENT PERIOD SECTION 3.01. So long as the Company is not in default in the payment of interest on any series of Debentures issued under the Indenture, the Company shall have the - 3 - 5 right, at any time during the term of the Series A Debentures, from time to time to extend the interest payment period of such Series A Debentures for up to 60 consecutive months (the "Extended Interest Payment Period"), at the end of which period the Company shall pay all interest accrued and unpaid on such Series A Debentures (together with interest on such accrued and unpaid interest at the rate specified for the Series A Debentures to the extent permitted by applicable law); provided that, during such Extended Interest Payment Period the Company shall not declare or pay any dividend on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock or make any guarantee payments with respect to the foregoing (other than payments on the Guarantee); and provided further that any such extended interest payment period may only be selected with respect to the Series A Debentures if an extended interest payment period of identical length is simultaneously selected for all Debentures then outstanding under the Indenture. Prior to the termination of any such Extended Interest Payment Period, the Company may further extend such period, provided that such period together with all such further extensions of it shall not exceed 60 consecutive months. Upon the termination of any Extended Interest Payment Period and upon the payment of all accrued and unpaid interest and any Additional Interest then due, the Company may select a new Extended Interest Payment Period, subject to the foregoing requirements. No interest shall be due and payable during an Extended Interest Payment Period, except at the end of such Period. SECTION 3.02. (a) If Illinois Power Capital is the sole holder of the Series A Debentures at the time the Company selects an Extended Interest Payment Period, the Company shall give both Illinois Power Capital and the Trustee written notice of its selection of such Extended Interest Payment Period one Business Day prior to the earlier of (i) the next succeeding date on which dividends on the Series A Preferred Securities are payable or (ii) the date Illinois Power Capital is required to give notice of the record date or the date such dividends are payable to the New York Stock Exchange or other applicable self-regulatory organization or to holders of the Series A Preferred Securities, but in any event not less than one Business Day prior to such record date. The Company shall cause Illinois Power Capital to give notice of the Company's selection of such Extended Interest Payment Period to the holders of the Series A Preferred Securities. (b) If Illinois Power Capital is not the sole holder of the Series A Debentures at the time the Company selects an Extended Interest Payment Period, the Company shall give the holders of the Series A Debentures and the Trustee written notice of its selection of such Extended Interest Payment Period 10 Business Days prior to the earlier of (i) the next succeeding Interest Payment Date or (ii) the date the Company is required to give notice of the record or payment date of such interest payment to the New York Stock Exchange or other applicable self-regulatory organization or to holders of the Series A Debentures, but in any event not less than two Business Days prior to such record date. (c) The month in which any notice is given pursuant to paragraphs (a) or (b) of this Section shall constitute one of the 60 mouths which comprise the maximum Extended Interest Payment Period. - 4 - 6 ARTICLE FOUR RIGHT OF SET-OFF SECTION 4.01. Notwithstanding anything to the contrary in the Indenture or in this First Supplemental Indenture, the Company shall have the right to set-off any payment it is otherwise required to make under the Indenture or hereunder with and to the extent the Company has previously made, or is concurrently on the date of such payment making, a payment under the Guarantee, dated as of ____________, 1994, executed by the Company and furnished to Illinois Power Capital for the benefit of the holders of the Series A Preferred Securities. ARTICLE FIVE COVENANT TO LIST ON EXCHANGE SECTION 5.01. If the Series A Debentures are to be issued as a Global Debenture in connection with the distribution of the Series A Debentures to the holders of the Series A Preferred Securities upon a Dissolution Event, the Company will use its best efforts to list such Debentures on the New York Stock Exchange or on such other exchange as the Series A Preferred Securities are then listed and traded on the same part of any such exchange. ARTICLE SIX FORM OF SERIES A DEBENTURE SECTION 6.01. The Series A Debentures and the Trustee's Certificate of Authentication to be endorsed on them are to be substantially in the following forms: (FORM OF FACE OF DEBENTURE) [If the Series A Debenture is to be a Global Indenture, insert -- This Debenture is a Global Debenture within the meaning of the Indenture referred to below and is registered in the name of a Depository or a nominee of a Depository. Except as otherwise provided in Section 2.11 of the Indenture, this Debenture may be transferred, in whole but not in part, only to another nominee of the Depository or to a successor Depository or to a nominee of such successor Depository. Unless this Debenture is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York) to the issuer or its agent for registration of transfer, exchange or payment, and any Debenture issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE OF THIS SERIES A DEBENTURE FOR VALUE OR OTHERWISE BY A - 5 - 7 PERSON IS WRONGFUL since the registered owner of this First Supplemental Indenture, Cede & Co., has an interest in this Debenture.] No._______________ $_______________ CUSIP No._________ ILLINOIS POWER COMPANY _______% SUBORDINATED DEBENTURE, SERIES A, DUE ____ ILLINOIS POWER COMPANY, a corporation duly organized and existing under the laws of the State of Illinois (the "Company," which term includes any successor corporation under the Indenture), for value received, hereby promises to pay to _______________ or registered assigns, the principal sum of __________________________ Dollars on ____________, _____, and to pay interest on said principal sum from ______________, 1994 or from the most recent interest payment date (each such date, an "Interest Payment Date") to which interest has been paid or duly provided for, monthly in arrears on the last day of each calendar month of each year commencing _________________, 1994 at the rate of ______% per annum plus Additional Interest, if any, until the principal of this Debenture shall have become due and payable, and on any overdue principal and premium, if any, and (to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the same rate per annum. The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on this Debenture is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the person in whose name this Debenture (or one or more Predecessor Debentures, as defined in the Indenture) is registered at the close of business on the regular record date for such interest installment[, which shall be the close of business on the Business Day next preceding such Interest Payment Date.] If pursuant to the provisions of Section 2.11(c) of the Indenture the Series A Debentures are no longer represented by a Global Debenture, the regular record date shall be the close of business on the ____ Business Day next preceding such Interest Payment Date.] Any such interest installment not punctually paid or duly provided for shall immediately cease to be payable to the registered holders on such regular record date, and may be paid to the person in whose name this Debenture (or one or more Predecessor Debentures) is registered at the close of business on a special record date to be fixed by the Trustee for the payment of such defaulted interest, notice of which special record date shall be given to the registered holders of this series of Debentures not less than 10 days prior to such special record date, or may be paid at any time in any other lawful manner not - 6 - 8 inconsistent with the requirements of any securities exchange on which the Debentures may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. The principal of (and premium, if any) and the interest on this Debenture shall be payable at the office or agency of the Company maintained for that purpose in Decatur, Illinois, in any coin or currency of the United States of America which at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made at the option of the Company by check mailed to the registered holder at such address as shall appear in the Debenture Register. Notwithstanding the foregoing, so long as the holder of this Debenture is Illinois Power Capital, L.P. ("Illinois Power Capital"), the payment of the principal of (and premium, if any) and interest (including Additional Interest, if any) on this Debenture will be made at such place and to such account as may be designated by Illinois Power Capital. The indebtedness evidenced by this Debenture is, to the extent provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness, and this Debenture is issued subject to the provisions of the Indenture with respect such Senior Indebtedness. Each Holder of this Debenture, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Trustee such Holder's attorney-in-fact for any and all such purposes. Each Holder of this Debenture, by such Holder's acceptance of this Debenture, waives all notice of the acceptance of the subordination provisions contained in this Debenture and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or incurred after the date of this Indenture, and waives reliance by each such Holder upon said provisions. This Debenture shall not be entitled to any benefit under the Indenture, be valid or become obligatory for any purpose until the Certificate of Authentication on this Debenture shall have been signed by or on behalf of the Trustee. Unless the Certificate of Authentication on this Debenture has been executed by the Trustee referred to on the reverse side of this Debenture, this Debenture shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. The provisions of this Debenture are contained on the reverse side of it and such continued provisions shall for all purposes have the same effect as though fully set forth at this place. - 7 - 9 IN WITNESS WHEREOF, the Company has caused this Instrument to be executed. Dated___________________ ILLINOIS POWER COMPANY By: ___________________________ Chairman Attest: ___________________________ Secretary (FORM OF CERTIFICATE OF AUTHENTICATION) CERTIFICATE OF AUTHENTICATION This is one of the Debentures of the series of Debentures described in the within-mentioned Indenture. The First National Bank of Chicago ___________________________ ___________________________ as Trustee or as Authentication Agent By_________________________ By ________________________ Authorized Signatory Authorized Signatory (FORM OF REVERSE OF DEBENTURE) This Debenture is one of a duly authorized series of Debentures of the Company (the "Debentures"), specified in the Indenture, all issued or to be issued in one or more series under and pursuant to an Indenture dated as of _______ 1, 1994 duly executed and delivered between the Company and The First National Bank of Chicago, a national banking association duly organized and existing under the laws of the United States of America, as Trustee (the "Trustee"), as supplemented by the First Supplemental Indenture dated as of ___________, 1994 between the Company and the Trustee (as so supplemented, the "Indenture"), to which Indenture and all indentures supplemental to it reference is made for a description of the - 8 - 10 rights, limitations of rights, obligations, duties and immunities under it the Indenture of the Trustee, the Company and the holders of the Debentures. By the terms of the Indenture, the Debentures are issuable in series which may vary as to amount, date of maturity, rate of interest and in other respects as provided in the Indenture. This series of Debentures is limited in aggregate principal amount as specified in said First Supplemental Indenture. If Illinois Power Capital redeems its __% Cumulative Monthly Income Preferred Securities, Series A (the "Series A Preferred Securities") in accordance with their terms, the Debentures will become due and payable in a principal amount equal to the aggregate stated liquidation preference of the Series A Preferred Securities so redeemed, together with any interest accrued on them, including Additional Interest (the "Mandatory Prepayment Price"). Any payment of such Mandatory Prepayment Price shall be made prior to 12:00 noon, New York time, on the date of such redemption or at such earlier time as the Company and Illinois Power Capital shall agree. At such time as there are no Series A Preferred Securities remaining outstanding and subject to the terms of Article Three of the Indenture, the Company shall have the right to redeem this Debenture at the option of the Company, without premium or penalty, in whole or in part at any time on or after ___________, 1999 (an "Optional Redemption"), at a redemption price equal to 100% of the principal amount of this Debenture plus any accrued but unpaid interest, including any Additional Interest, if any, to the date of such redemption (the "Optional Redemption Price"). Any redemption pursuant to this paragraph will be made upon not less than 30 nor more than 60 days' notice, at the Optional Redemption Price. If the Debentures are only partially redeemed by the Company pursuant to an Optional Redemption, the Debentures will be redeemed pro rata or by lot or by any other method utilized by the Trustee; provided that if at the time of redemption, the Debentures are registered as a Global Debenture, the Depository shall determine by lot the principal amount of such Debentures held by each Debentureholder to be redeemed. In the event of redemption of this Debenture in part only, a new Debenture or Debentures of this series for the unredeemed portion of this Debenture will be issued in the name of the Holder of this Debenture upon the cancellation of this Debenture. In case an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of all of the Debentures may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions for defeasance at any time of the entire indebtedness of this Debenture upon compliance by the Company with certain conditions set forth in the Indenture. The Indenture contains provisions permitting the Company and the Trustee, with the consent of the Holders of not less than a majority in aggregate principal amount of the Debentures of each series affected at the time outstanding, as defined in the Indenture, to execute supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders of the Debentures; provided, however, that no such supplemental indenture shall (i) extend the fixed maturity of any Debentures of any series, or reduce the principal amount of them, or reduce the rate or extend - 9 - 11 the time of payment of interest on them, or reduce any premium payable upon the redemption of them, without the consent of the holder of each Debenture so affected or (ii) reduce the aforesaid percentage of Debentures, the holders of which are required to consent to any such supplemental indenture, without the consent of the holders of each Debenture then outstanding and affected by such reduction. The Indenture also contains provisions permitting the Holders of a majority in aggregate principal amount of the Debentures of all series at the time outstanding affected thereby, on behalf of the Holders of the Debentures of such series, to waive any past default in the performance of any of the covenants contained in the Indenture, or established pursuant to the Indenture with respect to such series, and its consequences, except a default in the payment of the principal of or premium, if any, or interest on any of the Debentures of such series. Any such consent or waiver by the registered Holder of this Debenture (unless revoked as provided in the Indenture) shall be conclusive and binding upon such Holder and upon all future Holders and owners of this Debenture and of any Debenture issued in exchange for or in place of this Debenture (whether by registration of transfer or otherwise), irrespective of whether or not any notation of such consent or waiver is made upon this Debenture. No reference in this Debenture to the Indenture and no provision of this Debenture or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and premium, if any, and interest on this Debenture at the time and place and at the rate and in the money prescribed in this Debenture. The Company shall have the right at any time during the term of the Debentures, from time to time to extend the interest payment period of such Debentures to up to 60 consecutive months (the "Extended Interest Payment Period"), at the end of which period the Company shall pay all interest then accrued and unpaid (together with interest on such accrued and unpaid interest at the rate specified for the Debentures to the extent that payment of such interest is enforceable under applicable law); provided that, during such Extended Interest Payment Period the Company shall not declare or pay any dividend on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock or make any guarantee payments with respect to the foregoing (other than payments on the Guarantee); and provided further that any such extended interest payment period may only be selected with respect to the Series A Debentures if an extended interest payment period of identical length is simultaneously selected for all Debentures then outstanding under the Indenture. Prior to the termination of any such Extended Interest Payment Period, the Company may further extend such Extended Interest Payment Period, provided that such Period together with all such further extensions of it shall not exceed 60 consecutive months. At the termination of any such Extended Interest Payment Period and upon the payment of all accrued and unpaid interest and any additional amounts then due, the Company may select a new Extended Interest Payment Period. As provided in the Indenture and subject to certain limitations set forth in it, this Debenture is transferable by the registered holder of this Debenture on the Debenture Register of the Company, upon surrender of this Debenture for registration of transfer at the office or agency of the Company in Decatur, Illinois accompanied by a written instrument or instruments of transfer in form satisfactory to the Company or the Trustee duly executed by the registered holder of this Debenture or such holder's attorney duly authorized in writing, upon which one or more new Debentures of authorized denominations and for the same - 10 - 12 aggregate principal amount and series will be issued to the designated transferee or transferees. No service charge will be made for any such transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in relation to such transfer. Prior to due presentment for registration of transfer of this Debenture, the Company, the Trustee, any paying agent and any Debenture Registrar may deem and treat the registered holder of this Debenture as the absolute owner of this Debenture (whether or not this Debenture shall be overdue and notwithstanding any notice of ownership or writing on this Debenture made by anyone other than the Debenture Registrar) for the purpose of receiving payment of or on account of the principal of this Debenture and premium, if any, and interest due on this Debenture and for all other purposes, and neither the Company nor the Trustee nor any paying agent nor any Debenture Registrar shall be affected by any notice to the contrary. No recourse shall be had for the payment of the principal of or the interest on this Debenture, or for any claim based on this Debenture, or otherwise in respect of this Debenture, or based on or in respect of the Indenture, against any incorporator, stockholder, officer or director, past, present or future, as such, of the Company or of any predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance of this Debenture and as part of the consideration for the issuance of this Debenture, expressly waived and released. The Debentures of this series are issuable only in registered form without coupons in denominations of $25 and any integral multiple of $25. This Global Debenture is exchangeable for Debentures in definitive form only under certain limited circumstances set forth in the Indenture. Debentures of this series so issued are issuable only in registered form without coupons in denominations of $25 and any integral multiple of $25. As provided in the Indenture and subject to certain limitations set forth in this Debenture and the Indenture, Debentures of this series so issued are exchangeable for a like aggregate principal amount of Debentures of this series of a different authorized denomination, as requested by the Holder surrendering the same. All terms used in this Debenture which are defined in the Indenture shall have the meanings assigned to them in the Indenture. ARTICLE SEVEN ORIGINAL ISSUE OF SERIES A DEBENTURES SECTION 7.01. Series A Debentures in the aggregate principal amount of $__________ plus the amount of capital contributions made by the Company from time to time as general partner of Illinois Power Capital, may, upon execution of this First Supplemental Indenture, or from time to time thereafter, be executed by the Company and delivered to the Trustee for authentication, and the Trustee shall upon such execution and delivery authenticate and deliver said Debentures to or upon the written order of the Company, signed - 11 - 13 by its Chairman, or any Vice President and its Treasurer or an Assistant Treasurer, without any further action by the Company. ARTICLE EIGHT SPECIAL COVENANTS OF THE COMPANY SECTION 8.01. So long as any Debentures issued in connection with the application of the proceeds from the issuance and sale of a series of Series A Preferred Securities of Illinois Power Capital remain outstanding, the Company will (i) remain the sole general partner of Illinois Power Capital and maintain 100%-ownership of the general partner interests of Illinois Power Capital; provided that any permitted successor of the Company under the Indenture may succeed to its duties as general partner, (ii) contribute capital to the extent required to maintain its capital at an amount equal to at least 3% of the total capital contributions to Illinois Power Capital, (iii) not voluntarily dissolve, wind-up or terminate Illinois Power Capital, except in connection with a distribution of Debentures and in connection with certain mergers, consolidations or amalgamations permitted by the Limited Partnership Agreement, (iv) timely perform all of its duties as General Partner (including the duty to pay dividends on the Preferred Securities of Illinois Power Capital) and (v) use its reasonable efforts to cause Illinois Power Capital to remain a limited partnership except in connection with a distribution of Debentures and in connection with certain mergers, consolidations or amalgamations permitted by the Limited Partnership Agreement, and otherwise continue to be treated as a partnership for United States federal income tax purposes except in connection with a distribution of Debentures. ARTICLE NINE SUNDRY PROVISIONS SECTION 9.01. Except as otherwise expressly provided in this First Supplemental Indenture or in the form of Series A Debenture or otherwise clearly required by the context of this First Supplemental Indenture or the form of Series A Debenture, all terms used in this First Supplemental Indenture or in said form of Series A Debenture that are defined in the Indenture shall have the several meanings respectively assigned to them by the Indenture. SECTION 9.02. The Indenture, as supplemented by this First Supplemental Indenture, is in all respects ratified and confirmed, and this First Supplemental Indenture shall be deemed part of the Indenture in the manner and to the extent provided in this First Supplemental Indenture or in the Indenture. SECTION 9.03. The recitals contained in this First Supplemental Indenture are made by the Company and not by the Trustee, and the Trustee assumes no responsibility for the correctness of them. The Trustee makes no representation as to the validity or sufficiency of this First Supplemental Indenture. - 12 - 14 SECTION 9.04. This First Supplemental Indenture may be executed in any number of counterparts each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed, and their respective corporate seals to be affixed unto this First Supplemental Indenture and attested, on the date or dates indicated in the acknowledgments and as of the day and year first above written. ILLINOIS POWER COMPANY By: _______________________________ Vice President Attest: _______________________________ Secretary THE FIRST NATIONAL BANK OF CHICAGO as Trustee By: _______________________________ _______________________________ Attest: _______________________________ Assistant Treasurer - 13 - 15 STATE OF ILLINOIS ) COUNTY OF ______ ) ss.: _____________ ___, 1994 On the ____ day of _____________, in the year one thousand nine hundred ninety-four, before me personally came ___________________ to me known, who, being by me duly sworn, did depose and say that he is ____________ of ILLINOIS POWER COMPANY, one of the corporations described in and which executed the above instrument; that he knows the corporate seal of said corporation; that the seal affixed to the said instrument is such corporation seal; that it was so affixed by authority of the Board of Directors of said corporation, and that (s)he signed her/his name thereto by like authority. ___________________________________ NOTARY PUBLIC My Commission Expires _____________ STATE OF ILLINOIS ) COUNTY OF COOK ) ss.: _______________ ___, 1994 On the ____ day of __________, in the year one thousand nine hundred ninety-four, before me personally came _____________________ to me known, who, being by me duly sworn, did depose and say that (s)he is _____________________ of THE FIRST NATIONAL BANK OF CHICAGO, one of the corporations described in and which executed the above instrument; that (s)he knows the corporate seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation and that (s)he signed her/his name to the instrument by like authority. ___________________________________ NOTARY PUBLIC My Commission Expires______________ - 14 - EX-4.G 9 SUPPLEMENT INDENTURE TO INDENTURE (ADJ. RATE) 1 EXHIBIT 4(g) ILLINOIS POWER COMPANY AND THE FIRST NATIONAL BANK OF CHICAGO, AS TRUSTEE _________________ FIRST SUPPLEMENTAL INDENTURE DATED AS OF _______ __, 1994 TO INDENTURE DATED AS OF _________ 1, 1994 CUMULATIVE ADJUSTABLE RATE SUBORDINATED DEBENTURES, SERIES A, DUE _____ 2 THIS FIRST SUPPLEMENTAL INDENTURE, dated as of the ____ day of ________, 1994 (this "First Supplemental Indenture"), between ILLINOIS POWER COMPANY, a corporation duly organized and existing under the laws of the State of Illinois (the "Company"), and THE FIRST NATIONAL BANK OF CHICAGO, a national banking association organized and existing under the laws of the United States of America, as trustee (the "Trustee") under the Indenture dated as of __________ 1, 1994 between the Company and the Trustee (the "Indenture"). All terms used and not defined this First Supplemental Indenture are used as defined in the Indenture. WHEREAS, the Company executed and delivered the Indenture to the Trustee to provide for the future issuance of its subordinated debentures (the "Debentures"), said Debentures to be issued from time to time in series as might be determined by the Company under the Indenture, in an unlimited aggregate principal amount which may be authenticated and delivered under the Indenture as provided in the Indenture; and WHEREAS, pursuant to the terms of the Indenture, the Company desires to provide for the establishment of a new series of its Debentures to be known as its Adjustable Rate Subordinated Debentures, Series A, due _____ (the "Series A Debentures"), the form and substance of such Series A Debentures and the terms, provisions and conditions thereof to be set forth as provided in the Indenture and this First Supplemental Indenture; and WHEREAS, Illinois Power Capital, L.P., a Delaware limited partnership ("Illinois Power Capital"), has offered to the public its Cumulative Adjustable Rate Monthly Income Preferred Securities, Series A (the "Series A Preferred Securities"), representing limited partnership interests in Illinois Power Capital and proposes to invest the proceeds from such offering in the Series A Debentures; and WHEREAS, upon the occurrence of a Special Event (as defined in the Amended and Restated Agreement of Limited Partnership of Illinois Power Capital, dated _________ __, 1994 (the "Limited Partnership Agreement")), the Company may dissolve Illinois Power Capital and cause to be distributed to the holders of the Series A Preferred Securities, on a pro rata basis, Series A Debentures (a "Dissolution Event"); and WHEREAS, the Company desires and has requested the Trustee to join with it in the execution and delivery of this First Supplemental Indenture, and all requirements necessary to make this First Supplemental Indenture a valid instrument, in accordance with its terms, and to make the Series A Debentures, when executed by the Company and authenticated and delivered by the Trustee, the valid obligations of the Company, have been performed and fulfilled, and the execution and delivery of this First Supplemental Indenture have been in all respects duly authorized: NOW THEREFORE, in consideration of the purchase and acceptance of the Series A Debentures by their holders, and for the purpose of setting forth, as provided in the Indenture, the form and substance of the Series A Debentures and the terms, provisions and conditions of them, the Company covenants and agrees with the Trustee as follows: 3 ARTICLE ONE GENERAL TERMS AND CONDITIONS OF THE SERIES A DEBENTURES SECTION 1.01. There shall be and is authorized a series of Debentures designated the "Adjustable Rate Subordinated Debentures, Series A, Due ____," limited in aggregate principal amount to (i) $___________ plus (ii) the amount of capital contributions made by the Company from time to time as general partner of Illinois Power Capital, which amount shall be as set forth in any written order of the Company for the authentication and delivery of Series A Debentures. The Series A Debentures shall mature and the principal shall be due and payable together with all accrued and unpaid interest on them, including Additional Interest (as defined below) on ______ ___, _____, and shall be issued in the form of registered Series A Debentures without coupons. SECTION 1.02. Except as provided in Section 1.03, the Series A Debentures shall be issued in certificated form. Principal of and interest on the Series A Debentures issued in certificated form will be payable, the transfer of such Series A Debentures will be registrable and such Series A Debentures will be exchangeable for the Series A Debentures bearing identical terms and provisions at the office or agency of the Company in Decatur, Illinois; provided, however, that payment of interest may be made at the option of the Company by check mailed to the registered holder at such address as shall appear in the Debenture Register. Notwithstanding the foregoing, so long as the holder of the Series A Debentures is Illinois Power Capital, the payment of the principal of and interest (including Additional Interest, if any) on the Series A Debentures will be made at such place and to such account as may be designated by Illinois Power Capital. SECTION 1.03. In connection with a Dissolution Event, the Series A Debentures in certificated form may be presented to the Trustee by Illinois Power Capital in exchange for a Global Debenture in an aggregate principal amount equal to all Outstanding Series A Debentures, to be registered in the name of the Depository, or its nominee, and delivered by the Trustee to the Depository for crediting to the accounts of its participants. The Company upon any such presentation shall execute a Global Debenture in such aggregate principal amount and deliver the same to the Trustee for authentication and delivery as provided above and in the Indenture provided. Payments on the Series A Debentures issued as a Global Debenture will be made to the Depository. The Depository for the Series A Debentures shall be The Depository Trust Company, New York, New York. SECTION 1.04. Each Series A Debenture shall bear interest at a variable rate from the date it is made until maturity. The interest rate will be adjusted quarterly. The rate for the initial period from the original date of issuance to _______ ___, 1994 will be ___% per annum. After that, interest on the Series A Debentures will be payable at the "Applicable Rate" (as defined below) from time to time in effect. The interest rate on any overdue principal and (to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest will be at the same rate per annum, during such overdue period. Interest is payable monthly in arrears on the last day of each calendar month of each year (each, an "Interest Payment Date," commencing on ______, 1994), to the person in whose name such Series A Debenture or any predecessor Series A Debenture is registered, -2- 4 at the close of business on the regular record date for such interest installment, which shall be the close of business on the Business Day next preceding that Interest Payment Date. If pursuant to the provisions of Section 2.11(c) of the Indenture the Series A Debentures are no longer represented by a Global Debenture, the Company may select a regular record date for such interest installment which shall be any date not later than fifteen days preceding an Interest Payment Date. Any such interest (including Additional Interest) not punctually paid or duly provided for shall immediately cease to be payable to the registered holders on such regular record date, and may be paid to the person in whose name the Series A Debenture (or one or more Predecessor Debentures) is registered at the close of business on a special record date to be fixed by the Trustee for the payment of such defaulted interest, notice of which special record date shall be given to the registered holders of the Series A Debentures not less than 10 days prior to such special record date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Series A Debentures may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. Except as provided below in this paragraph, the "Applicable Rate" for any quarter (other than the initial period) will be equal to ___% of the Effective Rate (as defined below), but not less than ____% per annum nor more than ___% per annum. The "Effective Rate" for any quarter will be equal to the highest of the Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Thirty Year Constant Maturity Rate (each as defined below) for such quarter. The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Thirty Year Constant Maturity Rate with respect to any quarter shall be determined by Illinois Power Capital in the same manner as, and consistent with its determinations with respect to quarters for the purpose of dividends payable on the Series A Preferred Securities, as described below. The Applicable Rate will be rounded to the nearest five hundredth of a percent. In the event that Illinois Power Capital determines in good faith that for any reason: (i) any one of the Treasury Bill Rate, the Ten Year Constant Maturity Rate or the Thirty Year Constant Maturity Rate cannot be determined for any quarter, then the Effective Rate for such quarter will be equal to the higher of whichever two of such rates can be so determined; (ii) only one of the Treasury Bill Rate, the Ten Year Constant Maturity Rate or the Thirty Year Constant Maturity Rate can be determined for any quarter, then the Effective Rate for such quarter will be equal to whichever such rate can be so determined; or (iii) none of the Treasury Bill Rate, the Ten Year Constant Maturity Rate or the Thirty Year Constant Maturity Rate can be determined for any quarter, then the Effective Rate for the preceding quarter will be continued for such quarter. Except as described below in this paragraph, the "Treasury Bill Rate" for each quarter will be the arithmetic average of the two most recent weekly per annum secondary market discount rates (or the one weekly per annum secondary market discount rate, if only one such rate is published during the relevant Calendar Period (as defined below)) for three-month U.S. Treasury bills, as published weekly by the Federal Reserve Board (as defined below) during the Calendar Period immediately preceding the last ten calendar days preceding the quarter for which the interest rate on the Series A Debentures is being determined. In the - 3 - 5 event that the Federal Reserve Board does not publish such a weekly per annum secondary market discount rate during any such Calendar Period, then the Treasury Bill Rate for such quarter will be the arithmetic average of the two most recent weekly per annum secondary market discount rates (or the one weekly per annum secondary market discount rate, if only one such rate is published during the relevant Calendar Period) for three-month U.S. Treasury bills, as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by Illinois Power Capital. In the event that a per annum secondary market discount rate for three-month U.S. Treasury bills is not published by the Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, then the Treasury Bill Rate for such quarter will be the arithmetic average of the two most recent weekly per annum secondary market discount rates (or the one weekly per annum secondary market discount rate, if only one such rate is published during the relevant Calendar Period) for all of the U.S. Treasury bills then having remaining maturities of not less than 80 nor more than 100 days, as published during such Calendar Period by the Federal Reserve Board, or if the Federal Reserve Board does not publish such rates, by any Federal Reserve Bank or by any U.S. Government department or agency selected by Illinois Power Capital. In the event that Illinois Power Capital determines in good faith that for any reason no such U.S. Treasury bill rates are published as provided above during such Calendar Period, then the Treasury Bill Rate for such will quarter will be the arithmetic average of the per annum secondary market discount rates based upon the closing bids during such Calendar Period for each of the issues of marketable non-interest-bearing U.S. Treasury securities with a remaining maturity of not less than 80 nor more than 100 days from the date of each such quotation, as chosen and quoted daily for each Business Day in New York City (or less frequently if daily quotations are not generally available) to Illinois Power Capital by at least three recognized dealers in U.S. Government securities selected by Illinois Power Capital. In the event that Illinois Power Capital determines in good faith that for any reason Illinois Power Capital cannot determine the Treasury Bill Rate for any quarter as provided above in this paragraph, the Treasury Bill Rate for such quarter will be the arithmetic average of the per annum secondary market discount rates based upon the closing bids during such Calendar Period for each of the issues of marketable interest-bearing U.S. Treasury securities with a remaining maturity of not less than 80 nor more than 100 days, as chosen and quoted daily for each Business Day in New York City (or less frequently if daily quotations are not generally available) to Illinois Power Capital by at least three recognized dealers in U.S. Government securities selected by Illinois Power Capital. Except as described below in this paragraph, the "Ten Year Constant Maturity Rate" for each quarter will be the arithmetic average of the two most recent weekly per annum Ten Year Average Yields (as defined below) (or the one weekly per annum Ten Year Average Yield, if only one such yield is published during the relevant Calendar Period), as published weekly by the Federal Reserve Board during the Calendar Period immediately preceding the last ten calendar days preceding the quarter for which the interest rate on the Series A Debentures is being determined. In the event that the Federal Reserve Board does not publish such a weekly per annum Ten Year Average Yield during such Calendar Period, then the Ten Year Constant Maturity Rate for such quarter will be the arithmetic average of the two most recent weekly per annum Ten Year Average Yields (or the one weekly per annum Ten Year Average Yield, if only one such yield is published during the relevant Calendar Period), as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by Illinois Power Capital. In the event that a per annum Ten - 4 - 6 Year Average Yield is not published by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, then the Ten Year Constant Maturity Rate for such quarter will be the arithmetic average of the two most recent weekly per annum average yields to maturity or (the one weekly per annum average yield to maturity, if only one such yield published during the relevant Calendar Period) for all of the actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities (as defined below)) then having remaining maturities of not less than eight nor more than twelve years, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board does not publish such yields, by any Federal Reserve Bank or by any U.S. Government department or agency selected by Illinois Power Capital. In the event that Illinois Power Capital determines in good faith that for any reason Illinois Power Capital cannot determine the Ten Year Constant Maturity Rate for any quarter as provided above in this paragraph, then the Ten Year Constant Maturity Date for such quarter will be the arithmetic average of the per annum average yields to maturity based upon the closing bids during such Calendar Period for each of the issues of actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) with a final maturity date not less than eight or more than twelve years from the date of each such quotation, as chosen and quoted daily for each Business Day in New York City (or less frequently if daily quotations are not generally available) to Illinois Power Capital by at least three recognized dealers in U.S. Government securities selected by Illinois Power Capital. Except as described below in this paragraph, the "Thirty Year Constant Maturity Rate" for each quarter will be the arithmetic average of the two most recent weekly per annum Thirty Year Average Yields (as defined below) (or the one weekly per annum Thirty Year Average Yield, if only one such yield is published during the relevant Calendar Period), as published weekly by the Federal Reserve Board during the Calendar Period immediately preceding the last ten calendar days preceding the quarter for which the interest rate on the Series A Debentures is being determined. In the event that the Federal Reserve Board does not publish such a weekly per annum Thirty Year Average Yield during such Calendar Period, then the Thirty Year Constant Maturity Rate for such quarter will be the arithmetic average of the two most recent weekly per annum Thirty Year Average Yields (or the one weekly per annum Thirty Year Average Yield, if only one such yield is published during the relevant Calendar Period), as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by Illinois Power Capital. In the event that a per annum Thirty Year Average Yield is not published by the Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, then the Thirty Year Constant Maturity Rate for such quarter will be the arithmetic average of the two most recent weekly per annum average yields to maturity (or the one weekly per annum average yield to maturity, if only one such yield is published during the relevant Calendar Period) for all of the actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) then having remaining maturities of not less than twenty-eight nor more than thirty-two years, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board does not publish such yields, by any Federal Reserve Bank or by any U.S. Government department or agency selected by Illinois Power Capital. In the event that Illinois Power Capital determines in good faith that for any reason Illinois Power Capital cannot determine the Thirty Year Constant Maturity Date for any quarter as provided above in this paragraph, then the Thirty Year Constant Maturity Rate for such quarter will be the arithmetic average of the per annum - 5 - 7 average yields to maturity based upon the closing bids during such Calendar Period for each of the issues of actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) with a final maturity date not less than twenty-eight nor more than thirty-two years from the date of each such quotation, as chosen and quoted daily for each Business Day in New York City (or less frequently if daily quotations are not generally available) to Illinois Power Capital by at least three recognized dealers in U.S. Government securities selected by Illinois Power Capital. The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Thirty Year Constant Maturity Rate will each be rounded to the nearest one hundredth of a percent. The Applicable Rate with respect to each quarter (other than the initial period) will be calculated as promptly as practicable by Illinois Power Capital according to the appropriate method described above. Illinois Power Capital will cause each Applicable Rate to be published in a newspaper of general circulation in New York City before the commencement of the quarter to which it applies and will cause notice of such Applicable Rate to be given to the Depository Trust Company ("DTC"), New York, NY, the securities depository for the Series A Debentures. As used above, the term "Calendar Period" means a period of fourteen calendar days; the term "Federal Reserve Board" means the Board of Governors of the Federal Reserve System; the term "Special Securities" means securities which can, at the option of the holder, be surrendered at face value in payment of any federal estate tax or which provide tax benefits to the holder and are priced to reflect such tax benefits or which were originally issued at a deep or substantial discount; the term "Ten Year Average Yield" means the average yield to maturity for actively traded marketable U.S. Treasury fixed interest rate securities (adjusted to constant maturities of ten years); and the term "Thirty Year Average Yield" means the average yield to maturity for actively traded marketable U.S. Treasury fixed interest rate securities (adjusted to constant maturities of thirty years). ARTICLE TWO MANDATORY PREPAYMENT AND OPTIONAL REDEMPTION OF THE SERIES A DEBENTURES SECTION 2.01. If Illinois Power Capital redeems the Series A Preferred Securities in accordance with these terms, the Series A Debentures will become due and payable in a principal amount equal to the aggregate liquidation preference of the Series A Preferred Securities so redeemed, together with all accrued and unpaid interest on them, including Additional Interest, if any (the "Mandatory Prepayment Price"). Any payment pursuant to this provision shall be made prior to 12:00 noon, New York time, on the date of such redemption or at such earlier time as the Company and Illinois Power Capital shall agree. SECTION 2.02. At such time as there are no Series A Preferred Securities remaining outstanding and subject to the terms of Article Three of the Indenture, the Company shall have the right to redeem the Series A Debentures, in whole or in part, from time to time, on or after __________, 1999, at a redemption price equal to 100% of the principal amount to - 6 - 8 be redeemed plus any accrued and unpaid interest on them, including any Additional Interest, if any, to the date of such redemption (the "Optional Redemption Price"). Any redemption pursuant to this paragraph will be made upon not less than 30 nor more than 60 days' notice, at the Optional Redemption Price. If the Series A Debentures are only partially redeemed pursuant to this Section, the Debentures will be redeemed pro rata or by lot or by any other method utilized by the Trustee; provided, that if at the time of redemption, the Series A Debentures are registered as a Global Debenture, the Depository shall determine by lot the principal amount of such Series A Debentures held by each Series A Debentureholder to be redeemed. ARTICLE THREE EXTENSION OF INTEREST PAYMENT PERIOD SECTION 3.01. So long as the Company is not in default in the payment of interest on any series of Debentures issued under the Indenture, the Company shall have the right, at any time during the term of the Series A Debentures, from time to time to extend the interest payment period of such Series A Debentures for up to 60 consecutive months (the "Extended Interest Payment Period"), at the end of which period the Company shall pay all interest accrued and unpaid on such Series A Debenture (together with interest on such accrued and unpaid interest at the rate specified for the Series A Debentures to the extent permitted by applicable law); provided that, during such Extended Interest Payment Period the Company shall not declare or pay any dividend on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock or make any guarantee payments with respect to the foregoing (other than payments on the Guarantee); and provided further that any such extended interest payment period may only be selected with respect to the Series A Debentures if an extended interest payment period of identical length is simultaneously selected for all Debentures then outstanding under the Indenture. Prior to the termination of any such Extended Interest Payment Period, the Company may further extend such period, provided that such period together with all such further extensions of it shall not exceed 60 consecutive months. Upon the termination of any Extended Interest Payment Period and upon the payment of all accrued and unpaid interest and any Additional Interest then due, the Company may select a new Extended Interest Payment Period, subject to the foregoing requirements. No interest shall be due and payable during an Extended Interest Payment Period, except at the end of such period. SECTION 3.02. (a) If Illinois Power Capital is the sole holder of the Series A Debentures at the time the Company selects an Extended Interest Payment Period, the Company shall give both Illinois Power Capital and the Trustee written notice of its selection of such Extended Interest Payment Period one Business Day prior to the earlier of (i) the next succeeding date on which dividends on the Series A Preferred Securities are payable or (ii) the date Illinois Power Capital is required to give notice of the record date or the date such dividends are payable to the New York Stock Exchange or other applicable self-regulatory organization or to holders of the Series A Preferred Securities, but in an event not less than one Business Day prior to such record date. The Company shall cause Illinois Power Capital to give notice of the Company's selection of such Extended Interest Payment Period to the holders of the Series A Preferred Securities. - 7 - 9 (b) If Illinois Power Capital is not the sole holder of the Series A Debentures at the time the Company selects an Extended Interest Payment Period, the Company shall give the holders of the Series A Debentures and the Trustee written notice of its selection of such Extended Interest Payment Period 10 Business Days prior to the earlier of (i) the next succeeding Interest Payment Date or (ii) the date the Company is required to give notice of the record or payment date of such interest payment to the New York Stock Exchange or other applicable self-regulatory organization or to holders of the Series A Debentures, but in any event not less than two Business Days prior to such record date. (c) The month in which any notice is given pursuant to paragraphs (a) or (b) of this Section shall constitute one of the 60 months which comprise the maximum Extended Interest Payment Period. ARTICLE FOUR RIGHT OF SET-OFF SECTION 4.01. Notwithstanding anything to the contrary in the Indenture or in this First Supplemental Indenture, the Company shall have the right to set-off any payment it is otherwise required to make under the Indenture or hereunder with and to the extent the Company has previously made, or is concurrently on the date of such payment making, a payment under the Guarantee, dated as of _____________, 1994, executed by the Company and furnished to Illinois Power Capital for the benefit of the holders of the Series A Preferred Securities. ARTICLE FIVE COVENANT TO LIST ON EXCHANGE SECTION 5.01. If the Series A Debentures are to be issued as a Global Debenture in connection with the distribution of the Series A Debentures to the holders of the Series A Preferred Securities upon a Dissolution Event, the Company will use its best efforts to list such Debentures on the New York Stock Exchange or on such other exchange as the Series A Preferred Securities are then listed and traded on the same part of any such exchange. ARTICLE SIX FORM OF SERIES A DEBENTURE SECTION 6.01. The Series A Debentures and the Trustee's Certificate of Authentication to be endorsed on them are to be substantially in the following forms: (FORM OF FACE OF DEBENTURE) - 8 - 10 [If the Series A Debenture is to be a Global Indenture, insert - -- This Debenture is a Global Debenture within the meaning of the Indenture referred to below and is registered in the name of a Depository or a nominee of a Depository. Except as otherwise provided in Section 2.11 of the Indenture, this Debenture may be transferred, in whole but not in part, only to another nominee of the Depository or to a Successor depository or to a nominee of such successor Depository. Unless this Debenture is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York) to the issuer or its agent for registration of transfer, exchange or payment, and any Debenture issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE OF THIS SERIES A DEBENTURE FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner of this First Supplemental Indenture, Cede & Co., has an interest in this Debenture.] No. _______________ $_______________ CUSIP No._______________ ILLINOIS POWER COMPANY ADJUSTABLE RATE SUBORDINATED DEBENTURE, SERIES A, DUE ______ ILLINOIS POWER COMPANY, a corporation duly organized and existing under the laws of the State of Illinois (the "Company," which term includes any successor corporation under the Indenture), for value received, hereby promises to pay to ___________________ or registered assigns, the principal sum of_______________ Dollars on ______________, _____, and to pay interest on said principal sum from ___________, 1994 to ___________, 1994 at the initial rate of ________% per annum and after that from the most recent interest payment date (each such date, an "Interest Payment Date") to which interest has been paid or duly provided for, monthly in arrears on the last day of each calendar month of each year commencing _________, 1994 at the Applicable Rate (as defined in the First Supplemental Indenture) adjusted quarterly, determined by Illinois Power Capital in the manner described in the First Supplemental Indenture, plus Additional Interest, if any, until the principal of this Debenture shall have become due and payable, and on any overdue principal and premium, if any, and (to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the same rate per annum during such overdue period. The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on this Debenture is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if - 9 - 11 made on such date. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the person in whose name this Debenture (or one or more Predecessor Debentures, as defined in the Indenture) is registered at the close of business on the regular record date for such interest installment[, which shall be the close of business on the Business Day next preceding such Interest Payment Date.] [If pursuant to the provisions of Section 2.11(c) of the Indenture the Series A Debentures are no longer represented by a Global Debenture, the regular record date shall be the close of business on the ___ Business Day next preceding such Interest Payment Date.] Any such interest installment not punctually paid or duly provided for shall immediately cease to be payable to the registered holders on such regular record date, and may be paid to the person in whose name this Debenture (or one or more Predecessor Debentures) is registered at the close of business on a special record date to be fixed by the Trustee for the payment of such defaulted interest, notice which special record date shall be given to the registered holders of this series of Debentures not less than 10 days prior to such special record date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Debentures may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. The principal of (and premium, if any) and the interest on this Debenture shall be payable at the office or agency of the Company maintained for that purpose in Decatur, Illinois, in any coin or currency of the United States of America which at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made at the option of the Company by check mailed to the registered holder at such address as shall appear in the Debenture Register. Notwithstanding the foregoing, so long as the holder of this Debenture is Illinois Power Capital, L.P. ("Illinois Power Capital"), the payment of the principal of (and premium, if any) and interest (including Additional Interest, if any) on this Debenture will be made at such place and to such account as may be designated by Illinois Power Capital. The indebtedness evidenced by this Debenture is, to the extent provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness, and this Debenture is issued subject to the provisions of the Indenture with respect such Senior Indebtedness. Each Holder of this Debenture, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Trustee such Holder's attorney-in-fact for any and all such purposes. Each Holder of this Debenture, by such Holder's acceptance of this Debenture, waives all notice of the acceptance of the subordination provisions contained in this Debenture and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or incurred after the date of this Debenture, and waives reliance by each such Holder upon said provisions. This Debenture shall not be entitled to any benefit under the Indenture, be valid or become obligatory for any purpose until the Certificate of Authentication on this Debenture shall have been signed by or on behalf of the Trustee. Unless the Certificate of Authentication on this Debenture has been executed by the Trustee referred to on the reverse side of this Debenture, this Debenture shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. - 10 - 12 The provisions of this Debenture are contained on the reverse side of it and such continued provisions shall for all purposes have the same effect as though fully set forth at this place. IN WITNESS WHEREOF, the Company has caused this Instrument to be executed. Dated__________________ ILLINOIS POWER COMPANY By:_________________________________ Chairman Attest: _________________________________ Secretary (FORM OF CERTIFICATE OF AUTHENTICATION) CERTIFICATE OF AUTHENTICATION This is one of the Debentures of the series of Debentures described in the within-mentioned Indenture. The First National Bank of Chicago __________________________ as Trustee or as Authentication Agent By_________________________________ By__________________________ Authorized Signatory Authorized Signatory (FORM OF REVERSE OF DEBENTURE) This Debenture is one of a duly authorized series of Debentures of the Company (the "Debentures"), specified in the Indenture, all issued or to be issued in one or more series under and pursuant to an Indenture dated as of ________ 1, 1994 duly executed and delivered between the Company and The First National Bank of Chicago, a national banking association duly organized and existing under the laws of the United States of America, as Trustee (the "Trustee"), as supplemented by the First Supplemental Indenture dated as of _____________, 1994 between the Company and the Trustee (as so supplemented, the "Indenture"), to which Indenture and all indentures supplemental to it reference is made for a description of the - 11 - 13 rights, limitations of rights, obligations, duties and immunities under it of the Trustee, the Company and the holders of the Debentures. By the terms of the Indenture, the Debentures are issuable in series which may vary as to amount, date of maturity, rate of interest and in other respects as provided in the Indenture. This series of Debentures is limited in aggregate principal amount as specified in said First Supplemental Indenture. If Illinois Power Capital redeems its Cumulative Adjustable Rate Monthly Income Preferred Securities, Series A (the "Series A Preferred Securities") in accordance with their terms, the Debentures will become due and payable in a principal amount equal to the aggregate liquidation preference of the Series A Preferred Securities so redeemed, together with any interest accrued on them, including Additional Interest (the "Mandatory Prepayment Price"). Any payment of such Mandatory Prepayment Price shall be made prior to 12:00 noon, New York time, on the date of such redemption or at such earlier time as the Company and Illinois Power Capital shall agree. At such time as there are no Series A Preferred Securities remaining outstanding and subject to the terms of Article Three of the Indenture, the Company shall have the right to redeem this Debenture at the option of the Company, without premium or penalty, in whole or in part at any time on or after _________, 1999 (an "Optional Redemption"), at a redemption price equal to 100% of the principal amount of this Debenture plus any accrued but unpaid interest, including any Additional Interest, if any, to the date of such redemption (the "Optional Redemption Price"). Any redemption pursuant to this paragraph will be made upon not less than 30 nor more than 60 days' notice, at the Optional Redemption Price. If the Debentures are only partially redeemed by the Company pursuant to an Optional Redemption, the Debentures will be redeemed pro rata or by lot or by any other method utilized by the Trustee; provided that if at the time of redemption, the Debentures are registered as a Global Debenture, the Depository shall determine by lot the principal amount of such Debentures held by each Debentureholder to be redeemed. In the event of redemption of this Debenture in part only, a new Debenture or Debentures of this series for the unredeemed portion of this Debenture will be issued in the name of the Holder of this Debenture upon the cancellation of this Debenture. In case an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of all of the Debentures may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions for defeasance at any time of the entire indebtedness of this Debenture upon compliance by the Company with certain conditions set forth in the Indenture. The Indenture contains provisions permitting the Company and the Trustee, with the consent of the Holders of not less than a majority in aggregate principal amount of the Debentures of each series affected at the time outstanding, as defined in the Indenture, to execute supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders of the Debentures; provided, however, that no such supplemental indenture shall (i) extend the fixed maturity of any Debentures of any series, or reduce the principal amount of them, or reduce the rate or extend - 12 - 14 the time of payment of interest on them, or reduce any premium payable upon the redemption of them, without the consent of the holder of each Debenture so affected or (ii) reduce the aforesaid percentage of Debentures, the holders of which are required to consent to any such supplemental indenture, without the consent of the holders of each Debenture then outstanding and affected by such reduction. The Indenture also contains provisions permitting the Holders of a majority in aggregate principal amount of the Debentures of all series at the time outstanding affected thereby, on behalf of the Holders of the Debentures of such series, to waive any past default in the performance of any of the covenants contained in the Indenture, or established pursuant to the Indenture with respect to such series, and its consequences, except a default in the payment of the principal of or premium, if any, or interest on any of the Debentures of such series. Any such consent or waiver by the registered Holder of this Debenture (unless revoked as provided in the Indenture) shall be conclusive and binding upon such Holder and upon all future Holders and owners of this Debenture and of any Debenture issued in exchange for or in place of this Debenture (whether by registration of transfer or otherwise), irrespective of whether or not any notation of such consent or waiver is made upon this Debenture. No reference in this Debenture to the Indenture and no provision of this Debenture or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and premium, if any, and interest on this Debenture at the time and place and at the rate and in the money prescribed in this Debenture. The Company shall have the right at any time during the term of the Debentures, from time to time to extend the interest payment period of such Debentures to up to 60 consecutive months (the "Extended Interest Payment Period"), at the end of which period the Company shall pay all interest then accrued and unpaid (together with interest on such accrued and unpaid interest at the rate specified for the Debentures to the extent that payment of such interest is enforceable under applicable law); provided that, during such Extended Interest Payment Period the Company shall not declare or pay any dividend on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock or make any guarantee payments with respect to the foregoing (other than payments on the Guarantee); and provided further that any such extended interest payment period may only be selected with respect to the Series A Debentures if an extended interest payment period of identical length is simultaneously selected for all Debentures then outstanding under the Indenture. Prior to the termination of any such Extended Interest Payment Period, the Company may further extend such Extended Interest Payment Period, provided that such Period together with all such further extensions of it shall not exceed 60 consecutive months. At the termination of any such Extended Interest Payment Period and upon the payment of all accrued and unpaid interest and any additional amounts then due, the Company may select a new Extended Interest Payment Period. As provided in the Indenture and subject to certain limitations set forth in it, this Debenture is transferable by the registered holder of this Debenture on the Debenture Register of the Company, upon surrender of this Debenture for registration of transfer at the office or agency of the Company in Decatur, Illinois, accompanied by a written instrument or instruments of transfer in form satisfactory to the Company or the Trustee duly executed by the registered holder of this Debenture or such holder's attorney duly authorized in writing, upon which one or more new Debentures of authorized denominations and for the same - 13 - 15 aggregate principal amount and series will be issued to the designated transferee or transferees. No service charge will be made for any such transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in relation to such transfer. Prior to due presentment for registration of transfer of this Debenture, the Company, the Trustee, any paying agent and any Debenture Registrar may deem and treat the registered holder of this Debenture as the absolute owner of this Debenture (whether or not this Debenture shall be overdue and notwithstanding any notice of ownership or writing on this Debenture made by anyone other than the Debenture Registrar) for the purpose of receiving payment of or on account of the principal of and premium, if any, and interest due on this Debenture and for all other purposes, and neither the Company nor the Trustee nor any paying agent nor any Debenture Registrar shall be affected by any notice to the contrary. No recourse shall be had for the payment of the principal of or the interest on this Debenture, or for any claim based on this Debenture, or otherwise in respect of this Debenture, or based on or in respect of the Indenture, against any incorporator, stockholder, officer or director, past, present or future, as such, of the Company or of any predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance of this Debenture and as part of the consideration for the issuance of this Debenture, expressly waived and released. The Debentures of this series are issuable only in registered form without coupons in denominations of $25 and any integral multiple of $25. This Global Debenture is exchangeable for Debentures in definitive form only under certain limited circumstances set forth in the Indenture. Debentures of this series so issued are issuable only in registered form without coupons in denominations of $25 and any integral multiple of $25. As provided in the Indenture and subject to certain limitations set forth in this Debenture and the Indenture, Debentures of this series so issued are exchangeable for a like aggregate principal amount of Debentures of this series of a different authorized denomination, as requested by the Holder surrendering the same. All terms used in this Debenture which are defined in the Indenture shall have the meanings assigned to them in the Indenture. ARTICLE SEVEN ORIGINAL ISSUE OF SERIES A DEBENTURES SECTION 7.01. Series A Debentures in the aggregate principal amount of $_______ plus the amount of capital contributions made by the Company from time to time as general partner of Illinois Power Capital, may, upon execution of this First Supplemental Indenture, or from time to time thereafter, be executed by the Company and delivered to the Trustee for authentication, and the Trustee shall upon such execution and delivery authenticate and deliver said Debentures to or upon the written order of the Company, signed - 14 - 16 by its Chairman, or any Vice President and its Treasurer or an Assistant Treasurer, without any further action by the Company. ARTICLE EIGHT SPECIAL COVENANTS OF THE COMPANY SECTION 8.01. So long as any Debentures issued in connection with the application of the proceeds from the issuance and sale of a series of Series A Preferred Securities of Illinois Power Capital remain outstanding, the Company will (i) remain the sole general partner of Illinois Power Capital and maintain 100%-ownership of the general partner interests of Illinois Power Capital; provided that any permitted successor of the Company under the Indenture may succeed to its duties as general partner, (ii) contribute capital to the extent required to maintain its capital at an amount equal to at least 3% of the total capital contributions to Illinois Power Capital, (iii) not voluntarily dissolve, wind-up or terminate Illinois Power Capital, except in connection with a distribution of Debentures and in connection with certain mergers, consolidations or amalgamations permitted by the Limited Partnership Agreement, (iv) timely perform all of its duties as General Partner (including the duty to pay dividends on the Preferred Securities of Illinois Power Capital) and (v) use its reasonable efforts to cause Illinois Power Capital to remain a limited partnership except in connection with a distribution of Debentures and in connection with certain mergers, consolidations or amalgamations permitted by the Limited Partnership Agreement, and otherwise continue to be treated as a partnership for United States federal income tax purposes except in connection with a distribution of Debentures. ARTICLE NINE SUNDRY PROVISIONS SECTION 9.01. Except as otherwise expressly provided in this First Supplemental Indenture or in the form of Series A Debenture or otherwise clearly required by the context of this First Supplemental Indenture or the form of Series A Debenture, all terms used in this First Supplemental Indenture or in said form of Series A Debenture that are defined in the Indenture shall have the several meanings respectively assigned to them by the Indenture. SECTION 9.02. The Indenture, as supplemented by this First Supplemental Indenture, is in all respects ratified and confirmed, and this First Supplemental Indenture shall be deemed part of the Indenture in the manner and to the extent provided in this First Supplemental Indenture or in the Indenture. SECTION 9.03. The recitals contained in this First Supplemental Indenture are made by the Company and not by the Trustee, and the Trustee assumes no responsibility for the correctness of them. The Trustee makes no representation as to the validity or sufficiency of this First Supplemental Indenture. - 15 - 17 SECTION 9.04. This First Supplemental Indenture may be executed in any number of counterparts each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed, and their respective corporate seals to be affixed unto this First Supplemental Indenture and attested, on the date or dates indicated in the acknowledgments and as of the day and year first above written. ILLINOIS POWER COMPANY By: _____________________________ Vice President Attest: _______________________________ Secretary THE FIRST NATIONAL BANK OF CHICAGO as Trustee By: _____________________________ _____________________________ Attest: _____________________________ Assistant Treasurer - 16 - 18 STATE OF ILLINOIS ) COUNTY OF ______ ) ss.: _____________ ___, 1994 On the ____ day of _____________, in the year one thousand nine hundred ninety-four, before me personally came ___________________ to me known, who, being by me duly sworn, did depose and say that he is ____________ of ILLINOIS POWER COMPANY, one of the corporations described in and which executed the above instrument; that he knows the corporate seal of said corporation; that the seal affixed to the said instrument is such corporation seal; that it was so affixed by authority of the Board of Directors of said corporation, and that (s)he signed her/his name thereto by like authority. ___________________________________ NOTARY PUBLIC My Commission Expires_____________ STATE OF ILLINOIS ) COUNTY OF COOK ) ss.: _______________ ___, 1994 On the ____ day of __________, in the year one thousand nine hundred ninety-four, before me personally came _____________________ to me known, who, being by me duly sworn, did depose and say that (s)he is _____________________ of THE FIRST NATIONAL BANK OF CHICAGO, one of the corporations described in and which executed the above instrument; that (s)he knows the corporate seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation and that (s)he signed her/his name thereto by like authority. ___________________________________ NOTARY PUBLIC My Commission Expires _______________ - 17 - EX-4.J 10 GUARANTEE AGREEMENT - PREFERRED SECURITIES 1 EXHIBIT 4(j) GUARANTEE AGREEMENT THIS GUARANTEE AGREEMENT ("Guarantee Agreement"), dated as of _____, 1994, is executed and delivered by Illinois Power Company, an Illinois corporation (the "Guarantor"), for the benefit of the holders from time to time of the Preferred Securities (as defined in the Partnership Agreement described below) of Illinois Power Capital, L.P, a Delaware limited partnership (the "Issuer"). WHEREAS, pursuant to the Amended and Restated Agreement of Limited Partnership, dated as of today's date, of the Issuer (the "Partnership Agreement"), the Issuer may issue one or more series of Preferred Securities; WHEREAS, pursuant to the Partnership Agreement, the proceeds received by the Issuer from the issuance and sale of any such Preferred Securities will be invested by the Issuer in Subordinated Debentures (as defined in the Partnership Agreement); and WHEREAS, the Guarantor, as incentive for the Holders (as defined below) to purchase Preferred Securities, desires irrevocably and unconditionally to agree to the extent set forth in this Guarantee Agreement to pay to the Holders the Guarantee Payments (as defined below) and to make certain other payments on the terms and conditions set forth in this Guarantee Agreement. NOW, THEREFORE, in consideration of the purchase by each Holder of one or more Preferred Securities, which purchase the Guarantor agrees shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for the benefit of the Holders. ARTICLE ONE As used in this Guarantee Agreement, the terms set forth below shall, unless the context otherwise requires, have the following meanings. Capitalized terms used but not otherwise defined in this Guarantee Agreement shall have the meanings assigned to such terms in the Partnership Agreement. "Guarantee Payments" shall mean the following payments, without duplication, with respect to any series of Preferred Securities, to the extent not paid by the Issuer: (i) any accumulated and unpaid dividends which are required to be paid on such series of Preferred Securities, to the extent the Issuer shall have sufficient cash on hand to permit such payment and funds legally available for such payment, (ii) the redemption price, including all accumulated and unpaid dividends (the "Redemption Price"), payable with respect to any Preferred Securities called for redemption by the Issuer, to the extent the Issuer shall have sufficient cash on hand to permit such payment and funds legally available for such payment and (iii) upon a liquidation of the Issuer, the lesser of (a) the aggregate of the liquidation 2 preference and all accumulated and unpaid dividends on the Preferred Securities of such series to the date of payment (the "Liquidation Distribution") and (b) the amount of assets of the Issuer legally available for distribution to Holders in liquidation of the Issuer. "Holder" shall mean any holder, as registered on the books and records of the Issuer, of any series of Preferred Securities; provided, however, that in determining whether the holders of the requisite percentage of Preferred Securities have given any request, notice, consent or waiver under this Guarantee Agreement, "Holder" shall not include the Guarantor or any entity owned more than 50% by the Guarantor, either directly or indirectly. ARTICLE TWO SECTION 2.01. The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments, as and when due (except to the extent paid by the Issuer), regardless of any defense, right of set-off or counterclaim which the Issuer may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders. SECTION 2.02. The Guarantor waives notice of acceptance of this Guarantee Agreement and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Issuer, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. SECTION 2.03. The obligations, covenants, agreements and duties of the Guarantor under this Guarantee Agreement shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to any series of Preferred Securities to be performed or observed by the Issuer; (b) the extension of time for the payment by the Issuer of all or any portion of the dividends, Redemption Price, Liquidation Distribution or any other sums payable under the terms of any series of Preferred Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, any series of Preferred Securities; (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of any series of Preferred Securities, or any action on the part of the Issuer granting indulgence or extension of any kind: (d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, -2- 3 reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer; (e) any invalidity of, or defect or deficiency in, any series of Preferred Securities; (f) the settlement or compromise of any obligation guaranteed by this Guarantee Agreement or by this Guarantee Agreement incurred; or (g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 2.03 that the obligations of the Guarantor under this Guarantee Agreement shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Holders to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing. SECTION 2.04. The Guarantor expressly acknowledges that: (i) this Guarantee Agreement will be deposited with the General Partner to be held for the benefit of the Holders; (ii) in the event of the appointment of a Special Representative to, among other things, enforce this Guarantee Agreement, the Special Representative may take possession of this Guarantee Agreement for such purpose; (iii) if no Special Representative has been appointed, the General Partner has the right to enforce this Guarantee Agreement on behalf of the Holders; (iv) the Holders of not less than 10% in aggregate liquidation preference of the Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available in respect of this Guarantee Agreement, including the giving of directions to the General Partner or the Special Representative, as the case may be; and (v) if the General Partner or Special Representative fails to enforce this Guarantee Agreement as provided above, any Holder may institute a legal proceeding directly against the Guarantor to enforce its rights under this Guarantee Agreement, without first instituting a legal proceeding against the Issuer or any other person or entity. SECTION 2.05. This Guarantee Agreement is a guarantee of payment and not of collection. This Guarantee Agreement will not be discharged except by payment of the Guarantee Payments in full to the extent not paid by the Issuer and by complete performance of all obligations under this Guarantee Agreement. SECTION 2.06. The Guarantor shall be subrogated to all (if any) rights of the Holders against the Issuer in respect of any amounts paid to the Holders by the Guarantor under this Guarantee Agreement and shall have the right to waive payment by the Guarantor pursuant to Section 2.01; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any rights which it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of a payment under this Guarantee Agreement, if, at the time of any such payment, any amounts are due and unpaid under this Guarantee Agreement. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. - 3 - 4 SECTION 2.07. The Guarantor acknowledges that its obligations under this Guarantee Agreement are independent of the obligations of the Issuer with respect to the Preferred Securities and that the Guarantor shall be liable as principal and sole debtor under this Guarantee Agreement to make Guarantee Payments pursuant to this Guarantee Agreement notwithstanding the occurrence of any event referred to in subsections (a) through (f), inclusive, of Section 2.03. ARTICLE THREE SECTION 3.01. So long as any Preferred Securities remain outstanding, the Guarantor will not declare or pay any dividend on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock or make any guarantee payments with respect to the foregoing if at such time the Guarantor shall be in default with respect to its payment or other obligations under this Guarantee Agreement or there has occurred and is continuing any event that would constitute an Event of Default under the Indenture. SECTION 3.02. This Guarantee Agreement will constitute an unsecured obligation of the Guarantor and will rank (i) subordinate and junior in right of payment to all liabilities of the Guarantor, (ii) pari passu with the most senior preferred or preference stock now or after the date of this Guarantee Agreement issued by the Guarantor and with any guarantee now or after the date of this Guarantee Agreement entered into by the Guarantor in respect of any preferred or preference stock of any affiliate of the Guarantor and (iii) senior to the Guarantor's common stock. SECTION 3.03. So long as any Preferred Securities remain outstanding, the Guarantor will: (i) not voluntarily (to the extent permitted by law) dissolve, liquidate or wind-up the Issuer; (ii) remain the sole General Partner (as defined in the Partnership Agreement) of the Issuer and timely perform all of its duties as General Partner of the Issuer (including the duty to declare and pay dividends on the Preferred Securities), provided that any permitted successor of the Guarantor under the Indenture may succeed to the Guarantor's duties as General Partner; and (iii) use its reasonable efforts to cause the Issuer to remain a limited partnership (or permitted successor under the Partnership Agreement) and otherwise continue to be treated as a partnership for federal income tax purposes. ARTICLE FOUR This Guarantee Agreement shall terminate and be of no further force and effect, as to the Preferred Securities of any series, upon full payment of the Redemption Price of all of Preferred Securities of such series, and will terminate completely upon full payment of the amounts payable upon liquidation of the Issuer. This Guarantee Agreement will continue to be effective or will be reinstated, as the case may be, if at any time any Holder must restore payment of any sums paid under any series of Preferred Securities or this Guarantee Agreement. ARTICLE FIVE - 4 - 5 SECTION 5.01. All guarantees and agreements contained in this Guarantee Agreement shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Preferred Securities then outstanding. SECTION 5.02. Except with respect to any changes which do not adversely affect the rights of Holders (in which case no consent of Holders will be required), this Guarantee Agreement may only be amended with the prior approval of the Holders of not less than 66-2/3% in liquidation preference of all the outstanding Preferred Securities of each affected series (voting together as one class). SECTION 5.03. Any notice, request or other communication required or permitted to be given under this Guarantee Agreement to the Guarantor shall be given in writing by delivering the same against receipt for such communication by facsimile transmission (confirmed by mail), addressed to the Guarantor, as follows (and if so given, shall be deemed given when mailed): Illinois Power Company 500 South 27th Street Decatur, Illinois 62525 Facsimile No.: (217) 425-4152 Attention: Controller Any notice, request or other communication required or permitted to be given under this Guarantee Agreement to the Holders shall be given by the Guarantor in the same manner as notices sent by the Issuer to the Holders. SECTION 5.04. This Guarantee Agreement is solely for the benefit of the Holders and is not separately transferable from the Preferred Securities. SECTION 5.05. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS. THIS GUARANTEE AGREEMENT is executed as of the day and year first above written. ILLINOIS POWER COMPANY By: ________________________ Name: Title: - 5 - EX-5.A 11 OPINION - SCHIFF HARDIN AND WAITE 1 Robert J. Regan (312) 258-5606 EXHIBIT 5(A) August 19, 1994 Illinois Power Company 500 S. 27th Street Decatur, IL 62525-1805 Ladies and Gentlemen: We are acting as counsel for Illinois Power Company, an Illinois corporation (the "Company"), in connection with the proposed issuance and sale from time to time of up to $100,000,000 of (i) Cumulative Monthly Income Preferred Securities (the "Preferred Securities") of Illinois Power Capital, L.P., a limited partnership organized under the laws of the State of Delaware (the "Partnership"), which represent limited partner interests in the Partnership, (ii) a Guarantee of the Company to be issued for the benefit of the holders from time to time of the Preferred Securities, and (iii) Subordinated Debentures of the Company to be issued to the Partnership under an Indenture of the Company (the "Indenture") to The First National Bank of Chicago, as trustee (the "Trustee"), all as contemplated by the Registration Statement on Form S-3 (the "Registration Statement") proposed to be filed by the Company and the Partnership with the Securities and Exchange Commission on or about the date hereof for the registration of the Preferred Securities, the Guarantee and the Subordinated Debentures under the Securities Act of 1933, as amended (the "Act"), and for the qualification of the Indenture under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). As counsel for the Company, we have examined such corporate records, certificates and other documents of the Company and have made such inquiry and further investigation as we deemed necessary in order to enable us to render this opinion. We have assumed the continued exemption of the contemplated transactions from the requirements of the Public Utility Holding Company Act of 1935, as amended, the genuineness of all signatures, the authenticity of all documents submitted to us as original counterparts, and the conformity to the originals of all documents submitted to us as certified or photostatic copies. Based upon the foregoing, we are of the opinion that the Company is a corporation validly organized and existing under and by virtue of the laws of the State of Illinois. We are also of the opinion that when: (a) The Registration Statement, as it may be amended, shall have become effective under the Act and no stop order shall have been issued by the Securities and Exchange Commission relating thereto, and any applicable state securities or Blue Sky laws shall have been complied with, and the Indenture shall have become qualified under the Trust Indenture Act; 2 Illinois Power Company August 19, 1994 Page Two (b) the Illinois Commerce Commission shall have entered an order authorizing the Company to execute and deliver the Indenture and any supplemental indentures thereto and to issue the Subordinated Debentures and the Guarantee, and such order shall remain in effect; (c) the Company's Board of Directors, or a duly authorized committee thereof, shall have taken such action as may be necessary to authorize the issuance by the Company of the Subordinated Debentures and the Guarantee on the terms set forth in or contemplated by the Registration Statement, as it may be amended, and the exhibits thereto; (d) the Indenture and any supplemental indentures thereto shall have been appropriately executed and delivered by the Company and the Trustee, the terms of the Subordinated Debentures shall have been duly established and the Subordinated Debentures shall have been issued and authenticated in accordance with the applicable provisions of the Indenture, any supplemental indentures thereto and all necessary corporate authorizations; (e) the terms of the Guarantee shall have been duly established in accordance with applicable law and the Guarantee shall have been appropriately executed and delivered by the Company; (f) the Preferred Securities to which the Guarantee and the Subordinated Debentures relate shall have been duly issued and sold and the purchase price therefor shall have been received by the Partnership; and (g) The Company shall have received the consideration payable for the Subordinated Debentures; the Subordinated Debentures and the Guarantee will be legal, valid and binding obligations of the Company enforceable in accordance with their terms, subject, as to enforcement, to laws relating to or affecting generally the enforcement of creditors' rights, including, without limitation, bankruptcy and insolvency laws, and to general principles of equity. We confirm our opinion as set forth under the caption "United States Taxation" in each Prospectus Supplement constituting a part of the Registration Statement. We hereby consent to the use of this opinion as an exhibit to the Registration Statement to be filed with the Securities and Exchange Commission under the Act and to the reference to this firm under the caption "Legal Opinions" in the Prospectus and each Prospectus Supplement constituting a part of the Registration Statement. 3 Illinois Power Company August 19, 1994 Page Three We are members of the Illinois Bar and do not hold ourselves out as experts on the laws of any other state. Accordingly, in rendering this opinion, we have relied, as to all matters governed by the laws of the State of Delaware, upon the opinion of even date herewith of Richards, Layton & Finger, P.A., special Delaware counsel for the Company and the Partnership, which is being filed as an exhibit to the Registration Statement. Very truly yours, SCHIFF HARDIN & WAITE By: ________________________________ Robert J. Regan RJR:ck EX-5.B 12 OPINION - RICHARDS, LAYTON AND FINGER, P.A. 1 August 19, 1994 Illinois Power Capital, L.P. c/o Illinois Power Company 500 South 27th Street Decatur, Illinois 62525 Illinois Power Company 500 South 27th Street Decatur, Illinois 62525 Re: Illinois Power Capital, L.P. Ladies and Gentlemen: We have acted as special Delaware counsel for Illinois Power Company, an Illinois corporation ("Illinois Power"), and Illinois Power Capital, L.P., a Delaware limited partnership (the "Partnership"), in connection with the matters set forth herein. At your request, this opinion is being furnished to you. For purposes of giving the opinions hereinafter set forth, our examination of documents has been limited to the examination of executed or conformed counterparts, or copies otherwise proved to our satisfaction, of the following: 2 Illinois Power Capital, L.P. Illinois Power Company August 19, 1994 Page 2 (a) The Certificate of Limited Partnership of the Partnership, dated as of August 17, 1994 (the "Certificate"), as filed in the office of the Secretary of State of the State of Delaware (the "Secretary of State") on August 17, 1994; (b) The Agreement of Limited Partnership of the Partnership, dated as of August 17, 1994; (c) The registration statement (the "Registration Statement") on Form S-3, including a preliminary prospectus (the "Prospectus") and two preliminary prospectus supplements (the "Prospectus Supplements"), relating to the Preferred Securities, as proposed to be filed by Illinois Power and the Partnership with the Securities and Exchange Commission on August 19, 1994; (d) A form of Amended and Restated Agreement of Limited Partnership of the Partnership, attached as an exhibit to the Registration Statement (the "Agreement"); (e) A form of Action of Illinois Power, as general partner of the Partnership, relating to the Preferred Securities (the "Action"); and (f) A Certificate of Good Standing for the Partnership, dated August 18, 1994, obtained from the Secretary of State. The Agreement as amended and supplemented by the Action is hereinafter referred to as the "Partnership Agreement." Initially capitalized terms used herein and not otherwise defined are used as defined in the Partnership Agreement. For purposes of this opinion, we have not reviewed any documents other than the documents listed in paragraphs (a) through (f) above. In particular, we have not reviewed any document (other than the documents listed in paragraphs (a) through (f) above) that is referred to in or incorporated by reference into the Partnership Agreement or the Registration Statement. We have assumed that there exists no provision in any document that we have not reviewed that is inconsistent with the opinions stated herein. We have conducted no independent factual investigation of our own but rather have relied solely upon the foregoing documents, the statements and information set forth therein and the additional matters recited or assumed herein, all of which we have assumed to be true, complete and accurate in all material respects. 3 Illinois Power Capital, L.P. Illinois Power Company August 19, 1994 Page 3 With respect to all documents examined by us, we have assumed (i) the authenticity of all documents submitted to us as authentic originals, (ii) the conformity with the originals of all documents submitted to us as copies or forms, and (iii) the genuineness of all signatures. For purposes of this opinion, we have assumed (i) that the Partnership Agreement constitutes the entire agreement among the parties thereto with respect to the subject matter thereof, including with respect to the admission of partners to, and the creation, operation and termination of, the Partnership, and that the Partnership Agreement and the Certificate are in full force and effect and have not been amended, (ii) except to the extent provided in paragraph 1 below, the due organization or due formation, as the case may be, and valid existence in good standing of each party to the documents examined by us under the laws of the jurisdiction governing its organization or formation, (iii) the legal capacity of natural persons who are parties to the documents examined by us, (iv) that each of the parties to the documents examined by us has the power and authority to execute and deliver, and to perform its obligations under, such documents, (v) the due authorization, execution and delivery by all parties thereto of all documents examined by us, including the Agreement and the Action, (vi) the receipt by each Person to be admitted to the Partnership as a limited partner of the Partnership in connection with its purchase of Preferred Securities (each, a "Preferred Security Holder" and collectively, the "Preferred Security Holders") of an LP Certificate and the payment for the Preferred Securities acquired by it, in accordance with the Partnership Agreement, (vii) that the books and records of the Partnership set forth all information required by the Partnership Agreement and the Delaware Revised Uniform Limited Partnership Act (6 Del. C. Section 17-101, et seq.) (the "Act"), including all information with respect to all Persons to be admitted as Partners and their contributions to the Partnership, and (viii) that the Preferred Securities are issued and sold to the Preferred Security Holders in accordance with the Registration Statement and the Partnership Agreement. We have not participated in the preparation of the Registration Statement and assume no responsibility for its contents. This opinion is limited to the laws of the State of Delaware (excluding the securities laws of the State of Delaware), and we have not considered and express no opinion on the laws of any other jurisdiction, including federal laws and rules and regulations relating thereto. Our opinions are rendered only with respect to Delaware laws and rules, regulations and orders thereunder which are currently in effect. Based upon the foregoing, and upon our examination of such questions of law and statutes of the State of Delaware as we have considered necessary or 4 Illinois Power Capital, L.P. Illinois Power Company August 19, 1994 Page 4 appropriate, and subject to the assumptions, qualifications, limitations and exceptions set forth herein, we are of the opinion that: 1. The Partnership has been duly formed and is validly existing in good standing as a limited partnership under the laws of the State of Delaware. 2. Assuming that the Preferred Security Holders, as limited partners of the Partnership, do not participate in the control of the business of the Partnership, upon issuance and payment as contemplated by the Partnership Agreement, the Preferred Securities will represent valid and, subject to the qualifications set forth herein, will be fully paid and nonassessable limited partner interests in the Partnership, as to which the Preferred Security Holders, as limited partners of the Partnership, will have no liability in excess of their obligations to make payments provided for in the Partnership Agreement and their share of the Partnership's assets and undistributed profits (subject to the obligation of a Preferred Security Holder to repay any funds wrongfully distributed to it). 3. There are no provisions in the Partnership Agreement the inclusion of which, subject to the terms and conditions therein, or, assuming that the Preferred Security Holders, as limited partners of the Partnership, take no action other than actions permitted by the Partnership Agreement, the exercise of which, in accordance with the terms and conditions therein, would cause the Preferred Security Holders, as limited partners of the Partnership, to be deemed to be participating in the control of the business of the Partnership. We consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement. We hereby consent to the use of our name under the heading "Legal Opinions" in the Prospectus Supplements and the Prospectus. We hereby consent to the reliance by Schiff Hardin & Waite upon this opinion as to matters of Delaware law for purposes of its opinion being rendered in connection with the Registration Statement. In giving the foregoing consents, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. Except as stated above, without our prior written consent, this opinion may not be furnished or quoted to, or relied upon by, any other Person for any purpose. Very truly yours, PMA/lds EX-12 13 STATEMENT OF COMPUTATIONS 1 EXHIBIT 12 ILLINOIS POWER COMPANY STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (THOUSANDS OF DOLLARS)
YEAR ENDED ** ** DECEMBER 31, SUPPLEMENTAL SUPPLEMENTAL -------------------------------------------------------------------------------- 1989 1989 1990 1990 1991 1992 ------------ ------------ -------- ------------ -------- -------- Earnings Available for Fixed Charges and Preferred Stock Dividend Requirements: Net Income (Loss) per "Statement of Income".................................... $ (288,432) $ (288,432) $(78,484) $(78,484) $109,244 $122,088 Add: Income Taxes: Current................................ (43,577) (43,577) 21,307 21,307 29,369 22,930 Deferred -- Net........................ 91,764 91,764 36,545 35,545 45,990 63,739 Allocated income taxes................... (9,306) (9,306) 2,608 2,608 (1,348) (6,632) Investment tax credit -- deferred........ (8,787) (8,787) (14,121) (14,121) (11) (519) Income tax effect of disallowed costs.... (105,482) (105,482) (24,759) (24,759) -- -- Interest on long-term debt............... 216,029 216,029 191,569 191,569 176,179 160,795 Amortization of debt expense and premium -- net, and other interest charges..... 7,846 7,846 13,162 13,162 9,004 12,195 One-third of all rentals (Estimated to be representative of the interest component)............................. 4,185 4,185 5,053 5,053 4,996 5,117 Interest on In-Core Fuel................. 8,020 8,020 6,802 6,802 6,862 6,278 Disallowed Clinton Plant Costs........... -- 451,244 -- 160,328 -- -- ------------ ------------ -------- ------------ -------- -------- Earnings (loss) available for fixed charges and preferred stock dividend requirements............................... $ (127,740) $ 323,504 $159,672 $320,000 $382,285 $387,991 ============ ============ ========= ============ ========= ========= Fixed charges: Interest on long-term debt................. $ 216,029 $ 216,029 $191,559 $191,559 $176,179 $160,795 Amortization of debt expense and premium -- net, and other interest charges.......... 27,004 27,004 31,093 31,093 25,553 25,765 One-third of all rentals (Estimated to be representative of the interest component)............................... 4,185 4,185 5,053 5,053 4,996 5,117 ------------ ------------ -------- ------------ -------- -------- Fixed charges................................ $ 247,218 $ 247,218 $227,705 $227,705 $206,728 $191,697 ============ ============ ========= ============ ========= ========= Ratio of earnings to fixed charges........... (0.52)* 1.31 0.70* 1.41 1.85 2.02 ===== ==== ==== ==== ==== ==== ** SUPPLEMENTAL ** 12 MONTHS 12 MONTHS SUPPLEMENTAL ENDED ENDED ------------------------- JUNE 30, JUNE 30, 1993 1993 1994 1994 -------- ------------ --------- ------------ Earnings Available for Fixed Charges and Preferred Stock Dividend Requirements: Net Income (Loss) per "Statement of Income".................................... ($56,038) ($56,038) ($42,031) ($42,031) Add: Income Taxes: Current................................ 25,260 25,260 35,390 35,390 Deferred -- Net........................ 82,057 82,057 82,985 82,985 Allocated income taxes................... (12,599) (12,599) (11,479) (11,479) Investment tax credit -- deferred........ (782) (782) (3,968) (3,968) Income tax effect of disallowed costs.... (70,638) (70,638) (70,638) (70,638) Interest on long-term debt............... 154,110 154,110 146,168 146,168 Amortization of debt expense and premium -- net, and other interest charges..... 17,007 17,007 18,042 18,042 One-third of all rentals (Estimated to be representative of the interest component)............................. 5,992 5,992 6,421 6,421 Interest on In-Core Fuel................. 6,174 6,174 6,696 6,696 Disallowed Clinton Plant Costs........... -- 270,956 -- 270,956 -------- ------------ --------- ------------ Earnings (loss) available for fixed charges and preferred stock dividend requirements............................... $150,543 $421,499 $167,586 $438,542 ========= ============ ========= ============ Fixed charges: Interest on long-term debt................. $154,110 $154,110 $146,168 $146,168 Amortization of debt expense and premium -- net, and other interest charges.......... 27,619 27,619 28,287 28,287 One-third of all rentals (Estimated to be representative of the interest component)............................... 5,992 5,992 6,421 6,421 -------- ------------ --------- ------------ Fixed charges................................ $187,721 $187,721 $180,876 $180,876 ========= ============ ========= ============ Ratio of earnings to fixed charges........... 0.80* 2.25 0.93 * 2.42 ==== ==== ==== ====
- ------------------ * Earnings are inadequate to cover fixed charges. Additional earnings (thousands) of $374,958, $68,033, $37,178, and $13,290 for 1989, 1990, 1993 and the twelve months ended June 30, 1994, respectively, are required to attain a one-to-one Ratio of Earnings to Fixed Charges. ** Supplemental Ratio of Earnings to Fixed Charges presented to exclude nonrecurring item -- Disallowed Clinton plant costs. 2 ILLINOIS POWER COMPANY STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDEND REQUIREMENTS (THOUSANDS OF DOLLARS)
YEAR ENDED ** ** DECEMBER 31, SUPPLEMENTAL SUPPLEMENTAL ------------------------------------------------------------------------------ 1989 1989 1990 1990 1991 1992 ------------ ------------ -------- ------------ -------- -------- Earnings Available for Fixed Charges and Preferred Stock Dividend Requirements: Net Income (Loss) per "Statement of Income".................................... ($288,432) ($288,432) ($78,484) ($78,484) $109,244 $122,088 Add: Income Taxes: Current................................ (43,577) (43,577) 21,307 21,307 29,369 22,930 Deferred -- Net........................ 91,764 91,764 36,545 36,545 45,990 63,739 Allocated income taxes................... (9,306) (9,306) 2,608 2,608 (1,348) (6,632) Investment tax credit -- deferred........ (8,787) (8,787) (14,121) (14,121) (11) (519) Income tax effect of disallowed costs.... (105,482) (105,482) (24,759) (24,759) -- -- Interest on long-term debt............... 216,029 216,029 191,559 191,559 176,179 160,795 Amortization of debt expense and premium -- net, and other interest charges..... 7,846 7,846 13,162 13,162 9,004 12,195 One-third of all rentals (Estimated to be representative of the interest component)............................. 4,185 4,185 5,053 5,053 4,996 5,117 Interest on In-Core Fuel................. 8,020 8,020 6,802 6,802 8,862 8,278 Disallowed Clinton Plant Costs........... -- 451,244 -- 160,328 -- -- ------------ ------------ -------- ------------ -------- -------- Earnings (loss) available for fixed charges and preferred stock dividend requirements............................... ($127,740) $ 323,504 $159,672 $320,000 $382,285 $387,991 ============ ============ ========= ============ ========= ========= Fixed charges and preferred stock dividend requirements: Interest on long-term debt................. $ 216,029 $ 216,029 $191,559 $191,559 $176,179 $160,795 Amortization of debt expense and premium -- net, and other interest charges.......... 27,004 27,004 31,093 31,093 25,553 25,785 One-third of all rentals (Estimated to be representative of the interest component)............................... 4,185 4,185 5,053 5,053 4,996 5,117 Earnings required (before taxes) for preferred stock dividends)............... 37,365*** 56,979 36,839*** 66,743 52,023 48,691 ------------ ------------ -------- ------------ -------- -------- Fixed charges and preferred stock dividend requirements............................... $ 284,583 $ 304,197 $264,544 $294,448 $258,751 $240,388 ============ ============ ========= ============ ========= ========= Ratio of earnings to fixed charges and preferred stock dividend requirements...... (0.45)* 1.06 0.60* 1.09 1.48 1.61 ===== ==== ==== ==== ==== ==== ** SUPPLEMENTAL ** 12 MONTHS 12 MONTHS SUPPLEMENTAL ENDED ENDED ------------------------- JUNE 30, JUNE 30, 1993 1993 1994 1994 -------- ------------ --------- ------------ Earnings Available for Fixed Charges and Preferred Stock Dividend Requirements: Net Income (Loss) per "Statement of Income".................................... ($56,038) ($56,038) ($42,031) ($42,031) Add: Income Taxes: Current................................ 25,260 25,260 35,390 35,390 Deferred -- Net........................ 82,057 82,057 82,985 82,985 Allocated income taxes................... (12,599) (12,599) (11,479) (11,479) Investment tax credit -- deferred........ (782) (782) (3,968) (3,968) Income tax effect of disallowed costs.... (70,638) (70,638) (70,638) (70,638) Interest on long-term debt............... 154,110 154,110 146,168 146,168 Amortization of debt expense and premium -- net, and other interest charges..... 17,007 17,007 18,042 18,042 One-third of all rentals (Estimated to be representative of the interest component)............................. 5,992 5,992 6,421 6,421 Interest on In-Core Fuel................. 6,174 6,174 6,696 6,696 Disallowed Clinton Plant Costs........... -- 270,956 -- 270,956 -------- ------------ --------- ------------ Earnings (loss) available for fixed charges and preferred stock dividend requirements............................... $150,543 $421,499 $167,586 $438,542 ========= ============ ========= ============ Fixed charges and preferred stock dividend requirements: Interest on long-term debt................. $154,110 $154,110 $146,168 $146,168 Amortization of debt expense and premium -- net, and other interest charges.......... 27,619 27,619 28,287 28,287 One-third of all rentals (Estimated to be representative of the interest component)............................... 5,992 5,992 6,421 6,421 Earnings required (before taxes) for preferred stock dividends)............... 26,123*** 43,100 24,283 *** 40,291 -------- ------------ --------- ------------ Fixed charges and preferred stock dividend requirements............................... $213,844 $230,821 $205,159 $221,167 ========= ============ ========= ============ Ratio of earnings to fixed charges and preferred stock dividend requirements...... 0.70* 1.83 0.82 * 1.98 ==== ==== ==== ====
- ------------------ * Earnings are inadequate to cover fixed charges. Additional earnings (thousands) of $412,323, $104,872, $63,301, and $37,573 for 1989, 1990, 1993 and the twelve months ended June 30, 1994, respectively, are required to attain a one-to-one Ratio of Earnings to Fixed Charges. ** Supplemental Ratio of Earnings to Fixed Charges presented to exclude nonrecurring item -- Disallowed Clinton plant costs. *** Because the Company incurred a pre-tax loss, these amounts are at the net preferred dividend requirement level.
EX-23.C 14 CONSENT - PRICE WATERHOUSE 1 EXHIBIT 23(C) CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of this Registration Statement on Form S-3 of our report dated February 9, 1994, which appears on page 26 of the 1993 Annual Report to Shareholders of Illinois Power Company, which is incorporated by reference in Illinois Power Company's Annual Report on Form 10-K for the year ended December 31, 1993. We also consent to the incorporation by reference of our report on the Financial Statement Schedules, which appears on page 43 of such Annual Report on Form 10-K. We also consent to the reference to us under the heading "Experts" in such Prospectus. PRICE WATERHOUSE LLP August 18, 1994 EX-25 15 STATEMENT OF ELIGIBILITY OF TRUSTEE 1 EXHIBIT 25 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2) _____ THE FIRST NATIONAL BANK OF CHICAGO (Exact name of trustee as specified in its charter) A National Banking Association 36-0899825 (I.R.S. employer identification number) One First National Plaza, Chicago, Illinois 60670-0126 (Address of principal executive offices) (Zip Code) The First National Bank of Chicago One First National Plaza, Suite 0286 Chicago, Illinois 60670-0286 Attn: Lynn A. Goldstein, Law Department (312)732-6919 (Name, address and telephone number of agent for service) ILLINOIS POWER COMPANY (Exact name of obligor as specified in its charter) Illinois 37-0344645 (State or other jurisdiction of (I.R.S. employer incorporation of organization) identification number) 500 South 27th Street 62525 Decatur, Illinois (Zip Code) (Address of Principal Executive Offices) SUBORDINATED DEBENTURES (Title of Indenture Securities) 2 ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE: (A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT. Comptroller of Currency, Washington, D. C.; Federal Deposit Insurance Corporation, Washington, D. C., The Board of Governors of the Federal Reserve System, Washington, D. C. . (B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. The trustee is authorized to exercise corporate trust powers. ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. No such affiliation exists with the trustee. ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS STATEMENT OF ELIGIBILITY. 1. A copy of the articles of association of the trustee now in effect.* 2. A copy of the certificates of authority of the trustee to commence business.* 3. A copy of the authorization of the trustee to exercise corporate trust powers.* 4. A copy of the existing by-laws of the trustee.* 5. Not Applicable. 6. The consent of the trustee required by Section 321(b) of the Act. 7. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority. 8. Not Applicable 9. Not Applicable * EXHIBITS 1,2,3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS BEARING IDENTICAL NUMBERS IN ITEM 12 OF THE FORM T-1 OF THE FIRST NATIONAL BANK OF CHICAGO, FILED AS EXHIBIT 26 TO THE REGISTRATION STATEMENT ON FORM S-3 OF THE CIT GROUP HOLDINGS, INC., FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 16, 1993 (REGISTRATION NO. 33-58418). 3 Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, The First National Bank of Chicago, a national banking association organized and existing under the laws of the United States of America, has duly caused this Statement of Eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Chicago and State of Illinois, on the 17th day of August, 1994. THE FIRST NATIONAL BANK OF CHICAGO BY: /s/ Steven M. Wagner ------------------------------- STEVEN M. WAGNER VICE PRESIDENT AND SENIOR COUNSEL CORPORATE TRUST SERVICES DIVISION 4 EXHIBIT 6 THE CONSENT OF THE TRUSTEE REQUIRED BY SECTION 321(B) OF THE ACT August 17, 1994 Securities and Exchange Commission, Washington, D.C. 20549 Gentlemen: In connection with the qualification of an indenture between Illinois Power Company and The First National Bank of Chicago, the undersigned, in accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended, hereby consents that the reports of examinations of the undersigned, made by Federal or State Authorities authorized to make such examinations, may be furnished by such authorities to the Securities and Exchange Commission upon its request therefore. Very truly yours, THE FIRST NATIONAL BANK OF CHICAGO BY: /s/ Steven M. Wagner ------------------------------- Steven M. Wagner Vice President and Senior Counsel Corporate Trust Services Division 5 EXHIBIT 7 A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority. 6 Legal Title of Bank: The First National Call Date: 3/31/94 Bank of Chicago ST-BK: 17-1630 FFIEC 031 Address: One First National Plaza, Suite 0460 Page RC-1 City, State Zip: Chicago, IL 60670 FDIC Certificate No.: 0/3/6/1/8 CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND STATE-CHARTERED SAVINGS BANKS FOR MARCH 31, 1994 All schedules are to be reported in thousands of dollars. Unless otherwise indicated, report the amount outstanding of the last business day of the quarter. SCHEDULE RC--BALANCE SHEET
C400 <- DOLLAR AMOUNTS IN ------------ ------------ THOUSANDS RCFD BIL MIL THOU ----------------- ---- ------------ ASSETS 1. Cash and balances due from depository institutions (from Schedule RCA-A): a. Noninterest-bearing balances and currency and coin(1) . . . . . 0081 3,199,527 1.a. b. Interest-bearing balances(2) . . . . . . . . . . . . . . . . . 0071 7,574,509 1.b. 2. Securities a. Held-to-maturity securities(from Schedule RC-B, column A) . . . 1754 125,951 2.a. b. Available-for-sale securities (from Schedule RC-B, column D). . 1773 318,814 2.b. 3. Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and its Edge and Agreement subsidiaries, and in IBFs: a. Federal Funds sold. . . . . . . . . . . . . . . . . . . . . . . 0276 2,711,748 3.a. b. Securities purchased under agreements to resell . . . . . . . . 0277 695,723 3.b. 4. Loans and lease financing receivables: a. Loans and leases, net of unearned income (from Schedule RC-C). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2122 13,613,912 4.a. b. LESS: Allowance for loan and lease losses . . . . . . . . . . . RCFD 3123 352,027 4.b. c. LESS: Allocated transfer risk reserve . . . . . . . . . . . . . RCFD 3128 0 4.c. d. Loans and leases, net of unearned income, allowance, and reserve (item 4.a minus 4.b and 4.c). . . . . . . . . . . . . . 2125 13,261,885 4.d. 5. Assets held in trading accounts . . . . . . . . . . . . . . . . . 3545 8,561,533 5. 6. Premises and fixed assets (including capitalized leases) . . . . . 2145 478,470 6. 7. Other real estate owned (from Schedule RC-M) . . . . . . . . . . . 2150 95,399 7. 8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) . . . . . . . . . . . . . . . . . . 2130 6,434 8. 9. Customers' liability to this bank on acceptances outstanding . . . 2155 452,815 9. 10. Intangible assets (from Schedule RC-M) . . . . . . . . . . . . . . 2143 140,023 10. 11. Other assets (from Schedule RC-F) . . . . . . . . . . . . . . . . 2160 1,048,744 11. 12. Total assets (sum of items 1 through 11) . . . . . . . . . . . . . 2170 38,671,575 12.
(1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposit not held in trading accounts. 7 Legal Title of Bank: The First National Call Date: 3/31/94 Bank of Chicago ST-BK: 17-1630 FFIEC 031 Address: One First National Plaza, Suite 0460 Page RC-2 City, State Zip: Chicago, IL 60670 FDIC Certificate No.: 0/3/6/1/8 SCHEDULE RC-CONTINUED
DOLLAR AMOUNTS IN Thousands BIL MIL THOU ---------------- ------------ LIABILITIES 13. Deposits: a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part 1) . . . . . . . . . . . . . RCON 2200 14,309,869 13.a. (1) Noninterest-bearing(1) . . . . . . . . . . . . . . RCON 6631 5,980,761 13.a.(1) (2) Interest-bearing . . . . . . . . . . . . . . . . . RCON 6636 8,329,108 13.a.(2) b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, part II) . . . . . . . . RCFN 2200 9,813,189 13.b. (1) Noninterest bearing . . . . . . . . . . . . . . . RCFN 6631 374,630 13.b.(1) (2) Interest-bearing RCFN 6636 9,438,559 13.b.(2) 14. Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: a. Federal funds purchased . . . . . . . . . . . . . . . RCFD 0278 580,252 14.a. b. Securities sold under agreements to repurchase . . . . RCFD 0279 1,543,995 14.b. 15. a. Demand notes issued to the U.S. Treasury . . . . . . . RCON 2840 102,941 15.a. b. Trading Liabilities . . . . . . . . . . . . . . . . . RCFD 3548 5,353,511 15.b. 16. Other borrowed money: a. With original maturity of one year or less . . . . . . RCFD 2332 1,590,728 16.a. b. With original maturity of more than one year . . . . RCFD 2333 254,470 16.b. 17. Mortgage indebtedness and obligations under capitalized leases . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2910 267,000 17. 18. Bank's liability on acceptance executed and outstanding RCFD 2920 452,815 18. 19. Subordinated notes and debentures . . . . . . . . . . . . RCFD 3200 1,175,000 19. 20. Other liabilities (from Schedule RC-G) . . . . . . . . . RCFD 2930 549,976 20. 21. Total liabilities (sum of items 13 through 20) . . . . . RCFD 2948 35,993,746 21. 22. Limited-Life preferred stock and related surplus . . . . RCFD 3282 0 22. EQUITY CAPITAL 23. Perpetual preferred stock and related surplus . . . . . . RCFD 3838 0 23. 24. Common stock . . . . . . . . . . . . . . . . . . . . . . RCFD 3230 200,858 24. 25. Surplus (exclude all surplus related to preferred stock) . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3839 2,254,940 25. 26. a. Undivided profits and capital reserves . . . . . . . . RCFD 3632 222,981 26.a. b. Net unrealized holding gains (losses) on available-for-sale securities . . . . . . . . . . . . . . RCFD 8434 (8) 26.b. 27. Cumulative foreign currency translation adjustments . . . RCFD 3284 (942) 27. 28. Total equity capital (sum of items 23 through 27) . . . . RCFD 3210 2,677,829 28. 29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, and 28) . . . . . . RCFD 3300 38,671,575 29. Memorandum To be reported only with the March Report of Condition. 1. Indicate in the box at the right the number of the statement below that best describes the most comprehensive level of auditing work performed for the bank by independent external Number auditors as of any date during 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 6724 M.1.
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other with generally accepted auditing standards by a certified external auditors (may be required by state chartering public accounting firm which submits a report on the bank authority) 2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external conducted in accordance with generally accepted auditing auditors standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by submits a report on the consolidated holding company external auditors (but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work) 3 = Directors' examination of the bank conducted in 8 = No external audit work accordance with generally accepted auditing standards by a certified public accounting firm (may be required by state chartering authority)
(1) Includes total demand deposits and noninterest-bearing time and savings deposits.
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