<PAGE>
FILED PURSUANT TO RULE 424(B)(5)
PROSPECTUS SUPPLEMENT REGISTRATION NO. 333-18473
(TO PROSPECTUS DATED DECEMBER 15, 1998)
$75,000,000
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
$15,000,000
SENIOR NOTES, 5.375% DUE 2008
$60,000,000
SENIOR NOTES, 6.125% DUE 2028
[LOGO]
- ------------------------------------------------------------
This is a public offering by Central Illinois Public Service Company, known
as AmerenCIPS since December 31, 1997 (the "Company"), of $15,000,000 of Senior
Notes, 5.375% Due 2008 (the "2008 Notes") and $60,000,000 of Senior Notes,
6.125% Due 2028 (the "2028 Notes" and, together with the 2008 Notes, the
"Notes"). Interest on each series of Notes is payable semi-annually on June 15
and December 15 of each year, beginning June 15, 1999. The Company may redeem
all or part of each series of Notes at any time at the greater of their
principal amount and the discounted present value of the remaining scheduled
payments of principal and interest plus accrued and unpaid interest.
Until the Release Date, the Notes will be secured by the Company's Series AA
Senior Note Mortgage Bonds issued and delivered to the Trustee under the
Indenture. On the Release Date, the Notes will cease to be secured by the Series
AA Senior Note Mortgage Bonds, will become unsecured and unsubordinated
obligations of the Company and will rank on a parity with other unsecured and
unsubordinated indebtedness of the Company unless otherwise secured as described
in the attached Prospectus.
The Notes should be delivered on or about December 22, 1998 through the
book-entry facilities of The Depository Trust Company.
<TABLE>
<CAPTION>
2008 Notes 2028 Notes
------------------------ ------------------------
Per Note Total Per Note Total
--------- ------------- --------- -------------
<S> <C> <C> <C> <C>
Offering Price............................................. 99.582% $ 14,937,300 99.323% $ 59,593,800
Underwriting Discount...................................... 0.650% $ 97,500 0.875% $ 525,000
Proceeds to Company........................................ 98.932% $ 14,839,800 98.448% $ 59,068,800
</TABLE>
The offering price set forth above does not include accrued interest, if
any. Interest on the Notes will accrue from the date of original issuance and
must be paid by the purchaser if the Notes are delivered after such date.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
Prospectus Supplement or the attached Prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
- --------------------------------------------------------------------------------
LEHMAN BROTHERS
December 16, 1998
<PAGE>
You should rely only on the information contained or incorporated by
reference in this Prospectus Supplement or the attached Prospectus. No one has
been authorized to provide you with different information. You should not assume
that the information contained in this Prospectus Supplement or the attached
Prospectus is accurate as of any date other than the date on the front cover of
the document. We are not making an offer of these Notes in any state where the
offer is not permitted.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
PROSPECTUS SUPPLEMENT
The Company................................................................................................ S-3
Use of Proceeds............................................................................................ S-3
Capitalization............................................................................................. S-3
Description of Notes....................................................................................... S-4
Underwriting............................................................................................... S-6
PROSPECTUS
The Company................................................................................................ 3
Where You Can Find More Information........................................................................ 3
Ratios of Earnings to Fixed Charges........................................................................ 4
Use of Proceeds............................................................................................ 4
Description of Senior Notes................................................................................ 5
Description of Senior Note Mortgage Bonds.................................................................. 14
Book-Entry System.......................................................................................... 19
Plan of Distribution....................................................................................... 21
Legal Opinions............................................................................................. 22
Experts.................................................................................................... 22
</TABLE>
S-2
<PAGE>
THE COMPANY
The Company was organized in 1902 under the laws of the State of Illinois.
The Company is a public utility operating company engaged in the sale of
electricity and natural gas in portions of central and southern Illinois. The
Company generates, transmits and distributes electricity and, through
interchange agreements with other utility systems, purchases and sells power on
a firm basis, in emergency situations or when economical to do so. The Company
sells natural gas, which it purchases from suppliers and distributes in various
parts of the territory served, and transports natural gas purchased by end-users
directly from suppliers. The Company furnishes electric service to about 323,000
retail customers and natural gas service to about 170,000 retail customers. For
the year ended December 31, 1997, the Company derived approximately 82% of its
operating revenues from its electric business and 18% from its natural gas
business. The Company became a subsidiary of Ameren Corporation following the
completion of the merger between CIPSCO Incorporated (formerly the parent
holding company of the Company) and Union Electric Company on December 31, 1997.
USE OF PROCEEDS
The net proceeds from the sale of the Notes offered hereby are estimated to
be $73,713,600. The net proceeds will be used by the Company (i) to redeem the
Company's $33 million aggregate principal amount of First Mortgage Bonds, Series
W, 8 1/2%, due May 15, 2022, at a price of 105.95%, plus accrued interest to the
date of redemption, (ii) to repay approximately $21 million of indebtedness
outstanding under unsecured bank credit agreements that bear interest at an
average annualized rate of 6.15% and (iii) for other general corporate purposes.
CAPITALIZATION
The following table shows the capitalization of the Company at September 30,
1998 and as adjusted to reflect the issuance of the Notes and the application of
the net proceeds thereof as described above under "Use of Proceeds."
<TABLE>
<CAPTION>
ACTUAL % OF TOTAL AS ADJUSTED % OF TOTAL
(000'S) CAPITALIZATION (000'S) CAPITALIZATION
------------ --------------- ------------ ---------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Long-term Debt:
First Mortgage Bonds (1)........................... $ 306,000 26.1% $ 273,000 22.8%
Senior Notes offered hereby........................ -- -- 75,000 6.3
Other Long-term Debt............................... 201,635 17.2 180,635 15.1
Preferred Stock (without sinking fund)................. 80,000 6.8 80,000 6.7
Common Stockholder's Equity............................ 586,317 49.9 586,317 49.1
------------ ----- ------------ -----
Total Capitalization........................... $ 1,173,952 100.0% $ 1,194,952 100.0%
------------ ----- ------------ -----
------------ ----- ------------ -----
</TABLE>
- ------------------------
(1) Excludes current maturities of First Mortgage Bonds of $60 million.
S-3
<PAGE>
DESCRIPTION OF NOTES
PRINCIPAL AMOUNT, MATURITY AND INTEREST
The Company is issuing $15,000,000 of 2008 Notes which will mature on
December 15, 2008 and $60,000,000 of 2028 Notes which will mature on December
15, 2028. The Company will pay interest on the Notes on June 15 to holders of
record on the preceding May 31 and on December 15 to holders of record on the
preceding November 30. The first interest payment date is June 15, 1999.
Interest on each series of Notes accrues from the date of original issuance at
the rates per annum set forth on the cover page of this Prospectus Supplement.
The Notes of each series will be represented by one Global Security, in
registered form, without coupons, and will be registered in the name of a
nominee of The Depository Trust Company. See "Book-Entry System" in the attached
Prospectus.
OPTIONAL REDEMPTION
The Notes of each series will be redeemable, in whole or in part, at the
option of the Company at any time at a redemption price equal to the greater of
(i) 100% of the principal amount of the series of Notes being redeemed and (ii)
the sum of the present values of the remaining scheduled payments of principal
and interest that the Company has not yet made on the series of Notes being
redeemed (not including any portion of such payments of interest accrued as of
the date of redemption) discounted to the redemption date on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Adjusted
Redemption Treasury Rate (as defined below) plus 15 basis points, plus accrued
interest thereon to the date of redemption. The Company must provide the holders
of Notes to be redeemed with a notice of redemption at least 30 and not more
than 60 days before the redemption date.
"Adjusted Redemption Treasury Rate" means, with respect to any redemption
date, the annual rate equal to the semi-annual equivalent yield to maturity or
interpolated (on a 30/360 day count basis) yield to maturity of the Comparable
Redemption Treasury Issue, assuming a price for the Comparable Redemption
Treasury Issue (expressed as a percentage of its principal amount) equal to the
Comparable Redemption Treasury Price for such redemption date.
"Comparable Redemption Treasury Issue" means, with respect to each Note to
be redeemed, the United States Treasury security selected by the Quotation Agent
as having a maturity comparable to the remaining term of such Note to be
redeemed that would be utilized at the time of selection and in accordance with
customary financial practice in pricing new issues of corporate debt securities
of comparable maturity to the remaining term of such Note.
"Comparable Redemption Treasury Price" means, with respect to any redemption
date, (i) the average of the Redemption Reference Treasury Dealer Quotations for
such redemption date, after excluding the highest and lowest such Redemption
Reference Treasury Dealer Quotations (unless there is more than one highest or
lowest quotation, in which case only one such highest and/or lowest quotation
shall be excluded), or (ii) if the Quotation Agent obtains fewer than four such
Redemption Reference Treasury Dealer Quotations, the average of all such
Redemption Reference Treasury Dealer Quotations.
"Quotation Agent" means one of the Redemption Reference Treasury Dealers
appointed as such agent by the Company.
"Redemption Reference Treasury Dealer" means Lehman Brothers Inc. and four
other primary U.S. Government securities dealers in New York City selected by
the Company.
"Redemption Reference Treasury Dealer Quotations" means, with respect to
each Redemption Reference Treasury Dealer and any redemption date, the offer
price for the Comparable Redemption Treasury Issue (expressed in each case as a
percentage of its principal amount) for settlement on the
S-4
<PAGE>
redemption date quoted in writing to the Quotation Agent by such Redemption
Reference Treasury Dealer at 5:00 p.m., New York City time, on the third
business day preceding such redemption date.
SECURITY
Upon the issuance of the Notes, the Company will simultaneously issue and
deliver to the Trustee, as security for the 2008 Notes, the Company's First
Mortgage Bonds, Senior Notes Series AA-1 and, as security for the 2028 Notes,
the Company's First Mortgage Bonds, Senior Notes Series AA-2 (collectively, the
"Series AA Senior Note Mortgage Bonds"). The Series AA Senior Note Mortgage
Bonds will have the same interest rate, interest payment dates, stated maturity
date and redemption provisions, and will be in the same aggregate principal
amount, as the Notes to which they relate.
Payment by the Company to the Trustee of principal of, premium, if any, and
interest on the Series AA Senior Note Mortgage Bonds will be applied by the
Trustee to satisfy the Company's obligations with respect to principal of,
premium, if any, and interest on the Notes. As provided in the First Mortgage
Indenture, the Company's obligations to make payments with respect to the
principal of, premium, if any, and interest on the Series AA Senior Note
Mortgage Bonds shall be fully or partially, as the case may be, satisfied and
discharged to the extent that, at the time that any such payment shall be due,
the then due principal of, premium, if any, and interest on the Notes shall have
been fully or partially paid or there shall have been deposited with the Trustee
pursuant to the Indenture sufficient available funds to fully or partially pay
the then due principal of, premium, if any, and interest on the Notes.
Please refer to "Description of Senior Notes--Security; Release Date" in the
attached Prospectus for a description of the circumstances under which all or
part of the Senior Note Mortgage Bonds will cease to be held by the Trustee as
security for the Senior Notes. As explained in the attached Prospectus, the
Senior Notes will cease to be secured by the Senior Note Mortgage Bonds on the
Release Date and will become unsecured and unsubordinated general obligations of
the Company. The Release Date will be the date that all First Mortgage Bonds of
the Company issued and outstanding under the First Mortgage Indenture, other
than Senior Note Mortgage Bonds, have been retired (at, before or after the
maturity thereof) through payment, redemption or otherwise (including those
First Mortgage Bonds deemed to be paid within the meaning of the First Mortgage
Indenture). The Senior Notes can become secured by certain property of the
Company from and after the Release Date as explained in the attached Prospectus
under "Description of Senior Notes--Certain Covenants of the Company--Limitation
on Liens."
ADDITIONAL INFORMATION
See "Description of Senior Notes" and "Description of Senior Note Mortgage
Bonds" in the attached Prospectus for additional important information about the
Notes and the Series AA Senior Note Mortgage Bonds. That information includes
additional information about the terms of the Notes and the Series AA Senior
Note Mortgage Bonds, including security and the lien of the First Mortgage
Indenture, general information about the Indenture, the First Mortgage Indenture
and the trustees, a description of certain restrictions and covenants contained
in the Indenture and the First Mortgage Indenture and a description of events of
default under the Indenture and the First Mortgage Indenture.
S-5
<PAGE>
UNDERWRITING
Lehman Brothers Inc. (the "Underwriter") has agreed to purchase, and the
Company has agreed to sell to it, the Notes. The underwriting agreement provides
that the obligation of the Underwriter is subject to certain conditions as
therein set forth. The Underwriter will be obligated to purchase all the Notes
if any of the Notes are purchased.
The Company has been advised by the Underwriter that the Underwriter
proposes to offer the Notes to the public initially at the offering prices set
forth on the cover of this Prospectus Supplement and to certain dealers at such
prices less a selling concession of 0.40% of the principal amount of the 2008
Notes and 0.50% of the principal amount of the 2028 Notes. The Underwriter may
allow, and each such dealer may reallow, to other dealers a concession not
exceeding 0.20% of the principal amount of each series of Notes. After the
initial public offering, such offering prices and such concessions and
reallowances may be changed.
In connection with the offering made hereby, the Underwriter may purchase
and sell the Notes in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to cover short
positions created by the Underwriter in connection with the offering.
Stabilizing transactions consist of certain bids or purchases for the purpose of
preventing or retarding a decline in the market price of the Notes, and short
positions created by the Underwriter involve the sale by the Underwriter of a
greater aggregate principal amount of Notes than they are required to purchase
from the Company. The Underwriter also may impose a penalty bid, whereby the
Underwriter may reclaim selling concessions allowed to broker-dealers in respect
of the Notes sold in the offering if the Underwriter in stabilizing or covering
transactions repurchases such Notes. These activities may stabilize, maintain or
otherwise affect the market price of the Notes, which may be higher than the
price that might otherwise prevail in the open market; and these activities, if
commenced, may be discontinued at any time. These transactions may be effected
in the over-the-counter market or otherwise.
The Notes are a new issue of securities with no established trading market.
The Company has been advised by the Underwriter that it intends to make a market
in the Notes but is not obligated to do so and may discontinue any market making
at any time without notice. No assurance can be given as to the liquidity of the
trading market for the Notes. The Notes will not be listed on any securities
exchange.
The Company has agreed to indemnify the Underwriter against certain civil
liabilities, including liabilities under the Securities Act of 1933.
The Company estimates that its share of the total expenses of the offering,
excluding the underwriting discount, will be approximately $195,000.
S-6
<PAGE>
PROSPECTUS
$75,000,000
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
SENIOR NOTES
------------------------
Central Illinois Public Service Company, known as AmerenCIPS since December 31,
1997 (the "Company"), intends to offer at one or more times senior notes (the
"Senior Notes") with an aggregate principal amount not to exceed $75,000,000.
The Company will provide the specific terms of the Notes in supplements to this
prospectus. Investors should read this prospectus and the supplements carefully
before investing. The principal executive offices of the Company are located at
607 East Adams Street, Springfield, Illinois 62739 and its telephone number is
217-523-3600.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
December 15, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
The Company............................................................................ 3
Where You Can Find More Information.................................................... 3
Ratios of Earnings to Fixed Charges.................................................... 4
Use of Proceeds........................................................................ 4
Description of Senior Notes............................................................ 5
Description of Senior Note Mortgage Bonds.............................................. 14
Book-Entry System...................................................................... 19
Plan of Distribution................................................................... 21
Legal Opinions......................................................................... 22
Experts................................................................................ 22
</TABLE>
2
<PAGE>
THE COMPANY
The Company was organized in 1902 under the laws of the State of Illinois.
The Company is a public utility operating company engaged in the sale of
electricity and natural gas in portions of central and southern Illinois. The
Company generates, transmits and distributes electricity and, through
interchange agreements with other utility systems, purchases and sells power on
a firm basis, in emergency situations or when economical to do so. The Company
sells natural gas, which it purchases from suppliers and distributes in various
parts of the territory served, and transports natural gas purchased by end-users
directly from suppliers. The Company furnishes electric service to about 323,000
retail customers and natural gas service to about 170,000 retail customers. For
the year ended December 31, 1997, the Company derived approximately 82% of its
operating revenues from its electric business and 18% from its natural gas
business. The Company became a subsidiary of Ameren Corporation ("Ameren")
following the completion of the merger between CIPSCO Incorporated (formerly the
parent holding company of the Company) and Union Electric Company on December
31, 1997.
WHERE YOU CAN FIND MORE INFORMATION
The Company has filed a Registration Statement with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"). This prospectus is part of the Registration
Statement, but the Registration Statement also contains additional information
and exhibits. The Company also files annual, quarterly and current reports,
proxy statements and other information with the Commission. You may read and
copy the Registration Statement and any document that the Company files at the
Commission's public reference room at 450 Fifth Street, N.W., Washington, D.C.
20549. You can call the Commission's toll-free telephone number at
1-800-SEC-0330 for further information on the public reference room. The
Commission maintains a web site at www.sec.gov that contains reports, proxy and
information statements and other information regarding companies (such as the
Company) that file documents with the Commission electronically. The documents
can be found by searching the EDGAR Archives with the Commission electronically.
The documents can be found by searching the EDGAR Archives at the Commission's
web site.
The Commission allows the Company to "incorporate by reference" the
information that it files with the Commission which means that the Company can
disclose important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus and should be read with the same care. Later information that the
Company files with the Commission will automatically update and supersede this
information. The Company incorporates by reference the documents below:
- Annual Report on Form 10-K for the year ended December 31, 1997 (the "1997
Form 10-K").
- Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998, June
30, 1998 and September 30, 1998 (as amended on December 15, 1998).
- Current Reports on Form 8-K dated January 20, 1998, June 12, 1998 (as
amended on June 23, 1998) and September 24, 1998.
- Any future filings made with the Commission under Sections 13(a), 13(c),
14 and 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), if the filings are made prior to the time that all of the
Senior Notes are sold.
3
<PAGE>
You may request a free copy of these filings by writing or telephoning us at
the following address:
Central Illinois Public Service Company
Attention: Secretary's Department
P.O. Box 66149
St. Louis, Missouri 63166-6149
Telephone: 314-554-2715
You should read and rely only on the information incorporated by reference
or provided in this prospectus or any supplement. The Company has not authorized
anyone else to provide you with different information. The Company is not making
an offer of these securities in any state where the offer is not permitted. You
should not assume that the information in this prospectus is accurate as of any
date other than the date on the front of those documents.
RATIOS OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges before income taxes. For the purposes of such computations (i)
earnings consist of net income plus fixed charges and income taxes and (ii)
fixed charges consist of interest on long-term debt, net of amortization of debt
discount, premium and expenses, interest on provision for revenue refunds and
other interest charges.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges..................................... 4.82 4.92 4.41 4.30 3.64(1)
<CAPTION>
TWELVE
MONTHS
ENDED
SEPTEMBER
30, 1998
----------
<S> <C>
Ratio of Earnings to Fixed Charges..................................... 3.99(1)
</TABLE>
- ------------------------
(1) Net income for the year ended December 31, 1997 and the twelve months ended
September 30, 1998 was affected by the Company's recording in the fourth
quarter of 1997 of an extraordinary charge to earnings ($25 million, net of
income taxes) for the write-off of generation-related regulatory assets and
liabilities as a result of electric industry restructuring legislation
enacted in Illinois in December 1997.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the Senior
Notes will be used (i) in connection with the payment at maturity or the
redemption, refunding, refinancing or purchase of certain outstanding long-term
debt, including without limitation, bank borrowings and first mortgage bonds of
the Company (the "Prior Debt") and (ii) for general corporate purposes
(including payment of short-term debt incurred to finance construction
expenditures and for issuance costs). The specific allocation of the net
proceeds of a particular series of Senior Notes and information relating to the
particular Prior Debt, if any, to be paid at maturity, redeemed, refunded,
refinanced or purchased will be described in the Prospectus Supplement related
thereto. In case of the redemption, refunding or purchase of Prior Debt
consisting of first mortgage bonds, proceeds of the Senior Notes may be applied
to pay any redemption premium or purchase price in excess of the principal
amount.
4
<PAGE>
DESCRIPTION OF SENIOR NOTES
GENERAL
Each series of Senior Notes is to be an initial issue of a new series of
debt securities issued under, and secured by, the Indenture dated as of December
1, 1998, as it may be amended or supplemented (collectively, the "Indenture"),
between the Company and The Bank of New York, as trustee (the "Trustee"). The
following summaries of certain provisions of the Indenture do not purport to be
complete and are subject to, and qualified in their entirety by, all of the
provisions of the Indenture which is an exhibit to the Registration Statement of
which this Prospectus is a part and which is incorporated herein by this
reference.
Until the Release Date (as defined below), all of the Senior Notes
outstanding under the Indenture will be secured by one or more series of the
Company's Senior Note Mortgage Bonds (as defined below) issued and delivered by
the Company to the Trustee. See "--Security; Release Date." ON THE RELEASE DATE,
THE SENIOR NOTES WILL CEASE TO BE SECURED BY THE SENIOR NOTE MORTGAGE BONDS,
WILL BECOME UNSECURED GENERAL OBLIGATIONS OF THE COMPANY AND WILL RANK ON A
PARITY WITH OTHER UNSECURED AND UNSUBORDINATED INDEBTEDNESS OF THE COMPANY. The
Indenture provides that, in addition to the Senior Notes offered hereby,
additional Senior Notes may be issued thereunder, without limitation as to
aggregate principal amount, provided that, prior to the Release Date, the
principal amount of Senior Notes that may be issued and outstanding under the
Indenture cannot exceed the principal amount of Senior Note Mortgage Bonds then
held by the Trustee. See "Description of Senior Note Mortgage Bonds--Issuance of
Additional First Mortgage Bonds."
There is no requirement under the Indenture that future issuances of debt
securities of the Company be issued exclusively under the Indenture, and the
Company will be free to employ other indentures (including, prior to the Release
Date, the First Mortgage Indenture (as defined below)) or documentation,
containing provisions different from those included in the Indenture or
applicable to one or more issuances of Senior Notes, in connection with future
issuances of such other debt securities.
The Indenture provides that the Senior Notes will be issued in one or more
series, may be issued at various times, may have differing maturity dates and
may bear interest at differing rates. The Prospectus Supplement applicable to
each issuance of Senior Notes will specify: (1) the designation and aggregate
principal amount of such Senior Notes; (2) the original issue date for such
Senior Notes and the date on which such Senior Notes will mature; (3) the
interest rate or rates, or method of calculation of such rate or rates, for such
Senior Notes, and the date from which such interest shall accrue; (4) the dates
on which such interest will be payable; (5) the record dates for payments of
interest if other than the fifteenth day next preceding each interest payment
date; (6) the terms, if any, regarding the optional or mandatory redemption of
such Senior Notes, including redemption date or dates of such Senior Notes, if
any, and the price or prices applicable to such redemption; (7) the period or
periods within which, the price or prices at which and the terms and conditions
upon which such Senior Notes may be repaid, in whole or in part, at the option
of the holder thereof; (8) if prior to the Release Date, the designation of the
related series of Senior Note Mortgage Bonds being delivered to the Trustee in
connection with the issuance of such Senior Notes; and (9) any other terms of
such Senior Notes not inconsistent with the Indenture. Unless otherwise
indicated in the applicable Prospectus Supplement, the Senior Notes will be
denominated in United States currency in minimum denominations of $1,000 and
integral multiples thereof.
There are no provisions in the Indenture or the Senior Notes that require
the Company to redeem, or permit the holders to cause a redemption of, the
Senior Notes or that otherwise protect the holders in the event that the Company
incurs substantial additional indebtedness, whether or not in connection with a
change in control of the Company.
5
<PAGE>
REGISTRATION, TRANSFER AND EXCHANGE
Unless otherwise indicated in the applicable Prospectus Supplement, each
series of Senior Notes will initially be issued in the form of one or more
global securities (each, a "Global Security" and, collectively, the "Global
Securities"), in registered form, without coupons, as described under
"Book-Entry System." The Global Securities will be registered in the name of a
nominee of The Depository Trust Company ("DTC"), as depository (the
"Depository"), and deposited with, or on behalf of, the Depository. Except as
set forth herein under "Book-Entry System," owners of beneficial interests in a
Global Security will not be entitled to have Senior Notes registered in their
names, will not receive or be entitled to receive physical delivery of any such
Senior Notes and will not be considered the registered holder thereof under the
Indenture.
Senior Notes of any series will be exchangeable for other Senior Notes of
the same series of any authorized denominations and of a like aggregate
principal amount and tenor.
Unless otherwise indicated in the applicable Prospectus Supplement, Senior
Notes may be presented for exchange or registration of transfer (duly endorsed
or accompanied by a duly executed written instrument of transfer), at the office
of the Trustee maintained for such purpose with respect to any series of Senior
Notes, without service charge but upon payment of any taxes and other
governmental charges as described in the Indenture. Such transfer or exchange
will be effected upon the Company and the Trustee being satisfied with the
documents of title and indemnity of the person making the request.
In the event of any redemption of Senior Notes of any series, the Trustee
will not be required to exchange or register a transfer of any Senior Notes of
such series selected, called or being called for redemption except, in the case
of any Senior Note to be redeemed in part, the portion thereof not to be so
redeemed.
PAYMENT AND PAYING AGENTS
Principal of and interest and premium, if any, on Senior Notes issued in the
form of Global Securities will be paid in the manner described below under
"Book-Entry System."
Unless otherwise indicated in the applicable Prospectus Supplement, interest
on Senior Notes (other than interest at maturity) that are in the form of
certificated securities will be paid by check payable in clearinghouse funds
mailed to the person entitled thereto at such person's address as it appears in
the register for the Senior Notes maintained by the Trustee; provided, however,
a holder of Senior Notes of one or more series under the Indenture in the
aggregate principal amount of $10,000,000 or more having the same interest
payment dates will be entitled to receive payments of interest on such series by
wire transfer of immediately available funds to a bank within the continental
United States if appropriate wire transfer instructions have been received by
the Trustee on or prior to the applicable regular record date for such interest
payment date. Unless otherwise indicated in the applicable Prospectus
Supplement, the principal of, and interest at maturity and premium, if any, on
Senior Notes in the form of certificated securities will be payable in
immediately available funds at the office of the Trustee or at the authorized
office of any paying agent upon presentation and surrender of such Senior Notes.
All monies paid by the Company to the Trustee for the payment of principal
of, interest or premium, if any, on any Senior Note which remain unclaimed at
the end of two years after such principal, interest or premium shall have become
due and payable will be repaid to the Company, subject to applicable abandoned
property laws, and the holder of such Senior Note will thereafter look only to
the Company for payment thereof.
In any case where the date of maturity of the principal of or any premium or
interest on any Senior Note or the date fixed for redemption of any Senior Note
is not a Business Day, then payment of such principal or any premium or interest
need not be made on such date but may be made on the next succeeding Business
Day with the same force and effect as if made on the date of maturity or the
date fixed
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for redemption, and, in the case of timely payment thereof, no interest shall
accrue for the period from and after such interest payment date or the date on
which the principal or premium of the Senior Note is stated to be payable to
such next succeeding Business Day.
REDEMPTION PROVISIONS
Any terms for the optional or mandatory redemption of the Senior Notes will
be indicated in the applicable Prospectus Supplement. Unless otherwise indicated
in the applicable Prospectus Supplement, the Senior Notes will be redeemable
only upon notice by mail not less than 30 nor more than 60 days prior to the
date fixed for redemption, and, if less than, all the Senior Notes of a series
are to be redeemed, the particular Senior Notes to be redeemed will be selected
by the Trustee in such manner as it shall deem appropriate and fair.
Any notice of redemption at the option of the Company may state that such
redemption will be conditional upon receipt by the Trustee, on or prior to the
date fixed for such redemption, of money sufficient to pay the principal of and
premium, if any, and interest on such Senior Notes and that if such money has
not been so received, such notice will be of no force and effect and the Company
will not be required to redeem such Senior Notes.
SECURITY; RELEASE DATE
Until the Release Date, the Senior Notes will be secured by one or more
series of the Company's first mortgage bonds (the "Senior Note Mortgage Bonds")
issued and delivered by the Company to the Trustee (see "Description of Senior
Note Mortgage Bonds"). Upon the issuance of a series of Senior Notes before the
Release Date, the Company will simultaneously issue and deliver to the Trustee,
as security for all the Senior Notes being issued, a series of Senior Note
Mortgage Bonds that will have the same stated maturity date and mandatory
redemption provisions, and will be in the same aggregate principal amount as the
series of the Senior Notes being issued. Any series of Senior Note Mortgage
Bonds may, but need not, bear interest. Payment by the Company to the Trustee of
principal of, premium, if any, and interest on, a series of Senior Note Mortgage
Bonds will be applied by the Trustee to satisfy the Company's obligations with
respect to principal of, premium, if any, and interest on the related series of
Senior Notes.
THE RELEASE DATE WILL BE THE DATE THAT ALL FIRST MORTGAGE BONDS OF THE
COMPANY (THE "FIRST MORTGAGE BONDS") ISSUED AND OUTSTANDING UNDER THE FIRST
MORTGAGE INDENTURE, OTHER THAN SENIOR NOTE MORTGAGE BONDS, HAVE BEEN RETIRED
(AT, BEFORE OR AFTER THE MATURITY THEREOF) THROUGH PAYMENT, REDEMPTION OR
OTHERWISE (INCLUDING THOSE FIRST MORTGAGE BONDS DEEMED TO BE PAID WITHIN THE
MEANING OF THE FIRST MORTGAGE INDENTURE). ON THE RELEASE DATE, THE TRUSTEE WILL
DELIVER TO THE COMPANY FOR CANCELLATION ALL SENIOR NOTE MORTGAGE BONDS AND NOT
LATER THAN 30 DAYS THEREAFTER, WILL PROVIDE NOTICE TO ALL HOLDERS OF SENIOR
NOTES OF THE OCCURRENCE OF THE RELEASE DATE. AS A RESULT, ON THE RELEASE DATE,
THE SENIOR NOTE MORTGAGE BONDS SHALL CEASE TO SECURE THE SENIOR NOTES, AND THE
SENIOR NOTES WILL BECOME UNSECURED AND UNSUBORDINATED GENERAL OBLIGATIONS OF THE
COMPANY.
Each series of Senior Note Mortgage Bonds will be a series of First Mortgage
Bonds of the Company, all of which are secured by a lien on certain property
owned by the Company. See "Description of Senior Note Mortgage Bonds--Security."
Upon the payment or cancellation of any outstanding Senior Notes, the Trustee
shall surrender to the Company for cancellation an equal principal amount of the
related series of Senior Note Mortgage Bonds. The Company will not permit, at
any time prior to the Release Date, the aggregate principal amount of Senior
Note Mortgage Bonds held by the Trustee to be less than the aggregate principal
amount of Senior Notes then outstanding. Following the Release Date, the Company
will cause the First Mortgage Indenture to be discharged and the Company will
not issue any additional First Mortgage Bonds under the First Mortgage
Indenture. While the Company will be precluded after the Release Date from
issuing additional First Mortgage Bonds, the Company will not be precluded under
the Indenture or Senior Notes from issuing or assuming other secured debt, or
incurring liens on its property,
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except to the extent indicated below under "Certain Covenants of the
Company--Limitation on Liens" and except as otherwise indicated in the
applicable Prospectus Supplement.
EVENTS OF DEFAULT
The following constitute events of default under the Indenture: (a) default
in the payment of principal of and premium, if any, on any Senior Note when due
and payable; (b) default in the payment of interest on any Senior Note when due
and payable which continues for sixty days; (c) default in the performance or
breach of any other covenant or warranty of the Company in the Senior Notes or
in the Indenture and the continuation thereof for ninety days after written
notice thereof to the Company by the Trustee or to the Company and the Trustee
by the holders of at least 33% in aggregate principal amount of the outstanding
Senior Notes; (d) prior to the Release Date, the occurrence of a default as
defined in the First Mortgage Indenture; provided, however, that the waiver or
cure of such default under the First Mortgage Indenture and the rescission and
annulment of the consequences thereof under the First Mortgage Indenture shall
constitute a waiver of the corresponding event of default under the Indenture
and a rescission and annulment of the consequences thereof under the Indenture;
and (e) certain events of bankruptcy, insolvency, reorganization, assignment or
receivership of the Company.
If an event of default under the Indenture occurs and is continuing, either
the Trustee or the holders of a majority in aggregate principal amount of the
outstanding Senior Notes may declare, by notice in writing, the principal amount
of and interest on all Senior Notes to be due and payable immediately. Upon such
acceleration of the Senior Notes, the Senior Note Mortgage Bonds shall be
immediately redeemable upon demand of the Trustee (and surrender thereof to the
Mortgage Corporate Trustee (as defined herein)) at a redemption price of 100% of
the principal amount thereof, together with interest to the redemption date. See
"Description of Senior Note Mortgage Bonds--Redemption Provisions." At any time
after an acceleration of the Senior Notes has been declared, but before a
judgment or decree for the payment of the principal amount of the Senior Notes
has been obtained (and provided the acceleration of all Senior Note Mortgage
Bonds has not occurred), if the Company pays or deposits with the Trustee a sum
sufficient to pay all matured installments of interest and the principal and any
premium which has become due otherwise than by acceleration and all defaults
shall have been cured or waived, then such payment or deposit will cause an
automatic rescission and annulment of the acceleration of the Senior Notes.
The Indenture provides that the Trustee generally will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the holders of Senior Notes unless such holders
have offered to the Trustee reasonable security or indemnity. Subject to such
provisions for indemnity and certain other limitations contained in the
Indenture, the holders of a majority in principal amount of the outstanding
Senior Notes generally will have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee, or of
exercising any trust or power conferred on the Trustee. The holders of a
majority in principal amount of the outstanding Senior Notes generally will have
the right to waive any past default or event of default under the Indenture. The
Indenture provides that no holder of Senior Notes may institute any action
against the Company under the Indenture unless such holder previously shall have
given to the Trustee written notice of default and continuance thereof and
unless the holders of not less than a majority in aggregate principal amount of
Senior Notes shall have requested the Trustee to institute such action and shall
have offered the Trustee reasonable indemnity, and the Trustee shall not have
instituted such action within 60 days of such request. Furthermore, no holder of
Senior Notes will be entitled to institute any such action if and to the extent
that such action would disturb or prejudice the rights of other holders of
Senior Notes. Notwithstanding that the right of a holder of Senior Notes to
institute a proceeding with respect to the Indenture is subject to certain
conditions precedent, each holder of a Senior Note has the right, which is
absolute and unconditional, to receive payment of the principal of and premium,
if any, and interest, if any, on such Senior Note when due and to institute suit
for the enforcement of any such payment, and such rights may not be impaired
without the consent of such Holder of Senior Notes. The Indenture provides that
the
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Trustee, within 90 days after it receives notice of the occurrence of a default
with respect to the Senior Notes, is required to give the holders of the Senior
Notes notice of such default, unless cured or waived, but, except in the case of
default in the payment of principal of, or premium, if any, or interest on, any
Senior Notes, the Trustee may withhold such notice if it determines in good
faith that it is in the interest of such holders to do so. The Company is
required to deliver to the Trustee each year a certificate as to whether or not,
to the knowledge of the officers signing such certificate, the Company is in
compliance with the conditions and covenants under the Indenture.
MODIFICATION
Modification and amendment of the Indenture may be effected by the Company
and the Trustee with the consent of the holders of a majority in principal
amount of the outstanding Senior Notes affected thereby, provided that no such
modification or amendment may, without the consent of the holder of each
outstanding Senior Note affected thereby, (i) change the maturity date of any
Senior Note; (ii) reduce the rate (or change the method of calculation thereof)
or extend the time of payment of interest on any Senior Note; (iii) reduce the
principal amount of, or premium payable on, any Senior Note; (iv) change the
coin or currency of any payment of principal of, or any premium or interest on,
any Senior Note; (v) change the date on which any Senior Note may be redeemed or
repaid at the option of the holder thereof or adversely affect the rights of a
holder to institute suit for the enforcement of any payment on or with respect
to any Senior Note; (vi) impair the interest of the Trustee in the Senior Note
Mortgage Bonds held by it or, prior to the Release Date, reduce the principal
amount of any series of Senior Note Mortgage Bonds securing the Senior Notes to
an amount less than the principal amount of the related series of Senior Notes
or alter the payment provisions of such Senior Note Mortgage Bonds in a manner
adverse to the holders of the Senior Notes; or (vii) modify the foregoing
requirements or reduce the percentage of outstanding Senior Notes necessary to
modify or amend the Indenture or to waive any past default to less than a
majority. Modification and amendment of the Indenture may be effected by the
Company and the Trustee without the consent of the holders in certain cases,
including (a) to add to the covenants of the Company for the benefit of the
holders or to surrender a right conferred on the Company in the Indenture; (b)
to add further security for the Senior Notes; (c) to add provisions enabling the
Company to be released with respect to one or more series of outstanding Senior
Notes from its obligations under the covenants described under "Certain
Covenants of the Company--Limitation on Liens" and "--Limitation on Sale and
Lease-Back Transactions" and "Consolidation, Merger and Sale or Disposition of
Assets" below, upon satisfaction of conditions with respect to such series of
Senior Notes that are the same as those described below under "--Defeasance and
Discharge" (except that the opinion of tax counsel referred to therein need not
be based upon an External Tax Pronouncement (as defined in the Indenture)); (d)
to supply omissions, cure ambiguities or correct defects which actions, in each
case, are not prejudicial to the interests of the holders in any material
respect; or (e) to make any other change that is not prejudicial to the holders
of Senior Notes.
A supplemental indenture which changes or eliminates any covenant or other
provision of the Indenture (or any supplemental indenture) which has expressly
been included solely for the benefit of one or more series of Senior Notes, or
which modifies the rights of the holders of Senior Notes of such series with
respect to such covenant or provision, will be deemed not to affect the rights
under the Indenture of the holders of Senior Notes of any other series.
DEFEASANCE AND DISCHARGE
The Indenture provides that the Company will be discharged from any and all
obligations in respect of the Senior Notes and the Indenture (except for certain
obligations such as obligations to register the transfer or exchange of Senior
Notes, replace stolen, lost or mutilated Senior Notes and maintain paying
agencies) if, among other things, the Company irrevocably deposits with the
Trustee, in trust for the benefit of holders of Senior Notes, money or certain
United States government obligations, or any combination
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thereof, which through the payment of interest thereon and principal thereof in
accordance with their terms will provide money in an amount sufficient, without
reinvestment, to make all payments of principal of, and any premium and interest
on, the Senior Notes on the dates such payments are due in accordance with the
terms of the Indenture and the Senior Notes; provided that, unless all of the
Senior Notes are to be due within 90 days of such deposit by redemption or
otherwise, the Company shall also have delivered to the Trustee an opinion of
counsel to the effect that the holders of the Senior Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
defeasance or discharge of the Indenture and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as would have
been the case absent such defeasance or discharge of the Indenture. Thereafter,
the holders of Senior Notes must look only to such deposit for payment of the
principal of, and interest and any premium on, the Senior Notes.
CONSOLIDATION, MERGER AND SALE OR DISPOSITION OF ASSETS
The Company will not consolidate with or merge into any other corporation or
sell or otherwise dispose of its properties as or substantially as an entirety
to any person unless (i) the successor or transferee corporation or the person
that receives such properties pursuant to such sale, transfer or other
disposition shall be a corporation organized and existing under the laws of the
United States of America, any state thereof, or the District of Columbia, (ii)
the successor or transferee corporation or the person that receives such
properties pursuant to such sale, transfer or other disposition assumes by
supplemental indenture the due and punctual payment of the principal of and
premium and interest on all the Senior Notes and the performance of every
covenant of the Indenture to be performed or observed by the Company and (iii)
prior to the Release Date, the successor or transferee corporation or the person
that receives such properties pursuant to such sale, transfer or other
disposition assumes the Company's obligations under the First Mortgage Indenture
with respect to the Senior Note Mortgage Bonds. Upon any such consolidation,
merger, sale, transfer or other disposition of the properties of the Company
substantially as an entirety, the successor corporation formed by such
consolidation or into which the Company is merged or the person to which such
sale, transfer or other disposition is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under the Indenture
with the same effect as if such successor corporation or person had been named
as the Company therein and the Company will be released from all obligations
under the Indenture. For purposes of the Indenture, the conveyance or other
transfer by the Company of (a) all or any portion of its facilities for the
generation of electric energy, (b) all of its facilities for the transmission of
electric energy or (c) all of its facilities for the distribution of natural
gas, in each case considered alone or in any combination with properties
described in any other clause, shall in no event be deemed to constitute a
conveyance or other transfer of all the properties of the Company, as or
substantially as an entirety.
CERTAIN COVENANTS OF THE COMPANY
LIMITATION ON LIENS
The Indenture provides, so long as any Senior Notes are outstanding, the
Company may not issue, assume, guarantee or permit to exist after the Release
Date any Debt that is secured by any mortgage, security interest, pledge or lien
("Lien") of or upon any Operating Property of the Company, whether owned at the
date of the Indenture or thereafter acquired, without in any such case
effectively securing the Senior Notes (together with, if the Company shall so
determine, any other indebtedness of the Company ranking senior to, or equally
with, the Senior Notes) equally and ratably with such Debt (but only so long as
such Debt is so secured).
The foregoing restriction will not apply to: (1) Liens on any Operating
Property existing at the time of its acquisition (which Liens may also extend to
subsequent repairs, alterations and improvements to such Operating Property);
(2) Liens on Operating Property of a corporation existing at the time such
corporation is merged into or consolidated with, or such corporation disposes of
all or substantially all its
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properties (or those of a division) to, the Company; (3) Liens on Operating
Property to secure the cost of acquisition, construction, development or
substantial repair, alteration or improvement of property or to secure Debt
incurred to provide funds for any such purpose or for reimbursement of funds
previously expended for any such purpose, provided such Liens are created or
assumed contemporaneously with, or within 18 months after, such acquisition or
the completion of substantial repair or alteration, construction, development or
substantial improvement; (4) Liens in favor of any State, or any department,
agency or instrumentality or political subdivision of any State, or for the
benefit of holders of securities issued by any such entity (or providers of
credit enhancement with respect to such securities), to secure any Debt
(including, without limitation, obligations of the Company with respect to
industrial development, pollution control or similar revenue bonds) incurred for
the purpose of financing all or any part of the purchase price or the cost of
substantially repairing or altering, constructing, developing or substantially
improving Operating Property of the Company; or (5) any extension, renewal or
replacement (or successive extensions, renewals or replacements), in whole or in
part, of any Lien referred to in clauses (1) through (4), provided, however,
that the principal amount of Debt secured thereby and not otherwise authorized
by said clauses (1) to (4), inclusive, shall not exceed the principal amount of
Debt, plus any premium or fee payable in connection with any such extension,
renewal or replacement, so secured at the time of such extension, renewal or
replacement. However, the foregoing restriction will not apply to the issuance,
assumption or guarantee by the Company of Debt secured by a Lien that would
otherwise be subject to the foregoing restrictions up to an aggregate amount
which, together with all other secured Debt of the Company (not including
secured Debt permitted under any of the foregoing exceptions) and the Value (as
defined below) of Sale and Lease-Back Transactions (as defined below) existing
at such time (other than Sale and Lease-Back Transactions the proceeds of which
have been applied to the retirement of certain indebtedness, Sale and Lease-Back
Transactions in which the property involved would have been permitted to be
mortgaged under any of the foregoing exceptions in clauses (1) to (5) and Sale
and Lease-Back Transactions that are permitted by the first sentence of
"--Limitation on Sale and Lease-Back Transactions" below), does not exceed 15%
of Capitalization.
LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS
The Indenture provides that so long as any Senior Notes are outstanding, the
Company may not enter into or permit to exist after the Release Date any Sale
and Lease-Back Transaction with respect to any Operating Property (except for
transactions involving leases for a term, including renewals, of not more than
48 months), if the purchaser's commitment is obtained more than 18 months after
the later of the completion of the acquisition and the placing in operation of
such Operating Property or of such Operating Property as constructed or
developed or substantially repaired, altered or improved. This restriction will
not apply if (a) the Company would be entitled pursuant to any of the provisions
described in clauses (1) to (5) of the first sentence of the second paragraph
under "--Limitation on Liens" above to issue, assume, guarantee or permit to
exist Debt secured by a Lien on such Operating Property without equally and
ratably securing the Senior Notes, (b) after giving effect to such Sale and
Lease-Back Transaction, the Company could incur pursuant to the provisions
described in the second sentence of the second paragraph under "--Limitation on
Liens," at least $1.00 of additional Debt secured by Liens (other than Liens
permitted by clause (a)), or (c) the Company applies within 180 days an amount
equal to, in the case of a sale or transfer for cash, the net proceeds (not
exceeding the net book value), and, otherwise, an amount equal to the fair value
(as determined by its Board of Directors) of the Operating Property so leased,
to the retirement of Senior Notes or other Debt of the Company ranking senior
to, or equally with, the Senior Notes, subject to reduction for Senior Notes and
such Debt retired during such 180-day period otherwise than pursuant to
mandatory sinking fund or prepayment provisions and payments at stated maturity.
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CERTAIN DEFINITIONS
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions or trust companies in the
Borough of Manhattan, the City and State of New York, or in the city where the
corporate trust office of the Trustee is located, are obligated or authorized by
law or executive order to close.
"Capitalization" means the total of all the following items appearing on, or
included in, the consolidated balance sheet of the Company: (i) liabilities for
Debt maturing more than twelve (12) months from the date of determination; and
(ii) common stock, preferred stock, hybrid preferred securities, premium on
capital stock, capital surplus, capital in excess of par value, and retained
earnings (however the foregoing may be designated), less, to the extent not
otherwise deducted, the cost of shares of capital stock of the Company held in
its treasury. Subject to the foregoing, Capitalization will be determined in
accordance with generally accepted accounting principles and practices
applicable to the type of business in which the Company is engaged and that are
approved by independent accountants regularly retained by the Company, and may
be determined as of a date not more than sixty (60) days prior to the happening
of an event for which such determination is being made.
"Debt" means any outstanding debt for money borrowed of the Company
evidenced by notes, debentures, bonds, or other securities, or guarantees of any
thereof.
"Operating Property" means (i) any interest in real property owned by the
Company and (ii) any asset owned by the Company that is depreciable in
accordance with GAAP (as defined in the Indenture), excluding, in either case,
any interest of the Company as lessee under any lease which has been or would be
capitalized on the books of the lessee in accordance with GAAP.
"Sale and Lease-Back Transaction" means any arrangement with any person
providing for the leasing to the Company of any Operating Property (except for
leases for a term, including any renewals thereof, of not more than 48 months),
which Operating Property has been or is to be sold or transferred by the Company
to such person; provided, however, Sale and Lease-Back Transaction does not
include any arrangement first entered into prior to the date of the Indenture.
"Value" means, with respect to a Sale and Lease-Back Transaction, as of any
particular time, the amount equal to the greater of (i) the net proceeds to the
Company from the sale or transfer of the property leased pursuant to such Sale
and Lease-Back Transaction and (ii) the net book value of such property, as
determined in accordance with generally accepted accounting principles by the
Company at the time of entering into such Sale and Lease-Back Transaction, in
either case multiplied by a fraction, the numerator of which shall be equal to
the number of full years of the term of the lease that is part of such Sale and
Lease-Back Transaction remaining at the time of determination and the
denominator of which shall be equal to the number of full years of such term,
without regard, in any case, to any renewal or extension options contained in
such lease.
VOTING OF SENIOR NOTE MORTGAGE BONDS HELD BY TRUSTEE
The Trustee, as the holder of Senior Note Mortgage Bonds, will attend any
meeting of bondholders under the First Mortgage Indenture, or, at its option,
will deliver its proxy in connection therewith relating to matters with respect
to which it is entitled to vote or consent. So long as no event of default under
the Indenture shall have occurred or be continuing, the Trustee shall vote all
Senior Note Mortgage Bonds then held by it, or consent with respect thereto,
proportionately with the vote or consent of the holders of all other First
Mortgage Bonds outstanding under the First Mortgage Indenture, the holders of
which are eligible to vote or consent; provided, however, that the Trustee shall
not so vote in favor of, or so consent to, any amendment or modification of the
First Mortgage Indenture which, if it were an amendment or modification of the
Indenture, would require the consent of holders of Senior Notes as described
under
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"--Modification," without the prior consent of holders of Senior Notes that
would be required for such an amendment or modification of the Indenture.
RESIGNATION OR REMOVAL OF TRUSTEE
The Trustee may resign at any time upon written notice to the Company
specifying the day upon which the resignation is to take effect and such
resignation will take effect immediately upon the later of the appointment of a
successor Trustee and such specified day.
The Trustee may be removed at any time by an instrument or concurrent
instruments in writing filed with the Trustee and signed by the holders, or
their attorneys-in-fact, of at least a majority in principal amount of the then
outstanding Senior Notes. In addition, so long as no Event of Default or event
which, with the giving of notice or lapse of time or both, would become an Event
of Default has occurred and is continuing, the Company may remove the Trustee
upon notice to the holder of each Senior Note outstanding and the Trustee, and
appointment of a successor Trustee.
CONCERNING THE TRUSTEE
The Company and its affiliates maintain corporate trust and other normal
banking relationships with The Bank of New York. The Indenture provides that the
Company's obligations to compensate the Trustee and reimburse the Trustee for
expenses, disbursements and advances will constitute indebtedness which will be
secured by a lien generally prior to that of the Senior Notes upon all property
and funds held or collected by the Trustee as such.
GOVERNING LAW
The Indenture and each Senior Note will be governed by New York law.
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DESCRIPTION OF SENIOR NOTE MORTGAGE BONDS
GENERAL
Each series of Senior Note Mortgage Bonds will be a series of First Mortgage
Bonds issued under the Indenture of Mortgage or Deed of Trust dated October 1,
1941 between the Company and U.S. Bank Trust National Association, Chicago,
Illinois, as successor trustee (the "Mortgage Corporate Trustee"), and an
individual successor co-trustee (collectively, the "Mortgage Trustees"), as
amended and supplemented and as to be further amended by one or more
supplemental indentures with respect to the Senior Note Mortgage Bonds (such
Indenture of Mortgage, as supplemented and as to be supplemented, is herein
referred to as the "First Mortgage Indenture"). The following summaries of
certain provisions of the First Mortgage Indenture do not purport to be complete
and are subject to, and qualified in their entirety by, all of the provisions of
the First Mortgage Indenture which is an exhibit to the Registration Statement
of which this Prospectus is a part and which is incorporated herein by this
reference.
The Senior Note Mortgage Bonds will be issued as security for the Company's
obligations under the Indenture and will be immediately delivered to, and
registered in the name of, the Trustee. The Indenture provides that the Trustee
shall not transfer any Senior Note Mortgage Bonds except to a successor trustee,
to the Company (as provided in the Indenture) or in compliance with a court
order in connection with a bankruptcy or reorganization proceeding of the
Company. The Trustee shall generally vote the Senior Note Mortgage Bonds
proportionately with what it believes to be the vote of all other First Mortgage
Bonds then outstanding, as described under "Description of Senior Notes--Voting
of Senior Note Mortgage Bonds Held by Trustee."
The Senior Note Mortgage Bonds will correspond to the corresponding series
of Senior Notes in respect of principal amount, interest rate, maturity date and
redemption provisions. Upon payment of the principal of or premium, if any, or
interest on the Senior Notes, Senior Note Mortgage Bonds of the corresponding
series in a principal amount equal to the principal amount of such Senior Notes
will, to the extent of such payment of principal, premium or interest, be deemed
fully paid and the obligation of the Company to make such payment shall be
discharged.
At September 30, 1998 the Company had outstanding $366 million in principal
amount of First Mortgage Bonds issued under the First Mortgage Indenture. First
Mortgage Bonds may be authenticated against an equivalent principal amount of
First Mortgage Bonds previously issued under the First Mortgage Indenture and/or
against net expenditures for bondable property, which aggregated not less than
approximately $1.3 billion on September 30, 1998. See "--Issuance of Additional
First Mortgage Bonds" below. For the five years and the nine months ended
September 30, 1998, gross additions to the utility properties of the Company
aggregated approximately $540 million. Gross retirements for such periods were
approximately $266 million.
REDEMPTION PROVISIONS
The Senior Note Mortgage Bonds will be redeemed on the respective dates and
in the respective principal amounts that correspond to the redemption dates for,
and the principal amounts to be redeemed of, the corresponding series of Senior
Notes. The Senior Note Mortgage Bonds will not be entitled to any covenant
providing for the retirement or amortization of Senior Note Mortgage Bonds
outstanding or for the certification of expenditures for bondable property in
lieu of such retirement.
In the event of an event of default under the Indenture and acceleration of
the Senior Notes, the Senior Note Mortgage Bonds will be immediately redeemable
in whole, upon demand of the Trustee (and surrender thereof to the Mortgage
Corporate Trustee), at a redemption price of 100% of the principal amount
thereof, together with accrued interest to the redemption date. See "Description
of Senior Notes--Events of Default."
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SECURITY
The Senior Note Mortgage Bonds will be secured by the lien of the First
Mortgage Indenture and will rank equally with all the First Mortgage Bonds at
any time outstanding under and secured by the First Mortgage Indenture, except
as to differences between series permitted by the First Mortgage Indenture and
not affecting the rank of the lien thereof. In the opinion of Sorling, Northrup,
Hanna, Cullen & Cochran, Ltd., Springfield, Illinois, Illinois counsel for the
Company, the First Mortgage Indenture constitutes a first mortgage lien, subject
only to permitted encumbrances and liens, on all or substantially all the
permanent fixed properties (other than excepted property) now owned by the
Company. The First Mortgage Indenture contains provisions subjecting
after-acquired property, other than excepted property, to the lien thereof. Such
provisions might not be effective as to proceeds, products, rents, issues or
profits of property subject to the lien of the First Mortgage Indenture
realized, and additional property acquired, within 90 days prior and subsequent
to the filing of a case with respect to the Company under the United States
Bankruptcy Code, state insolvency laws or other similar laws affecting the
enforcement of creditor's rights. The First Mortgage Indenture excepts or
excludes from the lien thereof all cash, securities, accounts and bills
receivable, choses in action and certain judgments not deposited or pledged with
the Mortgage Trustees, all personal property held for sale, lease, rental or
consumption in the ordinary course of business, the last day of each term under
any lease of property, all gas, oil and other minerals under any property
subject thereto, and certain real estate described therein.
MAINTENANCE AND RENEWAL
The First Mortgage Indenture provides that so long as any First Mortgage
Bonds, including the Senior Note Mortgage Bonds, are outstanding, the Company
will expend during each calendar year, and certify to the Mortgage Trustees, an
amount equal to 15% of its utility operating revenues for such year (after
deducting from such revenues the cost of electricity and gas purchased for
resale) for (i) the maintenance and repair of its mortgaged utility properties,
(ii) bondable property on which the First Mortgage Indenture is a first mortgage
lien and/or (iii) the retirement of the First Mortgage Bonds of any series
heretofore or hereafter issued under the First Mortgage Indenture. In lieu of
such requirement, the Company may pay to the Mortgage Trustees, in cash, any
deficiency in the amount required to be so expended, after deducting any
unapplied excess expenditures previously made for any of such purposes. Any such
cash may be applied to the retirement, through purchase, payment or redemption,
of the First Mortgage Bonds (such retirement by redemption to be only if such
First Mortgage Bonds are otherwise redeemable) or be withdrawn by the Company to
the extent of 100% of either gross or net expenditures for bondable property on
which the First Mortgage Indenture is a first mortgage lien.
The First Mortgage Indenture also provides that (i) the Company shall
maintain the mortgaged properties in good repair and working order, (ii) the
Mortgage Trustees may, and if requested by holders of a majority in principal
amount of all outstanding First Mortgage Bonds and furnished with the necessary
funds therefor shall, cause such properties to be inspected by an independent
engineer (not more often than at five-year intervals) to determine whether they
have been so maintained and whether any property, not retired on the Company's
books, should be so classified for the purpose of computing net expenditures for
bondable property or otherwise and (iii) the Company shall make good any
deficiency in maintenance disclosed by such engineer's report as rendered or as
modified by arbitration.
ISSUANCE OF ADDITIONAL FIRST MORTGAGE BONDS
The First Mortgage Indenture does not fix an overall dollar limitation on
the aggregate principal amount of all First Mortgage Bonds that may be issued or
outstanding thereunder. First Mortgage Bonds may be issued from time to time
under the First Mortgage Indenture in a principal amount equal to: (a) 60% of
eligible net expenditures made by the Company for bondable property constructed
or acquired by it and on which the First Mortgage Indenture is a first mortgage
lien, subject only to permitted encumbrances and liens and prepaid liens, (b)
the principal amount of previously authenticated First
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Mortgage Bonds which have been retired or for the retirement of which the
Mortgage Trustees hold the necessary funds, other than certain First Mortgage
Bonds not usable for the purpose under the terms of the First Mortgage
Indenture, and (c) the amount of money deposited with the Mortgage Trustees for
the purpose, which money may be applied to the retirement of bonds or may be
withdrawn in lieu of the authentication of an equivalent principal amount of
First Mortgage Bonds under the First Mortgage Indenture provisions referred to
in clauses (a) and (b). Upon the retirement of certain series of First Mortgage
Bonds, any bonds of such series and any net expenditures for bondable property
used or applied to satisfy the debt retirement provisions applicable to such
series may be used as the basis for the authentication of additional First
Mortgage Bonds under the First Mortgage Indenture. Net expenditures for bondable
property are determined as provided in the First Mortgage Indenture. In general,
bondable property means any utility plant, property or equipment owned by the
Company on January 1, 1941 or constructed or otherwise acquired by it on or
after that date and used or useful in its utility business. The Company owns and
operates only electric and gas utility properties.
No additional First Mortgage Bonds may be authenticated under the First
Mortgage Indenture provisions referred to in clauses (a) and (c) above, or
authenticated as provided in clause (b) above if such additional First Mortgage
Bonds are issued more than five years prior to the maturity of such previously
authenticated bonds and bear interest at a higher rate than such previously
authenticated bonds, unless the Company's net earnings (as described below) for
a 12-month period ending within 90 days next preceding such authentication were
at least equal to twice the interest for one year on (1) all first mortgage
bonds to be outstanding under the First Mortgage Indenture immediately after
such authentication, other than First Mortgage Bonds for the retirement of which
the Mortgage Trustees hold the necessary funds and (2) all other indebtedness
then secured by a lien equal or prior to the First Mortgage Indenture on
property of the Company, with certain exceptions. The Senior Note Mortgage Bonds
are expected to be issued on the basis of retired bonds and bondable property
additions.
"Net earnings" of the Company for any period means the earnings of the
Company, computed in accordance with accepted principles of accounting and
determined by deducting from the Company's total gross earnings and income for
the period, all its operating expenses for the period, including maintenance,
repairs, rentals, insurance, all taxes other than income taxes, depreciation,
retirements, renewals and replacements, but not amortization, all as provided in
the First Mortgage Indenture.
ACQUISITION OF PROPERTY SUBJECT TO A PRIOR LIEN
The First Mortgage Indenture provides that the Company will not acquire any
property of a value in excess of (i) $25,000,000 or (ii) 10 percent of utility
plant, less accumulated depreciation, of the Company at the time of acquisition,
but in no event less than $1,000,000, which at the time of acquisition is
subject to a lien equal or prior to the First Mortgage Indenture (other than
permitted encumbrances, and liens and prepaid liens) unless, at that time, (a)
the principal amount of all outstanding obligations secured by such equal or
prior lien shall not exceed 60% of the fair value of any bondable property so
acquired and (b) the net earnings of such property during a 12-month period
ending within 90 days next preceding such acquisition were at least equal to
twice the annual interest charge on such obligations, except any of such
obligations for the retirement of which the necessary funds are deposited under
such lien or with the Mortgage Trustees.
LIMITATIONS ON COMMON STOCK DIVIDENDS
The First Mortgage Indenture provides in effect that, so long as any First
Mortgage Bonds of all prior series are outstanding, the Company will not declare
or pay any dividends on its Common Stock (other than in stock), or make any
other distribution on or purchase any of its Common Stock, unless, for the
period beginning January 1, 1941 to the date of such payment, distribution or
purchase, the total amount charged or provided by the Company for maintenance
and repairs and provided for depreciation of properties subject to the lien of
the First Mortgage Indenture, plus the earned surplus (retained earnings)
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of the Company earned during such period and remaining after any such payment,
distribution or purchase, shall aggregate not less than 15% of the Company's
total utility operating revenues for the period, after deducting from such
revenues the cost of electricity and gas purchased for exchange or resale. For
the period January 1, 1941 to September 30, 1998, the total of the amounts so
expended and provided by the Company for such maintenance, repairs and
depreciation, plus the undistributed earned surplus accumulated during the
period, aggregated about 22.6% of such revenues and, exclusive of such earned
surplus, aggregated about 19.6% of such revenues.
MODIFICATION OF FIRST MORTGAGE INDENTURE
The terms and provisions of the First Mortgage Indenture may be modified or
amended from time to time by a supplemental indenture executed by the Company
and the Mortgage Trustees and without the consent of bondholders, for any one or
more of the purposes provided in the First Mortgage Indenture. Such purposes
include, among others, (1) any change or modification of any of the terms or
conditions of the First Mortgage Indenture, provided that such change or
modification would not adversely affect the First Mortgage Bonds then
outstanding and is made effective only with respect to First Mortgage Bonds
authenticated after the execution of such supplemental indenture and (2) any
other change or modification of such terms or conditions which is not
inconsistent with the terms, and which shall not impair the security, of the
First Mortgage Indenture.
The First Mortgage Indenture may be amended in any respect with the consent
of the holders of not less than 51% in principal amount of all First Mortgage
Bonds of all series then outstanding that would be affected thereby, except
that, without the consent of the holder of each outstanding First Mortgage Bond
affected thereby, no such amendment shall, among other things, (i) extend the
time or times or otherwise affect the terms of payment of the principal,
interest or premium in respect of any First Mortgage Bond, or reduce the
principal amount of any First Mortgage Bond or any premium thereon or the rate
of interest thereon, (ii) impair the right of any bondholder to institute suit
for the enforcement of any such payment in respect of its First Mortgage Bonds,
(iii) permit the creation of any lien ranking prior to, or on a parity with, the
lien of the Indenture, other than permitted encumbrances and liens or prepaid
liens, (iv) deprive any nonassenting bondholder of a lien on the mortgaged
property for the security of the bondholder's First Mortgage Bonds or (v) reduce
the percentage in principal amount of First Mortgage Bonds, the consent of the
holders of which is required for any such amendment.
OTHER FIRST MORTGAGE INDENTURE PROVISIONS
Holders of a majority in principal amount of the First Mortgage Bonds
secured by the First Mortgage Indenture have the right to direct the time,
method and place of conducting proceedings for remedies available to, or
exercising any trust or power of, the Mortgage Trustees. However, the Mortgage
Trustees may decline to follow such directions in certain circumstances
specified in the First Mortgage Indenture; the Mortgage Trustees are not
required to exercise powers of entry or sale under the First Mortgage Indenture;
and the Mortgage Trustees are entitled to be indemnified against expenditures
incurred in connection with taking any directed action or proceeding.
A "default" or an "event of default" under the First Mortgage Indenture
means: (a) failure to pay the principal of any First Mortgage Bond when due at
maturity or otherwise; (b) failure to pay First Mortgage Bond interest within 60
days after its due date; (c) failure to pay the principal of, or interest on,
any prior lien bond, continued beyond the grace period (if any) specified in the
lien securing such bond; (d) failure of the Company for 90 days after written
demand to comply with any other covenant or condition in the First Mortgage
Indenture or in any First Mortgage Bond or any prior lien bond or lien; or (e)
certain events relating to bankruptcy, insolvency, assignment or receivership.
The Mortgage Trustees are required to give notice to bondholders of defaults
known to the Mortgage Trustees, within 90 days after the occurrence thereof;
provided that the Mortgage Trustees may withhold giving notice to bondholders of
defaults (other than any default in payment of interest, principal or sinking or
purchase fund installment in
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respect of any First Mortgage Bond) if the Mortgage Trustees determine in good
faith that such withholding is in the interest of the bondholders. Upon default,
the Mortgage Trustees may, among other remedies, and upon written notice from
the holders of a majority in principal amount of First Mortgage Bonds then
outstanding under the First Mortgage Indenture shall, declare the principal of
all First Mortgage Bonds to be immediately due and payable. Upon certain terms
and conditions, the declaration of acceleration may be rescinded and waived.
The Company is required to furnish to the Mortgage Trustees certificates of
officers and engineers and, in certain cases, of accountants in connection with
the authentication of First Mortgage Bonds, withdrawal of money, release of
property and other matters, and opinions of counsel as to the lien of the First
Mortgage Indenture and other matters. The Company also is required to furnish to
the Mortgage Trustees, not less frequently than annually, a certificate as to
the Company's compliance with all the conditions and covenants under the First
Mortgage Indenture, including the satisfaction of the maintenance and renewal,
and the debt retirement, provisions of the First Mortgage Indenture and an
opinion of counsel with respect to the lien of the First Mortgage Indenture.
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BOOK-ENTRY SYSTEM
Unless otherwise indicated in the applicable Prospectus Supplement, each
series of Senior Notes will initially be issued in the form of one or more
Global Securities, in registered form, without coupons. The Global Security will
be deposited with, or on behalf of, the Depository, and registered in the name
of the Depository or a nominee of the Depository.
So long as the Depository, or its nominee, is the registered owner of a
Global Security, such Depository or such nominee, as the case may be, will be
considered the owner of such Global Security for all purposes under the
Indenture, including any notices and voting. Except in the circumstances
described below, the owners of beneficial interests in a Global Security will
not be entitled to have Senior Notes registered in their names, will not receive
or be entitled to receive physical delivery of any such Senior Notes and will
not be considered the registered holder thereof under the Indenture.
Accordingly, each person holding a beneficial interest in a Global Security must
rely on the procedures of the Depository and, if such person is not a Direct
Participant (as defined herein), on procedures of the Direct Participant through
which such person holds its interest, to exercise any of the rights of a
registered owner of such Senior Note.
Global Securities may be exchanged in whole for certificated securities only
if (i) the Depository notifies the Company that it is unwilling or unable to
continue as Depository for the Global Securities or the Depository has ceased to
be a clearing agency registered under the Exchange Act and, in either case, the
Company thereupon fails to appoint a successor depository within 90 days, (ii)
the Company, at its option, notifies the Trustee in writing that it elects to
cause the issuance of certificated securities or (iii) there shall have occurred
and be continuing an event of default with respect to the Senior Notes of any
series. In any such case, the Company will notify the Trustee in writing that,
upon surrender by the Direct Participants and Indirect Participants (as defined
below) of their interest in such Global Securities, certificated securities
representing Senior Notes will be issued to each person that such Direct
Participants and Indirect Participants and the Depository identify as being the
Beneficial Owner (as defined below) of such Senior Notes.
The following is based solely on information furnished by DTC:
DTC will act as Depository for the Global Securities. The Global Securities
will be issued as fully-registered securities registered in the name of Cede &
Co. (DTC's partnership nominee). One fully-registered Global Security
certificate will be issued for each issue of the Global Securities, each in the
aggregate principal amount of such issue 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 corporation"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Direct Participants") deposit with DTC.
DTC also facilitates the settlement among Direct Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Direct 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. DTC is owned
by a number of its Direct Participants and by the New York Stock Exchange, Inc.,
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" and, together with the Direct Participants,
the "Participants"). The rules applicable to DTC and its Participants are on
file with the Commission.
Purchases of Global Securities under the DTC system must be made by or
through Direct Participants, which will receive a credit for such purchases of
Global Securities on DTC's records. The ownership
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interest of each actual purchaser of each Global 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
purchase, but Beneficial Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the Direct or Indirect Participant through which the Beneficial
Owner entered into the transaction. Transfers of ownership interests in the
Global 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 the Global
Securities, except in the event that use of the book-entry system for the Global
Securities is discontinued.
To facilitate subsequent transfers, all Global Securities deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Global Securities with DTC and their registration in
the name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Global Securities; DTC's
records reflect only the identity of the Direct Participants to whose accounts
such Global 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.
If the Global Securities are redeemable, redemption notices shall be sent to
Cede & Co. If less than all of the Global Securities are being redeemed, DTC's
practice is to determine by lot the amount of the interest of each Direct
Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to the Global
Securities. Under its usual procedures, DTC mails an omnibus proxy to the
Company as soon as possible after the record date. The omnibus proxy assigns
Cede & Co.'s consenting or voting rights to those Direct Participants whose
accounts the Global Securities are credited on the record date (identified in a
listing attached to the omnibus proxy).
Principal, interest and premium payments on the Global Securities will be
made to DTC in immediately available funds. DTC's practice is to credit Direct
Participants' accounts on the date on which interest is payable in accordance
with the respective holdings shown on DTC's records, unless DTC has reason to
believe that it will not receive payment on such date. Payments by Participants
to Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers in
bearer form or registered in "street name," and will be the responsibility of
such Participant and not of DTC, the Trustee, or the Company, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of principal, interest and premium on Senior Notes represented by Global
Securities to DTC is the responsibility of the Company and the Trustee.
Disbursement of such payments to Direct Participants shall be the responsibility
of DTC, and disbursement of such payments to the Beneficial Owners shall be the
responsibility of the Participants.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources (including DTC) that the Company believes to be
reliable, but the Company takes no responsibility for the accuracy thereof.
The underwriters, dealers or agents of any Senior Notes may be Direct
Participants of DTC.
NONE OF THE COMPANY, THE TRUSTEE, OR ANY AGENT FOR PAYMENT ON OR
REGISTRATION OF TRANSFER OR EXCHANGE OF ANY GLOBAL SECURITY WILL HAVE ANY
RESPONSIBILITY OR LIABILITY FOR ANY ASPECT OF THE RECORDS RELATING TO OR
PAYMENTS MADE ON ACCOUNT OF BENEFICIAL INTERESTS IN SUCH GLOBAL SECURITY OR FOR
MAINTAINING, SUPERVISING OR REVIEWING ANY RECORDS RELATING TO SUCH BENEFICIAL
INTERESTS.
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PLAN OF DISTRIBUTION
The Company may sell the Senior Notes (i) through underwriters or dealers;
(ii) directly to one or more institutional purchasers; or (iii) through agents.
The Prospectus Supplement with respect to each series of Senior Notes will set
forth the terms of the offering of such Senior Notes, including the name or
names of any underwriters, the purchase price of such Senior Notes and the
proceeds to the Company from such sale, any underwriting discounts and other
items constituting underwriters' compensation, any initial offering price and
any discounts, commissions or concessions allowed or reallowed or paid to
dealers. Any initial offering price and any discounts, concessions or
commissions allowed or reallowed or paid to dealers may be changed from time to
time.
If underwriters are used in an offering, the Senior Notes will be acquired
by the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. The Senior
Notes may be offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one or more of
such firms. The specific managing underwriter or underwriters, if any, will be
named in the Prospectus Supplement relating to the particular Senior Notes
together with the members of the underwriting syndicate, if any. Unless
otherwise set forth in the Prospectus Supplement, the obligations of the
underwriters to purchase the particular Senior Notes will be subject to certain
conditions precedent and the underwriters will be obligated to purchase all such
Senior Notes if any are purchased.
Senior Notes may be sold directly by the Company or through agents
designated by the Company from time to time. The Prospectus Supplement will set
forth the name of any agent involved in the offer or sale of the Senior Notes in
respect of which the Prospectus Supplement is delivered and any commissions
payable by the Company to such agent. Unless otherwise indicated in the
Prospectus Supplement, any such agent will be acting on a best efforts basis for
the period of its appointment.
Any underwriters utilized may engage in stabilizing transactions and
syndicate covering transactions in accordance with Rule 104 under the Exchange
Act. Stabilizing transactions permit bids to purchase the underlying security so
long as the stabilizing bids do not exceed a specified maximum. Syndicate
covering transactions involve purchases of the Senior Notes in the open market
after the distribution has been completed in order to cover syndicate short
positions. Such stabilizing transactions and syndicate covering transactions may
cause the price of the Senior Notes to be higher than it would otherwise be in
the absence of such transactions.
Any underwriters, dealers or agents participating in the distribution of the
Senior Notes may be deemed to be underwriters and any discounts or commissions
received by them on the sale or resale of the Senior Notes may be deemed to be
underwriting discounts and commissions under the Securities Act. Agents, dealers
and underwriters may be entitled, under agreements entered into with the
Company, to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act, and to contribution with respect
to payments which the agents, dealers or underwriters may be required to make in
respect thereof. Agents, dealers and underwriters may engage in transactions
with or perform services for the Company in the ordinary course of business.
Unless otherwise specified in a Prospectus Supplement, the Senior Notes will
not be listed on a national securities exchange. No assurance can be given that
any broker-dealer will make a market in any series of Senior Notes, and, in any
event, no assurance can be given as to the liquidity of the trading market for
any of the Senior Notes. The Prospectus Supplement will state, if known, whether
or not any broker-dealer intends to make a market in the Senior Notes. If no
such determination has been made, the Prospectus Supplement will so state.
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LEGAL OPINIONS
The validity of the Senior Notes will be passed upon for the Company by
Steven R. Sullivan, Esq., Vice President, General Counsel and Secretary of the
Company. Certain legal matters will be passed upon for any underwriters,
dealers, purchasers or agents by Winthrop, Stimson, Putnam & Roberts, One
Battery Park Plaza, New York, New York 10004.
The statements as to matters of law or legal conclusions expressed under the
caption "Description of Senior Note Mortgage Bonds--Security" in this Prospectus
have been reviewed by Sorling, Northrup, Hanna, Cullen & Cochran, Ltd. and are
set forth herein in reliance upon the opinion of said firm and upon said firm's
authority as experts.
EXPERTS
The audited financial statements of the Company as of December 31, 1997 and
1996 and for each of the three years in the period ended December 31, 1997
included in the 1997 Form 10-K and incorporated by reference in this Prospectus
and elsewhere in the Registration Statement, have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto, and are incorporated by reference herein in reliance upon the
authority of said firm as experts in giving said report. On June 12, 1998 Ameren
appointed PricewaterhouseCoopers LLP as its auditors and for its subsidiaries,
including the Company, for the year 1998.
With respect to the unaudited financial information of the Company for the
three-month and twelve-month periods ended March 31, 1998 and 1997, the
three-month, six-month and twelve-month periods ended June 30, 1998 and 1997,
and the three-month, nine-month and twelve-month periods ended September 30,
1998 and 1997 incorporated by reference in this Prospectus,
PricewaterhouseCoopers LLP reported that they have applied limited procedures in
accordance with professional standards for a review of such information.
However, their separate reports dated April 24, July 23 and October 15, 1998
included in the Company's Quarterly Report on Form 10-Q, as amended, for the
quarter ended September 30, 1998 and incorporated by reference in this
Prospectus, state that they did not audit and they do not express an opinion on
that unaudited financial information. PricewaterhouseCoopers LLP has not carried
out any significant or additional audit tests beyond those which would have been
necessary if their reports had not been so incorporated by reference.
Accordingly, the degree of reliance on their reports on such information should
be restricted in light of the limited nature of the review procedures applied.
PricewaterhouseCoopers LLP is not subject to the liability provisions of Section
11 of the Securities Act for their reports on that unaudited financial
information because those reports are not "reports" or a "part" of the
Registration Statement prepared or certified by PricewaterhouseCoopers LLP
within the meaning of Sections 7 and 11 of the Securities Act.
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$75,000,000
Central Illinois Public Service Company
$15,000,000
Senior Notes, 5.375% Due 2008
$60,000,000
Senior Notes, 6.125% Due 2028
-----------------------------
PROSPECTUS SUPPLEMENT
December 16, 1998
-----------------------------
LEHMAN BROTHERS
