<PAGE>
SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
[X] Preliminary information statement
[_] Definitive information statement
ILLINOIS POWER COMPANY
...............................................................................
(Name of Registrant as Specified in Charter)
ILLINOIS POWER COMPANY
...............................................................................
(Name of Person(s) Filing the Information Statement)
Payment of filing fee (check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), or 14c-5(g).
[_] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
....................................................................
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:/1/
....................................................................
(4) Proposed maximum aggregate value of transaction:
....................................................................
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
...................................................
(2) Form, schedule or registration statement no.:
...................................................
(3) Filing party:
....................................................
(4) Date filed:
....................................................
- - ------------------
/1/ Set forth the amount on which the filing fee is calculated and
state how it was determined.
<PAGE>
SIDLEY & AUSTIN
One First National Plaza
Chicago, Illinois 60603
May 13, 1994
BY ELECTRONIC SUBMISSION
- - ------------------------
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Illinois Power Company
----------------------
Dear Sir or Madam:
On behalf of Illinois Power Company, an Illinois corporation (the
"Company"), transmitted herewith for filing is a preliminary Information
Statement relating to the Company's 1994 Annual Meeting of Shareholders. The fee
associated with this filing in the amount of $125 has been remitted by wire
transfer to the U.S. treasury designated lockbox depository at the Mellon Bank
in Pittsburgh, Pennsylvania.
One copy of a conforming paper format version of the Information
Statement, legended as required, is being submitted to the Securities and
Exchange Commission at the address indicated below in accordance with Item
901(d) of Regulation S-T. In addition, one conforming paper format version of
the performance graph required by Item 402(1) of Regulation S-K is being
submitted supplementally to the Company's Branch Chief in the Division of
Corporation Finance, in accordance with Item 304 of Regulation S-T.
We appreciate your attention to this filing. Please call the undersigned
at (312) 853-6095 if you have any questions.
Sincerely yours,
/s/ Gary J. Kocher
Gary J. Kocher
cc: OFICS Filer Support
SEC Operations Center
6432 General Green Way
Alexandria, Virginia 22312-2413
Mr. Charles C. Leber
SEC, Branch 8
450 W. Fifth Street
Washington, D.C. 20549
New York Stock Exchange
Chicago Stock Exchange
<PAGE>
LOGO
ILLINOIS POWER COMPANY
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF ILLINOIS POWER COMPANY:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Illinois
Power Company will be held on July 1, 1994, at 10:00 a.m., at its corporate
headquarters, 500 South 27th Street, Decatur, Illinois, 62525-1805, for the
following purposes:
(1) To elect the Board of Directors for the ensuing year.
(2) To consider and vote upon an amendment to the Company's Restated
Articles of Incorporation.
(3) To transact any other business which may properly come before the
meeting or any adjournment.
Shareholders of record at the close of business on June 7, 1994 will be
entitled to notice of and to vote at the Annual Meeting.
ONLY SHAREHOLDERS OF THE COMPANY ARE ENTITLED TO ATTEND THE ANNUAL MEETING.
SHAREHOLDERS WILL BE ADMITTED UPON VERIFICATION OF RECORD SHARE OWNERSHIP AT
THE ADMISSION DESK. SHAREHOLDERS WHO OWN SHARES THROUGH BANKS, BROKERAGE
FIRMS, NOMINEES OR OTHER ACCOUNT CUSTODIANS MUST PRESENT PROOF OF BENEFICIAL
SHARE OWNERSHIP (SUCH AS A BROKERAGE ACCOUNT STATEMENT) AT THE ADMISSION DESK.
By Order of the Board of Directors,
Leah Manning Stetzner, Vice
President, General Counsel and
Corporate Secretary
Decatur, Illinois
June 10, 1994
<PAGE>
ILLINOIS POWER COMPANY
INFORMATION STATEMENT
(PURSUANT TO SECTION 14(C) OF THE SECURITIES EXCHANGE ACT OF 1934)
JUNE 10, 1994
(DATE FIRST SENT OR GIVEN TO SECURITY HOLDERS)
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
This Information Statement is furnished in connection with the Annual Meeting
of Shareholders of Illinois Power Company (the "Company"). The Annual Meeting
will be held on July 1, 1994, at 10:00 a.m., at the Company's corporate
headquarters, 500 South 27th Street, Decatur, Illinois 62525-1805, for the
purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders.
Effective May 27, 1994 (the "Effective Date"), the Company became a
subsidiary of Illinova Corporation ("Illinova"). On the Effective Date, each
outstanding share of the Company's Common Stock was converted in a merger into
one share of Common Stock of Illinova. As a result, the holders of the
Company's Common Stock became the owners of Illinova Common Stock and Illinova
became the sole holder of Common Stock of the Company.
On June 7, 1994 (the "Record Date"), Illinova beneficially owned all of the
75,643,937 shares of the Company's Common Stock then outstanding and there were
6,420,300 shares of the Company's Preferred Stock then outstanding, none of
which were held by Illinova.
VOTING RIGHTS
Shareholders who are present at the Annual Meeting in person or by proxy will
be entitled to one vote for each share of the Company's Common and Preferred
Stock which they held of record at the close of business on the Record Date.
Management does not know of any matter which will be presented for
consideration at the Annual Meeting other than the matters described in the
accompanying Notice of Annual Meeting.
When voting for candidates nominated to serve as directors, all shareholders
will be entitled to 12 votes (the number of directors to be elected) for each
of their shares and may cast all of their votes for any one candidate whose
name has been placed in nomination prior to the voting or distribute their
votes among two or more such candidates in such proportions as they may
determine. In voting upon other matters presented for consideration at the
Annual Meeting, each shareholder will be entitled to one vote for each share of
Common or Preferred Stock then held of record at the close of business on the
Record Date.
ELECTION OF DIRECTORS
The Company's entire Board of Directors is elected at each Annual Meeting of
Shareholders. Directors hold office until the next Annual Meeting of
Shareholders and until their successors are elected and qualified. At the
Annual Meeting a vote will be taken on a proposal to elect the 12 directors
nominated by the Company's Board of Directors. The names and certain additional
information concerning each of the director nominees is set forth below. Each
of the director nominees is currently a director of Illinova and Illinois
Power. If any nominee should become unable to serve as a director, another
nominee will be selected by the current Board of Directors. Share ownership
reflected below represents shares of Common Stock of the Company which were
converted into a like number of shares of Common Stock of Illinova on the
Effective Date.
1
<PAGE>
<TABLE>
<CAPTION>
YEAR IN SHARES OF
WHICH FIRST COMMON STOCK
ELECTED A BENEFICIALLY
NAME OF DIRECTOR NOMINEE, AGE, BUSINESS EXPERIENCE DIRECTOR OF OWNED AS OF
AND OTHER INFORMATION THE COMPANY MAY 2, 1994
- - -------------------------------------------------- ----------- ------------
<S> <C> <C>
RICHARD R. BERRY, 62................................ 1988 2,147
Prior to retirement in February, 1990, Mr. Berry
was Executive Vice President and director of Olin
Corporation, Stamford, Connecticut, a diversified
manufacturer concentrated in chemicals, metals and
aerospace/defense products, since June, 1983.
(1)(2)(5)
LARRY D. HAAB, 56................................... 1986 9,403(6)
Chairman, President and Chief Executive Officer of
Illinova since December, 1993, and of the Company
since June, 1991, and an employee of the Company
since 1965. He is a director of First Decatur
Bancshares, Inc., The First National Bank of Deca-
tur and Firstech, Incorporated. (1)(4)(5)
DONALD E. LASATER, 68............................... 1981 2,713
Prior to retirement in April, 1989, Mr. Lasater was
Chairman of the Board and Chief Executive Officer
of Mercantile Bancorporation, Inc., St. Louis, Mis-
souri, a bank holding company, since 1970. He is a
director of Interco Incorporated, General American
Life Insurance Company and A.P. Green Industries,
Inc. (1)(2)(5)
DONALD S. PERKINS, 67............................... 1988 6,707
Prior to retirement in June, 1983, as Chairman of
the Executive Committee, Mr. Perkins was Chairman
of the Board and Chief Executive Officer of Jewel
Companies, Inc., Chicago, Illinois, a diversified
retailer, from 1970 to 1980. He is a director of
American Telephone & Telegraph Company ("AT&T"),
Aon Corporation, Cummins Engine Company, Inc., In-
land Steel Industries, Inc., KMart Corporation,
LaSalle Street Fund, Inc., The Putnam Funds,
Springs Industries, Inc., and Time Warner, Inc.
(3)(4)
ROBERT M. POWERS, 62................................ 1984 6,000(7)
Prior to retirement in December, 1988, Mr. Powers
was President and Chief Executive Officer of A. E.
Staley Manufacturing Company, Decatur, Illinois, a
processor of grain and oil seeds, since 1980. He is
Chairman of the Board of A. E. Staley Manufacturing
Company, and a director of Tate & Lyle, PLC.
(1)(3)(4)
WALTER D. SCOTT, 62................................. 1990 2,600
Professor of Management and Senior Austin Fellow,
J.L. Kellogg Graduate School of Management, North-
western University, Evanston, Illinois, since 1988.
Previously, Mr. Scott served as Chairman of
GrandMet USA, from 1984 to 1986, and as President
and Chief Executive Officer of IDS Financial Serv-
ices, from 1980 to 1984. Mr. Scott is a director of
Chicago Title and Trust Company, Chicago Title In-
surance Company and Intermatic Incorporated. (1)(3)
RONALD L. THOMPSON, 44.............................. 1991 1,757
Chairman and Chief Executive Officer of Midwest
Stamping and Manufacturing Co., Bowling Green,
Ohio, a manufacturer of automotive parts, since
1993. He was President and Chief Executive Officer
and a director of The GR Group, Inc., St. Louis,
Missouri (a diversified holding company with inter-
ests in manufacturing and service activities), from
1980 to 1993. (3)(4)
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
YEAR IN SHARES OF
WHICH FIRST COMMON STOCK
ELECTED A BENEFICIALLY
NAME OF DIRECTOR NOMINEE, AGE, BUSINESS DIRECTOR OF OWNED AS OF
EXPERIENCE AND OTHER INFORMATION THE COMPANY MAY 2, 1994
- - --------------------------------------- ----------- ------------
<S> <C> <C>
WALTER M. VANNOY, 66.............................. 1990 2,100
Vice Chairman, Figgie International, Inc. (a di-
versified operating company serving consumer, in-
dustrial, technical, and service markets world-
wide), since 1994, and President of Vannoy Asso-
ciates, Lynchburg, Virginia, a consulting compa-
ny, 1989-1994. He is a director of Figgie Inter-
national, Inc., and Chempower, Inc. (2)(5)
MARILOU von FERSTEL, 56........................... 1990 2,707
Executive Vice President and General Manager of
Ogilvy Adams & Rinehart, Inc., a public relations
firm in Chicago, since June, 1990. She had previ-
ously been Managing Director and Senior Vice
President of Hill and Knowlton, Chicago, Illi-
nois, a public relations consulting firm, from
May, 1981 to June, 1990. Ms. von Ferstel is a di-
rector of Walgreen Company. (2)(3)(4)
CHARLES W. WELLS, 59.............................. 1976 7,949(6)(8)
Executive Vice President of Illinois Power Com-
pany since 1976. Mr. Wells has been an employee
of the Company since 1956. He was elected a Vice
President in 1972. He is a director of First of
America--Decatur N.A. (1)(5)
JOHN D. ZEGLIS, 47................................ 1993 1,027
Senior Vice President--General Counsel and Gov-
ernment Affairs of AT&T, Basking Ridge, New Jer-
sey, a diversified communications company, since
1989. He had been Senior Vice President--General
Counsel from 1986 to 1989. He is a director of
the Helmerich & Payne Corporation in Tulsa, Okla-
homa. (3)(4)
VERNON K. ZIMMERMAN, 65........................... 1973 6,686(8)
Director of the Center for International Educa-
tion Research and Accounting, and Distinguished
Service Professor of Accountancy, University of
Illinois, Urbana, Illinois, since August 1985. He
is a director of First Busey Corporation, Busey
Corporation, and ICH Corporation. (1)(2)(5)
</TABLE>
- - --------
(1) Member of the Finance Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation and Nominating Committee.
(4) Member of the Corporate Strategy Committee.
(5) Member of the Nuclear Operations Committee.
(6) Includes 3,970 and 6,418 shares held in the accounts of Messrs. Haab and
Wells, respectively, under the Company's Incentive Savings Plan.
(7) Mr. Powers' wife owns 1,200 shares of Illinois Power Preferred Stock, as
to which he does not disclaim beneficial ownership.
(8) Includes 1,000 and 1,968 shares held by wives of Messrs. Wells and
Zimmerman, respectively.
3
<PAGE>
INFORMATION REGARDING THE BOARD OF DIRECTORS
The Board of Directors of the Company held seven Board meetings during 1993.
Other than Mr. Powers, all directors attended at least 75% of the aggregate
meetings of the Board and Committees of which they were members during 1993.
Mr. Powers attended fewer than 75% of such meetings due to illness.
The Board has five standing committees: the Audit Committee, the Finance
Committee, the Compensation and Nominating Committee, the Corporate Strategy
Committee and the Nuclear Operations Committee.
The duties of the standing committees are:
Audit Committee
(1) Review with the Chairman, President and Chief Executive Officer and the
independent accountants the scope and adequacy of the Company's system of
internal controls; (2) review the scope and results of the annual
examination performed by the independent accountants; (3) review the
activities of the Company's internal auditors; (4) report its findings to
the Board and provide a line of communication between the Board and both
the internal auditors and the independent accountants; and (5) recommend to
the Board the appointment of the independent accountants and approval of
the services performed by the independent accountants, considering their
independence with regard thereto. The Audit Committee met three times
during 1993.
Finance Committee
(1) Review management's capital and operations and maintenance expenditure
budgets, financial forecasts and financing program, and make
recommendations to the Board regarding the approval of such budgets and
plans; (2) review the Company's banking relationships, short-term borrowing
arrangements, dividend policies, arrangements with the transfer agent and
registrar, investment objectives and the performance of the Company's
pension funds, evaluate fund managers, and make recommendations to the
Board concerning such matters; and (3) act in an advisory capacity to
management, the Board of Directors, and the Chairman, President and Chief
Executive Officer on other financial matters as they may arise. The Finance
Committee met three times during 1993.
Compensation and Nominating Committee
(1) Review performance and recommend salaries plus other forms of
compensation of elected Company officers and the Board of Directors; (2)
review the Company's benefit plans for elected Company officers and make
recommendations to the Board regarding any changes deemed necessary; (3)
review with the Chairman, President and Chief Executive Officer any
organizational or other personnel matters; and (4) recommend to the Board
nominees to stand for election as director to fill vacancies in the Board
of Directors as they occur. The Compensation and Nominating Committee will
consider shareholders' recommendations for nominees for director made
pursuant to timely notice in writing addressed to the Chairman of the
Committee at the executive offices of the Company, together with a full
description of the qualifications and business and professional experience
of the proposed nominees and a statement of the nominees' willingness to
serve. To be timely, the notice shall be delivered to or mailed and
received at the executive offices of the Company not less than 90 nor more
than 120 days prior to the Annual Meeting. The Compensation and Nominating
Committee met three times during 1993.
4
<PAGE>
Corporate Strategy Committee
(1) Review corporate objectives of the Company, consider appropriate
structure changes to meet corporate objectives and make recommendations to
the Board concerning such matters; (2) review the Company's program for
long-term corporate activities and make recommendations to the Board
regarding the approval of such programs; and (3) act in an advisory
capacity to management and the Board of Directors on corporate activities.
The Corporate Strategy Committee met three times during 1993.
Nuclear Operations Committee
(1) Review the safety, reliability and quality of nuclear operations; (2)
review the effectiveness of the management of nuclear operations; (3)
review the strategic plan of nuclear operations; and (4) report its
findings to the Board. The Nuclear Operations Committee met three times
during 1993.
SHARE OWNERSHIP AND BOARD COMPENSATION
The Chief Executive Officer and four other most highly paid executive
officers beneficially owned the following shares of Common Stock at May 2, 1994
(which shares were converted into a like number of shares of Common Stock of
Illinova on the Effective Date):
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY
EXECUTIVE OFFICER OWNED
----------------- ------------
<S> <C>
Larry D. Haab................................................ 9,403
Charles W. Wells............................................. 7,949
Paul L. Lang, Senior Vice President.......................... 2,359
J. Stephen Perry, Senior Vice President(1)................... 1,156
Larry F. Altenbaumer, Senior Vice President
and Chief Financial Officer................................. 3,356
</TABLE>
- - --------
(1) Mr. Perry ceased to be an employee of the Company effective April 22, 1994.
Except as indicated above, no director or any executive officer owns any
other equity securities of Illinova or the Company. No director or executive
officer owns as much as one percent of the Common Stock. All executive officers
and directors of the Company as a group own 68,502 shares of Common Stock (less
than one percent). The nature of beneficial ownership for shares shown is sole
voting and investment power.
Directors of the Company who are not salaried officers ("Outside Directors")
receive a retainer fee of $18,000 per year. Outside Directors who also chair
Board committees receive an additional $2,000 per year retainer. Outside
Directors receive a grant of 600 shares of Common Stock on the date of each
Annual Shareholders Meeting, representing payment in lieu of attendance-based
fees for all Board and Committee meetings to be held during the subsequent one-
year period. Outside Directors elected to the Board between Annual Shareholders
Meetings are paid $850 for each Board and Committee meeting attended prior to
the first Annual Shareholders Meeting after their election to the Board. The
Company has a Retirement Plan for Outside Directors. Under this plan, each
Outside Director who has attained age 65 and has served on the Board for a
period of 60 or more consecutive months is eligible for annual retirement
benefits at the rate of the annual retainer fee in effect when the director
retires. These benefits, at the discretion of the Board, may be extended to
Outside Directors who have attained the age of 65 but not served on the Board
for the specified period. The benefits are payable for a number of months equal
to the number of months of Board service, subject to a maximum of 120 months,
and cease upon the death of the retired Outside Director.
Pursuant to the Company's Deferred Compensation Plan for Certain Directors,
any director who is not a salaried officer or employee of the Company may elect
to defer all or any portion of his or her fees until termination of his or her
services as a director. Such deferred dollar amounts are converted into stock
units
5
<PAGE>
representing shares of Common Stock with the value of each stock unit based
upon the last reported sales price of such stock at the end of each calendar
quarter. Additional credits are made to the participating director's account in
dollar amounts equal to the dividends paid on Common Stock which the director
would have received if the director had been the record owner of the shares
represented by stock units, and are converted into additional stock units. Upon
termination of a participating director's services as a director, payment of
his or her deferred fees is made in shares of Common Stock in an amount equal
to the aggregate number of stock units credited to his or her account. Such
payment is made in such number of annual installments as the Company may
determine beginning in the year following the year of termination.
EXECUTIVE COMPENSATION
The following table sets forth a summary of the compensation of the Chief
Executive Officer and the four other most highly compensated executive officers
of the Company for the years indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
----------------------------- ------------------------
AWARDS
------------------------
OTHER RESTRICTED SHARES ALL OTHER
NAME AND BONUS ANNUAL STOCK AWARDS UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY (A) COMPENSATION (B) OPTIONS (C)
- - ------------------ ---- -------- ------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Larry D. Haab.......... 1993 $437,500 $22,531 $13,199 $22,531 20,000 shs. $3,555
Chairman, President 1992 403,958 28,883 7,099 16,000 shs. 3,373
and Chief Executive
Officer 1991 364,375 22,044 N/A
Charles W. Wells....... 1993 $265,875 $12,629 $ 9,697 $12,629 6,500 shs. $5,341
Executive Vice
President 1992 252,500 16,160 7,034 6,000 shs. 5,129
1991 240,958 14,605 N/A
Paul L. Lang........... 1993 $205,625 $ 9,767 $ 7,508 $ 9,767 6,000 shs. $ 527
Senior Vice President 1992 188,667 13,490 4,472 5,000 shs. 536
1991 175,417 10,638 N/A
J. Stephen Perry....... 1993 $205,625 $10,590 $ 6,421 $10,590 6,000 shs. $ 316
Senior Vice President 1992 188,667 12,075 4,672 5,000 shs. 384
1991 175,417 10,638 N/A
Larry F. Altenbaumer... 1993 $187,750 $ 8,918 $ 7,093 $ 8,918 6,000 shs. $2,009
Senior Vice President 1992 166,500 10,656 3,588 5,000 shs. 1,867
and Chief Financial
Officer 1991 150,833 9,176 N/A
</TABLE>
- - --------
(a) The amounts shown in this column are the cash award portion of grants made
to these individuals under the Executive Incentive Compensation Plan,
including amounts deferred under the Executive Deferred Compensation Plan.
See Plan description in footnote (b) below.
(b) This table sets forth stock unit awards for 1993 under the Company's
Executive Incentive Compensation Plan. One-half of each year's award under
this plan is converted into stock units representing shares of Common Stock
based on the closing price of Common Stock on the last trading day of the
award year. The other one-half of the award is paid to the recipient in
cash in the following year and is included in the Summary Compensation
Table as Bonus paid in the award year. Stock units awarded in a given year,
together with cash representing the accumulated dividend equivalents on
those stock units, become fully vested after a three-year holding period.
Stock units are converted into cash and paid based on the closing price of
Common Stock on the first trading day of the distribution year.
Participants (or beneficiaries of deceased participants) whose employment
is terminated by retirement on or after age 55, disability or death receive
the present value of all unpaid awards on the date of such termination.
Participants whose employment is terminated for reasons other than
retirement, disability or death forfeit all unvested awards. In the event
of a termination of employment within two years after a change in control
of the Company (as defined in the Employee Retention Agreement described
below), without good cause or by any participant with good reason, all
awards of the participant become fully vested
6
<PAGE>
and payable. As of December 31, 1993, named executive officers were credited
with the following total aggregate number of unvested stock units under the
Executive Incentive Compensation Plan since its inception, valued on the
basis of the closing price of Common Stock on December 31, 1993: Mr. Haab,
3,374 units valued at $74,650; Mr. Wells, 1,992 units valued at $44,083; Mr.
Lang, 1,557 units valued at $34,454; Mr. Perry, 1,528 units valued at
$33,813; Mr. Altenbaumer, 1,319 units valued at $29,200. Although stock
units have been rounded, valuation is based on total stock units, including
partial shares.
(c) The amounts shown in this column are Company contributions under the
Incentive Savings Plan (including the market value of shares of Common
Stock at the time of allocation).
The following tables summarize grants during 1993 of stock options under the
Company's 1992 Long Term Incentive Compensation Plan and awards outstanding at
year end for the individuals named in the Summary Compensation Table. No
options were exercisable or exercised during 1993.
OPTION GRANTS IN 1993
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------
NUMBER OF
SECURITIES % OF TOTAL EXERCISE GRANT
UNDERLYING OPTIONS GRANTED OR BASE DATE
OPTIONS TO EMPLOYEES PRICE PER EXPIRATION PRESENT
NAME GRANTED(A) IN 1993 SHARE DATE VALUE(B)
- - ---- ---------- --------------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
Larry D. Haab......... 20,000 27% $24.25 6/9/2003 $135,200
Charles W. Wells...... 6,500 9 24.25 6/9/2003 43,940
Paul L. Lang.......... 6,000 8 24.25 6/9/2003 40,560
J. Stephen Perry...... 6,000 8 24.25 6/9/2003 40,560
Larry F. Altenbaumer.. 6,000 8 24.25 6/9/2003 40,560
</TABLE>
- - --------
(a) Each option becomes exercisable on March 31, 1997. In addition to the
specified expiration date, the grant expires on the first anniversary of
the recipient's death and/or the 90th day following retirement, and is not
exercisable in the event recipient's employment terminates. In the event of
a public tender for all or a portion of the stock, or if a proposal to
merge or consolidate the Company with another company is submitted to the
shareholders for a vote, the Compensation and Nominating Committee may
declare the option immediately exercisable.
(b) The Grant Date Present Value has been calculated using the Black-Scholes
option pricing model. Disclosure of the Grant Date Present Value, using the
Black-Scholes model or potential realizable value assuming 5% and 10%
annualized growth rates, is mandated; however, the Company does not
necessarily view the Black-Scholes pricing methodology, or any other
present methodology, as a valid or accurate means of valuing stock option
grants. The Company elected to use the standard Black-Scholes model, which
uses the following factors: fair market value of share at grant; option
exercise price; term of the option; current yield of the stock; risk-free
interest rate; volatility of the stock. The fair market value of the stock
on June 9, 1993 was $24.25; the exercise price of the options is $24.25;
and the term of the option is ten years. The annual dividend rate on the
Company's Common Stock on June 9, 1993 was $0.80 for a yield of 3.3
percent. The risk-free interest rate used was 5.96 percent, based on the
ten-year U.S. Treasury bond yield on May 14, 1993. The volatility of the
stock used was .245. This figure is based on the absolute volatility
(annualized standard deviation of the logarithms of the prior stock
performance) for the 36-month period ending March, 1993. This is a
relatively high volatility for an electric utility due, in part, to the
Company's nuclear plant construction cost recovery disallowances, related
write-offs, and temporary suspension of Common Stock dividend payments
during this period. The value thus determined, $6.76 per share, was not
discounted.
7
<PAGE>
AGGREGATED OPTION AND FISCAL YEAR-END OPTION VALUE TABLE
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
IN-THE-MONEY
NUMBER OF OPTIONS AT
UNEXERCISED 1993 YEAR-END
OPTIONS AT EXERCISABLE/
1993 YEAR-END UNEXERCISABLE
EXERCISABLE/ (NONE-IN-THE-
NAME UNEXERCISABLE MONEY)
---- ------------------ -------------
<S> <C> <C>
Larry D. Haab............................ 0 shs./36,000 shs. 0/0
Charles W. Wells......................... 0 shs./12,500 shs. 0/0
Paul L. Lang............................. 0 shs./11,000 shs. 0/0
J. Stephen Perry......................... 0 shs./11,000 shs. 0/0
Larry F. Altenbaumer..................... 0 shs./11,000 shs. 0/0
</TABLE>
PENSION BENEFITS
The Company maintains a Retirement Income Plan for Salaried Employees (the
"Plan") providing pension benefits for all eligible salaried employees of the
Company. In addition to the Plan, the Company also maintains a nonqualified
Supplemental Retirement Income Plan for Salaried Employees of Illinois Power
Company (the "Supplemental Plan") that covers all elected officers eligible to
participate in the Plan and provides for payments from general funds of the
Company of any monthly retirement income not payable under the Plan because of
benefit limits imposed by law or because of certain Plan rules limiting the
amount of credited service accrued by a participant.
The following table shows the estimated annual pension benefits on a straight
life annuity basis payable upon retirement based on specified annual average
earnings and years of credited service classifications, assuming continuation
of the Plan and Supplemental Plan and employment until age 65. This table does
not show, but any actual pension benefit payments would be subject to, the
Social Security offset.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL BENEFITS (ROUNDED)
ANNUAL --------------------------------------------
AVERAGE 15 YRS. 20 YRS. 25 YRS. 30 YRS. 35 YRS.
EARNINGS SERVICE SERVICE SERVICE SERVICE SERVICE
- - -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000.......................... $ 37,500 $ 50,000 $ 62,500 $ 75,000 $ 87,500
150,000.......................... 45,000 60,000 75,000 90,000 105,000
175,000.......................... 52,500 70,000 87,500 105,000 122,500
200,000.......................... 60,000 80,000 100,000 120,000 140,000
250,000.......................... 75,000 100,000 125,000 150,000 175,000
300,000.......................... 90,000 120,000 150,000 180,000 210,000
350,000.......................... 105,000 140,000 175,000 210,000 245,000
400,000.......................... 120,000 160,000 200,000 240,000 280,000
450,000.......................... 135,000 180,000 225,000 270,000 315,000
500,000.......................... 150,000 200,000 250,000 300,000 350,000
550,000.......................... 165,000 220,000 275,000 330,000 385,000
600,000.......................... 180,000 240,000 300,000 360,000 420,000
</TABLE>
The earnings used in determining pension benefits under the Plan are the
participants' regular base compensation, as set forth under salaries in the
compensation table.
At December 31, 1993, for purposes of both the Plan and the Supplemental
Plan, Messrs. Haab, Wells, Altenbaumer, Lang and Perry had completed 28, 30,
21, 7 and 9 years of credited service, respectively.
8
<PAGE>
EMPLOYEE RETENTION AGREEMENTS
The Company has entered into Employee Retention Agreements with each of its
executive officers. Under each of these agreements, the officer would be
entitled to receive a lump sum cash payment if his or her employment were
terminated by the Company without good cause or voluntarily by the officer for
good reason within two years following a change in control of the Company (as
defined in the Agreement). The amount of the lump sum payment would be equal to
(1) 36 months' salary at the greater of the officer's salary rate in effect on
the date the change in control occurred or the salary rate in effect on the
date the officer's employment with the Company terminated; plus (2) three times
the largest bonus earned by the officer during the three calendar years
preceding termination of employment. Under the agreement, the officer would
continue, after any such termination of employment, to participate in and
receive benefits under other benefit plans of the Company. Such coverage would
continue for 36 months following termination of employment, or, if earlier,
until the officer reached age 65 or was employed by another employer; provided
that, if the officer was 50 years of age or older at the time of such
termination, then coverage under health, life insurance and similar welfare
plans would continue until the officer became 55 years of age, at which time he
or she would be eligible to receive the type of coverage extended to employees
of the Company who elect early retirement.
COMPENSATION AND NOMINATING COMMITTEE REPORT
ON OFFICER COMPENSATION
The five member Compensation and Nominating Committee of the Board of
Directors is composed entirely of independent, non-employee directors. The
Committee's role includes a review of the performance of the elected officers
and the establishment of specific officer salaries subject to Board approval.
The Committee establishes performance goals for the officers under the
Executive Incentive Compensation Plan (the "EIC Plan"), approves payments made
pursuant to the EIC Plan and recommends grants under the Long-Term Incentive
Plan (the "LTIC Plan") approved by the shareholders in 1992. The Committee also
reviews other forms of compensation and benefits making recommendations to the
Board on changes whenever appropriate. The Committee carries out these
responsibilities with assistance from an executive compensation consulting firm
and with input from the Chief Executive Officer and management as it deems
appropriate.
OFFICER COMPENSATION PHILOSOPHY
The Company's compensation philosophy reflects a commitment to compensate
officers competitively with other companies in the electric and gas utility
industry while rewarding executives for achieving levels of operational
excellence and financial returns consistent with continuous improvement in
customer satisfaction and shareholder value. The Company's compensation policy
is to provide a total compensation opportunity equal to a peer group of
comparable electric utility companies. One-third of the companies in the
compensation group are included in the S&P utilities index which is used to
relate the Company's shareholder value in the following performance graphs. The
S&P index covers the utility industry broadly including electric, gas, and
telecommunications utilities. After careful consideration, the Committee has
decided to maintain a separate peer group limited to electric or combination
electric and gas companies for compensation purposes.
The compensation program for officers consists of base salary, annual
incentive and long-term incentive components. The combination of these three
elements balances short- and long-term business performance goals and aligns
officer financial rewards with those of the Company's shareholders. The
compensation program is structured so that, depending on the salary level,
between 25 and 35 percent of an officer's total compensation opportunity is
composed of incentive compensation.
9
<PAGE>
Effective for compensation earned in 1994, Section 182(m) of the Internal
Revenue Code enacted as part of the Omnibus Budget Reconciliation Act of 1993
places limitations on the deductions a company can claim for compensation
earned by each of its executive officers. The Committee is committed to taking
all reasonable steps to ensure that the compensation paid to its officers is
completely deductible by the Company consistent with the best interests of the
Company and its shareholders.
BASE SALARY PLAN
The Committee determines base salary ranges for executive officers based upon
competitive pay practices. Officer salaries correspond to approximately the
average of the companies in the compensation peer group. Individual increases
were based on several factors including the officer's performance during the
year and the relationship of the officer's salary to the market salary level
for the position.
EXECUTIVE INCENTIVE COMPENSATION PLAN
The Board of Directors established the EIC Plan for the Company's officers,
effective in 1992. Annual incentive awards are earned based on the achievement
of specific annual financial and operational goals by the officer group as a
whole and consideration of the officer's individual contribution. If payment is
earned under the EIC Plan, one-half of the bonus is payable in cash during the
year following the award year and one-half is credited to the participant in
the form of Common Stock units, the number of which is determined by dividing
half of the earned bonus amount by the closing price of the Common Stock on the
last trading day of the award year. The officer's interest in the stock units
vests at the end of the three-year period which begins the year after the award
year. The officer receives this award in cash equal to (1) the closing stock
price on the first trading day of the distribution year times the number of
units held plus (2) dividend equivalents that would have been received if the
stock had actually been issued.
For 1993, awards under the EIC Plan are based on achievement of the
performance areas: earnings per share, customer satisfaction, employee
teamwork, cost management, and operating effectiveness. Based on an assessment
of performance relative to the standard set for each goal, each officer is
eligible for the same percentage of base salary. However, 15 percent of the
awarded amount is based on a determination of the individual officer's
performance during the year.
Awards shown in the Summary Compensation Table paid in February 1994 for
performance during 1993, were based on the following results. Earnings per
share were not high enough to exceed the threshold for award, although earnings
improved from the previous year. Customer Satisfaction was at the threshold
target level. Employee Teamwork did not result in an award. Cost Management and
Operating Effectiveness (as measured by power plant equivalent availability)
were better than the threshold level required for award.
LONG-TERM INCENTIVE PLAN
In 1992, the Board of Directors approved and the Company's shareholders
ratified the LTIC Plan. The initial grant of stock options was made in that
year. Awards under the LTIC Plan are made to individual officers based on their
contribution to corporate performance as determined by this Committee. The
Committee may grant awards in the form of stock options, stock appreciation
rights, or restricted stock grants. The stock option grants for the officers
named in the Summary Compensation Table were based on the Company's philosophy
of providing a total compensation opportunity consistent with the practices and
levels of the compensation peer group. The shares granted to the officers for
1993 represent a long-term incentive award based on Company and individual
performance as evaluated by the Chairman and reviewed by the Committee.
CEO COMPENSATION
Larry Haab became Chairman and Chief Executive Officer ("CEO") of the Company
on June 12, 1991. The Company based Mr. Haab's 1993 compensation on the
policies and plans described above.
10
<PAGE>
In setting the salary and incentive elements of Mr. Haab's compensation, the
Committee made an overall assessment of Mr. Haab's leadership in achieving the
Company's long-term strategic goals. Specific achievements considered were the
results of his accomplishments of personal goals established mutually by him
and the Board of Directors for 1993. The Committee determined that most goals
were achieved and that his overall performance was leading the Company to
achieving its strategic objectives.
The 1993 EIC Plan award for the Chief Executive Officer was calculated
consistent with the determination of awards for all other officers. Under the
terms of the plan, one-half of the award was paid in cash and one-half was
converted to 1018.3502 stock units which vest over a three-year period as
described above.
The 20,000 option shares granted to the CEO reflect the Committee's
recognition of his work in directing the Company toward its long-term
objectives of outstanding customer satisfaction and sustained growth in
shareholder return.
COMPENSATION AND NOMINATING
COMMITTEE
Donald S. Perkins, Chairman
Robert M. Powers
Walter D. Scott
Ronald L. Thompson
Marilou von Ferstel
John D. Zeglis
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Except as described below, no executive officer of the Company served as a
(i) member of the compensation committee (or other Board committee serving
similar functions, or in the absence of any such committee, the entire Board of
Directors) of another entity, one of whose executive officers served on the
Compensation and Nominating Committee or Board of Directors of the Company, or
(ii) director of another entity, one of whose executive officers served on the
Compensation and Nominating Committee of the Company. Donald S. Perkins, a
member of the Board of Directors and Compensation and Nominating Committee of
the Company, is a member of the Board of Directors of AT&T. John D. Zeglis, a
member of the Board of Directors and Compensation and Nominating Committee of
the Company, is an executive officer of AT&T.
11
<PAGE>
STOCK PERFORMANCE GRAPHS
The following performance graphs compare the cumulative total shareholder
return on the Company's Common Stock to the cumulative total return on the S&P
500 Index, S&P MidCap Index and S&P Utilities Index from (i) January 1, 1988
through December 31, 1993 and (ii) January 1, 1990 through December 31, 1993.
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG
ILLINOIS POWER, S&P 500 INDEX, S&P MIDCAP 400 AND S&P UTILITIES
<CAPTION>
Measurement Period ILLINOIS S&P S&P S&P
(Fiscal Year Covered) POWER 500 INDEX MIDCAP 400 UTILITIES
- - ------------------- -------- --------- ---------- ---------
<S> <C> <C> <C>
Measurement Pt-
/ /88 $100 $100 $100 $100
FYE / /89 $103 $132 $136 $147
FYE / /90 $ 89 $128 $129 $144
FYE / /91 $130 $166 $193 $165
FYE / /92 $127 $179 $216 $178
FYE / /93 $131 $197 $246 $204
</TABLE>
Assumes $100 invested on January 1, 1988 in the Company's Common Stock, S&P
500 Index, S&P MidCap 400 Index, and S&P Utilities Index.
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF THREE YEAR CUMULATIVE TOTAL RETURN AMONG
ILLINOIS POWER, S&P 500 INDEX, S&P MIDCAP 400 AND S&P UTILITIES
<CAPTION>
Measurement Period ILLINOIS S&P S&P S&P
(Fiscal Year Covered) POWER 500 INDEX MIDCAP 400 UTILITIES
- - ------------------- -------- --------- ---------- ---------
<S> <C> <C> <C>
Measurement Pt-
/ /90 $100 $100 $100 $100
FYE / /91 $146 $130 $150 $115
FYE / /92 $142 $140 $168 $124
FYE / /93 $147 $155 $191 $142
</TABLE>
Assumes $100 invested on January 1, 1990 in the Company's Common Stock, S&P
500 Index, S&P MidCap 400 Index, and S&P Utilities Index.
12
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Illinova is the sole holder of the Company's Common Stock, and its address is
500 South 27th Street, Decatur, Illinois 62525-1805. The following are the only
holders known by the Company to be the beneficial owners of more than five
percent of any other class of the Company's outstanding stock.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- - -------------- ------------------- ---------- --------
<S> <C> <C> <C>
Serial Preferred American Express Company 303,245 shares(1) 9.7%
Stock, Without American Express Tower
par value World Financial Center
New York, NY 10285
Serial Preferred American General 242,000 shares(2) 7.4%
Stock, $50 par Corporation and
value Subsidiaries
2929 Allen Parkway
Houston, TX 77019
</TABLE>
- - --------
(1) According to its Form 4 filing, American Express Company and its
Subsidiaries beneficially own 303,245 shares of Serial Preferred Stock,
without par value, as of February 18, 1994, as to which beneficial
ownership is disclaimed, with sole power to vote and dispose of all shares.
(2) According to its Schedule 13G filing dated February 11, 1994, American
General Corporation and Subsidiaries beneficially own 242,000 shares of
Serial Preferred Stock, $50 par value (consisting of 211,100 shares of
8.00% Cumulative Preferred Stock, and 30,900 shares of 8.24% Cumulative
Preferred Stock), and have shared power to vote or direct voting and shared
power to dispose or direct disposition of all of such shares.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires executive officers and directors, and persons who beneficially own
more than ten percent (10%) of the Company's equity securities registered under
the Exchange Act to file initial reports of ownership and reports of changes in
ownership with the Securities and Exchange Commission ("SEC"). Executive
officers, directors and greater than ten percent (10%) beneficial owners are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the Company
and written representations from the executive officers and directors, the
Company believes that all Section 16(a) filing requirements applicable to its
executive officers and directors were complied with during 1993, except that
American Express Company was late in filing a Statement of Changes in
Beneficial Ownership relating to a redemption by the Company of certain shares
of Serial Preferred Stock without par value.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1993, there were no transactions which are required to be disclosed
pursuant to Item 404 of Regulation S-K of the SEC.
13
<PAGE>
AMENDMENT TO RESTATED ARTICLES OF INCORPORATION
At the Annual Meeting a vote will be taken on a proposal to amend the
Company's Restated Articles of Incorporation by adding Article VIII (i) to
limit the personal liability of the Company's directors to the Company or its
shareholders for monetary damages arising from breach of fiduciary duty and
(ii) to indemnify the Company's directors, officers, agents and other persons
who provide services to Company, to the full extent permitted by the Illinois
Business Corporation Act. The proposed amendment to limit the personal
liability of the Company's directors is authorized by a change to the Illinois
Business Corporation Act that became effective on January 1, 1994. The proposed
amendment will assist the Company in attracting and retaining qualified
individuals to serve the Company.
Approval of the proposed amendment requires the affirmative vote of the
holders of at least two-thirds of all outstanding shares of Preferred Stock and
Common Stock, voting together as a single class. Any subsequent change or
repeal of the amendment would currently require the same vote.
BACKGROUND
Until the amendment of the Illinois Business Corporation Act in July 1993,
Illinois was one of the few states that had not taken action to protect
corporate directors who acted in good faith but were nevertheless threatened
with substantial liability from negligence claims. As a result of the change in
the law, an Illinois corporation is now able to provide its directors with
liability protection similar to that available from companies incorporated in
the vast majority of other states, including Delaware. Liability is not limited
under Illinois law if the acts or omissions of directors are in bad faith,
involve intentional wrongdoing, violate certain statutory provisions, or result
in profit or other advantage to which they are not legally entitled. Similarly,
adoption of the proposed amendment would not limit a director's duty to comply
with federal securities laws or affect his or her liability for a violation
thereof. However, the proposed amendment could, under certain circumstances,
eliminate a shareholder's cause of action against a director for monetary
damages for breach of his or her fiduciary duty including grossly negligent
business decisions relating to attempts to change control of the Company.
The directors of the Company may have a conflict of interest, at the
potential expense of shareholders, in the adoption of the proposed amendment.
The management of the Company has no knowledge of any pending or threatened
proceedings against any director to which the proposed amendment would apply.
The Company's By-laws currently provide for indemnification of Company
directors, officers, agents and other persons who serve the Company to the full
extent permitted by the Illinois Business Corporation Act, and the proposed
amendment would add such a provision to the Company's Restated Articles of
Incorporation.
The Company currently maintains liability insurance policies which indemnify
its directors and officers and the directors and officers of subsidiaries of
the Company against loss arising from claims by reason of their legal liability
for acts as such directors or officers, subject to limitations and conditions
as set forth in the policies. Among other limitations, the primary policy
states that no coverage is provided where payment would be contrary to
applicable laws.
TEXT OF THE PROPOSED AMENDMENT
The text of Article VIII proposed to be added to the Company's Restated
Articles of Incorporation is as follows:
(a) A director of the Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of
the director's duty of loyalty to the Corporation or its shareholders, (ii)
for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law, (iii) under Section 8.65 of the
Business Corporation Act of the State of Illinois, or (iv) for any
transaction from which the director derived an improper personal benefit.
If the Business Corporation Act of the State of Illinois is amended to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the full extent permitted by the Business
Corporation Act of the State of Illinois, as so amended. Any repeal or
14
<PAGE>
modification of this paragraph (a) by the shareholders of the Corporation
shall not adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification.
(b) Each person who is or was or had agreed to become a director or
officer of the Corporation, and each person who is or was serving or who
had agreed to serve at the request of the Board of Directors or an officer
of the Corporation as an employee or agent of the Corporation or as a
director, officer, employee, or agent, trustee or fiduciary of another
corporation, partnership, joint venture, trust or other enterprise
(including the heirs, executors, administrators or estate of such person),
shall be indemnified by the Corporation to the full extent permitted by the
Business Corporation Act of the State of Illinois or any other applicable
laws as presently or hereafter in effect. Without limiting the generality
of the foregoing, the Corporation may enter into one or more agreements
with any person which provide for indemnification greater or different than
that provided in this paragraph (b). Any repeal or modification of this
paragraph (b) shall not adversely affect any right or protection existing
hereunder immediately prior to such repeal or modification.
REASONS FOR THE PROPOSED AMENDMENT
Limitation of Director Liability. Directors of Illinois corporations are
required, under Illinois law, to perform their duties in good faith and with
that degree of care that an ordinarily prudent person in a like position would
use under similar circumstances. A director may rely upon information, opinions
and reports prepared by certain officers or employees, professional advisors,
or committees of the Board. Decisions made on that basis are protected by the
"business judgment rule" and should not be questioned by a court in the event
of a lawsuit challenging such decisions. However, the expense of defending such
lawsuits and the inevitable uncertainties of applying the business judgement
rule to particular facts and circumstances mean, as a practical matter, that
directors are not relieved of the threat of monetary damage awards. The Board
of Directors of the Company, therefore, believes that the proposed amendment
should be adopted in order to ensure that the Company will continue to be able
to attract and retain competent, qualified and talented persons to serve as its
directors.
Indemnification. Although the Company's By-Laws currently provide for the
indemnification of its directors, officers, agents and other persons who serve
the Company, such By-Laws could be changed unilaterally and without notice by
the Company's Board of Directors. The proposed amendment would add such
provisions to the Company's Restated Articles of Incorporation which can only
be changed after action of the Company's shareholders after notice.
Indemnification provisions in the Company's Restated Articles of Incorporation
are thus less likely to be changed than similar provisions in its By-laws, and
the enhanced stability, predictability and security which result from including
such provisions in the Company's Restated Articles of Incorporation are
expected to enhance the ability of the Company to attract and retain qualified
persons to serve it.
EFFECT OF THE PROPOSED AMENDMENT
Limitation of Director Liability. The proposed amendment would protect the
Company's directors against personal liability to the Company or its
shareholders for any breach of duty unless a judgment or other final
adjudication adverse to them establishes (i) a breach of duty of loyalty to the
Company, (ii) acts or omissions in bad faith or involving intentional
misconduct or a knowing violation of the law, (iii) acts violating the
prohibitions contained in Section 8.65 of the Illinois Business Corporation Act
against certain improper distributions of assets, or (iv) an improper personal
benefit to a director to which he or she was not legally entitled.
The amendment as proposed would not reduce the fiduciary duty of a director;
it merely limits monetary damage awards to the Company and its shareholders
arising from certain breaches of the duty. It does not affect the availability
of equitable remedies, such as the right to enjoin or rescind a transaction,
based upon a director's breach of fiduciary duty. The amendment also does not
affect a director's liability for acts taken or omitted prior to the time it
becomes effective (after shareholder approval and upon filing with the Illinois
Secretary of State). The limitation of liability afforded by the proposed
amendment affects only actions brought by the Company or its shareholders, and
does not preclude or limit recovery of damages by third parties.
15
<PAGE>
Indemnification. The proposed amendment would not change the rights of the
Company's directors, officers, agents and other persons who serve the Company
to be indemnified by it to the full extent permitted by the Illinois Business
Corporation Act, but would give them such rights under the Company's Restated
Articles of Incorporation as well as under the its By-Laws.
INDEPENDENT AUDITORS
The Board of Directors of the Company has selected Price Waterhouse as
independent auditors for the Company for 1994. A representative of Price
Waterhouse will not be present at the Annual Meeting.
ANNUAL REPORTS AND OTHER MATTERS
The Company's 1993 Annual Report to Shareholders was mailed to shareholders
commencing on March 11, 1994. Copies of the Company's Annual Report on Form 10-
K will be provided to shareholders, upon written request to Investor Relations,
F-10, Illinois Power Company, 500 South 27th Street, Decatur, Illinois 62525-
1805.
Any proposal by a stockholder to be presented at the next Annual Meeting must
be received at the Company's executive offices not later than December 14,
1994.
16
