<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549-1004
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended December 31, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Registrants, State of
Incorporation, Address
of Principal Executive
Commission Offices and Telephone I.R.S. Employer
File Number Number Identification No.
----------- -------------------------- ------------------
1-11327 ILLINOVA CORPORATION 37-1319890
(an Illinois Corporation)
500 S. 27th Street
Decatur, IL 62525-1805
(217) 424-6600
1-3004 ILLINOIS POWER COMPANY 37-0344645
(an Illinois Corporation)
500 S. 27th Street
Decatur, IL 62525-1805
(217) 424-6600
Securities registered pursuant to Section 12(b) of the Act:
Each of the following securities registered pursuant to
Section 12(b) of the Act are listed on the New York Stock
Exchange.
Title of each class Registrant
------------------- ----------
Common Stock (a) Illinova Corporation
--------------------------------------
Preferred stock, cumulative, Illinois Power Company
$50 par value
4.08% Series 4.26% Series 4.70% Series 8.00% Series
4.20% Series 4.42% Series 7.56% Series 8.24% Series
Preferred stock, cumulative,
no par value
Adjustable Rate Series A Adjustable Rate Series B
Preferred securities of subsidiary
(Illinois Power Capital, L.P.)
9.45% Series
First mortgage bonds
6 1/2% Series due 1999 8 3/4% Series due 2021
7.95% Series due 2004
New mortgage bonds
6 1/8% Series due 2000 6 3/4% Series due 2005
5 5/8% Series due 2000 8% Series due 2023
6 1/2% Series due 2003 7 1/2% Series due 2025
(a) Illinova Common Stock is also listed on the Chicago
Stock Exchange.
Indicate by check mark whether the registrants (1) have
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2)
have been subject to such filing requirements for the past
90 days.
Illinova Corporation Yes X No
Illinois Power Company Yes X No
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of
registrants' knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
Illinova Corporation [X]
Illinois Power Company [X]
The aggregate market value of the voting common stock
held by non-affiliates of Illinova Corporation at February
28, 1995 was $1.8 billion. Illinova Corporation is the sole
holder of the common stock of Illinois Power Company. The
aggregate market value of the voting preferred stock held by
non-affiliates of Illinois Power Company at February 28,
1995, was $301 million.
The number of shares of Illinova Corporation Common
Stock, without par value, outstanding on February 28, 1995
was 75,643,937.
Documents Incorporated by Reference
1. Portions of the 1994 Annual Report to Shareholders in the
appendix to the Illinova Corporation Proxy Statement.
(Parts I, II and IV of Form 10-K.)
2. Portions of the 1994 Annual Report to Shareholders in
the appendix to the Illinois Power Company Information
Statement.
(Parts I, II and IV of Form 10-K)
<PAGE>
ILLINOVA CORPORATION
ILLINOIS POWER COMPANY
FORM 10-K
This combined Form 10-K is separately filed by Illinova
Corporation and Illinois Power Company. Prior to the filing of
the combined 10-Q for the quarter ended June 30, 1994, Illinova
Corporation was not a reporting company for purposes of the
Securities Exchange Act of 1934 and Illinois Power Company filed
its own separate reports on Form 10-K. Information contained
herein relating to Illinois Power Company is filed by Illinova
Corporation and separately by Illinois Power Company on its own
behalf. Illinois Power Company makes no representation as to
information relating to Illinova Corporation or its subsidiaries,
except as it may relate to Illinois Power Company.
For the Fiscal Year Ended December 31, 1994
TABLE OF CONTENTS
Part I Page
Item 1. Business 6
General 6
Competition 7
Early Retirement 8
Selected Data 9
Electric Business 10
Power Coordination Agreement
With Soyland 11
Fuel Supply 11
Construction Program 16
Clinton Power Station 17
General 17
Rate and Regulatory Matters 18
Decommissioning Costs 19
Accounting Matters 20
Dividends 20
Gas Business 20
Gas Supply 22
Environmental Matters 23
Air Quality 23
Clean Air Act 24
Manufactured-Gas Plant(MGP) Sites 25
Water Quality 26
Other Issues 27
Electric and Magnetic Fields 27
Environmental Expenditures 28
Research and Development 28
Regulation 28
Executive Officers of the Registrants 29
Operating Statistics 31
Item 2. Properties 31
Item 3. Legal Proceedings 31
Fuel and Purchased Gas Adjustment
Clauses 31
Environmental 32
Item 4. Submission of Matters to a Vote of
Security Holders 32
Part II
Item 5. Market for Registrants' Common Equity
and Related Stockholder Matters 33
Item 6. Selected Financial Data 33
Item 7. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 33
Item 8. Financial Statements and Supplementary
Data 33
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 34
Part III
Item 10. Directors and Executive Officers of
the Registrants 35
Item 11. Executive Compensation 35
Item 12. Security Ownership of Certain
Beneficial Owners and Management 35
Item 13. Certain Relationships and Related
Transactions 35
Part IV
Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K 36
Signatures 38-39
Exhibit Index 40
<PAGE>
PART I
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ITEM 1. Business
-------
General
-------
Illinois Power Company (IP) was incorporated under the laws
of the State of Illinois on May 25, 1923.
On May 27, 1994, Illinova Corporation (Illinova), a holding
company, was officially formed with the filing of documents with
the Illinois Secretary of State. Illinova became the parent of IP
through a merger pursuant to a share-for-share conversion of IP
common stock into Illinova common stock. On June 8, 1994,
Illinova Generating Company (IGC) (formerly IP Group, Inc.),
originally a subsidiary of IP, was transferred as a dividend in
the amount of $9.2 million from IP to Illinova, establishing IGC
as a wholly owned subsidiary of Illinova. IP, the primary
business and subsidiary of Illinova, is engaged in the
generation, transmission, distribution and sale of electric
energy and the distribution, transportation and sale of natural
gas in the State of Illinois.
IGC is Illinova's wholly owned independent power subsidiary
which invests in energy supply projects throughout the world and
competes in the independent power market. In 1993, IGC invested
in a co-generation project in Teesside, England. During 1994, IGC
became an equity partner with Tenaska, Inc., in four natural gas-
fired generation plants, two of which are in operation and two of
which are under construction. Tenaska, Inc. is an Omaha, Nebraska-
based developer of independent power projects throughout the U.S.
In August 1994, IGC purchased 50 percent of the North American
Energy Services Company (NAES). NAES supplies a broad range of
operations, maintenance and support services to the worldwide
independent power generation industry and will operate the
Tenaska generation plants in which IGC purchased an equity
interest. In November 1994, IGC became an equity partner in an
operating diesel engine-powered generating plant in Puerto
Cortez, Honduras.
At December 31, 1994, Illinova's net investment in IGC was
$28.8 million.
IP provided approximately $20 million in funds to Illinova
for operations and investments during 1994. Illinova is paying IP
interest on these funds at a rate equal to that which Illinova
would have paid had it used a currently outstanding line of
credit.
Illinova Power Marketing, Inc. (IPM) is a wholly owned
subsidiary of Illinova formed in July 1994 as a Delaware
corporation. IPM plans to become active in the business of
brokering and marketing electric power and gas to various
customers. On July 20, 1994, IPM filed a petition with the
Federal Energy Regulatory Commission (FERC) seeking approval to
buy electricity from various producers not affiliated with IP and
to sell electricity at market rates to such wholesale customers
as utilities, electric cooperatives and municipalities. IPM
eventually intends to sell electricity directly to industrial and
commercial customers. Subsequent to the IPM filing, the FERC
issued a decision in Heartland Energy Services, Inc., et al.,
setting forth the general standards governing applications by
utility-affiliated marketers,
such as IPM, for market-based rates. Among these standards is the
submission, by the marketer's affiliated utility, of an open
access transmission tariff offering transmission services and
prices comparable to those which the
utility provides to its customers. Based on the FERC decision in
the Heartland case, IPM submitted an amended filing and IP
submitted the comparable open access transmission tariff,
designed to satisfy the FERC's "comparability" requirements, to
the FERC on March 20, 1995. IPM will begin power marketing
operations upon receipt of FERC approval of these filings. Until
that time, IPM will be limited to the brokering of electricity.
In January 1995, IPM established operating headquarters in Salt
Lake City, Utah.
On March 9, 1995 IPM agreed to purchase the fifty percent
ownership interest of InterCoast Energy Services in Tenaska
Marketing Ventures, a natural gas brokerage firm based in Omaha,
Nebraska. Tenaska Marketing Ventures had been a partnership
between Tenaska, Inc. Of Omaha and InterCoast Energy Services of
Davenport, Iowa.
IP's financial position and results of operations are
currently the principal factors affecting Illinova's consolidated
financial position and results of operations.
Competition
-----------
Competition has become a dominant issue for the electric
utility industry. Competition has been promoted by federal
legislation, starting with the Public Utility Regulatory Policy
Act of 1978, which facilitated the development of co-generators
and independent power producers, and continuing with enactment of
the Energy Policy Act of 1992 which authorized the FERC to
mandate wholesale wheeling of electricity by utilities at the
request of certain authorized generating entities and electric
service providers. Wheeling is the transport of electricity
generated by one entity over transmission and distribution lines
belonging to another entity. For many years prior to enactment of
the Energy Policy Act, the FERC imposed wholesale wheeling
obligations as a condition of approving mergers and granting
operating privileges, a practice that continues.
Competition arises not only from co-generation or
independent power production, but from municipalities seeking to
extend their service boundaries to include customers being served
by IP. This is not a new risk in the industry, as the right of
municipalities to have power wheeled to them by utilities was
established in 1973. The Illinois Commerce Commission (ICC) has
been supportive of IP's attempts to maintain its customer base
through approval of special contracts and flexible pricing that
help IP to compete with existing municipal providers.
Further competition may be introduced by state action or by
further federal regulatory action. While the Energy Policy Act
precludes the FERC from mandating retail wheeling, state
regulators and legislators could open utility franchise
territories to full competition at the retail level. Retail
wheeling involves the transport of electricity to end-use
residential, commercial or industrial customers. Such a change
would be a significant departure from existing regulation in
which public utilities have a universal obligation to serve the
public in return for relatively protected service territories and
regulated pricing designed to allow a reasonable return on
prudent investment and recovery of operating costs. States'
attempts to lay the groundwork for retail wheeling have been
hampered by opposition from various interest groups, as well as
the complexity of related issues, including recovery of costs
associated with pre-existing generation investment. During 1995,
IP, industrial customers and regulators have introduced bills to
the Illinois State Legislature to amend the Illinois Public
Utilities Act. Predictably, these bills vary widely, reflecting
different objectives, different constituencies and different
attitudes towards competition in the electric utility industry.
IP's proposed legislation would allow it to transfer all of its
generating plants to an affiliated company, which would then sell
the output of the plants to IP under a power purchase agreement
regulated by FERC. The spring legislative session is scheduled
to end May 28. During this session bills can be passed,
rejected, modified or set aside for further study. If a bill
passes both chambers, it can be approved by the Governor and
signed into law within 90 days. It is not possible to predict
whether any regulatory reform proposals will be enacted.
While Illinova and IP are confident of IP's present ability
to compete with all current alternate sources of energy supply,
the issue of competition is one that raises both risks and
opportunities. At this time, the ultimate effect of competition
in the electric utility industry on Illinova's consolidated
financial position and results of operations is uncertain.
Under the Energy Policy Act, an investor-owned utility must
respond to any bona fide transmission service request within 60
days. Although the Energy Policy Act created, for the first time,
a FERC-administered mechanism for imposing wholesale wheeling
obligations on utilities, IP has had the obligation to wheel
power for interconnected electricity suppliers since 1976. That
condition was included in IP's Clinton Power Station (Clinton)
construction permit and operating license issued by the Nuclear
Regulatory Commission (NRC). IP currently wheels power at rates
originally approved by the FERC in 1984.
It is too soon to predict the long-term financial impact of
increasing transmission access and other issues arising from such
access.
Early Retirement
----------------
In December 1994, IP announced a voluntary early retirement
program. Approximately 200 salaried employees would qualify for
early retirement under this program. The offer will be made to
employees during the fourth quarter of 1995. A similar program
for union employees is the subject of contract negotiations
currently underway between IP and the International Brotherhood
of Electrical Workers. Approximately 450 union employees would
qualify for the program if current negotiations result in the
same package as offered to salaried employees. At December 31,
1994, IP employed 4,350 people, as compared to 4,540 at December
31, 1993.
The early retirement program for salaried employees is
expected to generate a pre-tax charge of approximately $22
million against fourth quarter 1995 earnings and to generate
savings of approximately $15 million annually beginning in 1996.
A combined early retirement program for both salaried and union
employees, based on the same package as announced for salaried
employees, would generate a pre-tax charge of approximately $42
million against fourth quarter 1995 earnings and would generate
savings of approximately $35 million annually beginning in 1996.
Selected Data
-------------
The territory served by IP comprises substantial areas in
northern, central and southern Illinois, including the following
larger communities (1990 Federal Census data):
Class of Service
City Population Furnished
---- ---------- -----------------
Decatur 83,885 Electric and Gas
Champaign 63,502 Electric and Gas
Bloomington 51,972 Electric
Belleville 42,785 Electric and Gas
East St. Louis 40,944 Gas
Normal 40,023 Electric
Urbana 36,344 Electric and Gas
Danville 33,828 Electric and Gas
Galesburg 33,530 Electric and Gas
Granite City 32,862 Electric and Gas
IP holds franchises in all of the 310 incorporated
municipalities in which it furnishes retail electric service and
in all of the 257 incorporated municipalities in which it
furnishes retail gas service.
Total operating revenues, including interchange sales, of
Illinova and IP for the past three years by classes of service
were as follows:
1994 1993 1992
---- ---- ----
(Millions of Dollars)
Electric $1,287.5 $1,266.4 $1,190.9
Gas $ 302.0 $ 314.8 $ 288.6
Operating income before income taxes of Illinova and IP for
the past three years by classes of service were as follows:
1994 1993 1992
---- ---- ----
(Millions of Dollars)
Electric $ 411.4 $ 383.2 $ 348.4
Gas $ 27.3 $ 28.6 $ 23.9
Identifiable assets of Illinova and IP for the past three
years by classes of service were as follows:
1994 1993 1992
---- ---- ----
(Millions of Dollars)
Electric $4,589.0 $4,526.8 $4,602.9
Gas $ 442.6 $ 406.4 $ 355.4
Electric Business
-----------------
Overview
--------
IP supplies electric service at retail to an estimated
aggregate population of 1,265,000 in 310 incorporated
municipalities, adjacent suburban and rural areas, and numerous
unincorporated communities. Electric service at wholesale is
supplied for resale to one electric utility and to the Illinois
Municipal Electric Agency (IMEA) as agent for 10 municipalities.
IP also has a power coordination agreement with Soyland Power
Cooperative, Inc. (Soyland). See the sub-caption "Power Coordi
nation Agreement With Soyland" hereunder for additional
information. In 1994, IP provided interchange power to 13
utilities for resale and one power marketer.
IP's highest system peak hourly demand (native load) in 1994
was 3,395,000 kilowatts on June 20, 1994. This 1994 peak load
compares with IP's historical high of 3,508,000 kilowatts in
1988.
IP owns and operates electric generating facilities having a
net summer capability of 4,441,000 kilowatts. The major electric
generating stations are Clinton (930,000 kilowatts, of which
807,000 kilowatts of capability are owned by IP and 123,000
kilowatts of capability are owned by Soyland), Baldwin (1,751,000
kilowatts), Havana (666,000 kilowatts), Wood River (607,000
kilowatts), Hennepin (289,000 kilowatts) and Vermilion (174,000
kilowatts). The other generating facilities owned by IP consist
of gas turbine units at three locations which provide peaking
service and have an aggregate capability of 147,000 kilowatts.
Havana Units 1-5 (238,000 kilowatts) and Wood River Units 1-3
(139,000 kilowatts) are currently not staffed, but are available
to meet reserve requirements with a maximum of four months'
notice.
IP owns 20% of the capital stock of Electric Energy, Inc.
(EEI), an Illinois corporation, which was organized to own and
operate a steam electric generating station and related
transmission facilities near Joppa, Illinois to supply electric
energy to the U.S. Department of Energy (DOE) for its project
near Paducah, Kentucky. Under a power supply agreement with EEI,
IP has the right to purchase 5.0% of the annual output of the
Joppa facility. IP has the flexibility to schedule the capacity
in varying amounts ranging from a nominal 51,000 kilowatts for 52
weeks up to a maximum of 203,000 kilowatts for approximately 13
weeks. IP must schedule its annual capacity entitlement by
August 1 of the preceding year, and availability of the scheduled
capacity is subject to certain other limitations related to
scheduling considerations of the other co-owners of the Joppa
facility and the DOE, and unit outages (if any).
IP is a participant, together with Union Electric Company
(UE) and Central Illinois Public Service Company (CIPS), in the
Illinois-Missouri Power Pool which was formed in 1952. The Pool
operates under an Interconnection Agreement which provides for
the interconnection of transmission lines and contains provisions
for the coordination of generating equipment maintenance
schedules, inter-company sales of firm and non-firm power, and
the maintenance of minimum capacity reserves by each participant
equal to the greater of 15% of its peak demand, one-half of its
largest unit, or one-half of its largest non-firm purchase.
IP, CIPS and UE have a contract with Tennessee Valley
Authority (TVA) providing for the interconnection of the TVA
system with those of the three
companies to exchange economy and emergency power and for other
working arrangements.
IP also has interconnections with Indiana-Michigan Power
Company, Commonwealth Edison Company, Central Illinois Light
Company, Iowa-Illinois Gas & Electric Company, Kentucky Utilities
Company, Southern Illinois Power Cooperative, Soyland Power
Cooperative, Inc. and the City of Springfield, Illinois for
various interchanges, emergency services and other working
arrangements.
IP is also a member of the Mid-America Interconnected
Network, which is one of nine regional reliability councils
established to coordinate plans and operations of member
companies regionally and nationally.
Power Coordination Agreement With Soyland
-----------------------------------------
Under the provisions of a Power Coordination Agreement (PCA)
between Soyland and IP dated October 5, 1984, as amended, IP was
required to provide Soyland with 8.0% (288 megawatts) of
electrical capacity from its fossil-fueled generating plants
through 1994. This requirement increased to 12% on January 1,
1995 and will continue at that level each year thereafter until
the agreement expires or is terminated. This is in addition to
the capacity Soyland receives as an owner of Clinton. IP is
compensated with capacity charges and for energy costs and
variable operating expenses. IP transmits energy for Soyland
through IP's transmission and subtransmission systems. Under
provisions of the PCA, Soyland has the option of participating
financially in major capital expenditures at the fossil-fueled
plants, such as those needed for Phase II Clean Air Act
compliance, to the extent of its capacity entitlement with each
party bearing its own direct capital costs, or by having the
costs treated as plant additions and billed to Soyland in
accordance with other billing provisions of the PCA. See the sub-
caption "Clean Air Act" on page 24, under "Environmental Matters"
for further discussion. At any time after December 31, 2004,
either IP or Soyland can terminate the PCA by giving not less
than seven years' prior written notice to the other party. The
party to whom termination notice has been given may designate an
earlier effective date of termination which shall be not less
than twelve months after receiving notice. The revenues received
from the power supplied to Soyland under the PCA are classified
as operating revenues. In 1994, Soyland supplied electricity to
21 distribution cooperative members who serve approximately
162,400 rural customers in 69 Illinois counties.
Fuel Supply
-----------
IP used coal to generate 66.2% of the electricity produced
during the year ended December 31, 1994, with nuclear, oil, and
gas contributing 33.3%, 0.3%, and 0.2%, respectively. The
average cost of these fuels per million Btu during 1994 was:
Coal, $1.42; Nuclear, $.85; Oil, $3.89; and Gas, $3.06, for a
weighted average cost of $1.24. The weighted average cost of all
fuels per million Btu during the years 1993 and 1992 was $1.34
and $1.33, respectively. High-sulfur coal mined in Illinois,
Indiana, Kentucky and Ohio provided 65.5%, 11.9%, 1.0% and 0.5%,
respectively, of the coal delivered to IP's electric generating
stations in 1994. In addition, IP received low-sulfur coal from
Kentucky, Colorado, West Virginia, Wyoming, Utah and Illinois.
The average cost per million Btu of primary fuel consumed at
IP's generating stations during the periods indicated was as
follows:
Primary
Station Fuel 1994 1993 1992
------- ---- ---- ---- ----
Baldwin Coal $1.36 $1.41 $1.40
Havana Coal 1.53 1.63 1.59
Hennepin Coal 1.68 1.61 1.56
Vermilion Coal 1.38 1.38 1.34
Wood River Coal 1.49 1.60 1.49
Clinton Uranium 0.85 0.91 0.99
IP's rate schedules contain provisions for passing along to
its electric customers increases or decreases in the cost of
fuels used in its generating stations. For Illinova see the
information under the sub-captions "Revenue and Energy Cost" of
"Note 1 - Summary of Significant Accounting Policies" on page A-
15 and "1987 Uniform Fuel Adjustment Clause Reconciliation" on
page A-17 of the 1994 Annual Report to Shareholders in the
appendix to the Illinova Proxy Statement which is incorporated
herein by reference for additional information. For IP see the
information under the sub-captions "Revenue and Energy Cost" of
"Note 1 - Summary of Significant Accounting Policies" on page A-
15 and "1987 Uniform Fuel Adjustment Clause Reconciliation" on
page A-17 of the 1994 Annual Report to Shareholders in the
appendix to the IP Information Statement which is incorporated
herein by reference for additional information.
Reference is made to the sub-caption "Environmental Matters"
hereunder for information regarding pollution control matters
relating to IP's fuel supply.
COAL - As shown below, IP presently has coal purchase contracts
with expiration dates ranging from 1995 to 2010 which will
provide about 73 million tons of coal. Based upon projected 1995
usage of approximately 7.1 million tons, this is equivalent to
about 10.3 years of consumption.
Longer-term contracts with Peabody Coal Company and Arch Coal
Sales Company, Inc. were renegotiated during 1993 with new terms
and conditions, including significant price reductions, to
provide for continued economic use of Illinois high-sulfur coal
while IP complies with Phase I of the Clean Air Act amendments
effective January 1, 1995. In 1994, IP signed new three-year
agreements (1995-1997) amending and restating existing coal
supply contracts to change, among other things, source and
quality of coal. These amended and restated agreements are with
Mountain Coal, Pacific Basin Resources and Coastal Coal. All of
the coal can be shipped either to the Havana or Wood River
stations. The Mountain and Pacific Basin coal originates in
Colorado and the Coastal coal originates in Utah. IP also
extended the coal supply agreement with CONSOL, Inc. through 1997
at Wood River. Total contract purchases will range between 6.6
million and 6.8 million tons of coal in 1995.
The sources and quantities of coal supplies, contract
expiration dates, weighted average cost of coal purchases and
anticipated sulfur contents are summarized in the following
table:
<TABLE>
<CAPTION>
Weighted
Delivered
Cost
Per
Million
Btu for Expiration Anticpated
the Year Date of Sulfur
Ended Primary Content*
Supplier Station 12/31/94 Contract (Percent)
--------- ------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Peabody Coal Co.(a) Baldwin $1.40 2010 3.0
Arch Coal Sales Co., Inc. (b) Baldwin 1.26 1999 3.0
Peabody Coal Co.(a) Hennepin 1.43 2010 3.0
CONSOL, Inc.(c) Wood River 1.28 1997 0.9
Golden Oak Mining Co. (d) Wood River 1.64 1995 0.9
Buck Creek Mining (e) Vermilion 1.32 1994 3.0
Pacific Basin Resources (f) Havana 1.26 1997 0.6
Pacific Basin Resources (f) Wood River 1.24 1997 0.6
</TABLE>
* High-sulfur content classified as 2.5 percent or greater.
(a) IP has a contract with Peabody Coal Co. to purchase, in
total, a maximum of 3,500,000 tons per year at Baldwin and
Hennepin through 1999. During the years 2000-2010, the
quantity of coal to be purchased from Peabody is a
percentage of the total coal requirements at the Baldwin
and Hennepin stations. The coal to be provided for
contract years 2000-2010 will be at market prices.
(b) This contract will supply 2,065,500 tons per year.
(c) This contract will supply approximately 300,000 tons,
200,000 tons and 300,000 tons in 1995, 1996 and
1997, respectively.
(d) This contract will supply 200,000 tons in 1995.
(e) This contract was extended in 1994 and assigned to Pacific
Basin Resources.
(f) This contract will provide 350,000 tons of coal per year
from 1995-1997.
See the sub-caption "Environmental Matters" hereunder
for additional information regarding the supply of coal at the
Baldwin power station.
When IP's needs exceed contracted quantities, coal is
purchased on the spot market. Spot purchases in 1994 represented
about 10% of IP's total coal purchases. The delivered cost of
coal purchased on a spot basis during the year varied between
$19.84 per ton, or $0.94 per million Btu, and $40.91 per ton, or
$1.78 per million Btu. Though less spot tonnage will be required
between 1995 and 1997, IP anticipates that the spot market will
continue to be a favorable supplemental source of supply, and IP
will have adequate supplies of coal. The coal inventory at
December 31, 1994 represented a 30-day supply based on IP's
average daily burn projection for 1995.
OIL - The Havana power station (five units totaling 238,000
kilowatts) is IP's only station which utilizes fuel oil for the
generation of electric energy. These units are currently not
staffed, but are available to meet reserve requirements with a
maximum of four months' notice.
GAS - Three generating units (totaling 139,000 kilowatts) at the
Wood River power station and two combustion peaking plants,
Stallings (77,000 kilowatts) and Oglesby (60,000 kilowatts), are
fueled with natural gas. The three units at Wood River are
currently not staffed, but are available to meet reserve
requirements with a maximum of four months' notice. These units
have the capability of burning either natural gas or distillate
fuel oil. Natural gas is also used in start-up and as a
secondary boiler fuel for two generating units (totaling 289,000
kilowatts) at the Hennepin power station and as a secondary
boiler fuel for one generating unit (totaling 96,000 kilowatts)
at the Wood River power station. Natural gas is also used as
start-up fuel for one additional unit at the Wood River power
station. In September 1994, IP announced that the Vermilion power
station will be modified to use both natural gas and coal. By
switching to natural gas as the primary fuel at Vermilion, IP
will avoid the need to purchase about 6,000 emission allowances
that otherwise would be required to comply with Phase I of the
1990 Clean Air Act Amendments. After modifications are completed
in May 1995, gas will be used as the primary fuel and the units
will operate mainly to help meet peak summer demand. IP
anticipates that adequate supplies of gas for these uses will be
available for the foreseeable future. See the sub-caption "Gas
Business" hereunder.
NUCLEAR - IP leases nuclear fuel from Illinois Power Fuel Company
(Fuel Company). The Fuel Company, which is 50% owned by IP, was
formed in 1981 for the purpose of leasing nuclear fuel to IP for
Clinton. Lease payments are equal to the Fuel Company's cost of
fuel as consumed (including related financing and administrative
costs). This lease is recorded as a capital lease on IP's books.
As of December 31, 1994, the Fuel Company had an investment in
nuclear fuel of approximately $111 million. IP is obligated to
make subordinated loans to the Fuel Company at any time the
obligations of the Fuel Company which are due and payable exceed
the funds available to the Fuel Company. At December 31, 1994,
IP had no outstanding loans to the Fuel Company.
At December 31, 1994, IP's net investment in nuclear
fuel consisted of $50 million of Uranium 308. This inventory
represents fuel to be used in connection with the fifth reload of
Clinton which began on March 12, 1995. The unamortized
investment of the nuclear fuel assemblies in the reactor was $61
million.
IP has two long term contracts for the supply of
uranium concentrates. One contract is with U. S. Energy/Crested
Corporation and the other contract is with Cameco, a Canadian
corporation. Each of the two contracts is for 1,179,240 lbs. of
uranium concentrates, with deliveries through 1998. The
contracts contain an option for an additional 479,440 lbs. of ura
nium concentrates for delivery through 2000. Each of the two
contracts is to provide an estimated 35% of Clinton's fuel
requirements, but each contract contains provisions permitting IP
to purchase 35-45% of Clinton's fuel requirements in certain
years through the spot market. The decision to utilize these
provisions is made the year before each delivery and depends on
the estimated price and availability from the spot market versus
the estimated contract prices. In 1994, the Cameco contract was
renegotiated to lower the price and change it to a requirements
contract, for 55%-65% of requirements through 2000. During 1994,
all nuclear fuel purchases were settled in United States dollars.
In October 1993, IP filed suit in U.S. District Court,
Central District of Illinois, Danville, seeking a declaration
that IP's termination of the U.S. Energy contract is permitted by
the terms of the contract as they relate to rights of termination
in the event of certain receivership proceedings. Defendants in
the lawsuit are U.S. Energy Corporation, Crested Corporation,
U. S. Energy/Crested Corporation, Cycle Resources Investment
Corporation, Sheep Mountain Partners, Nulux Nukem Luxemburg GMBH,
and Dresdner Bank. The defendants are joint ventures,
partnerships, and domestic and foreign corporations who are
either original parties or parties by assignment to the contract.
IP purchased approximately half of its uranium concentrates
supply under this contract, which IP terminated shortly before
filing this action. On September 1, 1994, the Court granted
defendants' motions for summary judgment and ruled that the
termination constituted a breach of contract. Thereafter the
parties engaged in settlement discussions, reaching a tentative
agreement in principle on a restructured contract that would end
the litigation. After hearings in February 1995, at which the
defendants argued against one another over which was entitled to
perform and receive the proceeds of the revised contract or
receive any judgment entered subsequent to a trial on damages, on
March 7, 1995 IP filed a Motion under Federal Rule 60 (b) for
Reconsideration of the Court's September 1, 1994 ruling. That
motion, and defendants' various motions concerning their
respective rights under the contract were denied on March 15,
1995 and the matter set for trial on damages October 23, 1995.
Conversion services for the period 1991-2001 are
contracted with Sequoyah Fuels. Sequoyah Fuels closed its
Oklahoma conversion plant in 1992 and has joined with Allied Chem
ical Company to form a marketing company named CoverDyn. All
conversion services will be performed at Allied's Metropolis,
Illinois facility, but Sequoyah Fuels will retain the contract
with IP. IP has a Utility Services contract for uranium enrich
ment requirements with the DOE which provides 70% of the enrich
ment requirements of Clinton through September 1999. The
remaining 30% has been contracted with the DOE through its
incentive pricing plan through September 1995, and an amendment
was signed in 1993 which covers the remaining 30% through 1999.
This amendment allows IP to either purchase the enrichment
services at the DOE's incentive price or provide electricity at
DOE's Paducah, Kentucky enrichment plant, at an agreed exchange
rate. In addition, legislation was passed to create a new
private government corporation, the United States Enrichment
Corporation (USEC), for enrichment services. All of the DOE's
assets including all contracts were transferred to the USEC as of
July 1993.
A contract with General Electric Company provides fuel
fabrication requirements for the initial core and 2,196 fuel bun
dles (approximately 11 reloads through 2004). In 1993, an
amendment was signed with the General Electric Company to add
1,472 fuel bundles to the contract and to change the existing
price and other terms and conditions. The additional 1,472 fuel
bundles are expected to cover fuel fabrication requirements
through 2017.
Beyond the stated commitments, IP may enter into
additional contracts for uranium concentrates, conversion to
uranium hexafluoride, enrichment and fabrication.
Currently, no plants for commercial reprocessing of
spent nuclear fuel are in operation in the U.S., and reprocessing
cannot commence until appropriate licenses are issued by the NRC.
Clinton has on-site high density storage capability which will
provide spent nuclear fuel storage capacity to meet requirements
until the year 2004. Various governmental agencies are currently
reviewing the environmental impact of nuclear fuel reprocessing
and waste management. The Nuclear Waste Policy Act of 1982 was
enacted to establish a government policy with respect to disposal
of spent nuclear fuel and high-level radioactive waste. IP
signed a contract for disposal of spent nuclear fuel and/or high-
level radioactive waste on July 6, 1984 with the DOE. Under the
contract, IP is required to pay the DOE one mill (one-tenth of a
cent) per net kilowatt-hour (one dollar per MWH) of electricity
generated and sold. IP is recovering this amount through rates
charged to customers.
On June 20, 1994, IP and 13 other utilities filed an
action in the U.S. Court of Appeals for the District of Columbia
circuit asking the Court to rule that the DOE is obligated to
take responsibility for spent nuclear fuel by January 31, 1998
under the Nuclear Waste Policy Act of 1982. IP based its decision
to build Clinton, in part, on the assurance that a federal
repository would be built and operated by the DOE, and, under the
Act, the DOE has been collecting money from IP to pay for such a
repository. The utilities are asking the Court to confirm the
DOE's commitment and to order the DOE to develop and monitor a
compliance program with appropriate deadlines. The utilities have
also asked for relief from the ongoing funding requirements or to
have an escrow account established for future funds paid to DOE.
On January 13, 1995, the Court issued an order in this
case. In response to a DOE motion to dismiss the case as
premature, because of a pending DOE Notice of Inquiry on spent
fuel storage issues, the Court: 1) deferred action on the DOE
motion based on indications that DOE would issue a policy
position in the pending Notice of Inquiry, and 2) directed the
parties to file a status report on those proceedings within 60
days.
IP has on-site storage capacity that will accommodate
its spent fuel storage needs until the year 2004, based on
current operating levels. If by that date the U.S. Government
has not lived up to its statutory obligation to dispose of spent
fuel, and IP has continued to operate the plant at current
levels, then IP will have to use alternative means of disposal,
such as dry storage in casks on site, or transport the fuel rods
to private or collectively-owned utility repositories, neither of
which exists at present. Current technology allows safe, dry, on-
site storage, subject to licensing and local permitting
requirements.
Under the Energy Policy Act of 1992, IP is responsible for a
portion of the cost to decontaminate and decommission the DOE's
uranium enrichment facilities. Each utility will be assessed an
annual fee for a period of fifteen years based on quantities
purchased from the DOE facilities prior to passage of the Act.
At December 31, 1994, IP has a remaining liability of $5.7
million representing future assessments. IP is recovering these
costs, as amortized, through its fuel adjustment clause.
Construction Program
--------------------
The cost, including allowance for funds used during
construction (AFUDC), of IP's construction program during 1995
and during the period January 1, 1995 to December 31, 1999 is
estimated as follows:
Five-Year
Period
1995 1995-1999
---- ---------
(Millions of Dollars)
Electric generating facilities $82 $246
Electric transmission and distribution facilities 70 296
General plant 28 112
Gas facilities 24 121
---- --------
Total construction 204 775
Nuclear fuel 11 107
---- --------
Total $215 $882
==== ========
The above estimates exclude potential costs which may be
required to comply with the Clean Air Act as discussed further in
"Environmental Matters" hereunder. See the sub-caption "Clean
Air Act" hereunder on page 24 for additional information.
The estimated construction expenditures during the period
January 1, 1995 to December 31, 1999, together with the repayment
at maturity of currently outstanding long-term debt (including
lease payments under capital leases) and redeemable preferred
stock, aggregating approximately $370 million, and sinking fund
requirements of approximately $2 million are expected to require
expenditures by IP of approximately $1.254 billion. Construction
and capital requirements are expected to be met primarily through
internal cash generation.
In 1992, the IP Board authorized a new general
obligation mortgage (New Mortgage), which is intended to replace
IP's 1943 Mortgage and Deed of Trust (First Mortgage). Bonds
issued to date under the New Mortgage are secured by a
corresponding issue of First Mortgage bonds under the First
Mortgage. At December 31, 1994, based upon the most restrictive
earnings test contained in the First Mortgage, IP could issue
approximately $691 million of additional first mortgage bonds for
other than refunding purposes. The amount of available unsecured
borrowing capacity totaled $160 million at December 31, 1994.
Also, at December 31, 1994, the unused portion of Illinova's and
IP's total bank lines of credit was $293 million. IP is required
to maintain unused lines of credit with lending institutions
under which IP shall be entitled to borrow sums of money in an
aggregate amount equal at any time to the total of (a) the
aggregate principal amount of the commercial paper of the Fuel
Company then outstanding plus (b) the aggregate principal amount
of commercial paper of IP then outstanding. At December 31,
1994, such outstanding commercial paper of the Fuel Company was
$66.6 million.
Clinton Power Station
---------------------
General
-------
IP owns 86.8% of Clinton and Soyland owns the remaining
13.2%. The terms for sharing the construction, ownership and
operation of Clinton are set forth in several related agreements
between IP and Soyland. Under these agreements, IP has authority
to act on behalf of Soyland for purposes of various matters
relating to the design, construction, operation, maintenance and
decommissioning of Clinton. See the sub-caption "Decommissioning
Costs" hereunder on page 19 for additional information on the
decommissioning of Clinton.
The Clinton nuclear power station was placed in service in
1987 and represents approximately 18% of IP's installed
generation capacity. In 1994, Clinton provided 33% of IP's
generation and had the lowest fuel cost per megawatt-hour genera
tion compared to all other IP-owned power stations. The
investment in Clinton and its related deferred costs represented
approximately 52% of Illinova's total assets at December 31,
1994. Clinton-related costs represented 32% of Illinova's total
1994 other operating, maintenance and depreciation expenses.
Clinton's equivalent availability was 92%, 73% and 62% for 1994,
1993 and 1992, respectively. Clinton's equivalent availability
was higher in 1994 due to no refueling outage.
Ownership of an operating nuclear generating unit exposes IP
to significant risks, including increased and changing regula
tory, safety and environmental requirements and the uncertain
future cost of closing and dismantling the unit. IP expects to
be allowed to continue to operate Clinton; however, if any unfore
seen or unexpected developments would prevent IP from doing so,
Illinova and IP could be materially adversely affected. For
further discussion of insurance limitations for Illinova, refer
to the sub-caption "Insurance" of "Note 4 - Commitments and
Contingencies" on page A-18 of the 1994 Annual Report to
Shareholders in the appendix to the Illinova Proxy Statement
which is incorporated herein by reference. For further
discussion of insurance limitations for IP, refer to the sub-
caption "Insurance" of "Note 4 - Commitments and Contingencies"
on page A-18 of the 1994 Annual Report to Shareholders in the
appendix to the IP Information Statement which is incorporated
herein by reference.
Rate and Regulatory Matters
---------------------------
1992 Rate Order
---------------
A September 1993 decision by the Illinois Appellate Court,
Third District (Appellate Court Decision), upheld key components
of the August 1992 Rehearing Order (Rehearing Order) issued by
the Illinois Commerce Commission (ICC). The Rehearing Order
denied IP recovery of certain deferred Clinton post-construction
costs, which were composed of all deferred depreciation and real
estate taxes and 72.8% of the deferred common equity return.
IP originally recorded these deferred Clinton post-
construction costs as a regulatory asset when such costs were
believed probable of recovery through future rates, based on
prior ICC orders. The deferred costs were recorded from the time
Clinton began operations (April 1987) to the time the ICC allowed
IP to begin recovering these deferred costs in rates (March
1989), otherwise known as the regulatory lag period.
Based upon IP's assessment of the Appellate Court Decision
and in accordance with Statement of Financial Accounting
Standards No. 71, "Accounting for the Effects of Certain Types of
Regulation" (FAS 71), IP recorded a loss of $271 million ($200
million, net of income taxes) in September 1993. This write-off
included revenues and related interest of approximately $8.9
million to be refunded for deferred costs included in electric
rates between April and August 1992, which were disallowed by the
Rehearing Order.
The Appellate Court Decision remanded the case to the ICC
for further proceedings to determine the amount of actual
financial harm incurred by IP during the regulatory lag period.
The decision also remanded the case for verification of the
calculation of the amortization of deferred Clinton post-
construction costs from March 1989 to June 1992.
On February 25, 1994, IP and the remaining parties to this
case presented a joint motion to the Appellate Court requesting
entry of an order remanding the case to the Commission for
further proceedings in accordance with a stipulated agreement of
the parties. The Appellate Court granted the joint motion on
March 2, 1994. On March 16, 1994, the ICC issued an order on
remand that did not result in any change in IP's rates from those
adopted in the Rehearing Order. The order on remand required IP
to refund $8.9 million of revenue that had been collected between
April and August 1992 subject to refund. The refunds began in
March 1994 and were completed in October 1994.
1987 Uniform Fuel Adjustment Clause Reconciliation
--------------------------------------------------
In January 1994, the ICC issued an order on remand
consistent with an Illinois Appellate Court, Third District,
decision which held that evidence did not support the findings in
a February 1992 ICC order that $29.3 million in nuclear fuel
procurement and management costs were imprudent. As a result of
the Appellate Court decision and subsequent related ICC orders,
IP is in the process of recovering approximately $12.7 million of
nuclear fuel costs, which will not have an impact on consolidated
results of operations.
Decommissioning Costs
---------------------
IP is responsible for its ownership share of the costs of
decommissioning Clinton and for spent nuclear fuel disposal
costs. IP is collecting future decommissioning costs through its
rates based on an ICC-approved formula that allows IP to adjust
rates annually for changes in decommissioning cost estimates.
Based on NRC regulations that establish a minimum funding
level, IP's 86.8% share of Clinton decommissioning costs is
estimated to be approximately $357 million (1994 dollars). The
NRC minimum is based only on the cost of removing radioactive
plant structures. A site-specific study to estimate the costs of
dismantlement, removal and disposal of Clinton has not been made;
however, IP plans to undertake this study in 1995. This study
may result in projected decommissioning costs higher than the NRC-
specified funding level. At December 31, 1994 and 1993, IP had
recorded a liability of $22.4 million and $17.2 million,
respectively, for the future decommissioning of Clinton.
External decommissioning trusts, as prescribed under
Illinois law and authorized by the ICC, have been established to
accumulate funds based on the expected service life of the plant
for the future decommissioning of Clinton. For the years 1994,
1993 and 1992, IP has contributed $5.5 million, $3.9 million and
$3.7 million, respectively, to its external nuclear
decommissioning trust funds. The balances in these nuclear
decommissioning funds at December 31, 1994 and 1993, were $22.4
million and $17.2 million, respectively. IP recognizes earnings
and expenses from the trust funds as changes in its assets and
liabilities relating to these funds. In November 1994, the ICC
granted IP permission to invest up to 60% of the nuclear
decommissioning trust assets in selected equity securities.
The Securities and Exchange Commission (SEC) staff has
questioned certain current accounting practices of the electric
utility industry, including those practices used by IP, regarding
the recognition, measurement and classification of
decommissioning costs for nuclear generating stations in
financial statements. In response to these questions, the FASB
has agreed to review the accounting for removal costs of nuclear
generating stations, including decommissioning. If current
electric utility industry accounting practices for such
decommissioning are changed: 1) annual provisions for
decommissioning could increase; 2) the estimated total cost for
decommissioning could be recorded as a liability; and 3) trust
fund income from the external decommissioning trusts could be
reported as investment income rather than as a reduction to
decommissioning expense. Although it is too early to determine
whether any changes to current electric utility industry
accounting practices for decommissioning will be adopted, IP
believes that based on current information, any required changes
would not have an adverse effect on results of operations due to
existing and anticipated future ability to recover
decommissioning costs through rates.
In 1992, the ICC entered an order in which it expressed
concern that IP take all reasonable action to ensure that Soyland
contributes its ownership share of the current or any revised
estimate of decommissioning costs. The order also states that if
IP becomes liable for decommissioning expenses attributable to
Soyland, the ICC will then decide whether that expense should be
the responsibility of IP's stockholders or its customers.
Accounting Matters
------------------
The Illinova consolidated financial statements include the
accounts of Illinova Corporation, a holding company, IP, a
combination electric and gas utility, and IGC, a wholly-owned
subsidiary that invests in energy-related projects and competes
in the independent power market.
IP's consolidated financial position and results of
operations are currently the principal factors affecting
Illinova's consolidated financial position and results of
operations. All significant intercompany balances and
transactions have been eliminated from the consolidated financial
statements. All non-utility operating transactions are included
in the section titled Other Income and Deductions, "Miscellaneous-
net" in the Consolidated Statements of Income. Prior year amounts
have been restated on a basis consistent with the December 31,
1994, presentation.
The IP consolidated financial statements include the
accounts of Illinois Power Capital, L.P., a limited partnership
in which IP serves as the general partner.
IP currently prepares its financial statements in accordance
with FAS 71. Accordingly, IP records various regulatory assets
and liabilities to reflect the actions of regulators. Management
believes that IP currently meets the criteria for continued
application of FAS 71, but will continue to evaluate significant
changes in the regulatory and competitive environment to assess
IP's overall compliance with such criteria. These criteria
include: 1) whether rates set by regulators are designed to
recover the specific costs of providing regulated services and
products to customers and; 2) whether regulators continue to
establish rates based on cost. In the event that management
determines that IP no longer meets the criteria for application
of FAS 71, an extraordinary noncash charge to income would be
recorded in order to remove the effects of the actions of
regulators from the consolidated financial statements. The
discontinuation of application of FAS 71 would likely have a
material adverse effect on Illinova's and IP's consolidated
financial position and results of operations.
Dividends
---------
On October 12, 1994, the Board of Directors of Illinova
increased the common stock dividend 25 percent, declaring the
common stock dividend for the first quarter of 1995 at 25 cents
per share, payable February 1, 1995, to shareholders of record as
of January 10, 1995.
Gas Business
------------
IP supplies retail natural gas service to an estimated
aggregate population of 920,000 in 257 incorporated municipali
ties, adjacent suburban areas and numerous unincorporated
communities. It does not sell gas for resale.
During the twelve months ended December 31, 1994, IP
purchased 62,733,000 MMBtu of natural gas from various suppliers,
marketers and producers. After purchase, the gas is transported
to the IP system via Panhandle Eastern Pipeline (Panhandle),
Natural Gas Pipeline (Natural), Mississippi River Transmission
Corporation (Mississippi), Trunkline Gas Company (Trunkline), and
ANR Pipeline Company (ANR). Gas purchased including
transportation for 1994 was at a cost of approximately $158
million. The average cost of natural gas purchased by IP from
all suppliers for the years 1994, 1993 and 1992 was $2.52, $2.82
and $2.62 per MMBtu, respectively.
The total cost of natural gas delivered decreased 15.3% from
1993 due to lower pricing in the market. Gas therm sales, which
exclude therms transported, decreased 2.2% in 1994. When
transported gas for industrial and commercial customers is
included, the total gas delivered (therms sold plus therms
transported) to IP's customers increased 2.4% from 1993.
IP's rate schedules contain provisions for passing through
to its gas customers increases or decreases in the cost of
purchased gas. For Illinova see the information under the sub-
caption "Revenue and Energy Cost" of "Note 1 - Summary of Sig
nificant Accounting Policies" on page A-15 of the 1994 Annual Re
port to Shareholders in the appendix to the Illinova Proxy
Statement that is incorporated herein by reference. For IP see
the information under the sub-caption "Revenue and Energy Cost"
of "Note 1 - Summary of Significant Accounting Policies" on page
A-15 of the 1994 Annual Report to Shareholders in the appendix to
the IP Information Statement that is incorporated herein by
reference.
The volume of customer-owned gas transported during 1994
increased 14.4% from that of 1993 due to lower spot market prices
and the new gas rate structure. Approximately 150 industrial and
large commercial customers purchase gas directly from gas
producers and marketers. These customers are charged for the
transportation of gas through IP's system to their plant
facilities.
IP has eight underground gas storage fields having a total
capacity of approximately 15.2 million MMBtu and a total
deliverability on a peak day of about 347,000 MMBtu. In addition
to the capacity of the eight underground storage fields, IP has
contracts with Panhandle for 5.6 million MMBtu of underground
storage capacity and a total deliverability on a peak day of
approximately 59,000 MMBtu, with Natural for 1.2 million MMBtu of
storage capacity and a total deliverability on a peak day of
37,000 MMBtu, with Mississippi for 3.7 million MMBtu of storage
capacity with a peak day deliverability of 64,000 MMBtu and with
ANR for 63,000 MMBtu of storage capacity with a peak day
deliverability of 1,270 MMBtu. Operation of underground storage
permits IP to increase deliverability to its customers during
peak load periods by taking gas into storage during the off-peak
months.
IP owns two active liquefied petroleum gas plants having an
aggregate peak-day deliverability of about 40,000 MMBtu for peak-
shaving purposes. Gas properties include approximately 7,800
miles of mains.
IP experienced its 1994 peak-day send out of 786,070 MMBtu
of natural gas on January 18, 1994. IP's highest peak-day send
out was 857,324 MMBtu of natural gas on January 10, 1982.
On April 6, 1994, the ICC approved an increase of $18.9
million, or 6.1%, in IP's natural gas base rates. The increase
to customers will be partially offset by savings from lower gas
costs resulting from the expansion of the Hillsboro gas storage
field. The approved authorized rate of return on rate base is
9.29%, with a rate of return on common equity of 11.24%.
Concurrent with the gas rate increase, IP's gas utility plant
composite depreciation rate decreased to 3.4%.
Gas Supply
----------
Pursuant to Orders 636 and 636-A, issued in April and August
1992, respectively, the FERC approved amendments to its rules
that are intended to increase competition among natural gas
suppliers by "unbundling" the interstate pipelines' merchant
sales service into separate sales and transportation services and
by mandating that the pipelines' firm transportation service be
comparable to the transportation service included in their
traditional bundled sales service. Under this rule, pipelines
are required to unbundle services that they provided so that
natural gas purchasers can select services as needed to meet
their energy requirements. As of December 31, 1993, all of IP's
pipeline suppliers had restructured their service offerings to
conform with the requirements of Orders 636 and 636-A. These
rules have increased the complexity of providing firm gas
service. This additional complexity results from the greater
number of options available to IP, as well as the added
responsibility to arrange for the acquisition, transportation and
storage of natural gas, which was previously bundled into the
pipelines' sales service. As a result of Orders 636 and 636-A,
the pipelines are charging their customers "transition" costs,
which arise from unbundling services. IP estimates that
approximately $10.5 million in transition costs will be incurred.
In 1993, IP began to pay transition costs billed by gas pipelines
and to recover these payments through a tariff rider. On
September 23, 1994, the ICC issued a final order approving
recovery of Order 636 transition costs.
Under Order 636, IP has entered into firm transportation
agreements with the pipelines that feed its system. These
contracts replace the sales contracts previously held with the
respective pipelines. The amounts of firm transportation volumes
under the contracts currently in effect with each pipeline are
listed below.
Contract
Expiration
Source Firm Transportation Volume Date
------ -------------------------- -----------
Panhandle 75,900 MMBtu plus 58,370 MMBtu 04/30/96
Leased Storage
Natural 89,454 MMBtu plus 37,675 MMBtu 11/30/96
Leased Storage
Mississippi 102,000 MMBtu including Storage 10/31/96
Trunkline(1) 10,831 MMBtu 04/30/94
Trunkline SG-2 3,726 MMBtu 06/30/97
ANR 5,065 MMBtu 10/31/96
Noram 20,019 MMBtu 10/31/95
(1) The Trunkline contract was not renewed. It was replaced
with increased deliverability from the Hillsboro Storage
Field.
IP's present estimated supplies of gas from pipelines and
its own storage are sufficient to serve all of its existing firm
loads and to provide best efforts service to interruptible loads
during critical periods. Gas service to interruptible customers
was interrupted on six occasions for a total of 579 hours during
the year 1994. On these occasions, storage service was made
available in lieu of curtailment. Gas service continues to be
available to all applicants on a current basis.
Environmental Matters
---------------------
IP is subject to regulation by certain federal and Illinois
authorities with respect to environmental matters and may in the
future become subject to additional regulation by such
authorities or by other federal, state and local governmental
bodies. Existing regulations affecting IP are principally
related to air and water quality, hazardous wastes and toxic
substances.
Air Quality
-----------
Pursuant to the Federal Clean Air Act (Act), the United
States Environmental Protection Agency (USEPA) has established
ambient air quality standards for air pollutants which in its
judgment have an adverse effect on public health or welfare. The
Act requires each state to adopt laws and regulations, subject to
USEPA approval, designed to achieve such standards. Pursuant to
the Illinois Environmental Protection Act, the Illinois Pollution
Control Board (Board) adopted and, along with the Illinois
Environmental Protection Agency (IEPA), is enforcing a comprehen
sive set of air pollution control regulations which include
emission limitations and permitting and monitoring and reporting
requirements. These regulations have, with some modifications,
received USEPA approval and are enforceable by both the Illinois
and federal agencies.
The air pollution regulations of the Board impose
limitations on emissions of particulate, sulfur dioxide, carbon
monoxide, nitrogen oxides and various other pollutants.
Enforcement of emission limitations is accomplished in part
through the regulatory permitting process. To construct a
facility which will produce regulated emissions, a construction
permit must be obtained, usually on the basis of the design being
sufficient to permit operation within applicable emission
limitations. Upon completion of construction, an operating
permit for the facility must be obtained. Operating permits are
granted for various periods, usually within a range from two to
five years. The initial granting or subsequent renewal of
operating permits is based upon a demonstration that the facility
operates within prescribed limitations on emissions. IP's
practice is to obtain an operating permit for each source of
regulated emissions. Presently, it has a total of approximately
100 permits for emission sources at its power stations and other
facilities, expiring at various times. In addition to having the
requisite operating permits, each source of regulated emissions
must be operated within the regulatory limitations on emissions.
Verification of such compliance is usually accomplished by
reports to regulatory authorities and inspections by such
authorities.
Jointly, IP and IEPA petitioned the Board to adopt a
regulatory amendment providing for a site-specific sulfur dioxide
limitation applicable to the Baldwin power station. The Board
granted that relief in 1979 and amended it in 1983 to satisfy
certain concerns raised by USEPA. In October 1983, the
amendment, with supporting information, was submitted to USEPA
for approval as part of the State Implementation Plan (SIP). On
March 5, 1990, USEPA approved the Baldwin SIP allowing the use of
local coal up to full capacity of the Baldwin power station.
In addition to the sulfur dioxide emission limitations for
existing facilities, both the USEPA and the State of Illinois
adopted New Source Performance Standards (NSPS) applicable to
coal-fired generating units limiting emissions to 1.2 pounds of
sulfur dioxide per million Btu of heat input. This standard is
applicable to IP's Unit 6 at the Havana power station. The
federal NSPS also limits nitrogen oxides, opacity and particulate
emissions and imposes certain monitoring requirements. In 1977
and 1990 the Act was amended and, as a result, USEPA has adopted
more stringent emission standards for new sources. These
standards would apply to any new plant constructed by IP.
Clean Air Act
-------------
On November 15, 1990, the U. S. Congress passed the Clean
Air Act Amendments (Amendments). The Amendments create new
programs to control acid rain, protect stratospheric ozone and
require new permits for most air pollution sources. The
Amendments also modify the existing hazardous air pollutant
program and impose new air quality requirements on sources in
areas which do not meet the ambient air quality standards and
other sources which adversely impact these areas. As the
regulations implementing the Amendments are developed, IP will
develop and implement plans to maintain compliance with any new
air pollutant restrictions.
In August 1992, IP announced that it had suspended
construction of two scrubbers at the Baldwin power station, on
which IP had expended approximately $34.6 million. IP has
recovered approximately $3.1 million as a result of the sale of
excess materials that were not used on the project. After
suspending scrubber construction, IP reconsidered its
alternatives for complying with Phase I of the 1990 Clean Air Act
Amendments. In March 1993, IP announced its compliance plan for
Phase I (1995-1999) of the Clean Air Act, which is to continue
using high-sulfur Illinois coal and acquire emission allowances
to comply with the Clean Air Act requirements. An emission
allowance is the authorization by the USEPA to emit one ton of
sulfur dioxide. The ICC approved IP's Phase I Clean Air Act
compliance plan in September 1993, and IP is continuing to
implement that plan. Sufficient emission allowances have been
acquired to meet anticipated needs for 1995. IP will be active in
the emissions allowance market in order to meet requirements for
allowances in 1996 and beyond. In 1993, the Illinois General
Assembly passed and the governor signed legislation authorizing
but not requiring the ICC to permit expenditures and revenues
from emission allowance purchases and sales to be reflected in
rates charged to customers as a cost of fuel. In December 1994,
the ICC approved the recovery of emission allowance costs through
the Uniform Fuel Adjustment Clause. IP's compliance plan will
defer, until at least 2000, any need for scrubbers or other
capital projects associated with sulfur dioxide emission
reductions. Additional actions and capital expenditures will be
required by IP to achieve compliance with the Phase II (2000 and
beyond) sulfur dioxide emission requirements of the Clean Air
Act.
IP planned to comply with the Phase I nitrogen-oxide
emission reduction requirements of the acid rain provisions of
the Clean Air Act by installing low-nitrogen-oxide (NOx) burners
at Baldwin Unit 3. On November 29, 1994, the U.S. D.C. Circuit
Court of Appeals remanded the Phase I NOx rules back to the
USEPA. IP is positioned to comply with the previously established
rules and does not expect the new rules to be any more stringent.
Therefore, the Court's decision is not expected to have a
material impact on IP's compliance activity.
Additional capital expenditures are anticipated prior to
2000 to comply with the Phase II nitrogen-oxide requirements, as
well as potential requirements to further reduce nitrogen-oxide
emissions from IP plants to help achieve compliance with air
quality standards in the St. Louis and/or Chicago metropolitan
areas. IP has installed continuous emission monitoring systems at
its major generating stations, as required by the acid rain
provisions of the Clean Air Act.
In July 1993, the Alliance for Clean Coal (Alliance), a
coalition of Western coal producers and railroads, filed suit
against the ICC in the U.S. District Court in Chicago. The
Alliance sought a declaration that an Illinois statute regarding
the filing with and approval by the ICC of utility Clean Air Act
compliance plans, including provisions on the construction of
scrubbers or other devices to facilitate continued use of high-
sulfur Illinois coal as a fuel, is unconstitutional. In December
1993, the U.S. District Court issued an opinion and an order in
Alliance for Clean Coal vs. Ellen Craig, et al. declaring the
statute unconstitutional. The order prohibits the ICC from
enforcing the statute, and declares void compliance plans
prepared and approved in reliance on the statute. Subsequent to
that decision, IP filed its plan with the ICC, not for approval
as it believes no approval of the plan is required, but as a
supplement to informational filings made in a pending least-cost
plan proceeding. The ICC concluded in its final order that IP's
compliance plan represented the least-cost option for compliance.
On January 9, 1995, the Seventh Circuit Court of Appeals affirmed
the U.S. District Court decision.
Manufactured-Gas Plant (MGP) Sites
----------------------------------
IP, through its predecessor companies, was identified on a
State of Illinois list as the responsible party for potential
environmental impairment at 24 former MGP sites. IP is
investigating each of the sites to determine: (1) the type and
amount of residues present; (2) whether the residues constitute
environmental or health hazards and, if present, their extent;
and (3) whether IP has any responsibility for remedial action.
Because of the unknown and unique characteristics of each site
(such as amount and type of residues present, physical
characteristics of the site and the environmental risk) and
uncertain regulatory requirements, IP is not able to determine
its ultimate liability for the investigation and remediation of
the 24 sites. However, at December 31, 1994, IP has estimated
and recorded a minimum liability of $35 million. In 1994, IP
spent approximately $1.3 million for investigation and
remediation activities. IP is unable to determine at this time
what portion of these costs, if any, will be eligible for
recovery from insurance carriers or other potentially responsible
parties. In addition, IP is unable to determine the time frame
over which these costs may be paid out. IP has recorded a
regulatory asset in the amount of $35 million, reflecting
management's expectation that investigation and remediation costs
for the MGP sites will be recovered from customers or insurers.
In September 1992, the ICC issued a generic order concluding
that utilities will be allowed to collect from customers MGP
remediation costs paid to third parties, subject to prudency
evaluation. The order allowed recovery of such prudently incurred
costs over a five-year period but with no recovery from customers
of carrying costs on the unrecovered balance.
IP is currently recovering MGP site cleanup costs from its
customers through a tariff rider approved by the ICC in April
1993. In February 1994, an intervening consumer group appealed
the September 1992 ICC order and an affirming December 1993
Appellate Court decision to the Illinois Supreme Court, arguing
that utilities should not be permitted to recover MGP cleanup
costs from customers or should not be permitted to recover such
costs through riders. IP and other utilities have also appealed
to the Illinois Supreme Court seeking to include carrying costs
on the unrecovered balance of cleanup costs through the tariff
rider. The Illinois Supreme Court agreed to hear both appeals,
and briefing and oral arguments were held in September 1994.
Management believes that the final disposition of these appeals
will not have a material adverse effect on Illinova's or IP's
consolidated financial position or results of operations.
Water Quality
-------------
The Federal Water Pollution Control Act Amendments of 1972
require that National Pollutant Discharge Elimination System
(NPDES) permits be obtained from USEPA (or, when delegated, from
individual state pollution control agencies) for any discharge
into navigable waters. Such discharges are required to conform
with the standards, including thermal, established by USEPA and
also with applicable state standards.
Enforcement of discharge limitations is accomplished in
part through the regulatory permitting process similar to that
described previously under "Air Quality". Presently, IP has
approximately two dozen permits for discharges at its power
stations and other facilities, which must be periodically
renewed.
In addition to obtaining such permits, each source of
regulated discharges must be operated within the limitations
prescribed by applicable regulations. Verification of such
compliance is usually accomplished by monitoring results reported
to regulatory authorities and inspections by such authorities.
The Baldwin permit was reissued during the fourth quarter
of 1993 and is due for renewal in the fourth quarter of 1997.
The Hennepin NPDES permit was reissued in 1992 and is due for
renewal in the third quarter of 1997. The Clinton permit was
reissued in 1990 and is due for renewal in the second quarter of
1995. The application to renew this permit has been submitted
and IP is allowed to continue to operate the plant at currently
authorized levels. The Vermilion, Wood River and Havana permits
were reissued in 1991. These permits are due for renewal in the
fourth quarter of 1995.
During 1994, IP investigated various compliance options for
the ash pond discharge from the Vermilion Plant (Plant). One of
the options considered by the Plant was to request a flow-based
NPDES permit. This approach would require the new ash pond be
used to store wastewater during months when the flow in the
receiving stream was low and the possibility of exceeding in-
stream water quality standards would be greatest. New piping,
valves and sophisticated flow-monitoring equipment was installed
to allow the Plant to control the rate of release from the ash
pond so that in-stream standards would not be exceeded. A
modified NPDES permit was received from IEPA in June 1994 which
authorized this type operation.
Recently the Baldwin NPDES permit was modified to extend
the compliance schedule for achieving compliance with the boron
effluent limit for the ash pond discharge. The initial date for
achieving compliance was October 1996; however, because of delays
caused by the flooded Kaskaskia River, necessary mixing zones
studies could not be completed quickly. IEPA modified the permit
to extend the compliance schedule until December 1, 1997, which
allows IP sufficient time to complete all necessary studies.
Other Issues
------------
Hazardous and non-hazardous wastes generated by IP must be
managed in accordance with federal regulations under the Toxic
Substances Control Act, the Comprehensive Environmental Response,
Compensation and Liability Act and the Resource Conservation and
Recovery Act (RCRA) and additional state regulations promulgated
under both RCRA and state law. Regulations promulgated in 1988
under RCRA govern IP's use of underground storage tanks. The
use, storage, and disposal of certain toxic substances, such as
polychlorinated biphenyls (PCB's) in electrical equipment, are
regulated under the Toxic Substances Control Act. Hazardous
substances used by IP are subject to reporting requirements under
the Emergency Planning Community-Right-To-Know Act (EPCRA). The
State of Illinois has been delegated authority for enforcement of
these regulations under the Illinois Environmental Protection Act
and state statutes. These requirements impose certain
monitoring, recordkeeping, reporting and operational requirements
which IP has implemented or is implementing to assure compliance.
IP does not anticipate that compliance will have a material
adverse effect on its financial position or results of
operations.
Between June 1983 and January 1985, IP shipped various
materials containing PCB's to the Martha C. Rose Chemicals, Inc.
(Rose) facility in Holden, Missouri for proper treatment and
disposal. Rose, pursuant to permits issued by USEPA, had
undertaken to dispose of PCB materials for IP and others, but
failed in part to do so. As a result of such failure, PCB
materials were being stored at the facility. In 1986, IP joined
with a number of other generators to efficiently and economically
cleanup the facility. The Steering Committee, consisting of IP
and 15 other entities has received USEPA's approval to implement
the Remedial Design Work Plan. Remedial action plan activities
are scheduled for completion by the end of April 1995. The
Steering Committee is required to monitor ground water at the
site from a minimum of five years to a maximum of ten years after
completion of the Plan. At the present time, management does not
believe its ratable share of potential liability related to the
cost of future activities at the Rose site will have a material
adverse effect on Illinova's or IP's consolidated financial
position or results of operations. IP, along with fourteen other
steering committee members, reached a settlement with all
potentially responsible parties to recover their ratable share of
these costs.
Electric and Magnetic Fields
----------------------------
The possibility that exposure to electric and magnetic
fields (EMF) emanating from power lines, household appliances
and other electric sources may result in adverse health effects
continues to be the subject of litigation and governmental,
medical and media attention. Litigants have also claimed that EMF
concerns justify recovery from utilities for the loss in value of
real property exposed to power lines, substations and other such
sources of EMF. Scientific research worldwide has produced
conflicting results and no conclusive evidence that electric
and/or magnetic field exposure causes adverse health effects.
Research is continuing to resolve scientific uncertainties. The
DOE and the National Institute of Environmental Health Sciences
are administering a National EMF Research and Public Information
Dissemination Program. A final report on the results of this
Program is required by statute to be submitted to Congress by
March 31, 1997. It is too soon to tell what, if any, impact
these actions may have on Illinova's or IP's consolidated
financial position.
Environmental Expenditures
--------------------------
Operating expenses for environmentally-related activities in
1994 were approximately $48 million (including the incremental
costs of alternative fuels to meet environmental requirements).
IP's accumulated capital expenditures (including AFUDC) for
environmental protection programs since 1969 have reached
approximately $792 million.
Research and Development
------------------------
IP's research and development expenditures during 1994, 1993
and 1992 were approximately $5.5 million, $6.4 million and $3.7
million, respectively. The increased research and development
costs in 1993 are primarily due to increased dues to the Electric
Power Research Institute and increased alternate fuel testing at
the Baldwin power station. The decreased research and
development costs in 1994 were because of decreased alternate
fuel testing at the Baldwin power station.
Regulation
----------
Under the Illinois Public Utilities Act, the ICC has broad
powers of supervision and regulation with respect to the rates
and charges of IP, its services and facilities, extensions or
abandonment of service, classification of accounts, valuation and
depreciation of property, issuance of securities and various
other matters. The Illinois Public Utilities Act was amended
effective January 1, 1986 to include certain provisions
specifying criteria for the inclusion of utility plant investment
in rate base. These provisions state in substance that the ICC
shall include in a utility's rate base only the value of its
investment which is both prudently incurred and used and useful
in providing service to customers; that no new electric
generating plant or significant addition to existing facilities
shall be included in rate base unless the ICC determines that
such plant or facility is reasonable in cost, prudent and used
and useful in providing utility service to customers; and that
the ICC is empowered to determine whether a utility's generating
capacity is in excess of that reasonably necessary to provide
adequate and reliable service and to make appropriate and
equitable adjustments to rates upon a finding of excess capacity,
provided that any such determination and adjustment with respect
to generating capacity existing or under construction prior to
January 1, 1986 shall be limited to the determination and
adjustment, if any, appropriate under the law then in effect.
Illinova and IP are exempt from all the provisions of the
Public Utility Holding Company Act of 1935 except Section 9(a)(2)
thereof. That section requires approval of the Securities and Ex
change Commission prior to certain acquisitions of any securities
of other public utility companies or public utility holding
companies.
IP is subject to regulation under the Federal Power Act by
the FERC as to rates and charges in connection with the
transmission of electric energy in interstate commerce and the
sale of such energy at wholesale in interstate commerce, the
issuance of debt securities maturing in not more than 12 months,
accounting and depreciation policies, and certain other matters.
The FERC has declared IP exempt from the Natural Gas Act and
the orders, rules and regulations of the Commission thereunder.
IP is subject to the jurisdiction of the NRC with respect to Cl
inton. NRC regulations control the granting of permits and
licenses for the construction and operation of nuclear power
stations and subject such stations to continuing review and
regulation. Additionally, the NRC review and regulatory process
covers decommissioning, radioactive waste, environmental and
radiological aspects of such stations. In general, the NRC
continues to propose new and revised rules relating to the
operations and maintenance aspects of nuclear facilities. It is
unclear whether such proposed rules will be adopted and what
effect, if any, such adoption will have on IP.
IP is subject to the jurisdiction of the Illinois Department
of Nuclear Safety (IDNS) with respect to Clinton. IDNS and the
NRC entered a memorandum of understanding which allows IDNS to
review and regulate nuclear safety matters at state nuclear
facilities. The IDNS review and regulatory process covers
radiation safety, environmental safety, non-nuclear pressure
vessels, emergency preparedness and emergency response. IDNS
continues to propose new and revised state administrative code.
It is unclear if such proposed rules will be adopted and what
effect, if any, such adoption will have on IP.
Executive Officers of Illinova Corporation
------------------------------------------
Name of Officer Age Position
--------------- --- --------
Larry D. Haab 57 Chairman, President and
Chief Executive Officer
Larry F. Altenbaumer 47 Chief Financial Officer,
Treasurer and Controller
Leah Manning Stetzner 46 General Counsel and
Corporate Secretary
Mr. Haab was elected Chairman, President and Chief Executive
Officer in December 1993.
Mr. Altenbaumer was elected Chief Financial Officer,
Treasurer and Controller in June 1994.
Ms. Stetzner was elected General Counsel and Corporate
Secretary in June 1994.
Executive Officers of Illinois Power Company
--------------------------------------------
Name of Officer Age Position
--------------- --- --------
Larry D. Haab 57 Chairman, President and
Chief Executive Officer
Charles W. Wells 60 Executive Vice President
Larry F. Altenbaumer 47 Senior Vice President and
Chief Financial Officer
Larry S. Brodsky 46 Senior Vice President
Paul L. Lang 54 Senior Vice President
Wilfred Connell 57 Vice President
John G. Cook 47 Vice President
Larry L. Idleman 56 Vice President
Leah Manning Stetzner 46 Vice President, General
Counsel and Corporate
Secretary
Ralph F. Tschantz 42 Vice President
Alec G. Dreyer 37 Treasurer and Controller
Each of the above IP executive officers, except for Mr.
Tschantz and Mr. Dreyer, has been employed by IP for more than
five years in executive or management positions. Prior to
election to the positions shown above, the following executive
officers held the following positions since January 1, 1990.
Mr. Haab was elected Chairman in June 1991. He was elected
Chief Executive Officer in April 1991 and President in April
1989.
Mr. Altenbaumer was elected Senior Vice President and Chief
Financial Officer in June 1992. Prior to being elected Vice
President, Chief Financial Officer and Controller in June 1990,
he was Controller and Treasurer.
Mr. Brodsky was elected Senior Vice President in October
1994. He was previously elected Vice President in November 1987.
Mr. Lang was elected Senior Vice President in June 1992. He
joined IP as Vice President in July 1986.
Mr. Cook was elected Vice President in June 1992. He
previously held the positions of Manager of Clinton Power Station
and Manager of Nuclear Planning and Support.
Ms. Stetzner was elected Vice President, General Counsel and
Corporate Secretary in February 1993. She joined IP as General
Counsel and Corporate Secretary in October 1989.
Mr. Tschantz joined IP as Vice President in March 1995. He
previously was a Regional Account Management Director with
Keebler Company since 1993 and Group Director, Sales, Systems and
Planning since 1990.
Mr. Dreyer was elected Treasurer and Controller in December
1994. Prior to joining IP as Controller in June 1992, he was a
Senior Audit Manager with Price Waterhouse since 1990.
The present term of office of each of the above executive
officers extends to the first meeting of Illinova's and IP's
Board of Directors after the Annual Election of Directors. There
are no family relationships among the executive officers and
directors of Illinova and IP.
Operating Statistics
---------------------
For Illinova the information under the caption "Selected
Illinois Power Company Statistics" on page A-33 of the 1994
Annual Report to Shareholders in the appendix to the Illinova
Proxy Statement is incorporated herein by reference.
For IP the information under the caption "Selected
Statistics" on page A-33 of the 1994 Annual Report to
Shareholders in the appendix to the IP Information Statement is
incorporated herein by reference.
Item 2. Properties
-------
IP owns and operates electric generating stations at Havana,
Wood River, Hennepin, Baldwin and near Danville, Illinois
(designated as the Vermilion station), totaling 3,487,000 kilo
watts of net summer capability. IP has an ownership in the
Clinton power station (Clinton) of 86.8% and Soyland Power Coop
erative, Inc. owns the remaining 13.2%. IP's portion of net
summer output capability of Clinton is 807,000 kilowatts. IP
also owns other gas turbine generating facilities, at three
locations, with an aggregate capability of 147,000 kilowatts.
IP owns an interconnected electric transmission system of
approximately 2,800 circuit miles, operating from 69,000 to
345,000 volts and a distribution system which includes about
37,200 circuit miles of overhead and underground lines.
All outstanding first mortgage bonds issued under the
Mortgage and Deed of Trust dated November 1, 1943 are secured by
a first mortgage lien on substantially all of the fixed property,
franchises and rights of IP with certain exceptions expressly
provided in the mortgage securing the bonds. All outstanding New
Mortgage Bonds issued under the General Mortgage and Deed of
Trust dated November 1, 1992, are secured by a lien on IP's
properties used in the generation, purchase, transmission,
distribution and sale of electricity and gas, which lien is
junior to the lien of the Mortgage and Deed of Trust dated
November 1, 1943.
Item 3. Legal Proceedings
-------
See discussion of legal proceedings under Item 1 "Nuclear"
and "Gas Manufacturing Sites".
Fuel and Purchased Gas Adjustment Clauses
-----------------------------------------
The ICC holds annual public hearings to determine whether
each utility's fuel adjustment clause and purchased gas
adjustment clause reflect actual costs of fuel and gas prudently
purchased and to reconcile amounts collected with actual costs,
with the possibility of surcharges or refunds to reflect amounts
under-collected or over-collected. See "1987 Uniform Fuel
Adjustment Clause Reconciliation" reported under "Clinton Power
Station" in Item 1 for information regarding a January 1994 order
on remand from the ICC.
Environmental
-------------
See "Environmental Matters" reported under Item 1 for
information regarding legal proceedings concerning environmental
matters.
Item 4. Submission of Matters to a Vote of Security Holders
-------
IP did not submit any matter to a vote of security holders
during the fourth quarter of the fiscal year ended December 31,
1994.
<PAGE>
PART II
-----------------------------------------------------------------
Item 5. Market for Registrants' Common Equity and Related
------- Stockholder Matters
For Illinova the information under the caption "Quarterly
Consolidated Financial Information and Common Stock Data (Unaudit
ed)" on page A-31 of the 1994 Annual Report to Shareholders in
the appendix to the Illinova Proxy Statement is incorporated
herein by reference.
For IP the information under the caption "Quarterly
Consolidated Financial Information and Common Stock Data
(Unaudited)" on page A-31 of the 1994 Annual Report to
Shareholders in the appendix to the IP Information Statement is
incorporated herein by reference.
Item 6. Selected Financial Data
-------
For Illinova the information under the caption "Selected
Consolidated Financial Data" on page A-32 of the 1994 Annual
Report to Shareholders in the appendix to the Illinova Proxy
Statement is incorporated herein by reference.
For IP the information under the caption "Selected
Consolidated Financial Data" on page A-32 of the 1994 Annual
Report to Shareholders in the appendix to the IP Information
Statement is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial
------- Condition and Results of Operations
For Illinova the information under the caption "Management's
Discussion and Analysis" on pages A-2 through A-9 of the 1994
Annual Report to Shareholders in the appendix to the Illinova
Proxy Statement is incorporated herein by reference.
For IP the information under the caption "Management's
Discussion and Analysis" on pages A-2 through A-9 of the 1994
Annual Report to Shareholders in the appendix to the IP
Information Statement is incorporated herein by reference.
In December 1994, IP filed a petition with the ICC seeking
approval of a program whereby IP will reacquire shares of its
common stock from Illinova, from time to time, at prices
determined to be equivalent to current market value. The
reacquired stock will be retained as treasury stock or cancelled.
On March 22, 1995, the ICC approved the common stock repurchase
program. The ICC specified that IP may initiate the repurchase
of shares of its common stock from Illinova subject to meeting
certain financial tests. The ICC did not set a limit on the
number of shares of common stock that can be repurchased.
On May 1, 1995, IP will redeem the remaining 240,000 shares
of 8.00% Cumulative Preferred Stock for $100 per share plus
accrued dividends.
Item 8. Financial Statements and Supplementary Data
-------
For Illinova the consolidated financial statements and
related notes on pages A-11 through A-31 and Report of Inde
pendent Accountants on page A-10 of the 1994 Annual Report to
Shareholders in the appendix to the Illinova Proxy Statement are
incorporated herein by reference. With the exception of the
aforementioned information and the information incorporated in
Items 5, 6 and 7, the 1994 Annual Report to Shareholders in the
appendix to the Illinova Proxy Statement is not to be deemed
filed as part of this Form 10-K Annual Report.
For IP the consolidated financial statements and related
notes on pages A-11 through A-31 and Report of Independent
Accountants on page A-10 of the 1994 Annual Report to
Shareholders in the appendix to the IP Information Statement are
incorporated herein by reference. With the exception of the
aforementioned information and the information incorporated in
Items 5, 6 and 7, the 1994 Annual Report to Shareholders in the
appendix to the IP Information Statement is not to be deemed
filed as part of this form 10-K Annual Report.
Item 9. Changes in and Disagreements With Accountants on
------- Accounting and Financial Disclosure
None.
<PAGE>
PART III
-----------------------------------------------------------------
Item 10. Directors and Executive Officers of the Registrants
--------
For Illinova the information under the caption "Board of
Directors" on pages 3 through 7 of Illinova's Proxy Statement for
its 1995 Annual Meeting of Stockholders is incorporated herein by
reference. The information relating to Illinova's executive
officers is set forth in Part I of this Annual Report on Form 10-
K.
For IP the information under the caption "Board of Directors"
on pages 4 through 7 of IP's Information Statement for its 1995
Annual Meeting of Stockholders is incorporated herein by
reference. The information relating to Illinois Power Company's
executive officers is set forth in Part I of this Annual Report
on Form 10-K.
Item 11. Executive Compensation
--------
For Illinova the information under the caption "Executive
Compensation" on pages 8 through 12 of Illinova's Proxy Statement
for its 1995 Annual Meeting of Stockholders is incorporated
herein by reference.
For IP the information under the caption "Executive
Compensation" on pages 8 through 13 of IP's Information Statement
for its 1995 Annual Meeting of Stockholders is incorporated
herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
--------- Management
For Illinova the information under the caption "Security
Ownership of Management and Certain Beneficial Owners" on page 7
and the information regarding securities owned by certain
officers and directors under the caption "Board of Directors" on
pages 3 through 7 of Illinova's Proxy Statement for its 1995
Annual Meeting of Stockholders is incorporated herein by
reference.
For IP the information under the caption "Security Ownership
of Management and Certain Beneficial Owners" on page 7 and the
information regarding securities owned by certain officers and
directors under the caption "Board of Directors" on pages 4
through 7 of IP's Information Statement for its 1995 Annual
Meeting of Stockholders is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
--------
None.
<PAGE>
PART IV
------------------------------------------------------------
Item 14. Exhibits, Financial Statement Schedules, and
--------- Reports on Form 8-K
(a) Documents filed as part of this report.
(1a) Financial Statements:
Page in 1994
Annual Report
to Shareholders
in the appendix
to the Illinova
Proxy Statement*
----------------
Report of Independent Accountants A-10
Consolidated Statements of Income for the
three years ended December 31, 1994 A-11
Consolidated Balance Sheets at
December 31, 1994 and 1993 A-12
Consolidated Statements of Cash Flows for
the three years ended December 31, 1994 A-13
Consolidated Statements of Retained
Earnings (Deficit) for the three years
ended December 31, 1994 A-13
Notes to Financial Statements A-14 - A-31
* Incorporated by reference from the indicated pages of
the 1994 Annual Report to Shareholders in the appendix to
the Illinova Proxy Statement.
(1b) Financial Statements:
Page in 1994
Annual Report
to Shareholders
in the appendix
to the IP
Information
Statement**
---------------
Report of Independent Accountants A-10
Consolidated Statements of Income for the
three years ended December 31, 1994 A-11
Consolidated Balance Sheets at
December 31, 1994 and 1993 A-12
Consolidated Statements of Cash Flows for
the three years ended December 31, 199 A-13
Consolidated Statements of Retained
Earnings (Deficit) for the three years
ended December 31, 1994 A-13
Notes to Financial Statements A-14 - A-31
** Incorporated by reference from the indicated pages of
the 1994 Annual Report to Shareholders in the appendix to
the IP Information Statement (See page 35 of this Form 10-
K).
(2) Financial Statement Schedules:
All Financial Statement Schedules are omitted because
they are not applicable or the required information is shown
in the financial statements or notes thereto.
(3) Exhibits
The exhibits filed with this Form 10-K are listed
in the Exhibit Index located elsewhere herein. All
management contracts and compensatory plans or
arrangements set forth in such list are marked with
a ~.
(b) Reports on Form 8-K since September 30, 1994:
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ILLINOVA CORPORATION
(REGISTRANT)
By Larry D. Haab
------------------------
Larry D. Haab, Chairman,
President and Chief
Executive Officer
Date: March 30, 1995
------------------------
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities on
the dates indicated.
Signature Title Date
--------- ----- ----
Larry D. Haab Chairman, President, Chief March 30, 1995
--------------------- Executive Officer and Director
Larry D. Haab
(Principal Executive
Officer)
Larry F. Altenbaumer Chief Financial Officer, March 30, 1995
--------------------- Treasurer and Controller
Larry F. Altenbaumer
(Principal Financial
and Accounting
Officer)
Richard R. Berry Director March 30, 1995
---------------------
Richard R. Berry
Donald E. Lasater Director March 30, 1995
---------------------
Donald E. Lasater
Donald S. Perkins Director March 30, 1995
---------------------
Donald S. Perkins
Robert M. Powers Director March 30, 1995
---------------------
Robert M. Powers
Walter D. Scott Director March 30, 1995
---------------------
Walter D. Scott
Ronald L. Thompson Director March 30, 1995
---------------------
Ronald L. Thompson
Walter M. Vannoy Director March 30, 1995
---------------------
Walter M. Vannoy
Marilou von Ferstel Director March 30, 1995
---------------------
Marilou von Ferstal
Charles W. Wells Director March 30, 1995
---------------------
Charles W. Wells
John D. Zeglis Director March 30, 1995
---------------------
John D. Zeglis
Director March 30, 1995
---------------------
Vernon K. Zimmerman
<PAGE>
Exhibit Index
Exhibit Description Page Number
------- ----------- -----------
3(a)(1) Amended and Restated Articles of Incorporation
of Illinois Power Company, dated September 7, 1994.
Filed as Exhibit 3(a) to the Current Report on Form
8-K dated September 7, 1994 (File No. 1-3004). *
3(a)(2) Articles of Amendment to the Articles of
Incorporation of Illinova Corporation, filed as
of October 31, 1994. Filed as Exhibit 3(a) to
the Quarterly Report on Form 10-Q under the
Securities Exchange Act of 1934 for the quarter
ended September 30, 1994 (File No. 1-3004). *
3(a)(3) Statement of Correction to the Articles of
Incorporation of Illinova Corporation, filed
as of October 31, 1994. Filed as Exhibit 3(b)
to the Quarterly Report on Form 10-Q under the
Securities Exchange Act of 1934 for the quarter
ended September 30, 1994 (File No. 1-3004). *
3(b)(1) By-laws of Illinois Power Company, as amended
through December 14, 1994. 47
3(b)(2) By-laws of Illinova Corporation, as amended
through December 14, 1994. 55
4(a) Mortgage and Deed of Trust dated November 1,
1943. Filed as Exhibit 2(b) Registration
No. 2-14066. *
4(b) Supplemental Indenture dated October 1, 1966.
Filed as Exhibit 2(i) Registration No. 2-27783. *
4(c) Supplemental Indenture dated October 1, 1971.
Filed as Exhibit 2(r) Registration No. 2-59465. *
4(d) Supplemental Indenture dated May 1, 1974.
Filed as Exhibit 2(v) Registration No. 2-51674. *
4(e) Supplemental Indenture dated May 1, 1977.
Filed as Exhibit 2(w) Registration No. 2-59465. *
4(f) Supplemental Indenture dated July 1, 1979.
Filed as Exhibit 2 to the Quarterly Report on Form
10-Q under the Securities Exchange Act of 1934 for
the quarter ended June 30, 1979. *
4(g) Supplemental Indenture dated March 1, 1985.
Filed as exhibit 4(a) to the Quarterly Report on Form
10-Q under the Securities Exchange Act of 1934
for the quarter ended March 31, 1985
(File No. 1-3004). *
4(h) Supplemental Indenture No. 1 dated February 1,
1987, providing for $25,000,000 principal amount of 7 5/8%
First Mortgage Bonds, Pollution Control Series F,
due December 1, 2016. Filed as Exhibit 4(ii) to the
Annual Report on Form 10-K under the Securities
Exchange Act of 1934 for the year ended December 31,
1986 (File No. 1-3004). *
4(i) Supplemental Indenture No. 2 dated February 1,
1987, providing for $50,000,000 principal amount of 7 5/8%
First Mortgage Bonds, Pollution Control Series G,
due December 1, 2016. Filed as Exhibit 4(jj) to the
Annual Report on Form 10-K under the Securities
Exchange Act of 1934 for the year ended December 31,
1986 (File No. 1-3004). *
4(j) Supplemental Indenture No. 3 dated February 1,
1987, providing for $75,000,000 principal amount of 7 5/8%
First Mortgage Bonds, Pollution Control Series H,
due December 1, 2016. Filed as Exhibit 4(kk) to the
Annual Report on Form 10-K under the Securities
Exchange Act of 1934 for the year ended December 31,
1986 (File No. 1-3004). *
4(k) Supplemental Indenture dated July 1, 1987,
providing for $33,755,000 principal amount of
8.30% First Mortgage Bonds, Pollution Control
Series I, due April 1, 2017. Filed as Exhibit 4(ll)
to the Annual Report on Form 10-K under the
Securities and Exchange Act of 1934 for the year ended
December 31, 1987 (File No. 1-3004). *
4(l) Supplemental Indenture dated December 13, 1989,
providing for $300,000,000 principal amount of
Medium-Term Notes, Series A. Filed as Exhibit 4
(nn) to the Annual Report on Form 10-K under the
Securities and Exchange Act of 1934 for the year
ended December 31, 1989 (File No. 1-3004). *
4(m) Supplemental Indenture dated July 1, 1991,
providing for $84,710,000 principal amount of 7 3/8% First
Mortgage Bonds due July 1, 2021. Filed as Exhibit
4(mm) to the Annual Report on Form 10-K under the
Securities and Exchange Act of 1934 for the year
ended December 31, 1991 (File No. 1-3004). *
4(n) Supplemental Indenture No. 1 dated June 1, 1992.
Filed as Exhibit 4(nn) to the Quarterly Report
on Form 10-Q for the quarter ended June 30, 1992
(File No. 1-3004). *
4(o) Supplemental Indenture No. 2 dated June 1, 1992.
Filed as Exhibit 4(oo) to the Quarterly Report
on Form 10-Q for the quarter ended June 30, 1992
(File No. 1-3004). *
4(p) Supplemental Indenture No. 1 dated July 1, 1992.
Filed as Exhibit 4(pp) to the Quarterly Report
on Form 10-Q for the quarter ended June 30, 1992
(File No. 1-3004). *
4(q) Supplemental Indenture No. 2 dated July 1, 1992.
Filed as Exhibit 4(qq) to the Quarterly Report
on Form 10-Q for the quarter ended June 30, 1992
(File No. 1-3004). *
4(r) Supplemental Indenture dated September 1, 1992,
providing for $72,000,000 principal amount of 6.5%
First Mortgage Bonds due September 1, 1999. Filed
as Exhibit 4(rr) to the Quarterly Report on Form
10-Q for the quarter ended September 30, 1992
(File No. 1-3004). *
4(s) General Mortgage Indenture and Deed of Trust
dated as of November 1, 1992. Filed as Exhibit 4(cc) to
the Annual Report on Form 10-K under the
Securities and Exchange Act of 1934 for the
year ended December 31, 1992 (File No. 1-3004). *
4(t) Supplemental Indenture dated February 15, 1993,
to Mortgage and Deed of Trust dated November 1, 1943.
Filed as Exhibit 4(dd) to the Annual Report on Form
10-K under the Securities and Exchange Act of 1934
for the year ended December 31, 1992
(File No. 1-3004). *
4(u) Supplemental Indenture dated February 15, 1993,
to General Mortgage Indenture and Deed of Trust
dated as of November 1, 1992. Filed as Exhibit
4(ee) to the Annual Report on Form 10-K under the
Securities and Exchange Act of 1934 for the
year ended December 31, 1992 (File No. 1-3004). *
4(v) Supplemental Indenture No. 1 dated March 15,
1993, to Mortgage and Deed of Trust dated November
1, 1943. Filed as Exhibit 4(ff) to the Annual
Report on Form 10-K under the Securities and
Exchange Act of 1934 for the year ended December 31,
1992 (File No. 1-3004). *
4(w) Supplemental Indenture No. 1 dated March 15,
1993, to General Mortgage Indenture and Deed of Trust
dated as of November 1, 1992. Filed as Exhibit 4(gg) to
the Annual Report on Form 10-K under the Securities
and Exchange Act of 1934 for the year ended December
31, 1992 (File No. 1-3004). *
4(x) Supplemental Indenture No. 2 dated March 15,
1993, to Mortgage and Deed of Trust dated November 1,
1943. Filed as Exhibit 4(hh) to the Annual Report
on Form 10-K under the Securities and Exchange Act
of 1934 for the year ended December 31, 1992
(File No. 1-3004). *
4(y) Supplemental Indenture No. 2 dated March 15,
1993, to General Mortgage Indenture and Deed of Trust
dated as of November 1, 1992. Filed as Exhibit
4(ii) to the Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year ended
December 31, 1992 (File No. 1-3004). *
4(z) Supplemental Indenture dated July 15, 1993, to
Mortgage and Deed of Trust dated November 1, 1943.
Filed as Exhibit 4(jj) to the Quarterly Report on
Form 10-Q for the quarter ended June 30, 1993
(File No. 1-3004). *
4(aa) Supplemental Indenture dated July 15, 1993, to
General Mortgage Indenture and Deed of Trust
dated as of November 1, 1992. Filed as Exhibit
4(kk) to the Quarterly Report on Form 10-Q for
the quarter ended June 30, 1993 (File No. 1-3004). *
4(bb) Supplemental Indenture dated August 1, 1993, to
Mortgage and Deed of Trust dated November 1,
1943. Filed as Exhibit 4(ll) to the Quarterly
Report on Form 10-Q for the quarter ended June 30,
1993 (File No. 1-3004). *
4(cc) Supplemental Indenture dated August 1, 1993,
to General Mortgage Indenture and Deed of Trust
dated as of November 1, 1992. Filed as Exhibit
4(mm) to the Quarterly Report on Form 10-Q for
the quarter ended June 30, 1993 (File No. 1-3004). *
4(dd) Supplemental Indenture dated October 15, 1993,
to Mortgage and Deed of Trust dated November 1,
1943. Filed as Exhibit 4(nn) to the Quarterly
Report on Form 10-Q for the quarter ended
September 30, 1993. (File No. 1-3004). *
4(ee) Supplemental Indenture dated October 15, 1993,
to General Mortgage Indenture and Deed of Trust dated
as of November 1, 1992. Filed as Exhibit 4(oo)
to the Quarterly Report on Form 10-Q for the quarter
ended September 30, 1993. *
4(ff) Supplemental Indenture dated November 1, 1993,
to Mortgage and Deed of Trust dated November 1, 1943.
Filed as Exhibit 4(pp) to the Quarterly Report on
Form 10-Q for the quarter ended September 30, 1993
(File No. 1-3004). *
4(gg) Supplemental Indenture dated November 1, 1993,
to General Mortgage Indenture and Deed of Trust dated
as of November 1, 1992. Filed as Exhibit 4(qq)
to the Quarterly Report on Form 10-Q for the quarter
ended September 30, 1993 (File No. 1-3004). *
4(hh) Supplemental Indenture dated February 1, 1994,
to Mortgage and Deed of Trust dated November 1, 1943.
Filed as Exhibit 4(hh) to the Annual Report on
Form 10-K under the Securities Exchange Act of
1934 for the year ended December 31, 1993
(File No. 1-3004). *
4(ii) Indenture dated October 1, 1994 between Illinois
Power Company and the First National Bank of
Chicago. Filed as Exhibit 4(a) to the Quarterly Report on
Form 10-Q for the quarter ended September 30, 1994
(File No. 1-3004). *
4(jj) Supplemental Indenture dated October 1, 1994, to
Indenture dated as of October 1, 1994. Filed as
Exhibit 4(b) to the Quarterly Report on Form 10-Q
for the quarter ended September 30, 1994
(File No. 1-3004). *
10(a) Group Insurance Benefits for Managerial
Employees of Illinois Power Company as amended January 1,
1983. Supersedes the Group Insurance Benefits for
Managerial Employees of Illinois Power Company as
amended April 1, 1980 and filed as Exhibit 10(a)
to the Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year
ended December 31, 1983 (File No. 1-3004).~ *
10(b) Illinova Corporation Deferred Compensation Plan
for Certain Directors, as amended April 10, 1991.
Filed as Exhibit 10(b) to the Annual Report
on Form 10-K under the Securities Exchange Act
of 1934 for the year ended December 31, 1991
(File No. 1-3004).~ *
10(c) Illinois Power Company Incentive Savings Trust
and Illinois Power Company Incentive Savings
Plan and Amendment I thereto. Filed as Exhibit
10(d) to the Annual Report on Form 10-K under
the Securities Exchange Act of 1934 for the
year ended December 31, 1984 (File No. 1-3004).~ *
10(d) Illinova Corporation Director Emeritus Plan
for Outside Directors. Filed as Exhibit 10(e)
to the Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year
ended December 31, 1989 (File No. 1-3004).~ *
10(e) Description of Illinois Power Company's
Executive Incentive Compensation Plan. Filed
as Exhibit 10(f) to the Annual Report on Form
10-K under the Securities Exchange Act of
1934 for the year ended December 31, 1989
(File No. 1-3004).~ *
10(f) Illinois Power Company Employee Retention
Plan and Agreement. Filed as Exhibit 10(g) to
the Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year
ended December 31, 1989 (File No. 1-3004).~ *
10(g) Illinois Power Company Incentive Savings Plan,
as amended and restated effective January 1, 1991.
Filed as Exhibit 10(h) to the Annual Report on
Form 10-K under the Securities Exchange Act of
1934 for the year ended December 31, 1990
(File No. 1-3004).~ *
10(h) Illinova Corporation Stock Plan for Outside
Directors as amended and restated by the Board of
Directors on April 9, 1992 and as further amended
April 14, 1993. Filed as Exhibit 10(h) to the
Annual Report on Form 10-K under the Securities
Exchange Act of 1934 for the year ended
December 31, 1993 (File No. 1-3004).~ *
10(i) Retirement and Consulting Agreement entered into
as of June 1, 1991 between Illinois Power Company
and Wendell J. Kelley. Filed as Exhibit 10(i) to
the Annual Report on Form 10-K under the Securities
Exchange Act of 1934 for the year ended December
31, 1991 (File No. 1-3004).~ *
10(j) Illinova Corporation Retirement Plan for Outside
Directors, as amended through December 11, 1991.
Filed as Exhibit 10(j) to the Annual Report on Form
10-K under the Securities Exchange Act of 1934 for
the year ended December 31, 1991 (File No. 1-3004).~ *
10(k) Illinova Corporation 1992 long-term Incentive
Compensation Plan. Filed as Exhibit 10(k) to
the Quarterly Report on Form 10-Q for the quarter
ended March 31, 1992 (File No. 1-3004).~ *
10(l) Illinois Power Company Executive Deferred
Compensation Plan. Filed as Exhibit 10(l) to
the Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year
ended December 31, 1993. ~ *
10(m) Illinois Power Company Retirement Income Plan
for salaried employees as amended and restated effective
January 1, 1989, as further amended through
January 1, 1994.~ 63
10(n) Illinois Power Company Retirement Income Plan
for employees covered under a collective bargaining
agreement as amended and restated effective as of
January 1, 1994.~ 134
10(o) Illinois Power Company Incentive Savings Plan as
amended and restated effective January 1, 1991
and as further amended through amendments adopted
December 28, 1994.~ 200
10(p) Illinois Power Company Incentive Savings Plan
for employees covered under a collective bargaining
agreement as amended and restated effective
January 1, 1991 and as further amended through
amendments adopted December 28, 1994.~ 270
12(a) Computation of ratio of earnings to fixed
charges for Illinova Corporation. 336
12(b) Computation of ratio of earnings to fixed
charges for Illinois Power Company. 337
13(a) Illinova Corporation Proxy Statement and 1994
Annual Report to Shareholders. 338
13(b) Illinois Power Company Information Statement
and 1994 Annual Report to Shareholders. 386
21 Subsidiaries of Illinova Corporation and Illinois
Power Company. 434
23(a) Consent of Independent Accountants for Illinova
Corporation. 435
23(b) Consent of Independent Accountants for Illinois
Power Company. 436
_____________________________
* Incorporated herein by reference.
~ Management contract and compensatory plans or
arrangements.
<PAGE>
BYLAWS
ILLINOIS POWER COMPANY
(An Illinois Corporation)
As Amended December 14, 1994
ARTICLE I
Stockholders
Section 1. The annual meeting of the stockholders
of the Corporation shall be held on such date and at such
time and place as may be fixed from time to time by the
Board of Directors of the Corporation pursuant to a
resolution adopted by a majority of the members of the
Board then in office, for the purpose of electing
directors and of transacting such other business as may
properly be brought before the meeting.
Section 2. Special meetings of the stockholders may
be held upon call of the Chairman, the President, or of
the Board of Directors or of stockholders holding not
less than one-fifth of the shares of the capital stock of
the Corporation issued and outstanding, at such time and
at such place within the State of Illinois as may be
stated in the call and notice. In the event of war,
rebellion or other catastrophe, if the surviving members
of the Board of Directors shall be reduced to less than
a majority of the number fixed by these Bylaws, then any
surviving member of the Board of Directors may so call a
special meeting of stockholders, at such time and at such
place as may be stated in the call and notice.
Section 3. Notice stating the place, day and hour
of every meeting of the stockholders, and in the case of
a special meeting further stating the purpose for which
such meeting is called, shall be mailed at least ten days
before the meeting to each stockholder of record who
shall be entitled to vote thereat, at the last known post
office address of each such stockholder as it appears
upon the books of the Corporation. Such further notice
shall be given by mail, publication or otherwise, as may
be required by law. Any meeting may be held without
notice if all of the stockholders entitled to vote are
present or represented at the meeting, or all of the
stockholders entitled to notice of the meeting sign a
waiver thereof in writing.
Section 4. The holders of record of a majority of
the shares of the capital stock of the Corporation issued
and outstanding, entitled to vote thereat, present in
person or represented by proxy, shall constitute a quorum
at all meetings of the stockholders, and the vote of a
majority of such quorum shall be necessary for the
transaction of any business, unless otherwise provided by
law, by the Restated Articles of Incorporation or by the
Bylaws. If at any meeting there shall be no quorum, the
holders of record, entitled to vote, of a majority of
such shares of stock so present or represented may
adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum
shall have been obtained, when any business may be
transacted which might have been transacted at the
meeting as first convened had there been a quorum.
Section 5. Meetings of the stockholders shall be
presided over by the Chairman, or, if he is not present,
the President, or a Vice President, in that order, or, if
no such officer is present, by a chairman to be chosen at
the meeting. The Secretary of the Corporation, or, if he
is not present, an Assistant Secretary of the
Corporation, or, if neither the Secretary nor an
Assistant Secretary is present, a secretary to be chosen
at the meeting, shall act as secretary of the meeting.
Section 6. At all meetings of the stockholders
every holder of record of the shares of the capital stock
of the Corporation, entitled to vote thereat, may vote
thereat either in person or by proxy, provided that no
stockholder may appoint more than three persons as
proxies at any time, and that no proxy shall be valid
after eleven months from the date of its execution,
except where the stock is pledged as security for a debt
to the person holding the Proxy.
Section 7. At all elections of directors the voting
shall be by written ballot and stockholders may cumulate
their votes.
Section 8. The stock transfer books of the
Corporation may, if so determined by the Board of
Directors, be closed before any meeting of the
stockholders, and for any other purpose, including the
payment of any dividend, for such length of time as the
Board may from time to time determine.
ARTICLE II
Directors
Section 1. The Board of Directors of the
Corporation shall consist of between ten and fifteen
members. The directors shall be elected at the regular
annual meeting of the stockholders; but if the election
of directors is not held on the day of the annual
meeting, the directors shall cause the election to be
held as soon thereafter as conveniently may be. The
directors shall hold office for a term of one year and
until their successors are elected and qualified. No
director who is not also an employee of the Company shall
be elected to serve more than twelve (12) terms as a
member of the Board of Directors with the initial term
beginning in April, 1992, with respect to those directors
elected in April of 1992. A majority of the members of
the Board shall constitute a quorum for the transaction
of business, but if at any meeting of the Board there
shall be less than a quorum present, a majority of the
directors present may adjourn the meeting from time to
time, without notice other than announcement at the
meeting, until a quorum shall have been obtained, when
any business may be transacted which might have been
transacted at the meeting as first convened had there
been a quorum. The acts of a majority of the directors
present at any meeting at which there is a quorum shall,
except as otherwise provided by law, by the Restated
Articles of Incorporation or by the Bylaws, be the acts
of the Board.
No person shall be eligible for election as a
director after he has attained the age of 70, and no
officer or employee of the Corporation, other than the
Chairman or the President, shall be eligible for election
as director after he has attained the age of 65.
Section 2. Vacancies in the Board of Directors,
caused by death, resignation or otherwise, may be filled
at any meeting of the Board of Directors and the
directors so elected shall hold office until the next
annual meeting of the stockholders and until their
successors are elected and qualified.
Section 3. Meetings of the Board of Directors shall
be held at such place within or without the State of
Illinois as may from time to time be fixed by resolution
of the Board or as may be specified in the call of any
meeting. Regular meetings of the Board shall be held at
such time as may from time to time be fixed by resolution
of the Board, and notice of such meetings need not be
given. Special meetings of the Board may be held at any
time upon call of the President or a Vice President, by
oral, telegraphic or written notice, duly served on or
sent or mailed to each director not less than two days
before any such meeting. A meeting of the Board may be
held without notice immediately after the annual meeting
of the stockholders at the same place at which such
meeting is held. Any meeting may be held without notice
if all of the directors are present at the meeting, or if
all of the directors sign a waiver thereof in writing.
Section 4. Meetings of the Board of Directors shall
be presided over by the Chairman or, if he is not
present, the President, or a Vice President, in that
order, or, if no such officer is present, by a chairman
to be chosen at the meeting. The Secretary of the
Corporation or, if he is not present, an Assistant
Secretary of the Corporation or, if neither the Secretary
nor an Assistant Secretary is present, a secretary to be
chosen at the meeting shall act as secretary of the
meeting.
Section 5. The Board of Directors, by the
affirmative vote of a majority of the whole Board may
appoint an Executive Committee and a Finance Committee,
in each case to include three or more Directors, one of
whom shall be a resident of the State of Illinois, as the
Board may from time to time determine. Each such
Committee shall have and may exercise such powers as may
from time to time be specified in the resolution or
resolutions of the Board of Directors creating such
Committee, respectively. The Board shall have the power
at any time to fill vacancies in, to change the
membership of or to dissolve, either such Committee.
Each Committee may make rules for the conduct of its
business, and may appoint such committees and assistants
as it shall from time to time deem necessary. A majority
of the members of each Committee shall constitute a
quorum and the action of a majority thereof shall be the
action of such Committee. All actions taken by such
Committee shall be reported to the Board at its meeting
next succeeding such action.
Section 6. The Board of Directors may also appoint
one or more other committees to consist of such number of
the directors and to have such powers as the Board may
from time to time determine. The Board shall have the
power at any time to fill vacancies in, to change the
membership of, or to dissolve, any such committee. A
majority of the members of any such committee shall
constitute a quorum and may determine its action and fix
the time and place of its meetings unless the Board shall
otherwise provide. All action taken by any such
committee shall be reported to the Board at its meeting
next succeeding such action.
Section 7. Each member of the Board of Directors
who is not a salaried officer or employee of the
Corporation shall be compensated for his services as
director of the Corporation. The Board of Directors
shall fix the amount of such compensation.
Section 8. Nomination of persons for election to
the Board of Directors of the Corporation shall be made
only at a meeting of Stockholders and only (i) by or at
the direction of the Board of Directors or a Committee
thereof or (ii) by any Stockholder of the Corporation
entitled to vote for the election of Directors at the
meeting who complies with the notice procedure set forth
in this Section. Such nominations, other than those made
by or at the direction of the Board, shall be made
pursuant to timely notice in writing to the committee of
the Board of Directors which has responsibility for
nominating persons for election to the Board of
Directors, or in the event there is no such committee to
the Chairman of the Board of Directors, or in the event
there is no such person to the President of the Company
(the "Notice"). To be timely, a Notice shall be
delivered to, or mailed and received at, the principal
executive offices of the Corporation not less than ninety
(90) days nor more than one hundred twenty (120) days
prior to the Annual Meeting; provided, however, that in
the event that Directors are to be elected by the
Stockholders at any other time, the Notice shall be
delivered to, or mailed and received at, the principal
executive offices of the Corporation not later than the
tenth day following the day on which Notice of the date
of the meeting was first mailed to Stockholders. For
purposes of this Section, any adjournment or postponement
of the original meeting whereby the meeting will
reconvene within thirty (30) days from the original date
will be deemed for purposes of Notice to be a
continuation of the original meeting, and no nominations
by a Stockholder of persons to be elected Directors of
the Corporation may be made at any such reconvened
meeting unless pursuant to a Notice which was timely for
the meeting on the date originally scheduled.
The Notice shall set forth: (i) as to each person
whom the Stockholder proposes to nominate for election or
re-election as a Director, all information relating to
such person that is required to be disclosed in
solicitations of proxies for election of Directors, or as
otherwise required, in each case pursuant to the
Securities Exchange Act of 1934 (including such person's
written consent to being named in the proxy statement as
a nominee and to serving as a Director if elected); and
(ii) as to the Stockholder giving the Notice (A) the name
and address of the Stockholder (B) the class and number
of shares of voting stock of the Corporation which are
beneficially owned by such Stockholder, and (C) a
representation that the Stockholder intends to appear in
person or by proxy at the meeting to nominate the person
or persons specified in the Notice. Notwithstanding the
foregoing, nothing in this Section shall be interpreted
or construed to require the inclusion of information
about any such nominee in any proxy statement distributed
by, at the direction of, or on the behalf of, the Board.
ARTICLE III
Officers
Section 1. As soon as may be after the election
held in each year, the Board of Directors shall elect a
President (who shall be a director), one or more Vice
Presidents, one or more of whom may be designated as
Executive Vice President or Senior Vice President, and a
Secretary and a Treasurer and a Controller, and may elect
a Chairman (who shall be a director). The Board of
Directors may from time to time appoint such Assistant
Secretaries, Assistant Treasurers and other officers and
agents of the Corporation as it may deem proper. The
same person may be elected or appointed to more than one
office.
Section 2. The term of office of all officers shall
be one year or until their respective successors are
elected, but any officer or agent may be removed, with or
without cause, at any time by the affirmative vote of a
majority of the members of the Board then in office.
Section 3. The officers of the Corporation shall
each have such powers and duties as may be prescribed
from time to time by the Board of Directors or, in the
absence of such prescription, the officers of the
Corporation shall each have such powers and duties as
generally pertain to their respective offices. The
Treasurer, the Assistant Treasurers and any other
officers or employees of the Corporation may be required
to give bond for the faithful discharge of their duties,
in such sum and of such character as the Board may from
time to time prescribe.
Section 4. The salaries of all officers and agents
of the Corporation shall be fixed by the Board of
Directors, or pursuant to such authority as the Board may
from time to time prescribe.
ARTICLE IV
Certificates of Stock
Section 1. The interest of each stockholder in the
Corporation shall be evidenced by a certificate or
certificates for shares of stock of the Corporation, in
such form as the Board of Directors may from time to time
prescribe. The certificates for shares of stock of the
Corporation shall be signed by the President or a Vice
President and the Secretary or an Assistant Secretary,
sealed with the seal of the Corporation (which seal may
be a facsimile), and shall be countersigned and
registered in such manner, if any, as the Board may by
resolution prescribe.
Section 2. The shares of stock of the Corporation
shall be transferable on the books of the Corporation by
the holders thereof in person or by duly authorized
attorney, upon surrender for cancellation of certificates
for a like number of shares of the same class of stock,
with duly executed assignment and power of transfer
endorsed thereon or attached thereto and such proof of
the authenticity of the signatures as the Corporation or
its agents may reasonably require.
Section 3. No certificate for shares of stock of
the Corporation shall be issued in place of any
certificate alleged to have been lost, stolen or
destroyed, except upon production of such evidence of the
loss, theft, or destruction, and upon indemnification of
the Corporation and its agents to such extent and in such
manner as the Board of Directors may from time to time
prescribe.
ARTICLE V
Checks, Notes, etc.
All checks and drafts on the Corporation's bank
accounts and all bills of exchange and promissory notes,
and all acceptances, obligations and other instruments
for the payment of money, shall be signed by such officer
or officers or agent or agents as shall be thereunto
authorized from time to time by the Board of Directors;
provided that checks drawn on the Corporation's bank
accounts may bear facsimile signature or signatures,
affixed thereto by a mechanical device, of such officer
or officers and/or agent or agents as the Board of
Directors shall authorize.
ARTICLE VI
Fiscal Year
The fiscal year of the Corporation shall begin on
the first day of January in each year and shall end on
the thirty-first day of December following.
ARTICLE VII
Corporate Seal
The corporate seal shall have inscribed thereon the
name of the Corporation and the words "Corporate Seal
1923 Illinois."
ARTICLE VIII
Indemnification
Section 1. Indemnification of Directors, Officers
and Employees. The Corporation shall, to the fullest
extent to which it is empowered to do so by the Business
Corporation Act of 1983 or any other applicable laws, as
may from time to time be in effect, indemnify any person
who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a
director, officer, employee, trustee, or fiduciary of the
Corporation, or of a Corporation-sponsored or
Corporation-administered trust or benefit plan, or is or
was serving at the request of the Board of Directors of
the Corporation as a director, officer, employee,
trustee, or fiduciary of another corporation,
partnership, joint venture, trust, benefit plan, or other
enterprise, against all expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection
with such action, suit or proceedings.
Section 2. Contract with the Corporation. The
provisions of this Article VIII shall be deemed to be a
contract between the Corporation and each director or
officer who serves in any such capacity at any time while
this Article is in effect, and any repeal or modification
of this Article shall not affect any rights or
obligations hereunder with respect to any state of facts
then or theretofore existing or any action, suit or
proceeding theretofore or thereafter brought or
threatened based in whole or in part upon any such state
of facts.
Section 3. Other Rights of Indemnification. The
indemnification provided or permitted by this Article
shall not be deemed exclusive of any other rights to
which those indemnified may be entitled by law or
otherwise, and shall continue as to a person who has
ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and
administrators of such person.
Section 4. Retroactivity. The provisions of this
Article are to be given retroactive effect.
ARTICLE IX
Amendments
These Bylaws, or any part thereof, may be altered,
amended or repealed at any meeting of the Board of
Directors, provided that notice of such meeting shall set
forth the substance of such proposed change.
--END--
<PAGE>
BYLAWS
ILLINOVA CORPORATION
(An Illinois Corporation)
As Amended December 14, 1994
ARTICLE I
Stockholders
Section 1. The annual meeting of the
stockholders of the Corporation shall be held on such
date and at such time and place as may be fixed from time
to time by the Board of Directors of the Corporation
pursuant to a resolution adopted by a majority of the
members of the Board then in office, for the purpose of
electing directors and of transacting such other business
as may properly be brought before the meeting.
Section 2. Special meetings of the
stockholders may be held upon call of the Chairman, the
President, or of the Board of Directors or of
stockholders holding not less than one-fifth of the
shares of the capital stock of the Corporation issued and
outstanding, at such time and as such place within the
State of Illinois as may be stated in the call and
notice. In the event of war, rebellion or other
catastrophe, if the surviving members of the Board of
Directors shall be reduced to less than a majority of the
number fixed by these Bylaws, then any surviving member
of the Board of Directors may so call a special meeting
of stockholders, at such time and at such place as may be
stated in the call and notice.
Section 3. Notice stating the place, day and
hour of every meeting of the stockholders, and in the
case of a special meeting further stating the purpose for
which such meeting is called, shall be mailed at least
ten days before the meeting to each stockholder of record
who shall be entitled to vote thereat, at the last known
post office address of each such stockholder as it
appears upon the books of the Corporation. Such further
notice shall be given by mail, publication or otherwise,
as may be required by law. Any meeting may be held
without notice if all of the stockholders entitled to
vote are present or represented at the meeting, or all of
the stockholders entitled to notice of the meeting sign
a waiver thereof in writing.
Section 4. The holders of record of a majority
of the shares of the capital stock of the Corporation
issued and outstanding, entitled to vote thereat, present
in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders, and the vote
of a majority of such quorum shall be necessary for the
transaction of any business, unless otherwise provided by
law, by the Articles of Incorporation or by the Bylaws.
If at any meeting there shall be no quorum, the holders
of record, entitled to vote, of a majority of such shares
of stock so present or represented may adjourn the
meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall have
been obtained, when any business may be transacted which
might have been transacted at the meeting as first
convened had there been a quorum.
Section 5. Meetings of the stockholders shall
be presided over by the Chairman, or, if he is not
present, the President, or a Vice President, in that
order, or, if no such officer is present, by a chairman
to be chosen at the meeting. The Secretary of the
Corporation, or, if he is not present, an Assistant
Secretary of the Corporation, or, if neither the
Secretary nor an Assistant Secretary is present, a
secretary to be chosen at the meeting, shall act as
secretary of the meeting.
Section 6. At all meetings of the stockholders
every holder of record of the shares of the capital stock
of the Corporation, entitled to vote thereat, may vote
thereat either in person or by proxy, provided that no
stockholder may appoint more than three persons as
proxies at any time, and that no proxy shall be valid
after eleven months from the date of its execution,
except where the stock is pledged as security for a debt
to the person holding the Proxy.
Section 7. At all elections of directors the
voting shall be by written ballot and stockholders may
cumulate their votes.
Section 8. The stock transfer books of the
Corporation may, if so determined by the Board of
Directors, be closed before any meeting of the
stockholders, and for any other purpose, including the
payment of any dividend, for such length of time as the
Board may from time to time determine.
ARTICLE II
Directors
Section 1. Initially, the Board of Directors
of the Corporation shall consist of between one and five
members unless and until IP Merging Corporation shall
have merged with and into Illinois Power Company, with
Illinois Power Company surviving such merger (the
"Merger"). Upon consummation of the Merger, the Board of
Directors of the Corporation shall consist of between ten
and fifteen members, with all of the directors of
Illinois Power Company replacing the directors of the
Corporation and serving in such capacity until their
successors are duly elected at the next regular annual
meeting of the stockholders of the Corporation. The
directors shall be elected at the regular annual meeting
of the stockholders; but if the election of directors is
not held on the day of the annual meeting, the directors
shall cause the election to be held as soon thereafter as
conveniently may be. The directors shall hold office for
a term of one year and until their successors are elected
and qualified. No director who is not also an employee
of the Corporation shall be elected to serve more than
twelve (12) terms as a member of the Board of Directors
with the initial term beginning in April, 1994, with
respect to those directors elected in April of 1994 or
earlier. A majority of the members of the Board shall
constitute a quorum for the transaction of business, but
if at any meeting of the Board there shall be less than
a quorum present, a majority of the directors present may
adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum
shall have been obtained, when any business any be
transacted which might have been transacted at the
meeting as first convened had there been a quorum. The
acts of a majority of the directors present at any
meeting at which there is a quorum shall, except as
otherwise provided by law, by the Articles of
Incorporation or by the Bylaws, be the acts of the Board.
No person shall be eligible for election as a
director after he has attained the age of 70, and no
officer or employee of the Corporation other than the
Chairman or the President, shall be eligible for election
as director after he has attained the age of 65.
Section 2. Vacancies in the Board of
Directors, caused by death, resignation or otherwise, may
be filled at any meeting of the Board of Directors and
the directors so elected shall hold office until the next
annual meeting of the stockholders and until their
successors are elected and qualified.
Section 3. Meetings of the Board of Directors
shall be held at such place within or without the State
of Illinois as may from time to time be fixed by
resolution of the Board or as may be specified in the
call of any meeting. Regular meetings of the Board shall
be held at such time as may from time to time be fixed by
resolution of the Board, and notice of such meetings need
not be given. Special meetings of the Board may be held
at any time upon call of the President or a Vice
President, by oral telegraphic or written notice, duly
served on or sent or mailed to each director not less
than two days before any such meeting. A meeting of the
Board may be held without notice immediately after the
annual meeting of the stockholders at the same place at
which such meeting it held. Any meeting may be held
without notice if all of the directors are present at the
meeting, or if all of the directors sign a waiver thereof
in writing.
Section 4. Meetings of the Board of Directors
shall be presided over by the Chairman or, if he is not
present, the President, or a Vice President, in that
order, or, if no such officer if present, by a chairman
to be chosen at the meeting. The Secretary of the
Corporation or, if he is not present, an Assistant
Secretary of the Corporation or, if neither the Secretary
nor an Assistant Secretary is present, a secretary to be
chosen at the meeting shall act as secretary of the
meeting.
Section 5. The Board of Directors, by the
affirmative vote of a majority of the whole Board may
appoint an Executive Committee and a Finance Committee,
in each case to include three or more Directors, one of
whom shall be a resident of the State of Illinois, as the
Board may from time to time determine. Each such
Committee shall have and may exercise such powers as may
from time to time be specified in the resolution or
resolutions of the Board of Directors creating such
Committee, respectively. The Board shall have the power
at any time to fill vacancies in, to change the
membership of or to dissolve, either such Committee.
Each Committee may make rules for the conduct of its
business, and may appoint such committees and assistants
as it shall from time to time deem necessary. A majority
of the members of each Committee shall constitute a
quorum and the action of a majority thereof shall be the
action of such Committee. All actions taken by such
Committee shall be reported to the Board at its meeting
next succeeding such action.
Section 6. The Board of Directors may also
appoint one or more other committees to consist of such
number of directors and to have such powers as the Board
may from time to time determine. The Board shall have
the power at any time to fill vacancies in, to change the
membership of, or to dissolve, any such committee. A
majority of the members of any such committee shall
constitute a quorum and may determine its action and fix
the time and place of its meetings unless the Board shall
otherwise provide. All action taken by any such
committee shall be reported to the Board at its meeting
next succeeding such action.
Section 7. Each member of the Board of
Directors who is not a salaried officer or employee of
the Corporation shall be compensated for his services as
a director of the Corporation. The Board of Directors
shall fix the amount of such compensation.
Section 8. Nomination of persons for election
to the Board of Directors of the Corporation shall be
made only at a meeting of stockholders and only (i) by or
at the direction of the Board of Directors or a Committee
thereof or (ii) by any stockholder of the Corporation
entitled to vote for the election of Directors at the
meeting who complies with the notice procedure set forth
in this Section. Such nominations, other than those made
by or at the direction of the Board, shall be made
pursuant to timely notice in writing to the committee of
the Board of Directors which has responsibility for
nominating persons for election to the Board of
Directors, or in the event there is no such committee to
the Chairman of the Board of Directors, or in the event
there is no such person to the President of the Company
(the "Notice"). To be timely, a Notice shall be
delivered to, or mailed and received at, the principal
executive offices of the Corporation not less than ninety
(90) days nor more than one hundred twenty (120) days
prior to the Annual Meeting; provided, however, that in
the event that Directors are to be elected by the
stockholders at any other time, the Notice shall be
delivered to, or mailed and received at, the principal
executive offices of the Corporation not later than the
tenth day following the day on which Notice of the date
of the meeting was first mailed to stockholders. For
purposes of this Section, any adjournment or postponement
of the original meeting whereby the meeting will
reconvene within thirty (30) days from the original date
will be deemed for purposes of Notice to be a
continuation of the original meeting, and no nominations
by a stockholder of persons to be elected Directors of
the Corporation may be made at any such reconvened
meeting unless pursuant to a Notice which was timely for
the meeting on the date originally scheduled.
The Notice shall set forth: (i) as to each
person whom the stockholder proposes to nominate for
election or re-election as a Director, all information
relating to such person that is required to be disclosed
in solicitations of proxies for election of Directors, or
as otherwise required, in each case pursuant to the
Securities Exchange Act of 1934 (including such person's
written consent to being named in the proxy statement as
a nominee and to serving as a Director if elected); and
(ii) as to the stockholder giving the Notice (A) the name
and address of the stockholder (B) the class and number
of shares of voting stock of the Corporation which are
beneficially owned by such stockholder, and (C) a
representation that the stockholder intends to appear in
person or by proxy at the meeting to nominate the person
or persons specified in the Notice. Notwithstanding the
foregoing, nothing in this Section shall be interpreted
or construed to require the inclusion of information
about any such nominee in any proxy statement distributed
by, at the direction of, or on the behalf of, the Board.
ARTICLE III
Officers
Section 1. As soon as may be after the
election held in each year, the Board of Directors shall
elect a President (who shall be a director), one or more
Vice Presidents, one or more of whom may be designated as
Executive Vice President or Senior Vice President, and a
Secretary and a Treasurer and a Controller, and may elect
a Chairman (who shall be a director); provided, however,
that unless and until the consummation of the Merger, the
officers of the Corporation may consist only of a
President (who shall be a director), a Treasurer, a
Secretary and a Chairman (who shall be a director). The
Board of Directors may from time to time appoint such
Assistant Secretaries, Assistant Treasurers and other
officers and agents of the Corporation as it may deem
proper. The same person may be elected or appointed to
more than one office.
Section 2. The term of office of all officers
shall be one year or until their respective successors
are elected, but any officer or agent may be removed,
with or without cause, at any time by the affirmative
vote of a majority of the members of the Board then in
office.
Section 3. The officers of the Corporation
shall each have such powers and duties as may be
prescribed from time to time by the Board of Directors
or, in the absence of such prescription, the officers of
the Corporation shall each have such powers and duties as
generally pertain to their respective offices. The
Treasurer, the Assistant Treasurers and any other
officers or employees of the Corporation may be required
to give bond for the faithful discharge of their duties,
in such sum and of such character as the Board may from
time to time prescribe.
Section 4. The salaries of all officers and
agents of the Corporation shall be fixed by the Board of
Directors, or pursuant to such authority as the Board may
from time to time prescribe.
ARTICLE IV
Certificates of Stock
Section 1. The interest of each stockholder in
the Corporation shall be evidenced by a certificate or
certificates for shares of stock of the Corporation, in
such form as the Board of Directors may from time to time
prescribe. The certificates for shares of stock of the
Corporation shall be signed by the President or a Vice
President and the Secretary or an Assistant Secretary,
sealed with the seal of the Corporation (which seal may
be a facsimile), and shall be countersigned and
registered in such manner, if any, as the Board may by
resolution prescribe.
Section 2. The shares of stock of the
Corporation shall be transferable on the books of the
Corporation by the holders thereof in person or by a duly
authorized attorney, upon surrender for cancellation of
certificates for a like number of shares of the same
class of stock, with a duly executed assignment and power
of transfer endorsed thereon or attached thereto and such
proof of the authenticity of the signatures as the
Corporation or its agents may reasonably require.
Section 3. No certificate for shares of stock
of the Corporation shall be issued in place of any
certificate alleged to have been lost, stolen or
destroyed, except upon production of such evidence of the
loss, theft, or destruction, and upon indemnification of
the Corporation and its agents to such extent and in such
manner as the Board of Directors may from time to time
prescribe.
ARTICLE V
Checks, Notes, etc.
All checks and drafts on the Corporation's bank
accounts and all bills of exchange and promissory notes,
and all acceptances, obligations and other instruments
for the payment of money, shall be signed by such officer
or officers or agent or agents as shall be thereunto
authorized from time to time by the Board of Directors;
provided that checks drawn on the Corporation's bank
accounts may bear facsimile signature or signatures,
affixed thereto by a mechanical device, of such officer
or officers and/or agent or agents as the Board of
Directors shall authorize.
ARTICLE VI
Fiscal Year
The fiscal year of the Corporation shall begin
on the first day of January in each year and shall end on
the thirty-first day of December following.
ARTICLE VII
Corporate Seal
The corporate seal shall have inscribed
thereon, the name of the Corporation and the words
"Corporate Seal 1993 Illinois."
ARTICLE VIII
Indemnification
Section 1. Indemnification of Directors,
Officers and Employees. The Corporation shall, to the
fullest extent to which it is empowered to do so by the
Business Corporation Act of 1983 or any other applicable
laws, as may from time to time be in effect, indemnify
any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact
that he is or was a director, officer, employee, trustee,
or fiduciary of the Corporation, or of a Corporation-
sponsored or Corporation-administered trust or benefit
plan, or is or was serving at the request of the Board of
Directors of the Corporation as a director, officer,
employee, trustee, or fiduciary of another corporation,
partnership, joint venture, trust, benefit plan, or other
enterprise, against all expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection
with such action, suit or proceedings.
Section 2. The provisions of this Article VIII
shall be deemed to be a contract between the Corporation
and each director or officer who serves in any such
capacity at any time while this Article is in effect, and
any repeal or modification of this Article shall not
affect any rights or obligations hereunder with respect
to any state of facts then or theretofore existing or any
action, suit or proceeding theretofore or thereafter
brought or threatened based in whole or in part upon any
such state of facts.
Section 3. The indemnification provided or
permitted by this Article shall not be deemed exclusive
of any other rights to which those indemnified may be
entitled by law or otherwise, and shall continue as to a
person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
Section 4. The provisions of this Article are
to be given retroactive effect.
ARTICLE IX
Amendments
These Bylaws, or any part thereof, may be
altered, amended or repealed at any meeting of the Board
of Directors, provided that notice of such meeting shall
set forth the substance of such proposed change.
--END--
<PAGE>
Conformed Copy
ILLINOIS POWER COMPANY
RETIREMENT INCOME PLAN FOR SALARIED EMPLOYEES
As Amended and Restated
Effective January 1, 1989
As Further Amended
Through January 1, 1994
<PAGE>
TABLE OF CONTENTS
Page
------
ARTICLE I - DEFINITIONS . . . . . . . . . . . . . . . . 1
1.1 "Accrued Benefit" . . . . . . . . . . . . . . . . . 2
1.2 "Accumulation" . . . . . . . . . . . . . . . . . . 2
1.3 "Actuarial Value" . . . . . . . . . . . . . . . . . 2
1.4 "Actuary" . . . . . . . . . . . . . . . . . . . . . 3
1.5 "Break in Service" . . . . . . . . . . . . . . . . 3
1.6 "Code" . . . . . . . . . . . . . . . . . . . . . . 4
1.6A "Collectively Bargained Plan" . . . . . . . . . . . 4
1.7 "Company" . . . . . . . . . . . . . . . . . . . . . 4
1.8 "Credited Service" . . . . . . . . . . . . . . . . 4
1.9 "Covered Compensation" . . . . . . . . . . . . . . 4
1.10 "Earnings". . . . . . . . . . . . . . . . . . . . . 5
1.11 "Eligible Surviving Spouse" . . . . . . . . . . . . 5
1.12 "Employment Year" . . . . . . . . . . . . . . . . . 5
1.13 "ERISA" . . . . . . . . . . . . . . . . . . . . . . 5
1.14 "Final Average Compensation" . . . . . . . . . . . 5
1.15 "Final Average Earnings" . . . . . . . . . . . . . 6
1.16 "Funding Agent" . . . . . . . . . . . . . . . . . . 6
1.17 "Hour of Service" . . . . . . . . . . . . . . . . . 6
1.18 "Hypothetical Accumulation" . . . . . . . . . . . . 7
1.19 "1988 Plan" . . . . . . . . . . . . . . . . . . . . 7
1.20 "Normal Retirement Age" . . . . . . . . . . . . . . 7
1.21 "Participant" . . . . . . . . . . . . . . . . . . . 8
1.22 "Plan Year" . . . . . . . . . . . . . . . . . . . . 8
1.23 "Prior Plan" . . . . . . . . . . . . . . . . . . . 8
1.24 "Related Company" . . . . . . . . . . . . . . . . . 8
1.25 "Retirement Income" . . . . . . . . . . . . . . . . 8
1.26 "Service" . . . . . . . . . . . . . . . . . . . . . 8
1.27 "Social Security Benefit" . . . . . . . . . . . . . 8
1.28 "Taxable Wage Base . . . . . . . . . . . . . . . . 9
1.29 "Vested Participant" . . . . . . . . . . . . . . . 9
1.30 Words . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE II - ADMINISTRATION OF THE PLAN . . . . . . . . 9
2.1 Administration by Company . . . . . . . . . . . . . 9
2.2 Expenses of Administration . . . . . . . . . . . . . 9
2.3 Administrative Powers and Duties . . . . . . . . . . 9
2.4 Claims Procedure . . . . . . . . . . . . . . . . . . 10
2.5 Reliance on Information Furnished . . . . . . . . . 11
2.6 Agent for Service of Process . . . . . . . . . . . . 11
ARTICLE III - ELIGIBILITY . . . . . . . . . . . . . . . 11
3.1 Eligibility for Participation . . . . . . . . . . . 11
3.2 Transferred Employees . . . . . . . . . . . . . . . 12
ARTICLE IV - SERVICE AND CREDITED SERVICE . . . . . . . 13
4.1 Service . . . . . . . . . . . . . . . . . . . . . . 13
4.2 Credited Service . . . . . . . . . . . . . . . . . . 15
4.3 Cessation of Credited Service . . . . . . . . . . . 16
ARTICLE V - RETIREMENT BENEFITS . . . . . . . . . . . . 17
5.1 Normal Retirement Benefit . . . . . . . . . . . . . 17
5.2 Early Retirement Benefit . . . . . . . . . . . . . . 18
5.3 Postponed Retirement Benefit . . . . . . . . . . . . 19
5.4 Deferred Vested Retirement Benefit . . . . . . . . . 19
5.5 Minimum Benefit . . . . . . . . . . . . . . . . . . 20
5.6 Maximum Benefit . . . . . . . . . . . . . . . . . . 20
5.7 Employment Beyond Normal Retirement Date and
Reemployment After Benefit Commencement . . . . . . 24
5.8 Withdrawal of Accumulation . . . . . . . . . . . . . 26
ARTICLE VI - PAYMENT OF RETIREMENT INCOME . . . . . . . 29
6.1 Normal Form of Benefit . . . . . . . . . . . . . . . 29
6.2 Optional Forms of Benefit . . . . . . . . . . . . . 30
6.3 Effective Date of Options . . . . . . . . . . . . . 32
6.4 Cashout of Small Benefit Amounts . . . . . . . . . . 32
6.5 Incapacity of Rec6.5 Incapacity of Recipient . . . . 33
6.6 Benefit Increase to Retire6.6 Benefit
Increase to Retired Participants . . . . . . . . . . 33
6.7 Commencem6.7 Commencement of Benefits . . . . . . . 36
6.8 Transfers to Collectively6.8 Transfers
to Collectively Bargained Plan . . . . . . . . . . . 37
6.9 Early Ret6.9 Early Retirement Program . . . . . . . 38
ARTICLE VII - DEATH BENEFITS . . . . . . . . . . . . . . 40
7.1 Preretirement Surviving Spouse Benefit . . . . . . . 40
7.2 Surviving Spouse Benefit After Termination of
Service . . . . . . . . . . . . . . . . . . . . . . 41
7.3 Payment of Accumulation . . . . . . . . . . . . . . 42
7.4 Designation of Beneficiary . . . . . . . . . . . . . 42
ARTICLE VIII - FINANCING OF PLAN . . . . . . . . . . . . 43
8.1 Funding Agents . . . . . . . . . . . . . . . . . . . 43
8.2 Company Contributions . . . . . . . . . . . . . . . 44
8.3 Irrevocability of Contributions . . . . . . . . . . 44
8.4 No Participant Contributions . . . . . . . . . . . . 44
8.5 Exclusive Benefit Provision . . . . . . . . . . . . 44
8.6 No Guaranty of Benefits . . . . . . . . . . . . . . 45
ARTICLE IX - PROVISION TO PREVENT DISCRIMINATION . . . . 45
9.1 Purpose . . . . . . . . . . . . . . . . . . . . . . 45
9.2 Definitions . . . . . . . . . . . . . . . . . . . . 45
9.3 Limitations . . . . . . . . . . . . . . . . . . . . 46
9.4 Applicability of Restrictions . . . . . . . . . . . 46
9.5 Limitation on Lump-Sum Settlements . . . . . . . . . 47
ARTICLE X - AMENDMENT AND TERMINATION . . . . . . . . . 47
10.1 Amendment . . . . . . . . . . . . . . . . . . . . . 47
10.2 Involuntary Termination of Plan . . . . . . . . . 47
10.3 Voluntary Termination of or Permanent
Discontinuance of Contributions to the Plan . . . . 48
10.4 Effect of Termination or Discontinuance . . . . . . 48
10.5 Distribution of Funds upon Termination . . . . . . 49
10.6 Method of Payment . . . . . . . . . . . . . . . . . 50
10.7 Notice of Amendment or Termination . . . . . . . . 50
ARTICLE XI - MISCELLANEOUS . . . . . . . . . . . . . . . 50
11.1 Duty to Furnish Information and Documents . . . . . 50
11.2 Benefit Statements and Available Information . . . 50
11.3 No Enlargement of Employment Rights . . . . . . . . 51
11.4 Applicable Law . . . . . . . . . . . . . . . . . . 51
11.5 Unclaimed Funds . . . . . . . . . . . . . . . . . . 51
11.6 Merger or Consolidation of Plan . . . . . . . . . . 51
11.7 Interest Non-Transferable . . . . . . . . . . . . . 52
11.8 Prudent Man Rule . . . . . . . . . . . . . . . . . 52
11.9 Headings . . . . . . . . . . . . . . . . . . . . . 52
11.10 Gender and Number . . . . . . . . . . . . . . . . 52
11.11 ERISA and Approval Under Internal Revenue Code . . 52
11.12 Spousal Consents . . . . . . . . . . . . . . . . . 53
ARTICLE XII - TOP-HEAVY PROVISIONS . . . . . . . . . . . 53
12.1 Top-Heavy Status . . . . . . . . . . . . . . . . . 53
12.2 Definitions . . . . . . . . . . . . . . . . . . . . 53
12.3 Determination of Top-Heavy Status . . . . . . . . . 53
12.4 Actuarial Assumptions . . . . . . . . . . . . . . . 55
12.5 Vesting . . . . . . . . . . . . . . . . . . . . . . 55
12.6 Minimum Benefit . . . . . . . . . . . . . . . . . . 55
12.7 Compensation . . . . . . . . . . . . . . . . . . . 56
12.8 Maximum Allocation . . . . . . . . . . . . . . . . 56
12.9 Safe-Harbor Rule . . . . . . . . . . . . . . . . . 56
12.10 Limitation on Benefits to Key Employees . . . . . 57
Supplement AA-1
Supplement BB-1
<PAGE>
ILLINOIS POWER COMPANY
RETIREMENT INCOME PLAN FOR SALARIED EMPLOYEES
The Illinois Power Company Retirement Income Plan for
Salaried Employees (the "Plan"), is herein amended and restated,
effective January 1, 1989.
Illinois Power Company (the "Company") had amended and
restated the Plan effective January 1, 1976 as required to meet
the requirements of the Employee Retirement Income Security Act
of 1974 and has subsequently further amended and restated the
Plan from time to time.
The Company is required to further amend the Plan in
order to maintain its qualified status under applicable
provisions of the Internal Revenue Code and to comply with recent
amendments to the Internal Revenue Code, the Employee Retirement
Income Security Act of 1974 and the Age Discrimination in
Employment Act and applicable government regulations, and in
connection therewith, desires to make additional amendments to
the Plan and to restate the Plan and all such amendments in a
single document.
The Plan is herein amended and restated effective
January 1, 1989 (except where otherwise indicated) and as so
amended and restated will be applicable to those employees of
Illinois Power Company who meet the requirements of Article III
for eligibility for participation, and whose employment with the
Company terminates on or after January 1, 1989.
The benefits, if any, of a Participant under the Prior
Plan, as hereinafter defined, whose employment with the Company
terminated prior to January 1, 1984, shall be determined in
accordance with the provisions of the Prior Plan as constituted
on the date of his termination of employment, except as otherwise
specifically provided for herein. The benefits, if any, of a
Participant under the 1988 Plan, as hereinafter defined, whose
employment with the Company terminated after December 31, 1983
and prior to January 1, 1989, shall be determined in accordance
with the provisions of the 1988 Plan as constituted on the date
of his termination of employment, except as otherwise
specifically provided for herein.
ARTICLE I - DEFINITIONS
Whenever used in this Plan, the following terms shall
have the meanings hereinafter set forth:
1.1 "Accrued Benefit" means as of any given date, the
Retirement Income payable to a Participant, commencing at his
Normal Retirement Date, calculated under Section 5.1 of the Plan,
and based upon his Final Average Earnings, Social Security
Benefit and years of Credited Service (up to 30 years) determined
as of such date.
1.2 "Accumulation" means the sum of the contributions,
if any, made by the Participant under the Plan, plus any interest
credited thereon, which contributions and interest have not
previously been withdrawn by the Participant. Interest will be
credited on a Participant's contributions, compounded annually,
at the rate of 2% per annum prior to July 1, 1970, 3% per annum
from July 1, 1970 through December 31, 1975, 5% per annum from
January 1, 1976 through November 30, 1981, and thereafter 7% per
annum. Effective January 1, 1973, interest will be credited from
the January 1 next following the date on which each contribution
was made under the Plan to the first day of the month of the
first to occur of (a) the Participant's Retirement Date, (b) the
Participant's date of death, or (c) the date the Participant
elects the return of his Accumulation as provided in Section 5.8.
1.3 "Actuarial Value" means the value of a Retirement
Income or other benefit computed on the basis of the interest
rates and mortality rates specified below:
(a) For the purpose of converting from one periodic
form of payment to another periodic form of payment, including,
without limitation, where not otherwise specified by an
appropriate table, different commencement dates for payment:
(i) Interest: 7% per annum, provided, however,
that if at any time the interest rate specified by the
Pension Benefit Guaranty Corporation ("PBGC") to be used to
value immediate annuities for terminating plans falls below
7% per annum, such rate shall be used for this purpose.
(ii) Mortality: 86 PET - 88.70, a table,
prepared by the Wyatt Company, based on experience
underlying the 1971 Group Annuity Mortality Table, without
margins, with a projection of mortality improvement to 1986.
(b) For the purpose of converting from a periodic form
of payment into a lump sum form of payment under Section 6.4 or
10.6:
(i) Interest: The interest rates specified by
the PBGC for valuing immediate annuities and deferred
annuities for plans terminating on the relevant date.
(ii) Mortality: The UP-1984 Table or such other
table adopted by PBGC for this purpose.
(c) A Participant's Accumulation will be converted
into a periodic form of payment on a single life basis beginning
at Normal Retirement Date by increasing such Accumulation as of
December 1, 1981 with interest to Normal Retirement Date at a
rate of 5% per annum and multiplying such result by 10%. These
factors are subject to change by government regulation.
(d) In the event of termination or partial termination
of the Plan, the basis for converting from one periodic form of
payment to another periodic form of payment, shall be the basis
used by the insurer in the qualifying bid (as defined in PBGC
regulations) under which the Plan administrator will purchase
annuities to provide for the payment of benefits.
1.4 "Actuary" means a person or persons chosen by, but
who shall be independent of, the Company and qualified through
Fellowship in the Society of Actuaries and "enrolled" in
accordance with ERISA.
1.5 (a) "Break in Service" means an Employment Year
in which a Participant accumulates 500 or fewer Hours of Service.
The Break in Service shall be deemed to commence on the first day
of such Employment Year and shall be deemed to end immediately
prior to the first day of any subsequent Employment Year in which
the Participant completes more than 500 Hours of Service. When a
Participant completes more than 500, but fewer than 1,000 Hours
of Service in an Employment Year, such Year shall not be
considered a Break in Service, but no Service shall accrue in any
such Year.
(b) A Participant who is absent from work with the
Company because of (i) the Employee's pregnancy, (ii) the birth
of the Participant's child, (iii) the placement of the child with
the Participant in connection with the Participant's adoption of
the child, or (iv) caring for such child immediately following
such birth or placement shall receive credit solely for purposes
of paragraph (a) of this Section for the Hours of Service
provided in paragraph (c) of this Section; provided that the
total number of hours credited as Hours of Service under this
paragraph shall not exceed 501 Hours of Service.
(c) In the event of a Participant's absence from work
for any of the reasons set forth in paragraph (b) of this
Section, the Hours of Service which the Participant will be
credited with under paragraph (b) are (i) the Hours of Service
that otherwise would normally have been credited to the
Participant but for such absence, or (ii) eight (8) Hours of
Service per day of such absence if the Company is unable to
determine the Hours of Service described in clause (i).
(d) A Participant who is absent from work for any of
the reasons set forth in paragraph (b) of this Section shall be
credited with Hours of Service under paragraph (b), (i) only in
the Employment Year in which the absence begins, if the
Participant would be prevented from incurring a Break in Service
in that Year solely because the period of absence is treated as
credited Hours of Service, as provided in paragraphs (b) and (c),
or (ii) in any other case, in the immediately following
Employment Year.
(e) No credit for Hours of Service will be given
pursuant to paragraphs (b), (c) and (d) of this section unless
the Participant furnishes to the Company such timely information
that the Company may reasonably require to establish (i) that the
absence from work is for one of the reasons specified in
paragraph (b) and (ii) the number of days for which there was
such an absence. No credit for Hours of Service will be given
pursuant to paragraphs (b), (c) and (d) for any purpose of the
Plan other than the determination of whether a Participant has
incurred a Break in Service pursuant to paragraph (a).
1.6 "Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any regulations relating thereto.
1.6A "Collectively Bargained Plan" means the Illinois
Power Company Retirement Income Plan for Employees Covered under
a Collective Bargaining Agreement.
1.7 "Company" means Illinois Power Company.
1.8 "Credited Service" means the period of Service
during which an employee of the Company was a Participant, as
determined in accordance with the provisions of Section 4.2.
1.9 "Covered Compensation" used for a Plan Year is
one-twelfth of the average (without indexing) of the Taxable Wage
Base in effect for each calendar year during the 35-year period
ending with the last day of the calendar year in which a
Participant attains (or will attain) his Social Security
Retirement Age (as defined in paragraph (d) below). A
Participant's Covered Compensation shall automatically be
adjusted for each Plan Year, taking into consideration the
following factors:
(a) The Taxable Wage Base for the current Plan Year
and any subsequent Plan Year shall be assumed to be the same as
the Taxable Wage Base in effect as of the beginning of the Plan
Year for which the determination is made;
(b) A Participant's Covered Compensation for a Plan
Year after the 35-year period described above shall be the
Participant's Covered Compensation for the Plan Year during which
the Participant attained Social Security Retirement Age; and
(c) A Participant's Covered Compensation for a Plan
Year prior to such 35-year period shall be the Taxable Wage Base
in effect as of the beginning of such Plan Year.
(d) For purposes of this Section 1.9, Social Security
Retirement Age shall have the meaning set forth in Section
5.6(m).
1.10 "Earnings" means a Participant's regular basic
compensation, including any amount contributed by the Company on
behalf of the Participant and pursuant to the Participant's
election under a "qualified cash or deferred arrangement" (as
defined in Section 401(k) of the Code) that is part of any
qualified profit sharing plan maintained by the Company, but
excluding overtime and all extra compensation, and any matching
contribution made by the Company under any qualified profit
sharing plan maintained by the Company. Notwithstanding the
foregoing, the maximum amount of Earnings for any Plan year shall
not exceed $150,000 ($200,000 for Plan Years beginning prior to
January 1, 1994) or such other amount as may be permitted for any
such year under section 401(a)(17) of the Code.
1.11 "Eligible Surviving Spouse" means the person who
is legally married to a Participant throughout the one (1) year
period ending on the date of such Participant's death.
1.12 "Employment Year" means a twelve consecutive
month period commencing with a Participant's initial date of hire
and any anniversary thereof or, in the event of a termination of
Service that results in a Break in Service, his last date of
rehire, and any anniversary thereof.
1.13 "ERISA" means Public Law No. 93-406, the Employee
Retirement Income Security Act of 1974, as amended from time to
time, and any regulations relating thereto.
1.14 "Final Average Compensation" means the average of
a Participant's monthly Earnings from the Company for the 36
consecutive months preceding the date his Credited Service
ceases. If a Participant's entire period of employment with the
Company is less than 36 consecutive months, his Final Average
Compensation shall be determined by averaging (on a monthly
basis) the Earnings received by him from the Company during his
entire period of employment with the Company. In determining a
Participant's Final Average Compensation under this Section 1.14,
Earnings for any Plan Year in excess of the Taxable Wage Base in
effect at the beginning of such Plan Year shall not be taken into
account.
1.15 "Final Average Earnings" means the average of a
Participant's monthly Earnings from the Company for the 60
consecutive months during the last 120 months preceding the date
his Credited Service ceases, producing the highest such average,
as determined in a uniform manner by the Company based on records
maintained by the Company. If a Participant's entire period of
employment with the Company is less than 60 consecutive months,
his Final Average Earnings shall be determined by averaging (on a
monthly basis) the Earnings received by him from the Company
during his entire period of employment with the Company. The
Final Average Earnings of each Participant who has become a
Participant in the Plan in accordance with Section 3.2 shall be
determined as if his "Earnings" (as defined and determined in
accordance with the provisions of the Collectively Bargained Plan
as in effect on the date of transfer as specified in Section
3.2(a)) for periods of Credited Service prior to such date
constituted Earnings under the Plan.
1.16 "Funding Agent" means the legal reserve life
insurance company or trustee or combination thereof selected by
the Company from time to time to hold and invest the
contributions made under the Plan and to pay the benefits
provided under the Plan.
1.17 "Hour of Service" means (a) each Hour for which
an employee is paid or entitled to payment for the performance of
duties for the Company or any Related Company; and (b) each Hour
for which an employee is directly or indirectly paid by the
Company or a Related Company or is entitled to payment from the
Company or a Related Company during which no duties are performed
by reason of vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty or leave of absence
(but not in excess of 501 hours in any continuous period during
which no duties are performed). Each Hour of Service for which
back pay, irrespective of mitigation of damages, is either
awarded or agreed to by the Company or a Related Company shall be
included under either (a) or (b) as may be appropriate. Hours of
Service shall be credited:
(a) in the case of Hours referred to in clause (a) of
the first sentence of this section, for the computation period in
which the duties are performed;
(b) in the case of Hours referred to in clause (b) of
the first sentence of this section, for the computation period or
periods in which the period during which no duties are performed
occurs; and
(c) in the case of Hours for which back pay is awarded
or agreed to by the Company or a Related Company, for the
computation period or periods to which the award or agreement
pertains rather than to the computation period in which the
award, agreement or payment is made.
In determining Hours of Service with respect to an
employee who is employed on other than an hourly-rated basis,
such employee shall be credited with ten (10) Hours of Service
per day for each day the employee would, if hourly rated, be
credited with Hours pursuant to clause (a) of the first sentence
of this Section. If an employee is paid for reasons other than
the performance of duties pursuant to clause (b) of the first
sentence of this Section: (a) in the case of a payment made or
due which is calculated on the basis of units of time, an
employee shall be credited with the number of regularly scheduled
working hours included in the units of time on the basis of which
the payment is calculated; and (b) an employee without a regular
work schedule shall be credited with eight (8) Hours of Service
per day (to a maximum of forty (40) Hours of Service per week)
for each day that the employee is so paid. Hours of Service
shall be calculated in accordance with Department of Labor
Regulations Section 2530.200b-2 or any future legislation or
regulation that amends, supplements or supersedes said section.
1.18 "Hypothetical Accumulation" means the sum of the
contributions, if any, made by the Participant under the Plan,
plus any interest credited thereon, which contributions and
interest have not previously been withdrawn by the Participant.
For purposes of calculating a Participant's Hypothetical
Accumulation, interest will be credited on a Participant's
contributions, compounded annually, at the rate of 2% per annum
prior to July 1, 1970, 3% per annum from July 1, 1970 through
December 31, 1975, 5% per annum from January 1, 1976 through
November 30, 1981, 7% per annum from December 1, 1981 through
December 31, 1987, and 120% of the Federal mid-term rate (as in
effect under Section 1274 of the Code for the first month of a
Plan Year) from January 1, 1988 until the date of the
Participant's termination of employment.
1.19 "1988 Plan" means the Illinois Power Company
Retirement Income Plan for Salaried Employees, as in effect after
December 31, 1983 and prior to January 1, 1989.
1.20 "Normal Retirement Age" means the date on which a
Participant attains age 65. "Normal Retirement Date" means the
first day of the month coinciding with or next following the
Participant's 65th birthday. Upon reaching Normal Retirement
Age, a Participant shall have a nonforfeitable interest in his
Normal Retirement Benefit under Section 5.1 of the Plan.
1.21 "Participant" means a person who becomes covered
under the Plan in accordance with Section 3.1.
1.22 "Plan Year" means the 12-month period commencing
on January 1 and ending on December 31.
1.23 "Prior Plan" means the Illinois Power Company
Retirement Income Plan for Salaried Employees, as in effect prior
to January 1, 1984.
1.24 "Related Company" means: (i) any corporation that
is a member of a controlled group of corporations (as defined in
Section 414(b) of the Code) that includes the Company; (ii) any
trade or business, whether or not incorporated, that is under
common control (as defined in Section 414(c) of the Code) with
the Company; (iii) any member of an affiliated service group (as
defined in Section 414(m) of the Code) that includes the Company
and (iv) any entity that is required to be taken into
consideration pursuant to Treasury Regulations promulgated under
Section 414(o) of the Code; provided, however, that for purposes
of Section 5.6 of the Plan, Sections 414(b) and 414(c) of the
Code shall be applied by substituting the phrase "more than 50
percent" for the phrase "at least 80 percent" each place it
appears in Section 1563(a)(1) of the Code.
1.25 "Retirement Income" means any benefit payable in
the form of a series of payments in accordance with the Plan.
1.26 "Service" means the period of employment with the
Company determined in accordance with Section 4.1.
1.27 "Social Security Benefit" means 33.12% of a
Participant's Final Average Compensation for a Participant whose
Social Security Retirement Age (as defined in Section 5.6(m) of
the Plan) is age 65; provided, however, that 30.36% shall be
substituted in this definition of Social Security Benefit if the
Participant's Social Security Retirement Age is 66, and 27.60%
shall be substituted for a Participant whose Social Security
Retirement Age is 67. Notwithstanding the foregoing, if a
Participant's Final Average Compensation exceeds Covered
Compensation for a Plan Year, the Social Security Benefit for
such Participant for such Plan Year shall be calculated in
accordance with the following table:
If the ratio of Final Then the Social Security
Average Compensation to Benefit should be multiplied
Covered Compensation is: by:
1.00 100%
1.25 86.96%
1.50 76.81%
1.75 68.12%
2.00 60.87%
If the ratio of Final Average Compensation to Covered
Compensation falls between the ratios listed above, the
appropriate factor shall be determined by interpolation.
1.28 "Taxable Wage Base" means, for a Plan Year, the
contribution and benefit base under Section 230 of the Social
Security Act in effect at the beginning of such Plan Year.
1.29 "Vested Participant" means a Participant who has
completed five (5) or more years of Service.
1.30 Words in the masculine gender shall include the
feminine and the singular shall include the plural, and vice
versa, unless qualified by the context. Any headings used herein
are included for ease of reference only, and are not to be
construed so as to alter the terms hereof.
ARTICLE II - ADMINISTRATION OF THE PLAN
2.1 Administration by Company. The Company shall be
responsible for the general operation and administration of the
Plan and for carrying out the provisions thereof, and is hereby
designated the "administrator" and the "named fiduciary" within
the meaning of ERISA.
2.2 Expenses of Administration. The reasonable
expenses incident to the operation of the Plan including premiums
for termination insurance payable to the Pension Benefit Guaranty
Corporation, the compensation of the Funding Agent, Actuary,
attorney, advisors, and such other technical and clerical
assistance as may be required, may be paid by the Funding Agent
from the funds of the Plan, but the Company in its discretion may
elect at any time to pay part or all thereof directly. Any such
election shall not bind the Company as to its right to elect with
respect to the same or other expenses at any other time to have
such expenses paid by the Funding Agent from the funds of the
Plan.
2.3 Administrative Powers and Duties. The Company
shall have the following specific powers and duties:
(a) To make and enforce such rules and regulations as
it shall deem necessary or proper for the efficient administra-
tion of the Plan;
(b) To interpret the Plan and to decide any and all
interpretative matters arising hereunder, including the right to
remedy possible ambiguities, inconsistencies or omissions,
provided, however, that all such interpretations and decisions
shall be applied in a uniform and nondiscriminatory manner to all
Participants similarly situated;
(c) To compute the amount of Retirement Income payable
to any Participant, spouse, beneficiary or joint annuitant in
accordance with the provisions of the Plan;
(d) To authorize the Funding Agent to make
disbursements from the Plan's funds. Any instructions of the
Company to the Funding Agent shall be evidenced in writing and
signed by an officer of the Company or an authorized employee;
(e) To engage an Actuary to make actuarial valuations
under the Plan and to recommend the amounts of contributions to
be made and to perform such other services deemed necessary or
advisable in connection with the administration of the Plan.
2.4 Claims Procedure. All applications for benefits
under the Plan shall be submitted to: Illinois Power Company, 500
South 27th Street, Decatur, Illinois 62525. Applications for
benefits must be in writing on the forms prescribed by the
Company and must be signed by the Participant and, where required
by the Company, his spouse, beneficiary, joint annuitant or legal
representative. The Company reserves the right to require that
the Participant furnish proof of his age and that of his spouse
or contingent annuitant, if any, prior to processing any
application.
In the event a claim for benefits is wholly or
partially denied by the Company, the Company shall, within a
reasonable period of time, but no later than ninety (90) days
after receipt of the claim, notify the claimant in writing of the
denial of the claim. If the claimant shall not be notified in
writing of the denial of the claim within ninety (90) days after
it is received by the Company, the claim shall be deemed denied.
A notice of denial shall be written in a manner calculated to be
understood by the claimant, and shall contain (a) the specific
reason or reasons for denial of the claim, (b) a specific
reference to the pertinent Plan provisions upon which the denial
is based, (c) a description of any additional material or
information necessary for the claimant to perfect the claim,
together with an explanation of why such material or information
is necessary, and (d) an explanation of the Plan's review
procedure. Within sixty (60) days of the receipt by the claimant
of the written notice of denial of the claim, or within sixty
(60) days after the claim is deemed denied as set forth above, if
applicable, the claimant may file a written request with the
Company that it conduct a full and fair review of the denial of
the claimant's claim for benefits, including the conducting of a
hearing, if deemed necessary by the Company. In connection with
the claimant's appeal of the denial of his benefit, the claimant
may review pertinent documents and may submit issues and comments
in writing. The Company shall render a decision on the claim
appeal promptly, but not later than sixty (60) days after the
receipt of the claimant's request for review, unless special
circumstances (such as the need to hold a hearing, if necessary)
require an extension of time for processing, in which case the
sixty (60) day period may be extended to one hundred and twenty
(120) days. The Company shall notify the claimant in writing of
any such extension. The decision upon review shall (i) include
specific reasons for the decision, (ii) be written in a manner
calculated to be understood by the claimant and (iii) contain
specific references to the pertinent Plan provisions upon which
the decision is based.
2.5 Reliance on Information Furnished. The Company
will be entitled to rely conclusively upon all tables,
valuations, certificates, opinions and reports furnished by an
Actuary, accountant, controller, counsel or other person employed
or engaged by the Company for such purposes.
2.6 Agent for Service of Process. The individual
designated as agent for service of legal process on the Plan and
his address are as follows:
Corporate Secretary
Illinois Power Company
500 South 27th Street
Decatur, Illinois 62525
ARTICLE III - ELIGIBILITY
3.1 Eligibility for Participation. (a) Each employee
of the Company as of January 1, 1989 who was a Participant under
the 1988 Plan as of December 31, 1988 shall be a Participant
hereunder as of January 1, 1989. Each other employee of the
Company on or after January 1, 1989 who is not covered under the
terms and conditions of a collective bargaining agreement to
which the Company is a party (unless such bargaining agreement
provides for the participation of such employee in the Plan),
shall become a Participant hereunder on the first day of the
month that coincides with or next follows the date he (a) has
completed at least one Employment Year in which he completes at
least 1000 Hours of Service, and (b) has attained his 21st
birthday.
(b) A person who is not an employee of the Company,
and who performs services for the Company pursuant to an
agreement between the Company and a leasing organization, shall
be considered a "leased employee" if such person performs such
services on a substantially full-time basis for at least one year
and the services are of a type historically performed by
employees in the business field of the Company. Notwithstanding
anything hereinbefore contained in this Section 3.1, a person who
is considered a "leased employee" of the Company shall not be
considered an employee for purposes of this Plan other than for
purposes of determining the Hours of Service and Service a person
earns that would be considered if and when he becomes an employee
other than by reason of being a leased employee. In any event, a
leased employee's Hours of Service and Service shall not be
considered if the requirements of Section 414(n)(5) of the Code
are satisfied with respect to such person.
(c) If the employment of an employee with the Company
terminates prior to the date on which the employee becomes a
Participant hereunder, and the employee is subsequently
reemployed by the Company, he shall be deemed to be a new
employee for purposes of this Section 3.1. If the employment of
a Participant with the Company terminates and he is subsequently
reemployed by the Company prior to the date on which he incurs a
Break in Service, he shall again become a Participant hereunder
on the first day of the month which coincides with or next
follows the date he is reemployed by the Company. If the
employment of a Vested Participant with the Company terminates
and he is subsequently reemployed by the Company after the date
on which he incurs a Break in Service, he shall again participate
in the Plan on the first day of the month which coincides with or
next follows the date he is reemployed by the Company. If the
employment of a Participant, who is not a Vested Participant,
with the Company terminates, and he is subsequently reemployed by
the Company after the date on which he incurs a Break in Service,
he shall again participate in the Plan on the first day of the
month which coincides with or next follows the date he completes
one Employment Year following his date of reemployment in which
he completes at least 1,000 Hours of Service.
3.2 Transferred Employees. If an employee of the
Company or a Related Company:
(a)ceases to satisfy the eligibility requirements
of the Collectively Bargained Plan because he is
no longer employed as a member of a group of
employees to which the plan has been extended and
continues to be extended through a currently
effective collective bargaining agreement between
his employer and the collective bargaining
representative of the group of employees of which
he is a member;
(b)he continues to be employed by the Company or a
Related Company; and
(c)coincident with his cessation of eligibility for
the Collectively Bargained Plan, he satisfies the
provisions of subsection 3.1 of the Plan;
then assets and liabilities attributable to his accrued
benefit under the Collectively Bargained Plan (including, if
applicable, the amount of his Participant Accumulation plus
accrued interest as described in section 5.4 of the
Collectively Bargained Plan), as determined as of the date
described in paragraph (a) next above, shall be transferred
as soon as practicable thereafter to the Plan in accordance
with the requirements of section 414(l) of the Code and
regulations thereunder, and, for periods thereafter, he
shall cease to be a participant in the Collectively
Bargained Plan and shall be a Participant in this Plan,
subject to the terms and conditions of the Plan. Amounts
transferred to the Plan pursuant to this Section 3.2 shall
not be considered annual additions for purposes of Section
5.6.
ARTICLE IV - SERVICE AND CREDITED SERVICE
4.1 Service. Service is a period of time, measured in
whole Employment Years, consisting of a Participant's period of
employment with the Company in any capacity, determined as
follows:
(a) Service shall commence with the Employment Year
during which the Participant (i) is initially employed, or (ii)
is reemployed after a Break in Service, and shall end upon the
date a final Break in Service commences.
(b) Service shall include any period in which a
Participant is absent:
(i) on a leave of absence duly authorized in
accordance with customary personnel practices and policies
of the Company, if he returns to work immediately upon the
expiration of such authorized period; or
(ii) to serve in the armed forces of the United
States under circumstances whereby the Participant is
entitled to reemployment rights under applicable law, if he
returns or offers to return to work for the Company prior to
the expiration of such reemployment rights.
(c) Service shall exclude any Employment Year in which
an employee completes less than 1000 Hours of Service.
(d) If an employee shall incur a Break in Service
after December 31, 1975 and the Break shall thereafter terminate
(whether before or after the employee shall have received
benefits under the Plan), his period of employment prior to the
date such Break in Service commenced shall be added to the period
of employment following the Break in determining Service
hereunder, but only if one of the following conditions is met:
(i) the number of years of the employee's Break
in Service does not exceed the greater of (a) five years or
(b) his number of years of Service prior to the Break in
Service, and following the termination of the Break the
employee works an Employment Year in which he completes at
least 1000 Hours of Service; provided that clause (a) shall
only be effective from and after January 1, 1985.
Notwithstanding the preceding provisions of this paragraph
(i), if an employee had incurred a Break in Service on or
before December 31, 1984 and such Break in Service had not
ended on or before January 1, 1985, then Service will be
taken into account with respect to such employee pursuant to
this paragraph, only to the extent that such Service is
required to be taken into account under the provisions of
this paragraph without giving effect to clause (a); or
(ii) at the date such Break in Service commenced,
the employee had five or more years of Service as defined
herein.
If a Participant receives Retirement Income payments and
later resumes his employment with the Company, his period of
employment prior to termination shall be added to his period of
reemployment in determining his Service under the Plan.
(e) If the employment of a Participant shall have
terminated prior to January 1, 1976 and he shall have been
reemployed thereafter (whether before or after January 1, 1976),
his period of prior employment shall be included in his Service
only if, and to the extent, provided in the Prior Plan as in
effect on December 31, 1975.
(f) An Employee shall not accrue more than one year of
Service in any Employment Year.
4.2 Credited Service. Credited Service is a period of
a Participant's Service measured in Employment Years and
fractions of a Year (to the nearest month), consisting of:
(a) his period of Service after his 30th birthday and
prior to July 1, 1949, if he was employed and commenced making
contributions on that date, as then required by the Prior Plan,
(b) the period after June 30, 1949, and prior to
April 1, 1975 during which the Participant made all required
contributions under the Prior Plan, but excluding any period
prior to September 2, 1974 in respect of which period the
Participant's Accumulation arising from such contributions had
been withdrawn prior to January 1, 1976, plus
(c) his period of Service after March 31, 1975 while
he is a Participant in the Plan, adjusted as follows:
(i) Credited Service shall not include any period
of employment during which he does not meet the requirements
of Section 3.1, or any period during which the Company shall
make contributions on behalf of an employee to any other
qualified pension or retirement plan (other than any defined
contribution plan sponsored by the Employer or a Related
Company or Federal Social Security) for any period which is
used in calculating his retirement benefits under such other
pension or retirement plan. Notwithstanding the foregoing,
if such employee becomes a Participant in this Plan in
accordance with the provisions of Section 3.2, his years of
Credited Service hereunder shall be increased to include the
number of years taken into account under the Collectively
Bargained Plan prior to such transfer and the amount of his
Accrued Benefit under this Plan shall be determined in
accordance with the provisions of this Plan using his total
years of Credited Service; provided, however, that in no
event may a Participant's total years of Credited Service as
determined under this subsection 4.2(c)(i) be greater than
the sum of (1) the credited service accrued by such
Participant as of his date of transfer from the Collectively
Bargained Plan and (2) the Credited Service accrued by such
Participant under this Plan after his date of transfer from
the Collectively Bargained Plan.
(ii) Notwithstanding the provisions of Section
4.1(c) of the Plan, in calculating a Participant's Credited
Service for the year in which his Service terminates, the
Participant's years of Service shall be increased or
decreased (to the nearest month) to reflect his actual
months of employment as a Participant prior to termination.
(iii) Credited Service shall not include periods
of absence that are included in Service under Section
4.1(b)(i).
4.3 Cessation of Credited Service. A Participant
shall cease to accrue Credited Service under the Plan as of the
earlier of (1) the date described in Section 3.2(a) or (2) the
date he incurs a Severance from Service. The following
provisions shall apply with respect to a Participant's Severance
from Service.
(a) A Severance from Service shall occur on the
earlier of:
(i) the date as of which an employee quits,
retires, is discharged or dies; or
(ii) the first anniversary of the first date of a
period in which an employee remains absent from service
(with or without pay) with the Employer or Related Companies
for any reason other those listed in (i) above, such as
vacation, holiday, sickness, short-term disability, leave of
absence, layoff or military service.
(b) A Period of Severance commences on the date an
employee incurs a Severance from Service and ends on the date on
which the employee again performs an Hour of Service for an
Employer or Related Company. A one-year Period of Severance
means each period of 12 consecutive months beginning on the date
an employee incurs a Severance from Service and ending on each
anniversary of such date.
(c) Solely for the purpose of determining whether a
one-year Period of Severance has occurred, in the case of an
employee who is absent from work beyond the first anniversary of
the first date of an absence and the absence is for an approved
maternity or paternity leave, the date the employee incurs a
Severance from Service shall be the second anniversary of the
Employee's absence from employment. The period between the first
and second anniversaries of the first date of absence will not
constitute Credited Service. For purposes of this subsection, an
approved maternity or paternity leave means an absence (1) by
reason of pregnancy of the individual, (2) by reason of the birth
of a child of the individual, (3) by reason of the placement of a
child with the individual in connection with the adoption of such
child by such individual, or (4) for purposes of caring for such
child for a period beginning immediately following such birth or
placement.
(d) If an Employee incurs a Severance from Service
and is subsequently reemployed by an Employer or Related Company,
the following provisions apply:
(i) If he was entitled to receive a Retirement
Income at his Severance from Service, but benefit payments
have not yet commenced as of his date of reemployment, the
Credited Service he had at his Severance from Service will
be reinstated upon the date of his reemployment, unless his
is reemployed after a one-year Period of Severance, in which
case his prior Credited Service will not be reinstated
unless he is employed by an Employer or Related Company on
the first anniversary of the date of his reemployment;
(ii) If he was not entitled to receive a
Retirement Income at his Severance from Service and he is
reemployed after a five-year Period of Severance, the
Credited Service he had at his Severance from Service will
not be reinstated;
(iii) If he was not entitled to receive a
Retirement Income at his Severance from Service and he is
reemployed before a five-year Period of Severance, the
Credited Service he had at his Severance from Service will
be reinstated upon the date of his reemployment, unless he
is reemployed after a one-year Period of Severance, in which
case his prior Credited Service will not be reinstated
unless he is employed by the Employer or a Related Company
on the first anniversary of the date of his reemployment.
ARTICLE V - RETIREMENT BENEFITS
5.1 Normal Retirement Benefit. A Participant who
earns an Hour of Service on or after January 1, 1992 and who
attains his Normal Retirement Date while in the employ of the
Company shall be eligible to retire on that Date and receive a
Retirement Income, payable for his lifetime, in a monthly amount
equal to the greater of (a) or (b) below:
(a) the amount of the Participant's benefit as of
December 31, 1991, disregarding Credited Service, Earnings, or
any other changes occurring after that date; or
(b) an amount equal to 2% of the Participant's Final
Average Earnings (the "Base Formula") less 1-2/3% of his Social
Security Benefit (the "Offset"), multiplied by his years of
Credited Service (up to 30 years).
Notwithstanding the foregoing, the maximum Offset will
not be greater than 50% of the Base Formula, multiplied by a
fraction (not to exceed one), the numerator of which is the
Participant's Final Average Earnings, and the denominator of
which is the Participant's Final Average Compensation. In no
event will a Participant's Retirement Income be less than his
Vested Value as defined in Section 5.8.
5.2 Early Retirement Benefit. A Participant who
attains his 55th birthday while in the employ of the Company
shall be eligible to retire on any day after such birthday and
prior to his Normal Retirement Date and receive a Retirement
Income, payable for his lifetime, commencing at either his Normal
Retirement Date or any earlier date, in a monthly amount
determined as follows:
(a) If Retirement Income is to commence at his Normal
Retirement Date, the Participant's Retirement Income will be his
Accrued Benefit as of his date of retirement.
(b) A Participant who retires under this Section 5.2
may elect, by giving prior written notice to the Company, to have
his Retirement Income commence as of the first day of any month
on or after his date of retirement and prior to his Normal
Retirement Date. In that case his Retirement Income shall be the
amount determined under Section 5.2(a), provided that:
(i) for Plan Years beginning prior to January 1,
1994, the portion of his Retirement Income attributable to
the Base Formula shall be reduced by the 1/2 of one percent
for each month that benefit commencement of the
Participant's Retirement Income precedes the Participant's
62nd birthday; and
(ii) for Plan Years beginning on or after
January 1, 1994, the portion of his Retirement Income
attributable to the Base Formula shall be reduced in
accordance with the following table:
Age at Early Retirement
Retirement Factors
62 1.00
61 .96
60 .92
59 .82
58 .76
57 .70
56 .64
55 .58
(iii) the portion of his Retirement Income
attributable to the Offset shall be multiplied by the
appropriate factor from the following table:
Years Between
Retirement Date Early Retirement Reduction Factors
and Normal ----------------------------------
Retirement Date Social Security Retirement Age
--------------- 65 66 67
---- ---- ----
0 100% 100% 100%
1 100 100 100
2 100 100 100
3 100 100 100
4 .9167 .9091 .9500
5 .8333 .8646 .9000
6 .7917 .8182 .8500
7 .7500 .7727 .8000
8 .7083 .7273 .7500
9 .6667 .6818 .6880
10 .6250 .6255 .6320
If the Participant's Retirement Date is a fractional number of
years prior to his Normal Retirement Date, the appropriate factor
with respect to paragraphs (ii) or (iii) next above shall be
determined by interpolation.
5.3 Postponed Retirement Benefit. Notwithstanding
anything contained in the Prior Plan or the 1988 Plan, any
Participant who completes an Hour of Service on or after
January 1, 1988, and who continues in the employ of the Company
after his Normal Retirement Date, shall be entitled to receive a
Retirement Income, payable for his lifetime, in an amount
determined under Section 5.1 based upon his Credited Service,
Social Security Benefit and Final Average Earning as of his
actual retirement date, regardless of whether the Credited
Service was earned before or after January 1, 1988.
5.4 Deferred Vested Retirement Benefit. A Vested
Participant whose employment with the Company terminates prior to
his 55th birthday shall be eligible to receive a Retirement
Income, payable for his lifetime, commencing at his Normal
Retirement Date in a monthly amount determined under Section
5.2(a). A Participant who is eligible to receive a Retirement
Income under this section may elect to have his Retirement Income
commence as of the first day of any month on or after his 55th
birthday, and prior to his Normal Retirement Date, by giving
prior written notice to the Company not more than 180 days before
the selected date of commencement. In that case, his Retirement
Income shall be the amount determined under Section 5.2(a)
multiplied by the appropriate factor from the following table:
Duration in Years of Interval
Between Retirement Date and
Normal Retirement Date Reduction Factor
------------------------------- ----------------
0 1.000
1 .914
2 .839
3 .771
4 .712
5 .659
6 .611
7 .570
8 .531
9 .497
10 .466
5.5 Minimum Benefit. In no event shall the Retirement
Income of an employee who was a Participant in the 1988 Plan on
December 31, 1988 be less than the Actuarial Value of his Accrued
Benefit determined as of December 31, 1988. The Retirement
Income to which a Participant who has become a Participant in the
Plan in accordance with Section 3.2 becomes entitled under the
Plan shall not be less than the Retirement Income to which he
would be entitled under the Collectively Bargained Plan as of the
date of transfer as specified in Section 3.2(a).
5.6 Maximum Benefit. (a) Notwithstanding any other
provision of the Plan, in no event may a Participant's annual
Retirement Income attributable to Company contributions exceed
the equivalent, determined in accordance with paragraph (f) of
this Section and with rules determined by the Commissioner of the
Internal Revenue Service pursuant to Code Section 415, of a
straight life annuity payment equal to the lesser of:
(i) $90,000, or such other amount as may
hereafter be set forth in Section 415 of the Code or
determined by Treasury regulations issued pursuant to
Section 415(d) of the Code; or
(ii) one hundred percent (100%) of the
Participant's average annual compensation over the three
consecutive calendar years during which he had the greatest
aggregate compensation from the Company increased to reflect
cost of living adjustments determined by Treasury
regulations issued pursuant to Section 415 of the Code;
(iii) if the Participant has fewer than ten (10)
years of Credited Service, the amount determined under the
provisions of Section 5.6(a)(i) multiplied by a fraction,
the numerator of which is the Participant's number of years
of Credited Service (or part thereof) and the denominator of
which is ten (10), provided, however, that such product
shall not be less than one-tenth of the amount determined
under the foregoing provisions of this Section 5.6; and
(iv) if the Participant has fewer than ten (10)
years of Service, the amount determined under the provisions
of Section 5.6(a)(ii) multiplied by a fraction, the
numerator of which is the Participant's number of years of
service (or part thereof) and the denominator of which is
ten (10), provided, however, that such product shall not be
less than one-tenth of the amount determined under the
foregoing provisions of this Section 5.6.
Notwithstanding anything to the contrary contained herein,
clauses (iii) and (iv) above shall be applied separately with
respect to each change in the benefit structure of the Plan on or
after May 17, 1989.
(b) The maximum benefit permitted under paragraph (a)
of this Section 5.6 shall be in the form of a straight life
annuity (with no ancillary benefits) under a plan to which
employees do not contribute and under which no rollover
contributions are made.
(c) Notwithstanding the foregoing provisions of this
Section 5.6, a Retirement Income payable with respect to the Plan
shall not be deemed to exceed the limitation of this Section 5.6
in a Plan Year if the Retirement Income derived from Company
contributions payable with respect to the Participant under this
Plan and all other defined benefit plans of the Company do not in
the aggregate exceed $10,000 for such Plan Year, or for any prior
Plan Year. The provisions of this paragraph (c) shall not apply
with respect to any Participant if the Company has at any time
maintained a defined contribution plan in which the Participant
participated. If the Participant has fewer than ten (10) years
of Service, the $10,000 amount referred to above shall be
multiplied by a fraction, the numerator of which is the
Participant's number of years of Service (or part thereof) and
the denominator of which is ten (10), provided, however, that the
resulting product shall not be less than one-tenth of the amount
determined under this paragraph (c).
(d) Participant contributions will be treated as a
separate defined contribution plan maintained by the Company
which is subject to the limitations on contributions and other
additions described in Treasury Regulation Section 1.415-6.
(e) If the $90,000 amount contained in paragraph
(a)(i) of this Section is increased pursuant to Treasury
regulations issued under Section 415(d) of the Code, such
increase shall be effective as of January 1 of the calendar year
for which such Treasury regulations were effective and shall
apply with respect to Limitation Years ending with or within that
calendar year.
(f) For purposes of this Section 5.6:
(i) If the Retirement Income under the Plan is
payable in any form other than a straight life annuity, the
determination as to whether the limitation described in
paragraph (a) of this Section has been satisfied shall be
made in accordance with regulations prescribed by the
Secretary of the Treasury, by adjusting such benefit so that
it is the equivalent to the benefit described in paragraph
(a) of this Section. For purposes of this paragraph (f)(i),
any ancillary benefit which is not directly related to
Retirement Income benefits shall not be taken into account
and that portion of any annuity which constitutes a
qualified joint and survivor annuity (as defined in Section
417(b) of the Code) shall not be taken into account.
(ii) If the Retirement Income under the Plan
begins before the Social Security Retirement Age, the
determination as to whether the $90,000 limitation set forth
in paragraph (a) of this Section has been satisfied shall be
made (1) in the case of a Retirement Income commencing on or
after age 62, in accordance with regulations prescribed by
the Secretary of the Treasury by adjusting such Retirement
Income so that it is equivalent to a Retirement Income
beginning at the Social Security Retirement Age, and (2) in
the case of a Retirement Income commencing prior to age 62,
by first reducing such Retirement Income pursuant to clause
(1) immediately above and, thereafter, further reducing such
Retirement Income to its Actuarial Value.
(iii) If the Retirement Income under the Plan
begins after the Social Security Retirement Age, the
determination as to whether the $90,000 limitation set forth
in paragraph (a) of this Section has been satisfied shall be
made in accordance with regulations prescribed by the
Secretary of the Treasury, by adjusting such Retirement
Income so that it is equivalent to such a Retirement Income
beginning at the Social Security Retirement Age.
(iv) (A) For purposes of adjusting any Retirement
Income under paragraph (f)(i) of this section, the interest
rate assumption shall be the greater of five (5) percent or
the rate specified in Section 1.3(a) of the Plan.
(B) For purposes of adjusting any Retirement
Income under paragraph (f)(ii) of this section,
the interest rate assumption shall be the greater
of five (5) percent or the rate utilized in
reducing the amount of Retirement Income payable
to a Participant on account of commencement prior
to such Participant's Normal Retirement Date under
Section 5.2(b) of the Plan.
(C) For purposes of adjusting any Retirement
Income under paragraph (f)(iii) of this section,
the interest rate assumption shall be five (5)
percent.
(g) In the event that any Participant under this Plan
is also a Participant in a defined contribution plan or plans (as
defined in Section 415 of the Code) maintained by the Company,
the sum of the defined benefit plan fraction (as defined in Code
Section 415(e)(2)) and the defined contribution plan fraction (as
defined in Code Section 415(e)(3)) for any Limitation Year with
respect to such Participant shall not exceed one (1.0). If such
sum exceeds one (1.0), then the Participant's Retirement Income
under this Plan shall be reduced to obtain such compliance before
any reductions to the annual additions (as defined in section
415(c)(2) of the Code) for such Participant to such defined
contribution Plan or Plans.
(h) (i) The total annual benefit payable to a
Participant under all qualified plans maintained by the Company
will not exceed the limits under Section 415 of the Code as set
forth in paragraph (a) of this section.
(ii) For purposes of the limitations imposed by
this Section 5.6, a defined benefit plan or defined
contribution plan shall be treated as maintained by the
Company if the plan is maintained by any Related Company.
(i) For purposes of this Section 5.6, the term
"Limitation Year" means the period to be used in determining the
Plan's compliance with Section 415 of the Code and the
regulations thereunder. The Company shall take all actions to
ensure that the Limitation Year is the same period as the Plan
Year.
(j) For purposes of this Section 5.6, "compensation"
shall mean wages, salaries, fees for professional services
actually rendered in the course of service with the Company or a
Related Company (including, but not limited to commissions paid
salesmen, compensation for services on the basis of a percentage
of profits, tips and bonuses); shall include all compensation
actually paid or made available to a Participant; and shall not
include any other items or amounts paid to or for the benefit of
a Participant.
(k) Notwithstanding any provision of this Section 5.6
to the contrary, in the case of any Retirement Income payable to
or with respect to any person who was a Participant in the Plan
before January 1, 1983:
(i) the Company may, when calculating the defined
contribution plan fraction under paragraph (g) of this
section, elect to apply the transition rules set forth in
Section 235(d) of the Tax Equity and Fiscal Responsibility
Act of 1982 ("TEFRA");
(ii) in calculating the sum of the defined
contribution plan fraction and the defined benefit plan
fraction under paragraph (g) of this section, the transition
rule set forth in Section 235(g)(3) of TEFRA shall be
applied; and
(iii) the limitations of this section shall be
adjusted, as necessary, in accordance with the provisions of
Section 235(g)(4) of TEFRA.
(l) Notwithstanding any provision of this Section 5.6
to the contrary, in the case of any benefit payable to or with
respect to any person who was a Participant in the Plan before
January 1, 1987, the limitation of this Section shall be
adjusted, as necessary, in accordance with the provisions of
Sections 1106(i)(3) and (4) of the Tax Reform Act of 1986.
(m) For purposes of this Section, the term "Social
Security Retirement Age" means the age used as the retirement age
for a Participant under Section 216(l) of the Social Security
Act, except that such Section shall be applied (i) without regard
to the age increase factor, and (ii) as if the early retirement
age under Section 216(1)(2) of the Act were 62.
5.7 Employment Beyond Normal Retirement Date and
Reemployment After Benefit Commencement. Except as provided in
subsection 9.2(b), if a Participant is employed by the Company or
a Related Company for any period commencing on or after his
Normal Retirement Date, no Retirement Benefit (or Deferred Vested
Benefit) will be paid to such Participant until his termination
of employment, other than amounts required to be distributed
under Section 6.7. The following provisions apply in the event a
Participant is reemployed by the Company or a Related Company
after payment of his Normal Retirement Income, Early Retirement
Benefit or Deferred Vested Benefit has commenced:
(a) Resumption of Employment Prior to Age Sixty-Five.
If a Participant is rehired by the Company or a Related Company
before his sixty-fifth birthday, his benefit payments shall be
discontinued and shall not be paid or accrued during the period
of such reemployment, his previous election of form of payment
shall be canceled, and he shall have all Service and Credited
Service he had at the time of his termination of employment
reinstated. Upon his subsequent termination of employment, his
eligibility for a benefit and the amount of the benefit shall be
determined, calculated and paid as if he then first incurred a
termination of employment based upon both reinstated Service and
Credited Service and any additional Service and Credited Service
earned, but such benefit shall be actuarially reduced to
recognize any benefit payments he received prior to his
reemployment. In no event will a Participant's benefit at his
subsequent termination of employment be less than his benefit at
his earlier termination of employment. Notwithstanding the
foregoing, if a Participant rehired as described above,
subsequently reaches his sixty-fifth birthday and is employed at
a rate of fewer than forty Hours of Service per month, he shall
be entitled to receive a benefit determined under Article V of
the Plan, as applicable, during such period of reemployment.
Such payments shall continue every month there-after until his
rate of employment equals or exceeds forty Hours of Service per
month, at which time his benefit payments shall be suspended
under the terms and conditions described below.
(b) Resumption of Employment After Sixty-Five. If a
participant is rehired by the Company or a Related Company after
his sixty-fifth birthday, at a rate of at least forty Hours of
Service per month, his benefit payments shall be discontinued and
shall not be paid or accrued during the period of such
reemployment. Such suspension of benefits shall be done in
accordance with Department of Labor regulation 2530.203-3 and
shall include the notice described below. Such Participant shall
thereafter continue to accrue further benefits, and his previous
election of form of payment shall remain in effect. Upon the
Participant's subsequent termination of employment, he shall
resume receiving payments in the same form as he elected at his
earlier termination of employment but such benefit amount shall
be increased to reflect the value of any additional accrued
benefit. If a Participant is rehired by the Company or a Related
Company after his sixty-fifth birthday and his rate of employment
is fewer than forty Hours of Service per month, he shall receive
the same type and amount of his benefit payment he was entitled
to receive preceding his reemployment during such period of
reemployment. Such payments shall continue every month
thereafter until his rate of employment equals or exceeds forty
Hours of Service per month, at which time his benefit payments
shall be suspended as described above. If a Participant
continues in employment with the Company or a Related Company
after his sixty-fifth birthday at a rate of at least forty Hours
of Service per month, his benefit payments shall not commence
during the period of such employment. Such suspension of
benefits shall be done in accordance with Department of Labor
regulation 2530.203-3 and shall include the notice described
below. Such Participant shall continue to accrue further
benefits under the Plan. During such employment the provisions
of Section 7.1 of the Plan shall remain in effect and shall
determine what Preretirement Surviving Spouse Benefit is payable
under the Plan. If a Participant continues in employment with
the Company or a Related Company after his sixty-fifth birthday
and his rate of employment is fewer than forty Hours of Service
per month, he shall receive a benefit from the Plan under the
same terms and conditions as a Participant who incurred a
termination of employment. Such payments shall continue every
month thereafter until his rate of employment equals or exceeds
forty Hours of Service per month, at which time his benefit
payments shall be suspended as described above.
(c) Notice of Benefit Suspension. If a Participant's
benefits are to be suspended after age sixty-five, due to either
reemployment or continued employment, the Company shall notify
the Participant by personal delivery or first class mail during
the first calendar month in which the Plan withholds payments,
that benefits are suspended. The notice shall contain the
following information:
(i) a general description of the reasons why
payments are suspended;
(ii) a general description of Plan provisions
relating to the suspension of benefits;
(iii) a copy of such Plan provisions;
(iv) a statement that applicable Department of
Labor Regulations may be found in Section 2530.203-3 of the
Code of Federal Regulations;
(v) a statement that a review of the suspension
may be requested under the Plan's claims procedure; and
(vi) if the Plan requires a benefit resumption
notice or verification by the Participant that his benefits
should not be suspended, the procedure and forms for such
purposes.
The Plan shall adopt a procedure whereby a Participant
may request a determination of whether specific contemplated
employment after age sixty-five will result in the suspension of
benefits.
5.8 Withdrawal of Accumulation. (a) A Participant
may not withdraw his Accumulation while he remains in the active
employ of the Company, but a Participant whose Service has
terminated (including a Participant whose employment terminated
prior to January 1, 1976) and whose Retirement Income has not
commenced may withdraw his Accumulation. In that event, the
Retirement Income otherwise payable to the Participant under the
Plan shall be determined pursuant to paragraph (b) of this
Section. Notwithstanding the preceding provisions of this
Section, from and after January 1, 1985 a Participant may not
elect to withdraw his Accumulation pursuant to this Section,
unless the Participant's spouse consents in writing to the
Participant's election to make such withdrawal, such consent
acknowledges the effect of such election and such consent is
witnessed by a representative of the Plan or a notary public,
unless the Participant establishes to the satisfaction of a Plan
representative that such consent may not be obtained because
there is no spouse, such spouse cannot be located, or under such
other circumstances as the Secretary of the Treasury may by
regulation prescribe. Any consent by a spouse (or establishment
that the consent of the spouse may not be obtained) pursuant to
this Section shall be effective only with respect to such spouse.
(b) If a Participant, from and after January 1, 1988,
has elected to withdraw his Accumulation under paragraph (a) of
this Section, his Retirement Income (the "Residual Benefit")
shall be calculated according to the following provisions of this
paragraph.
(i) Determine the "Vested Value". The Vested
Value is the greater of (1) the annual Retirement Income of
the Participant commencing at his Normal Retirement Date
determined under Section 5.1 of the Plan, and (2) a single
life annuity commencing in an annual amount at his Normal
Retirement Date determined by converting the Hypothetical
Accumulation into such an annuity using the interest rate
specified in Section 1.3(b)(i) of the Plan and, with respect
to the period after the Participant's Normal Retirement
Date, the mortality assumptions specified in Section
1.3(b)(ii) of the Plan.
(ii) Determine the "Vested Interest". The
Vested Interest is a single life annuity payable in an
annual amount commencing at the Participant's Normal
Retirement Date. The determination of Vested Interest shall
use whichever of the following methods produces the smallest
such annuity: (A) projecting the Accumulation to the
Participant's Normal Retirement Date, based upon an interest
rate of 5% per annum and dividing such projected amount by
ten; or (B) converting the Hypothetical Accumulation into
such an annuity using the interest rate specified in Section
1.3(b)(i) of the Plan and, with respect to the period after
the Participant's Normal Retirement Date, the mortality
assumptions specified in Section 1.3(b)(ii) of the Plan.
(iii) Determine the "Residual Vested Annuity".
The Residual Vested Annuity is determined by reducing the
Vested Value, but not below zero, by the amount of the
Vested Interest.
(iv) Determine the "Residual Benefit". The
Residual Benefit is the lump sum Actuarial Value of the
Residual Vested Annuity, determined as of the date of
withdrawal, based upon the interest rate specified in
Section 1.3(b)(i) and the mortality assumptions specified in
Section 1.3(b)(ii).
(c) The following provisions shall apply with respect
to the aggregate amount of the Accumulation and the Residual
Benefit:
(i) If such aggregate amount is less than
$3,500, the Company shall direct that such amount be paid to
the Participant in a lump sum, in full satisfaction and
release of all further rights of the Participant, his spouse
and his Beneficiary (designated pursuant to Section 7.4) to
receive any benefits under the Plan.
(ii) If such aggregate amount is $3,500 or more
and less than $5,000, the Participant, by written instrument
delivered to the Company within 90 days of his date of
termination of employment, shall elect either:
(A) to receive such aggregate amount in a
lump sum, in full satisfaction and release of all further
rights of the Participant, his spouse and his Beneficiary to
receive any benefits under the Plan; or
(B) to receive the Accumulation in a lump
sum and to receive the Residual Vested Annuity, payable as
set forth in Section 6.1 or 6.2, and commencing as set forth
in Section 5.1, 5.2, 5.3 or 5.4.
(iii) If such aggregate amount is $5,000 or more,
the Participant shall receive the Accumulation in a
lump sum, and shall receive the Residual Vested
Annuity, payable as set forth in Section 6.1 or 6.2,
and commencing as set forth in Section 5.1, 5.2, 5.3 or
5.4.
(iv) Any lump sum distribution pursuant to this
paragraph (c) shall be paid within 120 days after the end of
the Plan Year in which the Participant's date of termination
of employment occurs.
(d) The Retirement Income of a Participant who
received a lump sum distribution of his Accumulation prior to
January 1, 1988, and who is reemployed and becomes entitled to a
benefit under the Plan after that date, shall be calculated to
reflect such distribution pursuant to the provisions of
paragraphs (i), (ii) and (iii) of subsection (b) above.
ARTICLE VI - PAYMENT OF RETIREMENT INCOME
6.1 Normal Form of Benefit. Except as otherwise
specifically provided in this Article VI, Retirement Income under
the Plan will be paid as follows:
(a) A Participant who is not married at the time of
his retirement will receive a Retirement Income in equal monthly
payments commencing on the Participant's retirement date,
provided he is then living, and terminating with the last monthly
payment before his death;
(b) A Participant who is married at the time of his
retirement, but who was not married to his spouse for the twelve
consecutive months immediately prior to his retirement, will
receive a reduced Retirement Income of equivalent Actuarial Value
to the benefit computed under subparagraph (a) hereof and such
spouse will receive 50% of such reduced Retirement Income
following the death of the Participant for the remaining lifetime
of such spouse;
(c) A Participant who was married to his spouse for
the twelve consecutive months immediately prior to his retirement
will receive the greater of (i) the reduced Retirement Income
computed under subparagraph (b) hereof or (ii) the Retirement
Income determined under Article V hereto multiplied by a factor
of .9000 reduced by .0050 for each year by which the spouse is
more than 10 years younger than the Participant, and such spouse
will receive 50% of such reduced Retirement Income following the
death of the Participant for the remaining lifetime of such
spouse.
Within at least 90 days prior to a Participant's
retirement date or such other date with respect to which
Retirement Income payments to him are to commence, the Company
shall give such Participant written notice in non-technical terms
of his right to elect not to receive his Retirement Income
pursuant to clause (a), (b) or (c) of this Section 6.1 and of his
right to make an election of the form of his Retirement Income
pursuant to Section 6.2. Such notice shall include a description
of (i) the terms and conditions of the normal form of benefit
under this Section 6.1, (ii) the Participant's right to make and
the effect of an election to waive such form, (iii) the rights of
the Participant's spouse, if any, not to consent to such
election, (iv) a general description of the material features,
and an explanation of the relative values, of the optional forms
available under Section 6.2, (v) the right, if any, to defer
receipt of an immediately distributable benefit, and (vi) the
right to make and the effect of a revocation of such an election.
The elections provided in Sections 6.1 and 6.2 may be
made by the Participant by giving a written notice of election to
the Company at any time during the period (the "Election
Period"), consisting of the ninety (90) day period ending on the
date with respect to which Retirement Income payments commence.
Any election provided in Sections 6.1 and 6.2 may be modified or
revoked during the Election Period and shall be automatically
revoked if the Participant dies before commencement of payment of
his Retirement Income to him.
If a Participant makes a request for additional
information, with respect to the elections provided in Section
6.1 or 6.2, on or before the last day of the Election Period, the
Election Period shall be extended to the extent necessary to
include at least the ninety (90) calendar days immediately
following the day the additional requested information is
personally delivered or mailed to the Participant.
From and after January 1, 1985, any election by a
Participant not to receive benefits in the normal form set forth
in Section 6.1(b) or (c) shall not take effect unless such
Participant's spouse consents in writing to such election, such
consent acknowledges the effect of such election and such consent
is witnessed by a representative of the Plan or a notary public,
unless the Participant establishes to the satisfaction of the
Company that such consent may not be obtained because there is no
spouse, the spouse cannot be located, or because of such other
circumstances as the Secretary of the Treasury may by regulations
prescribe. Any consent by a spouse (or establishment that the
consent of the spouse may not be obtained) pursuant to this
paragraph shall be effective only with respect to such spouse.
6.2 Optional Forms of Benefit. In lieu of the normal
form of Retirement Income specified in Section 6.1, a
Participant, prior to his retirement date, may, pursuant to
Section 6.1, elect to receive a benefit in one of the following
forms, subject to the conditions set forth in this Article VI:
(a) Joint and Survivor Option.
(i) Except as otherwise provided in this
paragraph (a), a Participant may elect to receive a reduced
Retirement Income commencing on the date this option becomes
effective and terminating with the last monthly payment
before his death. Following the death of the Participant
after this option becomes effective, all or a portion of
such reduced Retirement Income, as specified by the
Participant in his election of this option, shall be paid to
the person named as his contingent annuitant for such
contingent annuitant's remaining lifetime. The benefit
elected under this clause (i) shall be of equivalent
Actuarial Value to the Retirement Income computed under
Section 6.1(a).
(ii) Notwithstanding the foregoing, the
followingrules will apply to a joint and survivor option
elected under this Section 6.2(a) by a married Participant
who names his spouse, to whom he has been married for at
least twelve consecutive months immediately prior to his
retirement date, as contingent annuitant ("Married
Participant"):
(A) If a Married Participant elects a joint
and survivor option with a survivor benefit equal to
50% or more of the monthly benefit that he will receive
during his lifetime, then the Married Participant will
receive a reduced Retirement Income that is of
equivalent Actuarial Value to the reduced Retirement
Income computed under Section 6.1(c);
(B) If a Married Participant elects a joint
and survivor option with a survivor benefit equal to
less than 50% of the monthly benefit that he will
receive during his lifetime, then the Married
Participant will receive a reduced Retirement Income
that is the sum of:
(1) the reduced Retirement Income
computed under Section 6.2(a)(i), plus
(2) an additional amount determined by
dividing the elected survivor benefit percentage
by 50% and multiplying the quotient by the excess
of the reduced Retirement Income computed under
Section 6.1(c) over the reduced Retirement Income
computed under Section 6.2(a)(i); and
(C) Notwithstanding the provision of clause
(B) above, the reduced Retirement Income payable to a
Married Participant who elects a joint and survivor
option with a survivor benefit equal to less than 50%
of the monthly benefit that he will receive during his
lifetime shall be no less than the sum of:
(1) his Accrued Benefit as of
January 1, 1990, converted into the selected joint
and survivor option based upon the procedures
applicable to the Plan immediately prior to such
date, plus
(2) his Accrued Benefit earned from
January 1, 1990, to his retirement date converted
into the selected joint and survivor option on a
basis that is the equivalent Actuarial Value of
such Accrued Benefit
(iii) A Participant may not elect an optional
form of Retirement Income pursuant to this paragraph (a)
providing monthly benefits to a contingent annuitant who is
other than his spouse unless the Actuarial Value of the
payments expected to be made to the Participant is more than
50% of the Actuarial Value of the total payments expected to
be made under such optional form. In no event however,
shall the amount of each monthly payment to a contingent
annuitant exceed the amount of each monthly payment made to
the Participant.
(b) Social Security Option. If the Participant's
retirement date occurs before the earliest date he can begin
receiving payments of benefits under Title II of the Federal
Social Security Act, he may elect to receive an adjusted
Retirement Income, payable in a greater amount before such date
and a reduced amount thereafter, so that his total income,
including both the adjusted Retirement Income and said social
security benefits, shall be as nearly uniform as possible both
before and after such date. The benefit elected under this
paragraph (b) shall be of equivalent Actuarial Value to the
Retirement Income computed under Section 6.1(a).
6.3 Effective Date of Options. The optional form of
Retirement Income described in Section 6.2(a) shall become
effective on the Participant's retirement date, except that such
election will be automatically cancelled if either the
Participant or his contingent annuitant dies before such
Participant's retirement date. An election of such optional form
cannot be modified or rescinded after the effective date thereof
without the consent of the Company.
6.4 Cashout of Small Benefit Amounts.
(a) If the present value of any vested benefit payable
to any person, including any benefits payable under Article VII,
does not exceed $3,500 (and did not exceed $3,500 at the time of
any prior distribution), the Company shall direct the Trustee to
distribute (as soon as practicable after the Participant's
termination of employment with the Company and Related Companies
or, in the case of a benefit payable under Article VII, the
Participant's death) to the payee the present value of the
benefit payable to that person in a lump sum without regard to
whether the payee consents to such distribution, which payment
shall be in full discharge of all obligations under the Plan with
respect to the Participant. For purposes of this Section 6.4,
the present value of a benefit shall be determined as of the
Annuity Starting Date by using the mortality assumptions and
interest rates set forth in Section 1.3.
(b) If at the time of his termination of employment
with the Company and all Related Companies the present value of a
Participant's vested benefit is zero, the Participant shall be
deemed to have received a distribution of such vested benefit and
the nonvested portion of his benefit will be treated as a
forfeiture. If a Participant is deemed to have received a
distribution pursuant to the immediately preceding sentence, and
the Participant resumes employment covered under the Plan before
the date he incurs five consecutive One Year Breaks in Service,
upon the Participant's reemployment his benefit will be restored
to the amount of such benefit on the date of the deemed
distribution.
(c) At the request of the Participant or other payee,
any distribution made in accordance with Section 6.4(a) (or under
any other provision of this Plan) that qualifies as an "Eligible
Rollover Distribution" under Code Section 401(a)(31) which is
paid after December 31, 1992, shall be transferred by the Trustee
directly to the trustee or trustees under another qualified
retirement plan (the "Transferee Plan") or to the custodian of an
Individual Retirement Account ("IRA"), provided that the
Transferee Plan or IRA provides for the receipt of such a
transfer, and such Participant or other payee properly completes
such forms and provides such evidence regarding the status of
such Transferee Plan or IRA as may be required by the Company.
6.5 Incapacity of Recipient. If any person entitled
to a Retirement Income payment under the Plan is deemed by the
Company to be incapable of personally receiving and giving a
valid receipt for such payment, then, unless and until claim
therefor shall have been made by a duly appointed guardian or
other legal representative of such person, the Company may
provide for such payment or any part thereof to be made to any
other person or institution then contributing toward or providing
for the care and maintenance of such person. Any such payment
shall be a payment for the account of such person and a complete
discharge of any liability of the Plan therefor.
6.6 Benefit Increase to Retired Participants. (a)
Effective August 1, 1978, a benefit increase is applicable to (1)
Participants, or contingent annuitants of such Participants,
receiving benefits under Sections 5.1, 5.2 or 5.3 of the 1988
Plan (or comparable provisions of the Prior Plan) who retired on
or before January 1, 1977; (2) Participants, or contingent
annuitants of such Participants, receiving benefits under the
1988 Plan who retired on or before January 1, 1977, and after
cessation of a Company-provided disability allowance; (3)
surviving spouses of former Participants who died prior to
January 1, 1977, receiving benefits under Section 7.1 of the 1988
Plan (or the comparable provision of the Prior Plan); and (4)
Vested Participants who terminated employment with the Company
prior to January 1, 1977, due to disability and who are presently
receiving a Company provided disability allowance.
Benefits otherwise payable under the 1988 Plan to the
above persons on July 31, 1978 shall be increased effective
August 1, 1978 by two percent (2%) multiplied by the number of
full years during the period ending on December 31, 1977 and
beginning on the date the person's benefit commenced, except that
for a contingent annuitant the beginning date will be the date
the benefit commenced to the retired Participant; and for
Participants who retired while receiving a Company-provided
disability allowance or for a contingent annuitant or surviving
spouse of a Participant who was receiving a Company-provided
disability allowance, the beginning date will be the date
disability allowance benefits began.
(b) Effective June 1, 1981, a benefit increase is
applicable to (1) Participants, or contingent annuitants of such
Participants, receiving benefits under Sections 5.1, 5.2, or 5.3
of the 1988 Plan (or comparable provisions of the Prior Plan) who
retired on or before January 1, 1980; (2) Participants, or
contingent annuitants of such Participants, receiving benefits
under the 1988 Plan who retired on or before January 1, 1980, and
after cessation of a Company-provided disability allowance; (3)
surviving spouses of former Participants who died prior to
January 1, 1980, receiving benefits under Section 7.1 of the 1988
Plan (or the comparable provision of the Prior Plan); and (4)
Vested Participants who terminated employment with the Company
prior to January 1, 1980, due to disability and who are presently
receiving a Company-provided disability allowance.
Benefits otherwise payable under the 1988 Plan to the
above persons on May 31, 1981 shall be increased effective
June 1, 1981, by 3 percent multiplied by the number of full years
during the period ending on December 31, 1980, and beginning on
the date the person's benefit commenced, or January 1, 1978,
whichever is later, except that for a contingent annuitant the
beginning date will be the date the benefit commenced to the
retired Participant, or January 1, 1978, whichever is later; and
for Participants who retired while receiving a Company-provided
disability allowance or for a contingent annuitant or surviving
spouse of a Participant who was receiving a Company-provided
disability allowance, the beginning date will be the date
disability allowance benefits began, or January 1, 1978,
whichever is later.
(c) Effective January 1, 1987, a benefit increase is
applicable to (1) Participants, or contingent annuitants of such
Participants, receiving benefits under Sections 5.1, 5.2, or 5.3
of the 1988 Plan (or comparable provisions of the Prior Plan) who
retired on or before January 1, 1986; (2) Participants, or
contingent annuitants of such Participants, receiving benefits
under the 1988 Plan who retired at any time after cessation of a
Company-provided disability allowance that became effective on or
before January 1, 1986; (3) surviving spouses of former
Participants who died prior to January 1, 1986, receiving or
entitled to receive benefits under Section 7.1 of the 1988 Plan
(or the comparable provision of the Prior Plan); and (4) Vested
Participants who terminated employment with the Company prior to
January 1, 1986, due to disability and who on December 31, 1986
were receiving a Company-provided disability allowance.
Benefits otherwise payable under the 1988 Plan to the
above persons on December 31, 1986 shall be increased, effective
January 1, 1987, by 1.25% multiplied by the number of full years
during the period ending on December 31, 1986, and beginning on
the date the person's benefit commenced, or January 1, 1981,
whichever is later, except that (1) for a contingent annuitant of
a retired Participant the beginning date will be the date the
benefit commenced to the retired Participant, or January 1, 1981,
whichever is later; and (2) for a Participant who retired after
cessation of a Company-provided disability allowance, or for a
contingent annuitant or surviving spouse of a Participant who was
receiving a Company-provided disability allowance, the beginning
date will be the date disability allowance benefits commenced, or
January 1, 1981, whichever is later. Benefits otherwise payable
under the 1988 Plan commencing on a date after December 31, 1986,
to a surviving spouse of a Participant who died prior to
January 1, 1986 and under circumstances described in Section
7.1(b), shall be increased, effective on the commencement date of
the benefits, by 1.25% multiplied by the number of full years
during the period ending on December 31, 1986 and beginning on
the first day of the month following the date of the
Participant's death, or January 1, 1981, whichever is later.
Benefits otherwise payable under the 1988 Plan commencing on a
date after December 31, 1986, to a Vested Participant described
in clause (4) of the preceding paragraph, shall be increased,
effective on the commencement date of the benefits, by 1.25%
multiplied by the number of full years during the period ending
on December 31, 1986 and beginning on the date the disability
allowance commenced to the Vested Participant or January 1, 1981,
whichever is later.
6.7 Commencement of Benefits. (a) The payment of
benefits under the Plan to, or with respect to, a Participant
shall be made or commence not later than sixty days after the
last day of the Plan Year in which the last of the following
events occurs: (i) the Participant's sixty-fifth birthday; (ii)
the date on which the Service of the Participant terminates; or
(iii) the tenth anniversary of the commencement of the
Participant's Service.
(b) Notwithstanding anything to the contrary contained
elsewhere in the Plan:
(i) The payment of benefits under the Plan to
any Participant will:
(A) be distributed to him not later than
the Required Distribution Date (as defined in paragraph
(b)(iii)), or
(B) be distributed to him commencing not
later than the Required Distribution Date in accordance
with regulations prescribed by the Secretary of the
Treasury (I) over the life of the Participant or over
the lives of the Participant and his Beneficiary, or
(II) over a period not extending beyond the life
expectancy of the Participant or the life expectancy of
the Participant and his Beneficiary.
(ii) (A) If the Participant dies after
distribution to him has commenced pursuant to paragraph
(b)(i)(B) but before his entire interest in the Plan has
been distributed to him, then the remaining portion of that
interest will be distributed at least as rapidly as under
the method of distribution being used under paragraph
(b)(i)(B) at the date of his death.
(B) If the Participant dies before
distribution to him has commenced pursuant to paragraph
(b)(i)(B), then, except as provided in paragraphs
(b)(ii)(C) and (b)(ii)(D), his entire interest in the
Plan will be distributed within five years after his
death.
(C) Notwithstanding the provisions of
paragraph (b)(ii)(B), if the Participant dies before
distribution to him has commenced pursuant to paragraph
(b)(i)(B) and if any portion of his interest in the
Plan is payable (I) to or for the benefit of a
Beneficiary, (II) in accordance with regulations
prescribed by the Secretary of the Treasury over the
life of the Beneficiary or over a period not extending
beyond the life expectancy of the Beneficiary, and
(III) beginning not later than one year after the date
of the Participant's death or such later date as the
Secretary of the Treasury may prescribe by regulations,
then the portion of his interest referred to in this
paragraph (b)(ii)(C) shall be treated as distributed on
the date on which such distributions begin.
(D) Notwithstanding the provisions of
paragraphs (b)(ii)(B) and (b)(ii)(C), if the
Beneficiary referred to in paragraph (b)(ii)(C) is the
surviving spouse of the Participant, then:
(1) the date on which the distributions are
required to begin under paragraph (b)(ii)(C)(III) shall not
be earlier than the date on which the Participant would have
attained age 70 1/2, and
(2) if the surviving spouse dies before the
distributions to that spouse begin, then this paragraph
(b)(ii)(D) shall be applied as if the surviving spouse were
the Participant.
(3) For purposes of this paragraph (b), the
"Required Distribution Date" means April 1 of the calendar
year following the calendar year in which the Participant
attains age 70 1/2.
(4) For purposes of this paragraph (b), the life
expectancy of a Participant and his spouse may be
redetermined, but not more frequently than annually.
(c) No Participant shall receive a distribution under
circumstances that would impose an additional tax on such
distribution pursuant to Section 72(t) of the Code unless and
until that individual is notified in writing by the Company of
the tax and such individual, by a writing delivered to the
Company, acknowledges receipt of such notification and requests
such distribution.
6.8 Transfers to Collectively Bargained Plan. If an
employee of the Company or a Related Company:
(a)ceases to satisfy the requirements of Section 3.1;
(b)continues to be employed by the Company or a
Related Company; and
(c) coincident with his failure to satisfy the
requirements of Section 3.1, he becomes eligible to participate
in the Collectively Bargained Plan;
then assets and liabilities attributable to his Accrued Benefit
under the Plan (including, if applicable, the amount of his
Participant Accumulation plus accrued interest as described in
Section 1.2 of the Plan), determined as of the date described in
paragraph (a) next above, shall be transferred to the
Collectively Bargained Plan in accordance with the requirements
of section 414(l) of the Code and regulations thereunder, and,
for periods thereafter, he shall cease to be a Participant in the
Plan and shall be a participant in the Collectively Bargained
Plan, subject to the terms and conditions of the Collectively
Bargained Plan.
6.9 Early Retirement Program. (a) As used in this
Section 6.8: (i) "ERP" means the Early Retirement Program
described in this Section; (ii) "ERP Benefits" means the benefits
described under paragraph (b) of this Section; (iii) "Eligible
ERP Participant" means a Participant under the Plan on April 1,
1989 who is not then on a Company-approved leave of absence or
receiving a Company-provided disability allowance, and who on or
before his ERP Retirement Date has attained age 55 and completed
ten (10) or more years of continuous Service; (iv) "ERP Election
Period" means the period from April 1, 1989 through May 31, 1989;
and (v) ERP Retirement Date means May 1, 1989, June 1, 1989 or
July 1, 1989, as applicable.
(b) An Eligible ERP Participant who elects, during the
ERP Election Period, by written instrument provided by and
delivered to the Company, to retire from the employ of the
Company effective on his ERP Retirement Date, will be eligible to
receive:
(i) a monthly Retirement Income for life in an
amount equal to his Accrued Benefit determined as of his ERP
Retirement Date, but calculated by adding five (5) years to
his age for purposes of determining the appropriate factor
under Section 5.2(b)(i), and five (5) years to his years of
Credited Service on his ERP Retirement Date; provided that
in no event shall he receive credit for more than 30 years
of Credited Service; and
(ii) a supplement payment in the amount of $675
per month payable for each month commencing with the month
in which his ERP Retirement Date occurs and continuing until
and including the later to occur of the month in which he
attains age 62 and the month in which he receives the
twenty-fourth of such supplement payments; provided,
however, that any Eligible ERP Participant who has attained
age 62 on or prior to his ERP Retirement Date, shall receive
a lump sum supplement payment in the amount of $16,200, in
lieu of the aforementioned monthly payments; and provided
further, that any Participant who has not attained age 62 on
or prior to his ERP Retirement Date but who attains age 62
prior to receiving twenty-four of such supplement payments
shall receive the balance of such payments in one lump sum
in the month he attains age 62. Notwithstanding anything to
the contrary contained herein, in the event that an Eligible
ERP Participant dies prior to receiving his entire
supplement payment, as determined under the provisions of
the preceding sentence, the balance of such supplement
payment shall be paid in a lump sum to his surviving spouse
if he is married at the time of his death, or to his
Beneficiary if he is not married at the time of his death,
as soon as practicable after the date of his death.
The Retirement Income set forth in clause (i) above,
shall be payable in the normal form set forth in Section 6.1 or
an optional form validly elected pursuant to Section 6.2. Such
Retirement Income shall be payable effective as of an Eligible
ERP Participant's ERP Retirement Date, however the first payment
thereof shall be made as soon as practicable after the first to
occur of (A) the date on which an election as to the form of
payment is made pursuant to Section 6.2 above, or (B) the
expiration of the Election Period set forth in Section 6.1. The
monthly payments, if any, payable pursuant to clause (ii) above
shall commence, or be paid in a lump sum if applicable, on or as
soon as practicable after his ERP Retirement Date.
Notwithstanding the preceding sentence, in no event shall the
Retirement Income set forth in clause (i) above be paid out under
the optional form of payment described in Section 6.2(b).
(c) Each Eligible ERP Participant shall receive from
the Company on or before his ERP Retirement Date, a notification,
in writing, of his eligibility to elect the ERP, which
notification shall specify the ERP Benefits and include a form
for electing the ERP.
(d) Any Eligible ERP Participant who does not elect to
participate in the ERP during the ERP Election Period shall not
thereafter be eligible to make such election or to receive ERP
Benefits and except as stated in the following sentence, his
Retirement Income under the Plan shall be determined without
reference to this Section 6.8. Notwithstanding the preceding
sentence and anything elsewhere contained in the Plan, any
Eligible ERP Participant who does not elect to participate in the
ERP during the ERP Election Period and who subsequently retires
on or after his Normal Retirement Age shall be entitled to a
Retirement Income equal to the greater of (i) his Retirement
Income determined on his actual retirement date pursuant to the
provisions of Article V; and (ii) the Retirement Income he would
have received under paragraph (b)(i) of this Section if he had
elected to participate in the ERP.
ARTICLE VII - DEATH BENEFITS
7.1 Preretirement Surviving Spouse Benefit. (a) If a
Participant dies leaving an Eligible Surviving Spouse and at any
time while in the employ of the Company, or while receiving a
Company-provided disability allowance, and, in either case, after
he attains his 50th birthday, then his Eligible Surviving Spouse
shall be entitled to receive a monthly annuity for life. Such
annuity shall commence as of the first day of the month following
the Participant's death, and shall terminate with the last
payment made before the Eligible Surviving Spouse's death. Such
annuity shall be in an amount equal to 50% of the monthly amount
that the Participant would have been eligible to receive as an
early retirement benefit if he had retired on the date of his
death under circumstances described in Section 5.2 of the Plan,
and had elected to receive a Retirement Income for his life
alone, except that no reduction shall be made (i) under Section
5.2(b) of the Plan to reflect the fact that Retirement Income
payments commenced before his Normal Retirement Date, or (ii) to
reflect payment of his Accumulation under Section 7.3; provided,
however, that if the Eligible Surviving Spouse is more than 10
years younger than the Participant, the amount of the annuity
payable to such Spouse shall be reduced by 1/2 of 1 percent
thereof for each year in excess of 10 years difference in their
ages.
(b) If a Participant who has received credit for at
least one Hour of Service on or after August 23, 1984 dies
leaving an Eligible Surviving Spouse (i) on or after January 1,
1989, (ii) while in the employ of the Company or while receiving
a Company-provided disability allowance, (iii) after completing
at least five (5) years of Service, and (iv) prior to attaining
his 50th birthday, then his Eligible Surviving Spouse shall be
entitled to receive a monthly annuity for life. In the case of
such a Participant who has an Accumulation at the date of his
death, such annuity shall commence on the first day of the month
following the Participant's death and shall terminate with the
last payment made before the Eligible Surviving Spouse's death.
In the case of such a Participant who does not have an
Accumulation at the date of his death, such annuity shall
commence on the first day of the month in which the Participant
would have attained his 55th birthday and shall terminate with
the last payment made before the Eligible Surviving Spouse's
Death. Such annuity shall be in an amount equal to 50% of the
monthly amount (or the Actuarial Value of such amount in the case
of a Participant who has an Accumulation at the date of his
death) that the Participant would have been entitled to receive
as an early retirement benefit under Section 5.2 (payable in the
form set forth in Section 6.1(c), without any reduction to
reflect payment of his Accumulation under Section 7.3) and
reduced as set forth under Section 5.2(b) to reflect the fact
that payments commenced before the Participant's Normal
Retirement Date), if the Participant had terminated his
employment with the Company on the date of his death, survived to
age 55, retired on his 55th birthday and then commenced receiving
such early retirement benefit and died on the day after his 55th
birthday.
7.2 Surviving Spouse Benefit After Termination of
Service. (a) If a Participant leaves the employ of the Company
on or after he attains his 55th birthday and subsequently dies
leaving an Eligible Surviving Spouse prior to the date as of
which his Retirement Income payments commence, then his Eligible
Surviving Spouse shall be entitled to receive a monthly annuity
for life. Such annuity shall commence as of the first day of the
month following the Participant's death and shall terminate with
the last payment made before the Eligible Surviving Spouse's
death. Such annuity shall be in a monthly amount equal to the
monthly amount that would have been payable to such Eligible
Surviving Spouse if the Participant had commenced receiving
Retirement Income in the form described in the first sentence of
Section 6.1 of the Plan on the first day of the month preceding
his death and reduced to reflect any withdrawal of his
Accumulation under Section 5.8. This paragraph shall not be
applicable to a Participant whose Service with the Company
terminated prior to January 1, 1976 regardless of his date of
death.
(b) If a Participant completes at least five (5) years
of Service, leaves the employ of the Company before he attains
his 55th birthday and subsequently dies leaving an Eligible
Surviving Spouse (i) on or after January 1, 1989, and (ii) prior
to the date as of which his Retirement Income payments commence,
then his Eligible Surviving Spouse shall be entitled to receive a
monthly annuity for life. In the case of such a Participant who
has an Accumulation at the date of his death, such annuity shall
commence on the first day of the month following the
Participant's death and shall terminate with the last payment
made before the Eligible Surviving Spouse's death. In the case
of such a Participant who does not have an Accumulation at the
date of his death, such annuity shall commence as of the later to
occur of (i) the first day of the month following the date of his
death, and (ii) the first day of the month in which the
Participant would have attained his 55th birthday, and shall
terminate with the last payment made before the Eligible
Surviving Spouse's death. If the Participant dies on or prior to
attaining his 55th birthday, such annuity shall be in a monthly
amount equal to 50% of the monthly amount (or the Actuarial Value
of such amount in the case of a Participant who has an
Accumulation at the date of his death) that the Participant would
have been eligible to receive as an early retirement benefit
under Section 5.2, (payable in the form set forth in Section
6.1(c), and reduced (i) to reflect any withdrawal of his
Accumulation under Section 5.8, and (ii) as set forth under
Section 5.2(b) to reflect the fact that payments commence before
the Participant's Normal Retirement Date), if the Participant had
survived to age 55, and then commenced receiving such early
retirement benefit, and died on the day after his 55th birthday.
If the Participant dies after his 55th birthday, such annuity
shall be in a monthly amount equal to 50% of the monthly amount
that the Participant would have been eligible to receive as an
early retirement benefit under Section 5.2 (payable in the form
set forth in Section 6.1(c), and reduced (i) to reflect any
withdrawal of his Accumulation under Section 5.8, and (ii) as set
forth in Section 5.2(b) to reflect the fact that payments
commence before the Participant's Normal Retirement Date), if the
Participant had retired and commenced receiving such early
retirement benefit on the day before his date of death.
7.3 Payment of Accumulation. If a Participant dies
before his retirement date, his Accumulation will be paid to his
Beneficiary in a single sum. If a Participant dies after his
retirement date, if he did not withdraw his Accumulation prior to
his death pursuant to Section 5.8, and if Retirement Income
payments are not to be continued following his death to his
spouse or contingent annuitant pursuant to Sections 6.1, 6.2 or
7.2, the excess, if any, of his Accumulation as of his retirement
date over the sum of the Retirement Income payments made to him,
if any, shall be paid in a lump sum to the Beneficiary designated
by the Participant. If a Participant referred to in the
preceding sentence dies after his retirement date, upon the death
of the second to die of the Participant and his contingent
annuitant or his surviving spouse, the excess, if any, of the
Participant's Accumulation at his retirement date over the sum of
the Retirement Income payments made to the Participant and to his
contingent annuitant or his spouse shall be paid in a lump sum to
the Beneficiary designated by the Participant.
7.4 Designation of Beneficiary.
(a) Each Participant shall have the right to
designate, by giving a written designation to the Company, a
person or persons or entity to receive amounts payable under
Section 7.3 in the event of the death of the Participant and his
contingent annuitant or surviving spouse if applicable.
Successive designations may be made by the Participant, and the
last designation received by the Company prior to the death of
the Participant shall be effective and shall revoke all prior
designations. If a designated person shall die before the date
for payment pursuant to Section 7.3, his interest shall
terminate, and, unless otherwise provided in the Participant's
designation, such interest shall be paid in equal shares to those
Beneficiaries, if any, who are living on such date for payment.
The Participant shall have the right to revoke the designation of
any Beneficiary without the consent of the Beneficiary.
(b) If a Participant shall fail to designate a
Beneficiary, if such designation shall for any reason be illegal
or ineffective, or if no Beneficiary shall be living on the date
for payment pursuant to Section 7.3, his death benefits shall be
paid:
(i) to his surviving spouse;
(ii) if there is no surviving spouse, to his then
living descendants (including legally adopted children and
their descendants) per stirpes;
(iii) if there is neither surviving spouse nor
then living descendants, to the duly appointed and qualified
executor or other personal representative of the Participant
to be distributed in accordance with the Participant's will
or applicable intestacy law; or
(iv) if there shall be no such representative
duly appointed and qualified within six (6) months after the
date for payment pursuant to Section 7.3, then to such
persons as, at the date for such payment, would be entitled
to share in the distribution of such deceased Participant's
personal estate under the provisions of the Illinois statute
then in force governing the descent of intestate property,
in the proportions specified in such statute.
(c) The Company may determine the identity of the
distributees and in so doing may act and rely upon any
information it may deem reliable upon reasonable inquiry, and
upon any affidavit, certificate, or other paper believed by it to
be genuine, and upon any evidence believed by it sufficient.
ARTICLE VIII - FINANCING OF PLAN
8.1 Funding Agents. Funding Agents have been
appointed and agreements have been executed under the terms of
which the Funding Agents shall receive and hold contributions,
interest and other income, and pay the benefits provided by the
Plan as modified from time to time.
8.2 Company Contributions. The Company shall
contribute to the Funding Agents such amounts as are deemed
necessary by an Actuary to fund the benefits provided by the Plan
on an acceptable basis in accordance with ERISA and Section 412
of the Code. Any actuarial gains arising from actual experience
under the Plan and forfeitures will be used to reduce future
Company contributions and will not be used to increase any
benefits payable under the Plan. All contributions are made on
the condition that they are deductible under Section 404 of the
Code. The Company shall not be required to make, but may make in
any calendar or fiscal year, any contributions to the Funding
Agents in any amount which is greater than the amount specified
in Section 8.2. The timing of all contributions shall be
entirely discretionary with the Company to the extent permitted
by the Code and ERISA.
8.3 Irrevocability of Contributions. Except as set
forth in Section 8.5, once contributions are made to the Funding
Agents by the Company on behalf of Participants, they are not
refundable to the Company.
8.4 No Participant Contributions. Participants will
not be required or permitted to make contributions to the Plan.
8.5 Exclusive Benefit Provision. Except as provided
in Sections 10.5 and 10.6, (a) all Company contributions when
made to the Funding Agents and all property held by the Funding
Agents, including income from investments and all other sources,
shall be retained for the exclusive benefit of Participants or
their Beneficiaries and shall be used to pay benefits provided
hereunder or to pay expenses of administration of the Plan and
the Funding Agent to the extent not paid by the Company; and (b)
the Company shall not have any right, title, or interest in or to
the contributions made to the Trustee, and no part of the
property held by the Funding Agents shall ever revert or be
repaid to the Company, either directly or indirectly. However,
without regard to Section 8.3 or the foregoing provisions of this
Section 8.5:
(a) If any contribution under the Plan is conditioned
on initial qualification of the Plan under Section 401(a) of the
Code and if the Plan receives an adverse determination with
respect to its initial qualification, the Funding Agents shall,
upon written request of the Company, return to the Company the
amount of such contribution (increased by earnings attributable
thereto and reduced by losses attributable thereto) within one
calendar year after the date that qualification of the Plan is
denied provided that the application for the determination is
made by the time prescribed by law for filing the Company's
return for the taxable year in which the Plan is adopted, or such
later date as the Secretary of the Treasury may prescribe;
(b) If a contribution is conditioned upon the
deductibility of the contribution under Section 404 of the Code,
then, to the extent the deduction is disallowed, the Funding
Agents shall upon written request of the Company, return the
contribution (to the extent disallowed) to the Company within one
year after the date the deduction is disallowed;
(c) If a contribution or any portion thereof is made
by the Company by a mistake of fact, the Funding Agents shall,
upon written request of the Company, return the contribution or
such portion to the Company within one year after the date of
payment to the Funding Agents; and
(d) Earnings attributable to amounts to be returned to
the Company pursuant to paragraph (b) or (c) above shall not be
returned, and losses attributable to amounts to be returned
pursuant to paragraph (b) or (c) shall reduce the amount to be so
returned.
8.6 No Guaranty of Benefits. The benefits provided
under the Plan shall be paid solely from the assets held by the
Funding Agents. Except to the extent provided by ERISA, nothing
contained in the Plan or in any insurance contract or trust
agreement shall constitute a guaranty by the Company or any other
entity or person that such assets will be sufficient to pay any
benefit to any person.
ARTICLE IX - PROVISION TO PREVENT DISCRIMINATION
9.1 Purpose. To prevent discrimination in favor of
highly compensated employees, the provisions of this Article IX
shall be applicable notwithstanding anything elsewhere contained
in the Plan to the contrary.
9.2 Definitions. In this Article, the following
definitions shall have the following meanings:
(a) "Commencement Date" shall mean January 1, 1981,
and the effective date of any amendment of the Plan which
substantially increases benefits so as to result in any possible
discrimination in favor of Highly Compensated Employees.
(b) "Highly Compensated Employee" means any of the
twenty-five (25) highest paid Employees as of the applicable
Commencement Date, including any such highly paid Employee who is
not covered by the Plan at that time but who may later be
covered, but excluding any Employee whose estimated annual
Retirement Income is not expected to exceed $1,500.
(c) "Substantial Owner" means an individual who owns,
directly or indirectly, more than ten (10) percent in value of
either the voting stock of the Company or a Related Company or
all the stock of the Company or a Related Company.
9.3 Limitations. If (a) at any time during the ten
(10) year period following a Commencement Date (i) the Plan shall
be terminated or (ii) benefits first become payable to a Highly
Compensated Employee, or (b) at any time after the ten (10) year
period following a Commencement Date, the benefits of a Highly
Compensated Employee become payable and the full current costs of
the Plan for the ten (10) year period following the Commencement
Date have not been met, the Company contributions which may be
used for the benefit of any Participant who was a Highly
Compensated Employee shall not exceed his "unrestricted benefit."
For purposes of this Section 9.3:
(a) The "unrestricted benefit" of a Highly Compensated
Employee who is also a Substantial Owner shall be the greater of
(i) the dollar amount described in Treasury Regulation Section 1.401 -
4(c)(2)(iii), or (ii) the dollar amount which equals the present
value of the benefit guaranteed for such Employee under Section
4022 of ERISA, or if the Plan has not terminated, the present
value of the benefit that would be guaranteed if the Plan
terminated on the date the benefit commences, determined in
accordance with regulations of the Pension Benefit Guaranty
Corporation.
(b) The "unrestricted benefit" of a Highly Compensated
Employee who is not a Substantial Owner shall be the greater of
(i) the dollar amount described in Treasury Regulation Section 1.401 -
4(c)(2)(iii), or (ii) the dollar amount which equals the present
value of the maximum benefit described in Section 4022(b)(3)(B)
of ERISA (determined on the date the Plan terminates or the date
payments commence, whichever is earlier) and determined in
accordance with regulations of the Pension Benefit Guaranty
Corporation (without regard to any other limitations in Section
4022 of ERISA).
9.4 Applicability of Restrictions. The provisions of
this Article shall not restrict: (a) the payment of such larger
amounts as may be permissible at such time as the provisions of
Treasury Regulation Section 1.401-4(c) or any substitute therefore are
no longer effective or applicable to the Plan; (b) the current
payment of the full benefit called for by the Plan to any person
while the Plan is in full effect and its full current costs have
been met; or (c) the payment of any benefit withheld for a prior
year (under the provisions of this Article) after all deficits
for all prior years and full current costs are met.
9.5 Limitation on Lump-Sum Settlements. While the
provisions of this Article are applicable, no lump sum settlement
shall be made other than "unrestricted benefits," except in the
case of a Participant who dies while the Plan is in full effect
and while the full current costs have been met. The conditions
set forth in this Article shall not restrict the current payment
of full benefits in a lump sum provided that the Company obtains
from the distributee of such benefits either:
(a) a surety bond payable in favor of the Plan, in
such form as is acceptable to the Company, in an amount equal to
one hundred per cent (100%) of the amount distributed in excess
of the limitations set forth in this Article, or
(b) as security property held in an escrow having a
fair market value of one hundred twenty-five percent (125%) of
the amount distributed in excess of the limitations set forth in
this Article, and the distributee agrees that should the fair
market value of such security decline to less than one hundred
ten percent (110%) of the excess distribution, he will deposit
additional property in escrow so as to raise the total value of
the security to one hundred twenty-five percent (125%) of the
excess distribution.
ARTICLE X - AMENDMENT AND TERMINATION
10.1 Amendment. The Company shall have the right to
amend the Plan at any time and from time to time by resolution of
its Board of Directors and all Participants, and persons claiming
any interest hereunder shall be bound thereby; provided, however,
that no amendment shall have the effect of: (a) directly or
indirectly divesting the interest of any Participant in any
amount that he would have been entitled to receive had he
terminated his Service immediately prior to the effective date of
such amendment or the interest of any Beneficiary as such
interest existed immediately prior to the effective date of such
amendment; (b) directly or indirectly affecting the vesting terms
set forth in Sections 1.25 and 5.4 of the Plan on the effective
date of the amendment unless the conditions of Section 411(a)(10)
of the Code are satisfied; (c) vesting in the Company any right,
title or interest in or to any Plan assets; (d) causing or
effecting discrimination in favor of officers, shareholders,
supervisors or highly compensated employees; or (e) causing any
part of the assets held by any Funding Agent to be used for any
purpose other than for the exclusive benefit of the Participants
and their Beneficiaries.
10.2 Involuntary Termination of Plan. (a) The Plan
shall automatically terminate with respect to the Company if it
is legally adjudicated a bankrupt, makes a general assignment for
the benefit of creditors, or is dissolved. In the event of the
merger or consolidation of the Company with or into any other
corporation, or in the event substantially all of the assets of
the Company shall be transferred to another corporation, the
successor corporation resulting from the consolidation or merger,
or transfer of such assets, as the case may be, shall have the
right to adopt and continue the Plan and succeed to the position
of the Company, hereunder. If, however, the Plan is not so
adopted within ninety (90) days after the effective date of such
consolidation, merger or sale, the Plan shall automatically be
deemed terminated with respect to the Company as of the effective
date of such transaction. Nothing in this Plan shall prevent the
dissolution, liquidation, consolidation or merger of the Company,
or the sale or transfer of all or substantially all of the assets
of the Company.
10.3 Voluntary Termination of or Permanent
Discontinuance of Contributions to the Plan. The Company expects
the Plan to be permanent, but since future conditions affecting
the Company cannot be anticipated, the Company shall have the
right to terminate the Plan in whole or in part, or to
permanently discontinue contributions to the Plan, at any time by
resolution of its Board and by giving written notice of such
termination or permanent discontinuance to the Funding Agents.
Such resolution shall specify the effective date of termination
or permanent discontinuance, which shall not be earlier than the
first day of the Plan Year that includes the date of the
resolution.
10.4 Effect of Termination or Discontinuance. If the
Plan shall terminate or partially terminate (as determined by the
Secretary of the Treasury) or upon the complete discontinuance of
contributions to the Plan by the Company, the benefits then
accrued for each Participant affected by such termination or
discontinuance will be fully vested in him; provided, however,
such benefits will be payable only out of the Trust Fund or by
the Pension Benefit Guaranty Corporation, in accordance with
ERISA and no Participant or other person shall have any recourse
against the Company in the event the assets held by the Funding
Agents and the amounts paid by the Pension Benefit Guaranty
Corporation shall not be sufficient to provide such benefits in
full. No further contributions will be made by the Company with
respect to each such Participant under the Plan, except to the
extent that additional contributions may be required under ERISA,
unless such Participant again becomes a Participant under the
Plan. The Company shall give due notice to the Pension Benefit
Guaranty Corporation, if applicable, and shall comply with its
procedures and lawful orders. As soon as it may do so, the
Company thereupon shall cause all assets held by the Funding
Agents to be allocated and distributed in the manner and order
set forth in Section 10.6 below.
10.5 Distribution of Funds upon Termination. In the
event the Plan shall be terminated or partially terminated, the
then present value of benefits vested in each affected
Participant in accordance with the Plan shall be determined as of
the Plan termination date and the assets held by the Funding
Agents allocable to the affected Participants shall be segregated
by the Funding Agents and shall be allocated to the extent that
they shall be sufficient, after providing for expenses of
administration, in the order of precedence set forth below:
(a) There shall first be set aside amounts derived
from Participants' contribution under the Plan.
(b) There shall next be set aside an amount which will
provide Retirement Income for Participants and their respective
spouses or Beneficiaries who were receiving benefits or who were
eligible to receive benefits at least three years prior to
termination of the Plan, which Retirement Income shall be based
on Plan provisions in effect during the five year period prior to
the date of the Plan's termination under which such Retirement
Income would have been least.
(c) There shall next be set aside an amount which will
provide all other insured benefits as provided for under Title
IV, Section 4044 of ERISA.
(d) There shall next be set aside an amount which will
provide all other nonforfeitable benefits, as determined under
the provisions of the Plan on the termination date, but which are
not insured under ERISA.
(e) Finally, there shall be set aside an amount which
will provide all other accrued benefits for Participants who did
not have nonforfeitable interests in accordance with the Plan as
of the date of Plan termination.
If the assets held by the Funding Agents as of the date
the Plan is terminated are not sufficient to provide in whole the
amounts required within the classes described above, such assets
shall be allocated pro rata within the class in which the amounts
first cannot be provided in full.
Allocation in any of the above listed categories shall
be adjusted for any allocation already made to the same
Participant under a prior category. Allocation of assets may be
modified by the Internal Revenue Service to meet
nondiscrimination requirements. After all expenses of
administration have been provided for, and all liabilities of the
Plan to Participants, former Participants and their respective
spouses and Beneficiaries have been satisfied, the Company shall
be entitled to any remaining balance of such assets.
10.6 Method of Payment. Provided no discrimination in
value results, the Company may direct that the amounts allocated
to any or all persons under the foregoing provisions of this
Article X be paid either in cash or in other assets, including
annuity contracts. The Company shall direct that payment be made
in a single lump sum upon termination of this Plan to any
Participant, spouse or Beneficiary who elects to receive payment
in a single lump sum. In the absence of such an election by any
Participant, spouse or Beneficiary, and subject to the provisions
of Section 6.4 and final and temporary Pension Benefit Guaranty
Corporation Regulations Section 2617.4(b), payment shall be made
in the form of an annuity purchased by the Funding Agents. In no
event shall the Company receive at any time amounts from the
funds held by the Funding Agents except such amounts as may
remain after satisfaction of all liabilities under the Plan.
10.7 Notice of Amendment or Termination. Affected
Participants will be notified of an amendment, termination or
partial termination of the Plan as required by the applicable
provisions of ERISA.
ARTICLE XI - MISCELLANEOUS
11.1 Duty to Furnish Information and Documents.
Participants, spouses and Beneficiaries must furnish to the
Company and the Funding Agents such evidence, data or information
as the Company considers necessary or desirable for the purpose
of administering the Plan, and the provisions of the Plan for
each person are upon the condition that he will furnish promptly
full, true, and complete evidence, data, and information
requested by the Company. All parties to, or claiming any
interest under, the Plan hereby agree to perform any and all
acts, and to execute any and all documents and papers, necessary
or desirable for carrying out the Plan.
11.2 Benefit Statements and Available Information.
The Company shall advise employees of the eligibility
requirements and benefits under the Plan. The Company shall
provide each Participant, and each former Participant, spouse,
and Beneficiary entitled to a benefit under the Plan with a
statement reflecting the current status of his benefits as soon
as practicable after receipt from such individual of a written
request for such statement; provided, however, that the Company
shall not be obligated to provide any individual with more than
one such statement in any Plan Year. In addition, the Company
may, in its discretion, provide such statement to each
Participant, former Participant, spouse and Beneficiary as soon
as practicable after the close of each Plan Year, and at such
other times as the Company may determine. No Participant shall
have the right to inspect the records relating to any other
Participant. The Company shall make available for inspection at
reasonable times by Participants, spouses and Beneficiaries,
copies of the Plan, any amendments thereto, a Plan summary, and
all reports of Plan operations required by law.
11.3 No Enlargement of Employment Rights. Nothing
contained in the Plan shall be construed as a contract of
employment between the Company and any person, nor shall the Plan
be deemed to give any person the right to be retained in the
employ of the Company or limit the right of the Company to employ
or discharge any person with or without cause, or to discipline
any employee.
11.4 Applicable Law. All questions pertaining to the
validity, construction and administration of the Plan shall be
determined in conformity with the laws of Illinois to the extent
that such laws are not preempted by ERISA and valid regulations
published thereunder.
11.5 Unclaimed Funds. Each Participant shall keep the
Company informed of his current address and the current address
of his spouse, or Beneficiaries. Neither the Company nor any
Funding Agent shall be obligated to search for the whereabouts of
any person. If the location of a Participant is not made known
to the Company within three (3) years after the date on which
distribution of the Participant's benefits may first be made,
distribution may be made as though the Participant had died at
the end of the three-year period. If, within one additional year
after such three-year period has elapsed, or, within three years
after the actual death of a Participant, the Company is unable to
locate any individual who would receive a distribution under the
Plan upon the death of the Participant pursuant to Article VII of
the Plan, any benefit payable under the Plan to such individual
shall be deemed a forfeiture and shall be used to reduce Company
contributions to the Plan for the Plan Year next following the
year in which the forfeiture occurs in a manner determined by the
Board; provided, however, that in the event that the Participant,
spouse or Beneficiary makes a claim for any amount which has been
so forfeited, the benefits which have been forfeited shall be
reinstated.
11.6 Merger or Consolidation of Plan. Any merger or
consolidation of the Plan with another plan, or transfer of Plan
assets or liabilities to any other plan, shall be effected in
accordance with such regulations, if any, as may be issued
pursuant to Section 208 of ERISA, in such a manner that each
Participant in the Plan would receive, if the merged,
consolidated or transferee plan were terminated immediately
following such event, a benefit which is equal to or greater than
the benefit he would have been entitled to receive if the Plan
had terminated immediately before such event.
11.7 Interest Non-Transferable. (a) Except as
provided in paragraph (b), no interest of any person or entity
in, or right to receive distributions from, assets held by any
Funding Agent shall be subject in any manner to sale, transfer,
assignment, pledge, attachment, garnishment, or other alienation
or encumbrance of any kind; nor may such interest or right to
receive distributions be taken, either voluntarily or
involuntarily, for the satisfaction of the debts of, or other
obligations or claims against, such person or entity, including
claims in bankruptcy proceedings.
(b) Notwithstanding the provisions of paragraph (a),
all or any part of the Accrued Benefit of a Participant shall be
subject to and payable in accordance with the applicable
requirements of any Qualified Domestic Relations Order, as that
term is defined in Section 206(d)(3) of ERISA, and the Company
shall direct the Funding Agents to provide for payment in
accordance with such Order and Section and any government
regulations promulgated under such Section. All such payments
pursuant to Qualified Domestic Relations Orders shall be subject
to reasonable rules and regulations promulgated by the Company;
provided that such rules and regulations are consistent with such
Section. If prior to the commencement of payment to a
Participant of his Retirement Income, any amount of his Accrued
Benefit is paid to an alternate payee or payees pursuant to a
Qualified Domestic Relations Order, the amount of his Accrued
Benefit shall be reduced by the Actuarial Value of any such
payment.
11.8 Prudent Man Rule. Notwithstanding any other
provision of the Plan, the Company and the Funding Agents shall
exercise their powers and discharge their duties under the Plan
for the exclusive purpose of providing benefits to Participants
and their spouses and Beneficiaries, and shall act with the care,
skill, prudence and diligence under the circumstances that a
prudent man acting in a like capacity and familiar with such
matters would use in the conduct of an enterprise of a like
character and with like aims.
11.9 Headings. The headings in this Plan are inserted
for convenience of reference only and are not to be considered in
construction of the provisions hereof.
11.10 Gender and Number. Except when otherwise
required by the context, any masculine terminology in this
document shall include the feminine, and any singular terminology
shall include the plural.
11.11 ERISA and Approval Under Internal Revenue Code.
This Plan is intended to qualify as a Plan meeting the
requirements of Section 401(a) of the Code, as now in effect or
hereafter amended, so that the income from the assets held by the
Funding Agents may be exempt from taxation under Section 501(a)
of the Code and contributions of the Company under the Plan may
be deductible for Federal Income Tax purposes under Section 404
of the Code, as now in effect or hereafter amended. Any
modification or amendment of the Plan may be made retroactively,
as necessary or appropriate, to establish and maintain such
qualification and to meet any requirement of the Code or ERISA.
11.12 Spousal Consents. Each written consent of a
spouse given pursuant to any provision of the Plan shall be
irrevocable.
ARTICLE XII - TOP-HEAVY PROVISIONS
12.1 Top-Heavy Status. The provisions of this Article
shall not apply to the Plan with respect to any Plan Year for
which the Plan is not Top-Heavy (except as provided in Sections
12.5(b) and 12.5(c)). If the Plan is or becomes Top-Heavy in any
Plan Year, the provisions of this Article XII will supersede any
conflicting provisions elsewhere in the Plan.
12.2 Definitions. For purposes of this Article XII,
the following words and phrases shall have the meanings stated
below unless a different meaning is plainly required by the
context:
(a) "Determination Date" means, with respect to any
Plan Year: (i) the last day of the preceding Plan Year, or (ii)
in the case of the first Plan Year of the Plan, the last day of
such Plan Year.
(b) "Key Employee" means an employee meeting the
definition of "key employee" contained in Section 416(i)(l) of
the Code and the Treasury Regulations interpreting said Section.
For purposes of determining whether an employee is a Key
Employee, compensation shall have the meaning set forth in
Section 12.7.
(c) "Non-Key Employee" means any employee who is not a
Key Employee.
(d) "Valuation Date" means with respect to a
particular Determination Date, the most recent valuation date
occurring within a twelve (12) month period ending on the
applicable Determination Date and used for computing Plan costs
for purposes of the minimum funding requirements of the Code.
12.3 Determination of Top-Heavy Status. (a) The Plan
will be "Top-Heavy" with respect to any Plan Year if, as of the
Determination Date applicable to such Year, the ratio of the
present value of the Accrued Benefits under the Plan for Key
Employees (determined as of the Valuation Date applicable to such
Determination Date) to the present value of the Accrued Benefits
under the Plan for all Employees (determined as of such Valuation
Date) exceeds 60%. For purposes of computing such ratio, and for
all other purposes of applying and interpreting this paragraph
(a): (i) the present value of the cumulative accrued benefits for
any Employee shall be increased by the aggregate distributions
made with respect to such Employee under the Plan during the
five-year period ending on any Determination Date; (ii) benefits
provided under all plans that are aggregated pursuant to (b) of
this Section must be considered; and (iii) the provisions of
Section 416 of the Code and all Treasury Regulators interpreting
said Section shall be applied. If any Employee has not performed
services for the Company or any Related Company at any time
during the five-year period ending on any Determination Date, the
Accrued Benefit of such Employee shall not be taken into
consideration for purposes of determining whether the Plan is
Top-Heavy with respect to the Plan Year to which the
Determination Date applied.
(b) For purposes of determining whether the Plan is
Top-Heavy, all qualified retirement plans maintained by the
Company and each Related Company shall be aggregated to the
extent that such aggregation is required under the applicable
provisions of Section 416 of the Code and the Treasury
Regulations interpreting said Section. All other qualified
retirement plans maintained by the Company and each Related
Company shall be aggregated only to the extent permitted by
Section 416 of the Code and such Treasury Regulations and elected
by the Company.
(c) For purposes of determining whether the Plan is
Top-Heavy, the Accrued Benefit of a Participant shall not include
(i) the amount of a rollover contribution (or similar transfer)
initiated by the Participant and derived from a plan not
maintained by the Company or any Related Company, or (ii) a
distribution made with respect to an Employee that is a tax-free
rollover contribution (or similar transfer) that is either not
initiated by the Employer or that is made to a plan maintained by
the Company or any Related Company.
(d) Solely for purposes of determining whether the
Plan is Top-Heavy, the Accrued Benefit of any Non-Key Employee
shall be determined (i) under the method, if any, that uniformly
applies for accrued purposes under all plans of the Company or
any Related Employer, or (ii) if there is no such method, as if
such benefit accrued not more rapidly than the slowest accrual
rate permitted under the fractional accrual rule of
Section 411(b)(1)(C) of the Code.
12.4 Actuarial Assumptions. For purposes of
determining whether the Plan is Top-Heavy, the actuarial
assumptions provided in Section 1.3 of the Plan shall be used.
12.5 Vesting. (a) If the Plan becomes Top-Heavy, the
vested interest of a Participant in the portion of his Accrued
Benefit referred to in paragraph (b) below shall be determined in
accordance with the following formula in lieu of the provisions
set forth in Sections 1.28 and 5.4 of the Plan:
Years of Vested Forfeitable
Service Percentage Percentage
--------------------------------------------------
Less than 2 0% 100%
2 but less than 3 20% 80%
3 but less than 4 40% 60%
4 but less than 5 60% 40%
5 but less than 6 80% 20%
6 or more 100% 0%
For purposes of the above schedule, years of Service shall
include all years of Service required to be counted under Section
411(a) of the Code, disregarding all years of Service permitted
to be disregarded under Section 411(a)(4) of the Code.
(b) The vesting schedule set forth in paragraph (a)
next above shall apply to all benefits which have accrued while
the Plan is Top-Heavy and during the period of time before the
Plan becomes Top-Heavy. This vesting schedule shall not apply to
the Accrued Benefit of any Participant who does not have an Hour
of Service after the Plan becomes Top-Heavy.
(c) If the Plan becomes Top-Heavy and subsequently
ceases to be Top-Heavy, the vesting schedule set forth in
paragraph (a) of this Section shall automatically cease to apply,
and the provisions set forth in Sections 1.29 and 5.4 of the Plan
shall automatically apply with respect to all benefits which
accrue to a Participant for all Plan Years after the Plan Year
with respect to which the Plan was last Top-Heavy. For purposes
of this paragraph (c), this change in vesting provisions shall
only be valid to the extent that the conditions of Section 10.1
of the Plan and Section 411(a)(10) of the Code are satisfied.
12.6 Minimum Benefit. (a) If the Plan shall be Top-
Heavy, the Accrued Benefit at any point in time for each Non-Key
Employee described in paragraph (c) of this Section shall be the
Actuarial Value (based on the assumptions set forth in Section
1.3 of the Plan) of a single life annuity payable over the life
of the Non-Key Employee, commencing on his 65th birthday, equal
to a percentage of such Employee's average compensation (as
defined in Section 12.7 of the Plan) for the five consecutive
Plan Years when the Employee had the highest aggregate amount of
such compensation from the Company and all Related Companies.
Such percentage shall equal the lesser of (i) two percent (2%)
multiplied by such Employee's years of Service (as computed
pursuant to paragraph (b) of this Section), or (ii) twenty
percent (20%). The minimum benefit payable pursuant to this
Section 12.6 will be determined without regard to any
contributions for any Employee under the Federal Social Security
Act.
(b) For purposes of this Section 12.6, years of
Service shall not include Plan Years when (i) the Plan was not
Top-Heavy for any Plan Year ending during such year of Service,
and (ii) years of Service completed in a Plan Year beginning
before January 1, 1984.
(c) Each Non-Key Employee who completes at least
1,000 Hours of Service in a Plan Year shall accrue the minimum
Accrued Benefit described in paragraph (a) of this Section for
such Year. A Non-Key Employee shall not fail to accrue such
benefit merely because the Employee was not employed on a
specific date.
(d) For purposes of paragraph (c) of this section,
compensation in Plan Years ending before January 1, 1984 and
compensation in Plan Years after the close of the last Plan Year
in which the Plan is Top-Heavy shall be disregarded.
12.7 Compensation. For any Plan Year in which the
Plan is Top-Heavy, the annual compensation for purposes of this
Article XII shall have the meaning set forth in Section 414(q)(7)
of the Code.
12.8 Maximum Allocation. For purposes of determining
whether the Plan would be Top Heavy if "90%" were substituted for
"60%" each place it appears in paragraphs (1)(A) and (2)(B) of
Section 416(g) of the Code, as required by Section 416(h) of the
Code, all of the preceding provisions of this Article shall be
applicable except that the phrase "90%" shall be substituted for
the phrase "60%" where it appears in paragraph 12.3(a). If,
pursuant to the preceding sentence, it is determined that the
Plan would be Top Heavy if "90%" were substituted for "60%", then
for purposes of applying Sections 415(e) and 416(h) of the Code
and Section 5.6 of the Plan to the Retirement Income of any
Participant for any Limitation Year, "1.0" shall be substituted
for "1.25" in each applicable place in paragraphs (2)(B) and
(3)(B) of Section 415(e) of the Code.
12.9 Safe-Harbor Rule. Each Non-key Employee who is a
Participant in both this Plan and a Top-Heavy defined
contribution plan maintained by the Company or any Related
Company must receive the minimum benefit under the provisions of
Section 12.6 of this Plan.
12.10 Limitation on Benefits to Key Employees.
Subject to the exception provided below, if, for any Plan Year,
this Plan is a Top-Heavy Plan, then the overall limitation
imposed by Section 415(e) and (h) of the Code and Section 5.6 of
the Plan in the case of a Key Employee who is a Participant in
both this Plan and a Top-Heavy defined contribution plan
maintained by the Company or any Related Company, shall be
applied by substituting "1.0" for "1.25" in each applicable place
in paragraphs (2)(B) and (3)(B) of Section 415(e) of the Code.
The change in the Section 415(e) limitation specified in the
preceding sentence shall not be applicable to a Participant for a
Plan Year in which this Plan is a Top-Heavy Plan if (a) the sum
of the present values of the accrued benefits and account
balances of all participants in all defined benefit plans and
defined contribution plans maintained by the Company or any
Related Company who are Key Employees does not exceed 90% of the
sum of the present values of the accrued benefits and account
balances of all Participants in all defined benefit Plans and
defined contribution plans maintained by the Company or any
Related Company, and (b) the minimum benefit percentage in
paragraph 12.6 is increased to three percent (3%).
IN WITNESS WHEREOF, the Company has caused this Plan to
be executed on its behalf by its duly authorized officer this
____ day of ___________________, 1990, as amended and restated
effective January 1, 1989.
ILLINOIS POWER COMPANY
By: ________________________________
<PAGE>
SUPPLEMENT A
ILLINOIS POWER COMPANY
RETIREMENT INCOME PLAN FOR SALARIED EMPLOYEES
Purpose A.1. The purpose of this Supplement B
to the Plan is to set forth the benefit
formula under the Plan as in effect on
December 31, 1991.
Definitions A.2. A word, term or phrase used or
defined in the Plan is similarly used or
defined for purposes of this Supplement
A. In determining the benefits
described in this Supplement B, the
following definitions will be used in
applying the benefit formula under the
Plan in effect as of December 31, 1991.
"Social Security Benefit" means 41.4% of
a Participant's Final Average
Compensation; provided, however, that if
a Participant's Final Average
Compensation exceeds Covered
Compensation for a Plan Year, the Social
Security Benefit for such Participant
for such Plan Year shall be calculated
in accordance with the following table:
If the ratio of
Final Average
Compensation to Then the 41.4% of Final
Covered Compensation but not Compensation should be
is greater than: more than: reduced to:
1.00 1.25 27.0% of Covered
Compensation plus 14.4%
of Final Average
Compensation
1.25 1.50 31.5% of Covered
Compensation plus 10.8%
of Final Average
Compensation
1.50 1.75 37.8% of Covered
Compensation plus 6.6%
of Final Average
Compensation
1.75 2.00 42.0% of Covered
Compensation plus 4.2%
of Final Average
Compensation
2.00 -- 25.2% of final Average
Compensation
Benefit Formula A.3. Pursuant to Section 5.1 of the
Plan, a Participant will receive the
greater of the amount of the
Participant's benefit as of December 31,
1991, or the benefit calculated in
accordance with Section 5.1(b) of the
Plan.
A Participant's monthly benefit
determined as of December 31, 1991 is
equal to 2% of his Final Average
Earnings (the "Base Formula") less
1-2/3% of his Social Security Benefit
(as defined in this Supplement B, and
referred to as the "Offset"), multiplied
by his years of Credited Service (up to
30 years).
A Participant who does not earn an Hour
of Service after December 31, 1988 will
be entitled to receive a monthly benefit
determined under the Plan as in effect
from time to time. A Participant who
earns an Hour of Service after
December 31, 1991, will be entitled to
receive a benefit in accordance with the
terms of the Plan as in effect on the
date he terminates employment.
Early Retirement A.4. Early Retirement Benefit. A
BenefitParticipant who attains his 55th
birthday while in the employ of the
Company shall be eligible to retire on
any day after such birthday and prior to
his Normal Retirement Date and receive a
Retirement Income, payable for his
lifetime, commencing at either his
Normal Retirement Date or any earlier
date, in a monthly amount determined as
follows:
(a) If Retirement Income is to commence
at his Normal Retirement Date, the
Participant's Retirement Income will be
his Accrued Benefit as of his date of
Retirement.
(b) A Participant who retires under
this Section may elect, by giving prior
written notice to the Company, to have
his Retirement Income commence as of the
first day of any month on or after his
date of retirement and prior to his
Normal Retirement Date. In that case
his Retirement Income shall be the
amount determined under Section 5.2(a),
provided that:
(i) The portion of his Retirement
Income attributable to the Base
Formula shall be multiplied by the
appropriate factor from the following
table:
Duration in years of
Interval Between Retire-
ment Date and Normal Reduction
Retirement Date Factors
0 1.000
1 1.000
2 1.000
3 1.000
4 .94
5 .88
6 .82
7 .76
8 .70
9 .64
10 .58;
(If the Participant's Retirement Date is
a fractional number of years prior to
his Normal Retirement Date, the
appropriate factor shall be determined
by interpolation.)
and
(ii) the Offset shall be reduced by
5/9 of 1% for each of the first 60
calendar months by which the earlier
of the date of commencement of his
Retirement Income or the date of
attainment of age 62 precedes his
Social Security Retirement Age (as
defined in Section 5.6(m) of the
Plan), 5/18 of 1% for each of the
next 60 calendar months in excess of
the first 60 calendar months by which
the date of commencement of his
Retirement Income precedes his Social
Security Retirement Age, and on an
actuarially equivalent basis for any
such additional months.
<PAGE>
SUPPLEMENT B
TO
ILLINOIS POWER COMPANY RETIREMENT INCOME PLAN
FOR SALARIED EMPLOYEES
Purpose B-1. The purpose of this Supplement B
to Illinois Power Company Retirement
Income Plan for Salaried Employees (the
"Plan") is to provide for the funding of
the cost of medical benefits for
Eligible Participants (as described in
subsection B-4) under the Plan.
Effective Date B-2. This Supplement B is effective for
Plan Years commencing on or after
January 1, 1993 (the "Effective Date" of
this Supplement B).
Definitions B-3. Unless the context clearly implies
or indicates the contrary, a word, term
or phrase used or defined in the Plan is
similarly used or defined in this
Supplement B.
Eligible B-4. For purposes of this Supplement B,
Participant the term "Eligible Participant" means
each Participant who, on or after the
Effective Date, (i) receives or is
eligible to receive Retirement Income
under the Plan by reason of his
retirement from the employ of the
Company after his 55th birthday (and not
by reason of his termination of
employment with the Company prior to his
55th birthday), and (ii) is eligible for
retiree medical coverage under The
Benefit Plan for Illinois Power Company,
as it may be amended from time to time
(the "Benefit Plan"); provided,
however, that a Participant who, as at
any date, is a "key employee" (as that
term is defined in section 416(i) of the
Code) or is eligible for medical
coverage under the medical plan for
retired managerial employees will not
thereafter be an Eligible Participant
for purposes of this Supplement B. An
Eligible Participant who is reemployed
by the Company or a Related Company
shall cease to be an Eligible
Participant during the period of his
reemployment.
Payment for B-5. Subject to the provisions of this
Medical Benefits Supplement B, for any Plan Year that the
costs of Medical Benefits (as described
below) exceed $1.5 million, such excess
costs shall be paid, at the direction of
the Company, by the trustee (or by the
Company for reimbursement by the
trustee) from amounts credited to the
Separate Account (as described in sub-
section B-7). For purposes of this
Supplement B, the term "Medical
Benefits" means amounts paid for
sickness, accident, hospitalization and
expenses for medical care (as defined in
section 213 of the Code) under the
Benefit Plan for an Eligible
Participant, his spouse, his surviving
spouse and his dependents (as defined in
section 152 of the Code), as provided
under the terms of the Benefit Plan.
Company B-6. Subject to the provisions of
Contributions subsection B-12 and the following
provisions of this subsection B-6, the
Company shall make contributions from
time to time to the trustee in such
amounts, determined by the Company in
accordance with generally accepted
actuarial principles, necessary to fund
amounts required to be paid in
accordance with subsection B-5;
provided, however, that for any Plan
Year, the Company shall not be required
to contribute an amount in excess of the
maximum amount deductible on account
thereof by the Company for that Plan
Year under section 404 of the Code or,
if less, the amount collected for that
Plan Year from the Company's rate payers
and designated for the funding of post-
retirement welfare benefits. In no
event shall the amount of the Company's
contribution under this subsection B-6
for any Plan Year, when added to the
amount, if any, contributed for that
Plan Year to provide Life Insurance
Protection (as described below) under
the Plan, exceed an amount equal to the
lesser of:
(a) 25 percent of the amount of the
aggregate actual contributions to the
Plan (other than contributions to fund
past service credits) for that Plan Year
and for any prior Plan Year beginning on
or after the Effective Date to provide
retirement benefits under the Plan,
current and future payments required
under subsection B-5, and any such Life
Insurance Protection; or
(b) the amount, determined by the
Company for the Plan Year in accordance
with generally accepted actuarial
methods, necessary to fund amounts
required to be paid in accordance with
subsection B-5, taking into account the
funding of any such amounts under the
Plan, the Illinois Power Company Welfare
Benefit Trust for Salaried Retirees (the
"Salaried VEBA"), and any other funding
medium that the Company may from time to
time establish, in its sole discretion.
At the time it makes a contribution to
the Plan, the Company shall designate in
writing to the trustee, that portion, if
any, of its contribution which is
allocable to the funding of Medical
Benefits under this Supplement B. For
purposes of this subsection B-6, the
term "Life Insurance Protection"
includes any benefit paid under the Plan
as a result of a Participant's death to
the extent that such payment exceeds the
amount of the reserve to provide the
retirement benefits for the Participant
existing at his death.
Separate Account B-7. The Company (or the trustee at the
direction of the Company) shall maintain
a Separate Account which shall reflect
the portion of the trust fund allocable
to the provision of Medical Benefits
pursuant to this Supplement B. The
trustee shall not be required to
separately invest the funds credited to
such Separate Account; provided,
however, that if the funds credited to
the Separate Account are invested with
the other assets of the trust, a
reasonable portion of the trust earnings
and losses shall be allocated to the
Separate Account.
Payment B-8. Notwithstanding any provision of
From General this Supplement B to the contrary, the
Corporate Assets costs for Medical Benefits otherwise
required to be paid as of any date under
the provisions of subsection B-5 shall
not be payable from the Plan (but may be
paid by the Company from its general
corporate assets or from the Salaried
VEBA) to the extent that the assets in
the Separate Account at the time such
amounts are payable are insufficient to
meet the total cost of Medical Benefits
then due under the Benefit Plan.
Forfeiture B-9. If any interest of an Eligible
Participant under the Separate Account
is forfeited for any reason prior to
termination of the Plan, an amount equal
to the amount of the forfeiture shall be
applied as soon as practicable
thereafter to reduce subsequent Company
contributions allocable to the Separate
Account. Notwithstanding any provision
of this Supplement B to the contrary,
neither the provisions of this
Supplement B nor the funding of the cost
of Medical Benefits pursuant hereto
shall give any Eligible Participant or
any other person, at any time, whether
before or after a Participant's
retirement, any vested interest in any
medical benefit provided under the
Benefit Plan or funded under this
Supplement B, and neither retirement nor
the satisfaction of conditions for
receipt of Retirement Income pursuant to
the terms of the Plan shall confer upon
any person any rights to benefits under
the Benefit Plan or this Supplement B.
Diversion B-10. Prior to the satisfaction of all
Prohibited liabilities under this Supplement B, no
part of the corpus or income of the
trust fund allocable to the Separate
Account may be used for, or diverted to,
any purpose other than for Medical
Benefits and the payment of appropriate
expenses of the Plan attributable to the
administration of Medical Benefits under
this Supplement B.
Reversion B-11. Any amounts which are credited to
to Company the Separate Account upon the
satisfaction of all liabilities for the
provision of Medical Benefits under this
Supplement B shall be returned to the
Company.
Amendment B-12. The Company's right to amend or
and Termination terminate the Benefit Plan including,
without limitation, the right to
decrease benefit levels or increase
required employee contributions, shall
be governed exclusively by the terms and
conditions of the Benefit Plan and shall
not be limited or abridged by the provi-
sions of this Supplement B. Subject to
the provisions of the trust, the Company
reserves the right to amend and to
terminate the provisions of this
Supplement B at any time, including,
without limitation, the right to include
additional persons as Eligible
Participants, and the right to eliminate
the Company's obligation under the Plan
to make contributions required under
subsection B-6 for any Plan Year;
provided, however, that an amendment or
termination which would eliminate the
obligation of the Company to make
contributions required under subsection
B-6 for any Plan Year shall be effective
only if the amendment or termination is
adopted before the last day of that year
or, if earlier, the date such
contribution is paid. A termination of
the provisions of this Supplement B or a
modification or termination of the
benefits payable under the Benefit Plan
shall not constitute a termination or
partial termination of the Plan.
No Guaranty B-13. Neither the trustee nor the
of Benefits Company in any way guarantee the assets
credited to the Separate Account from
loss or depreciation. The Company does
not guarantee any payment for benefits
under this Supplement B to any person.
The liability of the trustee to pay for
Medical Benefits under this Supplement B
is limited to the assets credited to the
Separate Account.
Return of B-14. Notwithstanding any provision of
Nondeductible this Supplement B to the contrary, in
Contributions the event that the Commissioner of
Internal Revenue or his delegate
determines that a contribution (or
portion thereof) made pursuant to this
Supplement B is not deductible, such
nondeductible contributions and the
earnings thereon shall be returned to
the Company within one year of the
disallowance of the deduction.
IN WITNESS WHEREOF, the undersigned officer of the Company
has set his hand this 28th day of December, 1993.
--------------------------------------
Its:
---------------------------------
Title
<PAGE>
Conformed Copy
ILLINOIS POWER COMPANY
RETIREMENT INCOME PLAN
FOR EMPLOYEES COVERED UNDER A COLLECTIVE BARGAINING AGREEMENT
(As Amended and Restated
Effective as of January 1, 1994)
Mayer, Brown & Platt
Chicago
<PAGE>
I, __________________________________, Secretary of Illinois
Power Company hereby certify that the attached document is a
full, true and complete copy of the ILLINOIS POWER COMPANY
RETIREMENT INCOME PLAN FOR EMPLOYEES COVERED UNDER A COLLECTIVE
BARGAINING AGREEMENT as presently in effect.
Dated this _____ day of ___________________, 199__.
Secretary as Aforesaid
(Seal)
<PAGE>
TABLE OF CONTENTS
SECTION 1 - General. . . . . . . . . . . . . . . . . . . . . . .1
1.1. History, Purpose and Effective Date. . . . . . . . .1
1.2. Benefits Under the Plan as in Effect
Prior to Effective Date . . . . . . . . . . . . .1
1.3. Related Companies. . . . . . . . . . . . . . . . . .1
1.4. Plan Administration, Trust and Fiduciary
Responsibility. . . . . . . . . . . . . . . . . .2
1.5. Plan Year. . . . . . . . . . . . . . . . . . . . . .2
1.6. Applicable Laws. . . . . . . . . . . . . . . . . . .2
1.7. Gender and Number. . . . . . . . . . . . . . . . . .2
1.8. Notices. . . . . . . . . . . . . . . . . . . . . . .2
1.9. Form and Time of Elections . . . . . . . . . . . . .3
1.10. Evidence . . . . . . . . . . . . . . . . . . . . . .3
1.11. Action by Employers. . . . . . . . . . . . . . . . .3
1.12. Plan Supplements . . . . . . . . . . . . . . . . . .3
1.13. Defined Terms. . . . . . . . . . . . . . . . . . . .3
SECTION 2 - Participation in Plan. . . . . . . . . . . . . . . .3
2.1. Eligibility for Participation. . . . . . . . . . . .3
2.2. Plan Not Contract of Employment. . . . . . . . . . .4
2.3. Leased Employees . . . . . . . . . . . . . . . . . .4
2.4 Transferred Employees. . . . . . . . . . . . . . . .5
SECTION 3 - Service and Vesting. . . . . . . . . . . . . . . . .6
3.1. Service. . . . . . . . . . . . . . . . . . . . . . .6
3.2. Credited Service . . . . . . . . . . . . . . . . . .6
3.3. Hour of Service. . . . . . . . . . . . . . . . . . .7
3.4. One Year Break in Service. . . . . . . . . . . . . .9
3.5. Determination of Vested Interest . . . . . . . . . 10
SECTION 4 - Retirement Dates . . . . . . . . . . . . . . . . . 12
4.1. Normal Retirement Date . . . . . . . . . . . . . . 12
4.2. Postponed Retirement Date. . . . . . . . . . . . . 12
4.3. Early Retirement Date. . . . . . . . . . . . . . . 12
4.4. Retirement Date. . . . . . . . . . . . . . . . . . 13
SECTION 5 - Amount of a Participant's Retirement Income. . . . 13
5.1. Retirement Income. . . . . . . . . . . . . . . . . 13
5.2. Normal and Postponed Retirement Benefit. . . . . . 14
5.3. Early Retirement Benefit . . . . . . . . . . . . . 14
5.4. Participant Accumulation.. . . . . . . . . . . . . 16
5.5. Withdrawal of Accumulation . . . . . . . . . . . . 16
5.6. Limitation on Earnings. . . . . . . . . . . . . . 17
5.7. Benefit Increase to Retired Participants . . . . . 17
SECTION 6 - Deferred Vested Retirement Benefit . . . . . . . . 21
6.1. Deferred Vested Retirement Benefit.. . . . . . . . 21
6.2. Amount of Deferred Vested Retirement Benefit.. . . 21
SECTION 7 - Limitations on Benefits. . . . . . . . . . . . . . 22
7.1. General Limitation.. . . . . . . . . . . . . . . . 22
7.2. Adjustments for Other Payment Forms. . . . . . . . 24
7.3. Related Defined Contribution Plan Adjustment . . . 25
SECTION 8 - Payment of Retirement Income
and Deferred Vested Income . . . . . . . . . . . . 25
8.1. Payment of Retirement Income and Deferred
Vested Income in Normal Form. . . . . . . . . . 25
8.2. Payment in Surviving Spouse Annuity Form and
Revocation Thereof. . . . . . . . . . 26
8.3. Retirement Election Period and
Retirement Election Information.. . . . . . . . 28
8.4. Optional Forms of Benefit. . . . . . . . . . . . . 29
8.5. Election and Discontinuance of Options.. . . . . . 30
8.6. Beneficiary Designation. . . . . . . . . . . . . . 31
8.7. Spousal Consent. . . . . . . . . . . . . . . . . . 31
8.8. Distributions To Persons Under Disability. . . . . 32
8.9. Interests Not Transferable.. . . . . . . . . . . . 33
8.10. Limitation on Payment Period.. . . . . . . . . . . 33
8.11. Cashout of Small Benefit Amounts.. . . . . . . . . 34
8.12. Actuarial Equivalent.. . . . . . . . . . . . . . . 35
8.13. Delayed Benefit Commencement . . . . . . . . . . . 36
8.14 Transfers to Salaried Plan . . . . . . . . . . . . 36
8.15 Absence of Guaranty. . . . . . . . . . . . . . . . 37
SECTION 9 - Employment Beyond Normal Retirement
Date and Reemployment . . . . . . . . . . . . . 37
9.1. Employment Beyond Normal Retirement Date.. . . . . 37
9.2. Reemployment After Benefit Commencement. . . . . . 37
SECTION 10 - Pre-Retirement Surviving Spouse Annuity . . . . . 40
10.1. Pre-Retirement Surviving Spouse Annuity. . . . . . 40
10.2. Amount and Payment of Pre-Retirement
Surviving Spouse Annuity. . . . . . . . . . . . 40
10.3. Death After Benefit Commencement.. . . . . . . . . 42
10.4. Payment of Accumulation. . . . . . . . . . . . . . 42
SECTION 11 - Funding Plan Benefits . . . . . . . . . . . . . . 43
11.1. Contributions. . . . . . . . . . . . . . . . . . . 43
11.2. Forfeitures. . . . . . . . . . . . . . . . . . . . 43
11.3. No Reversion to Employers. . . . . . . . . . . . . 43
SECTION 12 - Administration of the Plan . . . . . . . . . . . 44
12.1. Administration by Company. . . . . . . . . . . . . 44
12.2. Expenses of Administration.. . . . . . . . . . . . 44
12.3. Administrative Powers and Duties.. . . . . . . . . 44
12.4. Claims Procedure.. . . . . . . . . . . . . . . . . 45
12.5. Reliance on Information Furnished. . . . . . . . . 46
12.6. Agent for Service of Process.. . . . . . . . . . . 46
SECTION 13 - Amendment or Termination. . . . . . . . . . . . . 47
13.1. Amendment. . . . . . . . . . . . . . . . . . . . . 47
13.2. Termination. . . . . . . . . . . . . . . . . . . . 47
13.3. Merger and Consolidation of Plan,
Transfer of Plan Assets.. . . . . . . . . . . . 48
13.4. Vesting and Distribution on Termination
and Partial Termination.. . . . . . . . . . . . 48
13.5. Notice of Amendment, Termination or
Partial Termination.. . . . . . . . . . . . . . 48
SECTION 14 - Miscellaneous . . . . . . . . . . . . . . . . . . 48
14.1. Duty to Furnish Information and Documents. . . . . 48
14.2. Annual Statements and Available Information. . . . 49
14.3. Unclaimed Funds. . . . . . . . . . . . . . . . . . 49
14.4. Prudent Person Rule. . . . . . . . . . . . . . . . 49
14.5. ERISA and Approval Under Internal Revenue Code . . 50
Supplement A - Early Retirement Program
Supplement B - Enhanced Retirement Program
Appendix - Defined Terms
<PAGE>
ILLINOIS POWER COMPANY
RETIREMENT INCOME PLAN
FOR EMPLOYEES COVERED UNDER A COLLECTIVE BARGAINING AGREEMENT
(As Amended and Restated
Effective as of January 1, 1994)
SECTION 1
General
1.1. History, Purpose and Effective Date. Effective
July 1, 1949, Illinois Power Company (the "Company") established
a retirement plan known as the Illinois Power Company Retirement
Income Plan for Employees Covered under a Collective Bargaining
Agreement (the "Plan") for the benefit of eligible employees of
the Company. The Plan was amended and restated effective
January 1, 1976 in accordance with the requirements of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"). The Plan was again amended and restated effective
January 1, 1982 and effective January 1, 1986. The following
provisions constitute an amendment, restatement and continuation
of the Plan as in effect immediately prior to January 1, 1994,
the "Effective Date" of the Plan as set forth herein. To the
extent that any provisions of the Plan as set forth herein
specifically provide for an effective date other than January 1,
1994, such provisions shall constitute an amendment of the Plan
as in effect on such date. The Plan is intended to qualify under
section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code").
1.2. Benefits Under the Plan as in Effect Prior to
Effective Date. Except as otherwise specifically provided, the
provisions of the Plan as set forth herein shall apply only to
employees who meet all of the requirements set forth in
subsections 2.1(a), (b) and (c) on or after the Effective Date.
If an employee's employment with the Employers and all Related
Companies (as both terms are defined in subsection 1.3) last
terminated prior to the Effective Date, or if the employee does
not, at any time after the Effective Date, meet the requirements
of subsections 2.1(a), (b) and (c), his right to benefits, if
any, and the amount thereof, will be determined in accordance
with the provisions of the Plan as in effect on the earlier of
the date of his termination of such employment or the date he
last met the requirements of subsections 2.1(a), (b) and (c).
1.3. Related Companies. The term "Related Company" means
any corporation or trade or business during any period during
which it is, along with the Company, a member of a controlled
group of corporations or a controlled group of trades or
businesses, as described in sections 414(b) and 414(c),
respectively, of the Code. The Company and each Related Company
which, with the consent of the Company, adopts the Plan are
referred to below collectively as the "Employers" and
individually as an "Employer". If any Employer shall terminate
its participation in the Plan pursuant to subsections 13.2 or
13.3, such entity shall thereupon cease to be an Employer.
1.4. Plan Administration, Trust and Fiduciary
Responsibility. The authority to control and manage the
administration of the Plan shall continue to be vested in the
Company as described in Section 12. Except as otherwise provided
in Section 12, the Company shall have the rights, duties and
obligations of the plan "administrator" as described in
section 3(16)(A) of ERISA and of a "plan administrator as that
term is defined in section 414(g) of the Code. The funds
contributed by the Employers under the Plan will continue to be
held and invested until distributed by a trustee (the "Trustee")
acting under a trust which forms a part of the Plan. The terms
of the trust are set forth in a trust agreement between the
Trustee and the Company which is known as the Illinois Power
Company Retirement Income Trust (the "Trust"). The portion of
the Trust which shall constitute the fund for payment under the
Plan is herein called the "Trust Fund". The assets in the Trust
Fund held by the Trustee may be commingled for investment
purposes with the funds of each other employee pension benefit
plan, qualified under section 401(a) of the Code, of Illinois
Power Company or any of its subsidiaries which participate in the
Trust.
1.5. Plan Year. The term "Plan Year" means the twelve-
consecutive-month period beginning on each January 1 and ending
on the following December 31.
1.6. Applicable Laws. The Plan shall be construed and
administered in accordance with the internal laws of the State of
Illinois to the extent that such laws are not preempted by the
laws of the United States of America.
1.7. Gender and Number. Where the context admits, words in
any gender shall include any other gender, words in the singular
shall include the plural and the plural shall include the
singular.
1.8. Notices. Any notice or document required to be filed
with the Company under the Plan will be properly filed if
delivered or mailed by registered mail, postage prepaid, to such
committee in care of the Company at its principal executive
offices. Any notice required under the Plan may be waived by the
person entitled to notice.
1.9. Form and Time of Elections. Unless otherwise
specified herein, each election permitted to be made by any
Participant or other person entitled to benefits under the Plan,
and any permitted modification or revocation thereof, shall be in
writing filed with the Company at such times and in such form as
the Company shall require.
1.10. Evidence. Evidence required of anyone under the Plan
may be by certificate, affidavit, document or other information
which the person acting on it considers pertinent and reliable,
and signed, made or presented by the proper party or parties.
1.11. Action by Employers. With the consent of the
Company, any Related Company may become an Employer under this
Plan by (a) taking such action as shall be necessary to adopt the
Plan, (b) filing with the Company a duly certified copy of this
Plan as adopted by such entity, (c) becoming a party to any trust
agreement establishing the Trust, and (d) executing and
delivering such instruments and taking such other action as may
be necessary or desirable to put this Plan into effect with
respect to such entity. Except as otherwise specifically
provided, any action required or permitted to be taken by any
Employer which is a corporation, shall be by resolution of its
Board of Directors or by a duly authorized officer of the
Employer.
1.12. Plan Supplements. The provisions of the Plan as
applied to any Employer or any group of employees of any Employer
may, with the consent of the Company, be modified or supplemented
from time to time by the adoption of one or more Supplements.
Each Supplement shall form a part of the Plan as of the
Supplement's effective date. In the event of any inconsistency
between a Supplement and the Plan document, the terms of the
Supplement shall govern.
1.13. Defined Terms. Terms used frequently with the same
meaning are indicated by initial capital letters, and are defined
throughout the Plan. Appendix 1 contains an alphabetical listing
of all such terms and the subsections in which they are defined.
SECTION 2
Participation in Plan
2.1. Eligibility for Participation. Each employee of an
Employer who was a Participant in the Plan immediately prior to
the Effective Date will continue as a Participant in the Plan on
and after that date, subject to the terms and conditions of the
Plan. Each other employee of an Employer will become a
"Participant" in the Plan on the later of the Effective Date or
the first day of the month coincident with or next following the
date on which:
(a) he is employed as a member of a group to whom the Plan
has been and continues to be extended through a
currently effective collective bargaining agreement
between his Employer and the collective bargaining
representative of the group of employees of which he is
a member;
(b) has completed at least one Employment Year (as defined
in subsection 3.1) in which he completes at least 1,000
Hours of Service (as defined in subsection 3.4);
(c) has attained age 21; and
(d) he has not attained age 65 years or more on his initial
date of hire by the Employer or a Related Company;
provided however, that the provisions of this paragraph
(d) shall not apply for periods on and after January 1,
1990 with respect to any employee of an Employer or
Related Company who is credited with at least one Hour
of Service (as defined in 29 C.F.R. 2530.200(b)-2(a)(1)
and (2)) on or after that date; and provided further,
that any such employee who was excluded from
participation in the Plan for periods prior to January
1, 1990 by reason of the provisions of this paragraph
(d) shall become a participant in the Plan on the later
of January 1, 1990 or the date, if any, on which he
meets the requirements of paragraphs (a), (b) and (c)
next above.
Prior to April 1, 1979, eligible employees of the Company were
required to file a written election to commence participation in
the Plan, which election included the employee's consent to make
employee contributions to the Plan as required by the terms of
the Plan as then in effect. Effective April 1, 1979, each
eligible employee (including any eligible employee who declined
participation prior to that date) will commence participation in
the Plan according to the terms of this subsection 2.1.
2.2. Plan Not Contract of Employment. The Plan does not
constitute a contract of employment, and participation in the
Plan will not give any employee or Participant the right to be
retained in the employ of any Employer nor any right or claim to
any benefit under the Plan, unless such right or claim has
specifically accrued under the terms of the Plan.
2.3. Leased Employees. If a person satisfies the
requirements of section 414(n) of the Code and applicable
Treasury regulations for treatment as a "Leased Employee", such
Leased Employee shall not be eligible to participate in this
Plan, or in any other plan maintained by an Employer which is
qualified under section 401(a) of the Code, but, to the extent
required by section 414(n) of the Code and applicable Treasury
regulations, such person shall be treated as if the services
performed by him in such capacity were performed by him as an
employee of a Related Company which has not adopted the Plan;
provided, however, that no such service shall be credited for any
period during which not more than 20% of the non-Highly
Compensated work force of the Employers and the Related Companies
consists of Leased Employees and the Leased Employee is a
Participant in a money purchase pension plan maintained by the
leasing organization which (i) provides for a non-integrated
employer contribution of at least 10 percent of compensation,
(ii) provides for full and immediate vesting, and (iii) covers
all employees of the leasing organization (beginning with the
date they become employees), other than those employees excluded
under section 414(n)(5) of the Code. For purposes of this
subsection 2.3, a Highly Compensated employee shall mean an
individual described in section 414(q) of the Code and the
regulations thereunder.
2.4 Transferred Employees. If an employee of the Company
or a Related Company:
(a) ceases to satisfy the eligibility requirements of the
Illinois Power Company Retirement Income Plan for
Salaried Employees (the "Salaried Plan") because he
transfers into an employment classification as a member
of a group of employees to which the Plan has been
extended through a currently effective collective
bargaining agreement between his employer and the
collective bargaining representative of the group of
employees of which he is a member;
(b) he continues to be employed by the Company or a Related
Company; and
(c) coincident with his cessation of eligibility for the
Salaried Plan, he satisfies the provisions of
subsection 2.1 of the Plan;
then assets and liabilities attributable to his accrued
benefit under the Salaried Plan (including, if applicable,
the amount of his Participant Accumulation plus accrued
interest as described in section 1.2 of the Salaried Plan),
as determined as of the date described in paragraph (a) next
above, shall be transferred as soon as practicable
thereafter to the Plan in accordance with the requirements
of section 414(l) of the Code and regulations thereunder,
and, for periods thereafter, he shall cease to be a
participant in the Salaried Plan and shall be a Participant
in the Plan, subject to the terms and conditions of the
Plan.
SECTION 3
Service and Vesting
3.1. Service. The term "Service" means a period of time,
measured in Employment Years (as defined below) consisting of a
Participant's period of employment with the Employers and Related
Companies in any capacity, determined in accordance with the
following:
(a) Service shall commence on the date the Participant is
(i) initially employed or (ii) is reemployed after a
One Year Break in Service, and shall end upon the date
the Participant terminates employment with all
Employers and Related Companies.
(b) An employee or Participant shall be credited with one
year of Service for each Employment Year (or portion
thereof) during which he completes at least 1,000 Hours
of Service (as defined in subsection 3.4); provided,
however, that Service shall exclude any whole or
partial Employment Year in which an employee completes
less than 1,000 Hours of Service.
(c) In no event will a Participant be credited with less
Service as of the Effective Date than he has as of
December 31, 1993.
For purposes of the Plan, the term "Employment Year" shall mean
the 12-consecutive-month period beginning on a Participant's
initial date of hire and any anniversary thereof or, in the event
of a termination of employment which results in a One Year Break
in Service, his last date of rehire, and any anniversary thereof.
3.2. Credited Service. Except as otherwise provided by the
terms and conditions of the Plan, the term "Credited Service"
means the period of a Participant's employment (excluding a
Participant's employment with Related Companies for periods that
any such Related Company is not an Employer) measured in whole
and fractional Employment Years (to the nearest day) as follows:
(a) A Participant's Credited Service shall be equal to the
sum of:
(i) his periods of employment after his 30th
birthday and prior to July 1, 1949, if he was
employed and commenced making contributions on
that date, as required by the terms of the Plan
as then in effect;
(ii) his periods of employment after June 30, 1949
and prior to April 1, 1979 during which he made
all required contributions under the Plan as
then in effect; and
(iii) his periods of employment after April 1, 1979
during which he is a Participant in the Plan.
(b) A Participant's Credited Service shall exclude any
period of employment during which he does not meet the
requirements of Section 2.1, or any period during which
the Company shall make contributions on behalf of an
employee to any other qualified pension or retirement
plan (other than any defined contribution plan
sponsored by the Employer or a Related Company or
Federal Social Security) for any period which is used
in calculating his retirement benefits under such other
pension or retirement plan. Notwithstanding the
foregoing, if such employee becomes a Participant in
this Plan in accordance with the provisions of Section
2.4, his Credited Service hereunder shall be increased
to included the number of years taken into account
under the Salaried Plan prior to such transfer and the
amount of his Retirement Income under this Plan shall
be determined in accordance with the provisions of this
Plan taking into account the years of Credited Service
earned before and after such transfer.
3.3. Hour of Service. The term "Hour of Service" means,
with respect to any employee or Participant, each hour for which
he is paid or entitled to payment for the performance of duties
for an Employer or a Related Company or for which back pay,
irrespective of mitigation of damages, has been awarded to the
employee or Participant or agreed to by an Employer or a Related
Company, subject to the following:
(a) An employee or Participant shall be credited with Hours
of Service equal to the number of regularly scheduled
working hours which normally would have been credited
to him or, if the number of such hours is not
determinable, 8 Hours of Service per day (to a maximum
of 40 Hours of Service per week) for any period during
which he performs no duties for an Employer or a
Related Company (irrespective of whether the employment
relationship has terminated) by reason of a vacation,
holiday, illness, incapacity (including disability),
layoff, jury duty, military duty or leave of absence;
provided, however, that an employee or Participant
shall not be credited with more than 501 Hours of
Service under this paragraph (a) for any single
continuous period during which he performs no duties
for an Employer or a Related Company; and provided
further that payments considered for purposes of the
foregoing shall include payments unrelated to the
length of the period during which no duties are
performed but shall not include payments made solely
for the purpose of complying with applicable worker's
compensation, unemployment compensation or disability
insurance laws. For the purposes of determining Hours
of Service with respect to an employee who is employed
on other than an hourly-rated basis, such employee
shall be credited with 10 Hours of Service per day for
each day the employee would, if hourly rated, be
credited with Hours of Service for duties performed;
provided, however, if such employee is paid for periods
during which no duties are performed, such employee
shall be credited with (i) the number of regularly
scheduled working hours included in the units of time
normally assigned to such duties, if payment for such
duties is calculated on units of time, or (ii) 8 Hours
of Service per day (to a maximum of 40 Hours of Service
per week) if the employee does not have a regular work
schedule for each day the employee is paid on other
than an hourly-rated basis. Notwithstanding the
foregoing provisions of this paragraph (a), an employee
or Participant who is absent from work on account of an
injury or disability sustained in the course of
employment with the Employer or a Related Company and
with respect to which he receives worker's compensation
benefits shall be credited with 40 Hours of Service per
calendar week during the period he would normally have
been scheduled to work for an Employer or Related
Company during his period of absence.
(b) A Participant who terminates his employment with an
Employer or Related Company to serve in the armed
forces of the United States and returns to active
employment with an Employer or Related Company under
circumstances which entitle him to veteran's
reemployment rights under Federal law, shall be
credited with Hours of Service for the period between
the date his employment terminated and the date of his
reemployment by an Employer or Related Company.
(c) A Participant shall be credited with Hours of Service
for any period during which he is on an uncompensated
leave of absence approved and granted by the Employer
in accordance with rules uniformly applied by it,
provided he returns to active employment with the
Employer or Related Company immediately upon the
expiration of such authorized period.
(d) Hours of Service shall be calculated and credited
pursuant to Department of Labor Regulation section
2530.200b-2, which is incorporated herein by reference.
3.4. One Year Break in Service. The term "One Year Break
in Service" means, with respect to the Service of any employee or
Participant, any Employment Year in which he completes less than
501 Hours of Service. Solely for the purposes of determining
whether a Participant has incurred a One Year Break in Service,
the following rules shall apply:
(a) for any period during which an employee or Participant
is absent from active employment with the Employer or a
Related Company by reason of the employee's pregnancy,
the birth of a child of the employee, or the placement
of a child with the employee in connection with the
employee's adoption of such child, and, in each case,
the care of such child immediately after its birth or
placement, he shall be credited with the number of
regularly scheduled working hours which would normally
have been credited to him but for such absence, or, if
the number of such hours is not determinable, the
employee or Participant shall be credited with 8 Hours
of Service per day during such absence; provided,
however, that (i) Hours of Service shall not be
credited for any absence described in this paragraph
(a) which commenced prior to January 1, 1985, (ii) in
no event shall more than 501 Hours of Service be
credited under this paragraph (a) for any single
continuous period during which he performs no duties
for an Employer or Related Company, and (iii) Hours of
Service credited in accordance with this paragraph (a)
shall be credited for the first Employment Year during
which the absence begins, to the extent that such
crediting is necessary to prevent the employee or
Participant from incurring a One Year Break in Service
during that Employment Year and, in each other case,
shall be credited to the immediately following
Employment Year. The Company may require the employee
or Participant to furnish such information as it
considers necessary to establish that such individual's
absence was for one of the reasons specified above.
(b) The number of Hours of Service to be credited under the
provisions of this subsection 3.5 shall be determined
under uniform rules adopted by the Company in
accordance with 29 C.F.R. 2530.200b-2.
(c) If an employee or Participant does not have a
nonforfeitable right under the Plan to any portion of
his benefits under the Plan and the number of his
consecutive One Year Breaks in Service equals or
exceeds the greater of five (one in the case of an
employee or Participant who incurred the One Year Break
in Service prior to January 1, 1986) or the aggregate
number of his years of Service completed prior to such
break and not disregarded under subsection 3.1 by
reason of any prior One Year Breaks in Service, then
all of his years of Service completed prior to such
break shall be disregarded and, if he is later
reemployed by an Employer or a Related Company, he
shall be considered as a new employee for all purposes
of the Plan.
3.5. Determination of Vested Interest. A Participant who
has at least one Hour of Service on or after January 1, 1990
shall become fully vested and nonforfeitable in his benefits
accrued under the Plan in accordance with the following schedule:
Years of Service Vested Percentage
Less than 5 0%
5 or more 100%
3.6. Accelerated Vesting. Notwithstanding the provisions
of subsection 3.6, a Participant shall have a fully vested,
nonforfeitable interest in his benefits accrued under the Plan
upon attaining age 65 (his "Normal Retirement Age"). In
addition, in the event of the Plan's termination or partial
termination (as determined under applicable law and regulations),
each affected Participant shall be fully vested in his benefits
accrued under the Plan, to the extent then funded.
3.7. Cessation of Credited Service. A Participant shall
cease to accrue Credited Service under the Plan as of the earlier
of (1) the date of described Section 2.4(a) or (2) the date he
incurs a Severance from Service. The following provisions shall
apply with respect to a Participant's Severance from Service.
(a) A Severance from Service shall occur on the earlier of:
(i) the date as of which an employee quits, retires,
is discharged or dies; or
(ii) the first anniversary of the first date of a
period in which an employee remains absent from
service (with or without pay) with the Employer or
Related Companies for any reason other those
listed in (i) above, such as vacation, holiday,
sickness, short-term disability, leave of absence,
layoff or military service.
(b) A Period of Severance commences on the date an employee
incurs a Severance from Service and ends on the date on
which the employee again performs an Hour of Service
for an Employer or Related Company. A one-year Period
of Severance means each period of 12 consecutive months
beginning on the date an employee incurs a Severance
from Service and ending on each anniversary of such
date.
(c) Solely for the purpose of determining whether a one-
year Period of Severance has occurred, in the case of
an employee who is absent from work beyond the first
anniversary of the first date of an absence and the
absence is for an approved maternity or paternity
leave, the date the employee incurs a Severance from
Service shall be the second anniversary of the
Employee's absence from employment. The period between
the first and second anniversaries of the first date of
absence will not constitute Credited Service. For
purposes of this subsection, an approved maternity or
paternity leave means an absence (1) by reason of
pregnancy of the individual, (2) by reason of the birth
of a child of the individual, (3) by reason of the
placement of a child with the individual in connection
with the adoption of such child by such individual, or
(4) for purposes of caring for such child for a period
beginning immediately following such birth or
placement.
(d) If an Employee incurs a Severance from Service and is
subsequently reemployed by an Employer or Related
Company, the following provisions apply:
(i) If he was entitled to receive a Retirement
Income at his Severance from Service, but
benefit payments have not yet commenced as of
his date of reemployment, the Credited
Service he had at his Severance from Service
will be reinstated upon the date of his
reemployment, unless his is reemployed after
a one-year Period of Severance, in which case
his prior Credited Service will not be
reinstated unless he is employed by an
Employer or Related Company on the first
anniversary of the date of his reemployment;
(ii) If he was not entitled to receive a
Retirement Income at his Severance from
Service and his Period of Severance equals or
exceeds the greater of five years or the
aggregate periods of Credited Service
(regardless of whether such periods of
Credited Service are consecutive) completed
prior to his Severance from Service, then
such periods of Credited Service shall be
disregarded and, if he is later reemployed by
an Employer or Related Company, he shall be
considered a new employee;
(iii) If he was not entitled to receive a
Retirement Income at his Severance from
Service and he is reemployed before a five-
year Period of Severance, the Credited
Service he had at his Severance from Service
will be reinstated upon the date of his
reemployment, unless he is reemployed after a
one-year Period of Severance, in which case
his prior Credited Service will not be
reinstated unless he is employed by the
Employer or a Related Company on the first
anniversary of the date of his reemployment.
SECTION 4
Retirement Dates
4.1. Normal Retirement Date. The "Normal Retirement Date"
for a Participant is the first day of the calendar month
coincident with or next following his Normal Retirement Age. The
Retirement Income (as defined in subsection 5.1) of a Participant
who retires on his Normal Retirement Date shall commence as of
the first day of the calendar month coincident with his
Retirement Date (as defined in subsection 4.4).
4.2. Postponed Retirement Date. The "Postponed Retirement
Date" for a Participant is the first day of the calendar month
coincident with or next following the date on which he terminates
employment with the Employers and all Related Companies after his
Normal Retirement Date. Except as otherwise specifically
provided herein, the Retirement Income of a Participant who
retires on a Postponed Retirement Date shall commence as of the
first day of the calendar month coincident with his Retirement
Date.
4.3. Early Retirement Date. The "Early Retirement Date"
for a Participant is the first day of the calendar month
coincident with or next following the date on which he terminates
employment with the Employers and all Related Companies before
his Normal Retirement Date and after his 55th birthday. The
Retirement Income of a Participant who retires on an Early
Retirement Date shall commence as of the date that would have
been his Normal Retirement Date unless the Participant, by
advance written application to the Company, elects to have his
Retirement Income commence as of the first day of any calendar
month coincident with or next following his Early Retirement
Date; provided, however, that payment of such Retirement Income
must commence no later than the date which would have been his
Normal Retirement Date.
4.4. Retirement Date. The "Retirement Date" for a
Participant is one of the Retirement Dates described in the
foregoing subsections of this Section 4 on which he actually
retires from employment with the Employers and Related Companies
regardless of when benefit payments commence.
SECTION 5
Amount of a Participant's Retirement Income
5.1. Retirement Income. Subject to the terms and
conditions of the Plan, a Participant's "Retirement Income" means
his Normal, Early, or Postponed Retirement Income, as the case
may be, based on a Participant's Earnings (as defined below) and
Credited Service and determined in accordance with the following
provisions of this Section 5. The amount of a Participant's
Retirement Income will be paid in accordance with the provisions
of Sections 8 and 9 and is subject to the limitations described
in Section 7. The term "Earnings" means a Participant's earnings
determined as follows:
(a) For all purposes of the Plan, except as otherwise
specified, "Earnings" means a Participant's regular
basic compensation from the Employers, excluding
overtime and all extra compensation.
(b) With respect to any Participant who terminates
employment with the Employers and Related Companies on
or after January 1, 1990, and who is entitled to
receive an immediate or deferred Retirement Income
benefit in accordance with the terms of the Plan, the
value of any Earnings accrued prior to January 1, 1979
that may be included in the calculation of such
Participant's Retirement Income will be increased by
sixty percent.
(c) For the purposes of applying Code section 415, as
described in Section 7, "Earnings" means an employee's
"Section 415 Compensation" as defined in Section 7.1 of
the Plan.
(d) Subject to the provisions of Section 5.6, the annual
Earnings of each Participant taken into account under
the Plan for any Plan Year shall not exceed the amount
specified in section 401(a)(17) of the Code, as
adjusted by the Secretary.
5.2. Normal and Postponed Retirement Benefit. Normal or
Postponed Retirement Income will be determined in accordance with
the following provisions:
(a) Subject to the terms and conditions of the Plan, a
Participant who retires on or after his Normal or Postponed
Retirement Date will be entitled to receive a monthly
"Normal Retirement Income" which, when expressed as a single
life annuity, is equal to 1/12 of the sum of the following:
(i) 2.2% of his annual rate of Earnings as in effect
on June 1, 1959 multiplied by his Credited Service
prior to July 1, 1959; and
(ii) 2.2% of his annual rate of Earnings multiplied by
each year of his Credited Service after June 30,
1959.
(b) Notwithstanding the foregoing, the value of the accrued
benefit of each Participant who is employed by the Company
or a Related Company on January 1, 1994 will be the greater
of (1) the Normal Retirement Income to which the Participant
would be entitled on January 1, 1994 under the terms of this
Plan, determined in accordance with this Section 5.2, or (2)
the Retirement Income to which the Participant would be
entitled on January 1, 1994 under the terms of the Illinois
Power Company Retirement Income Plan for Salaried Employees
(the "Salaried Retirement Plan"), determined in accordance
with the provisions of Section 5.1 of the Salaried
Retirement Plan (as set forth in Supplement C of this Plan).
In the event that the accrued benefit provided under the
Salaried Retirement Plan is greater than the accrued benefit
under this Plan as of January 1, 1994, the Participant's
accrued benefit under this Plan will be adjusted to reflect
the increase. Additional benefit accruals for all
Participants will be determined after January 1, 1994 in
accordance with the formula set forth in subsection (a)
above.
(c) The Normal or Postponed Retirement Income of a
Participant who becomes a Participant in the Plan in
accordance with Section 2.4 will be determined in accordance
with the provisions of this Section 5.2; provided, however,
that the Normal or Postponed Retirement Income to which such
Participant becomes entitled under the Plan shall not be
less than the Normal or Postponed Retirement Income to which
he would be entitled under the Salaried Plan as of the date
of transfer as specified in Section 2.4(a) of this Plan.
5.3. Early Retirement Benefit. Subject to the terms and
conditions of the Plan, a Participant who retires on an Early
Retirement Date will be entitled to receive a monthly "Early
Retirement Income" commencing at either his Normal Retirement
Date or an earlier date coincident with or following his Early
Retirement Date, determined as follows:
(a) If the Participant's Early Retirement Income is to
commence at his Normal Retirement Date, the
Participant's Early Retirement Income will be his
Normal Retirement Income determined according to
subsection 5.2, using the Participant's Earnings and
Credited Service as of his Early Retirement Date.
(b) For Plan Years beginning prior to January 1, 1994, if
the Participant's Early Retirement Income is to
commence on or after his Early Retirement Date, but
prior to the date the Participant attains age 62, the
Participant's Early Retirement Income will be
determined according to subsection 5.2, using the
Participant's Earnings and Credited Service as of his
Early Retirement Date, reduced for early commencement
according to the following table:
Age at Retirement Early Retirement Factors
62 1.00
61 .94
60 .88
59 .82
58 .76
57 .70
56 .64
55 .58
If the Participant's Retirement Date is a fractional
number of years prior to his Normal Retirement Date,
the appropriate factor shall be determined by
interpolation.
(c) For Plan Years beginning on or after January 1, 1994,
if the Participant's Early Retirement Income is to
commence on or after his Early Retirement Date, but
prior to the date the Participant attains age 62, the
Participant's Early Retirement Income will be
determined according to subsection 5.2, using the
Participant's Earnings and Credited Service as of his
Early Retirement Date, reduced for early commencement
according to the following table:
Age at Retirement Early Retirement Factors
62 1.00
61 .96
60 .92
59 .82
58 .76
57 .70
56 .64
55 .58
If the Participant's Retirement Date is a fractional
number of years prior to his Normal Retirement Date,
the appropriate factor shall be determined by
interpolation.
Notwithstanding the foregoing, in no event shall the
Participant's Early Retirement Income determined in accordance
with this section 5.3 be less than the amount of the Early
Retirement Income payable to such Participant as of December 31,
1993.
5.4. Participant Accumulation. The term "Accumulation" as
applied to any Participant means the sum of the contributions, if
any, made by the Participant under the Plan as in effect prior to
April 1, 1979, plus any interest credited on such sum, which
contributions and interest have not previously been withdrawn by
the Participant. Interest will be credited on a Participant's
contributions, compounded annually, at the rate of 2% per annum
prior to July 1, 1970, 3% per annum from July 1, 1970 through
December 31, 1975, 5% per annum from January 1, 1976 through
December 31, 1981 and thereafter at 7% per annum or, if higher,
such other rate in effect from time to time as may be specified
by regulation. Effective January 1, 1973, interest will be
credited from the January 1 next following the date each
contribution was made to the first day of the month of the first
to occur of (a) the Participant's Retirement Date, (b)the
Participant's date of death, or (c) the date the Participant
elects the return of his Accumulation as provided in subsection
5.5.
5.5. Withdrawal of Accumulation. A Participant whose
employment with the Employers and Related Companies has
terminated and whose Retirement Income has not commenced may
withdraw his Accumulation in the form of a lump sum payment. In
that event, the Retirement Income otherwise payable to the
Participant under the Plan shall be reduced by a Retirement
Income which is the Actuarial Equivalent (as defined in
subsection 8.12) to his withdrawn Accumulation. Notwithstanding
the foregoing, from and after January 1, 1985 a Participant may
not elect to withdraw his Accumulation pursuant to this
subsection 5.5 unless the Participant's spouse consents in
writing to the Participant's election to make such withdrawal,
according to the provisions of subsection 8.7. Effective on and
after January 1, 1993, the portion of Participant's Accumulation
which is attributable to interest earned pursuant to subsection
5.4 and which is withdrawn according to the terms of this
subsection 5.5 will be subject to mandatory withholding
requirements for lump sum distributions from a qualified plan.
5.6. Limitation on Earnings. Notwithstanding any other
provision of the Plan to the contrary, for purposes of
determining a Participant's Retirement Income benefits accrued
under the Plan:
(a) for plan years beginning on and after the effective
date and before January 1, 1994, a Participant's
Earnings taken into account for any 12-consecutive
month period (including any such period beginning
before the effective date) shall not exceed $200,000,
as adjusted to reflect any applicable cost-of-living
increases in effect under section 401(a)(17) of the
code for the calendar year in which such 12-consecutive
month period begins; and
(b) for plan years beginning on and after January 1, 1994,
a Participant's Earnings taken into account for any 12-
consecutive month period (including any such period
beginning before January 1, 1994) shall not exceed
$150,000, as adjusted to reflect any applicable cost-
of-living increases in effect under section 401(a)(17)
of the code for the calendar year in which such 12-
consecutive month period begins.
The foregoing shall be applied by taking into account any
proration of such limitations as may be required under code
section 401(a)(17) and the regulations thereunder where family
members (as defined in section 401(a)(17) and 414(q)(6) of the
Code) and their Earnings must be aggregated, or where Earnings
are computed with respect to a period of less than 12 months
(other than on account of mid-year commencement or cessation of
active participation).
5.7. Benefit Increase to Retired Participants. Participants
and surviving spouses or contingent annuitants of Participants
may be entitled to receive benefit increases according to the
following schedule:
(a) Effective August 1, 1978, a benefit increase is
applicable to (1) Participants, or contingent
annuitants of such Participants, receiving benefits
under 5.2 or 5.3 of the Plan (or comparable provisions
of the Plan as in effect prior to the Effective Date)
who retired on or before January 1, 1977; (2)
Participants, or contingent annuitants of such
Participants, receiving benefits under the Plan who
retired on or before January 1, 1977, and after
cessation of a Company-provided disability allowance;
(3) surviving spouses of former Participants who died
prior to January 1, 1977, receiving benefits under
subsection 10.2 of the Plan (or the comparable
provision of the Plan as in effect prior to the
Effective Date); and (4) Vested Participants who
terminated employment with the Employers and Related
Companies prior to January 1, 1977, due to disability
and who are presently receiving a Company-provided
disability allowance. Benefits otherwise payable under
the Plan to the above persons on July 31, 1978 shall be
increased effective August 1, 1978 by 2 percent,
multiplied by the number of full years during the
period ending on December 31, 1977, and beginning on
the date the person's benefit commenced, except that
for a contingent annuitant the beginning date will be
the date the benefit commenced to the retired
Participant; and for Participants who retired while
receiving a Company-provided disability allowance or
for a contingent annuitant or surviving spouse of a
Participant who was receiving a Company-provided
disability allowance, the beginning date will be the
date disability allowance benefits began.
(b) Effective June 1, 1981, a benefit increase is
applicable to (l) Participants, or contingent
annuitants of such Participants, receiving benefits
under subsections 5.2 or 5.3 of the Plan (or comparable
provisions of the Plan as in effect prior to the
Effective Date) who retired on or before January 1,
1980; (2) Participants, or contingent annuitants of
such Participants, receiving benefits under the Plan
who retired on or before January 1, 1980, and after
cessation of a Company-provided disability allowance;
(3) surviving spouses of former Participants who died
prior to January 1, 1980, receiving benefits under
subsection 10.2 of the Plan (or the comparable
provision of the Plan as in effect prior to the
Effective Date); and (4) Vested Participants who
terminated employment with the Employers or Related
Companies prior to January 1, 1980, due to disability
and who are presently receiving a Company-provided
disability allowance.
Benefits otherwise payable under the Plan to the above
persons on May 31, 1981 shall be increased effective
June 1, 1981, by 3 percent multiplied by the number of
full years during the period ending on December 31,
1980, and beginning on the date the person's benefit
commenced, or January 1, 1978, whichever is later,
except that for a contingent annuitant the beginning
date will be the date the benefit commenced to the
retired Participant, or January 1, 1978, whichever is
later; and for Participants who retired while receiving
a Company-provided disability allowance or for a
contingent annuitant or surviving spouse of a
Participant who was receiving a Company-provided
disability allowance, the beginning date will be the
date disability allowance benefits began, or January 1,
1978, whichever is later.
(c) Effective January 1, 1987, a benefit increase is
applicable to (l) Participants, or contingent
annuitants of such Participants, receiving benefits
under subsections 5.2 or 5.3 of the Plan (or comparable
provisions of the Plan as in effect prior to the
Effective Date) who retired on or before January 1,
1986; (2) Participants, or contingent annuitants of
such Participants, receiving benefits under the Plan
who retired on or before January 1, 1986, and after
cessation of a Company-provided disability allowance;
(3) surviving spouses of former Participants who died
prior to January 1, 1986, receiving or entitled to
receive benefits under subsection 10.2 of the Plan (or
the comparable provision of the Plan as in effect prior
to the Effective Date); and (4) Vested Participants who
terminated employment with the Employers and Related
Companies prior to January 1, 1986, due to disability
and who on December 31, 1986 were receiving a Company-
provided disability allowance. Benefits otherwise
payable under the Plan to the above persons on
December 31, 1986 shall be increased effective
January 1, 1987 by 1.25 percent, multiplied by the
number of full years during the period ending on
December 31, 1986, and beginning on the date the
person's benefit commenced, or January 1, 1981,
whichever is later, except that for a contingent
annuitant the beginning date will be the date the
benefit commenced to the retired Participant, or
January 1, 1981, whichever is later; and for
Participants who retired while receiving a Company-
provided disability allowance or for a contingent
annuitant or surviving spouse of a Participant who was
receiving a Company-provided disability allowance, the
beginning date will be the date disability allowance
benefits began, or January 1, 1981, whichever is later.
Benefits otherwise payable under the Plan commencing on
a date after December 31, 1986, to a surviving spouse
of a Participant who died prior to January 1, 1986 and
under circumstances described in subsection 10.2 shall
be increased, effective on the commencement date of the
benefits, by 1.25% multiplied by the number of full
years during the period ending on December 31, 1986 and
beginning on the first day of the month following the
date of the Participant's death, or January 1, 1981,
whichever is later. Benefits otherwise payable under
the Plan commencing on a date after December 31, 1986,
to a Vested Participant described in clause (4) of the
preceding paragraph, shall be increased, effective on
the commencement date of the benefits, by 1.25%
multiplied by the number of full years during the
period ending on December 31, 1986 and beginning on the
date the disability allowance commenced to the Vested
Participant or January 1, 1981, whichever is later.
(d) Effective January 1, 1992, a benefit increase is
applicable to (l) Participants, or contingent
annuitants of such Participants, receiving benefits
under subsections 5.2 or 5.3 of the Plan (or comparable
provisions of the Plan as in effect prior to the
Effective Date) who retired on or before January 1,
1990; (2) Participants, or contingent annuitants of
such Participants, receiving benefits under the Plan
who retired on or before January 1, 1990, and after
cessation of a Company-provided disability allowance;
(3) surviving spouses of former Participants who died
prior to January 1, 1990, receiving or entitled to
receive benefits under subsection 10.2 of the Plan (or
the comparable provision of the Plan as in effect prior
to the Effective Date); and (4) Vested Participants who
terminated employment with the Employers and Related
Companies prior to January 1, 1990, due to disability
and who on December 31, 1990 were receiving a Company-
provided disability allowance.
Benefits otherwise payable under the Plan to the above
persons on December 31, 1991 shall be increased
effective January 1, 1992 by 2 percent, multiplied by
the number of full years during the period ending on
December 31, 1991, and beginning on the date the
person's benefit commenced, or January 1, 1987,
whichever is later, except that for a contingent
annuitant the beginning date will be the date the
benefit commenced to the retired Participant, or
January 1, 1987, whichever is later; and for
Participants who retired while receiving a Company-
provided disability allowance or for a contingent
annuitant or surviving spouse of a Participant who was
receiving a Company-provided disability allowance, the
beginning date will be the date disability allowance
benefits began, or January 1, 1987, whichever is later.
Benefits otherwise payable under the Plan commencing on
a date after December 31, 1989, to a surviving spouse
of a Participant who died prior to January 1, 1990 and
under circumstances described in subsection 10.2 shall
be increased, effective on the commencement date of the
benefits, by 1.25% multiplied by the number of full
years during the period ending on December 31, 1989 and
beginning on the first day of the month following the
date of the Participant's death, or January 1, 1987,
whichever is later. Benefits otherwise payable under
the Plan commencing on a date after December 31, 1986,
to a Vested Participant described in clause (4) of the
preceding paragraph, shall be increased, effective on
the commencement date of the benefits, by 1.25%
multiplied by the number of full years during the
period ending on December 31, 1991 and beginning on the
date the disability allowance commenced to the Vested
Participant or January 1, 1987, whichever is later.
Notwithstanding the foregoing, monthly Normal Retirement Income
for any Participant described in this subsection 5.6 shall be
equal to the greater of (1) his Normal Retirement Income,
adjusted according to the provisions of this subsection 5.6, or
his Base Benefit. A Participant's "Base Benefit" is equal to
$90.00 multiplied by his years of Credited Service (up to a
maximum of 30 years of Credited Service).
SECTION 6
Deferred Vested Retirement Benefit
6.1. Deferred Vested Retirement Benefit. A Participant who
has terminated employment with the Employers and Related
Companies prior to attaining age 55 and who has at least five
years of Service as of the date of his termination shall be
eligible to receive a monthly Deferred Vested Income commencing
at his Normal Retirement Date, or any date on or after he attains
age 55 and prior to his Normal Retirement Date, in a monthly
amount determined in accordance with subsection 6.2; provided,
however, that a Participant whose termination of employment with
the Employer and all Related Companies occurred prior to January
1, 1990 must have at least ten years of Service as of the date of
his termination. A Participant who is entitled to a Deferred
Vested Income may elect, by advance written application to the
Company to have his Deferred Vested Income commence as of the
first day of any month on or after the date he attains age 55;
provided, however, that payment of such Participant's Deferred
Vested Income must commence no later than the date that would
have been his Normal Retirement Date.
6.2. Amount of Deferred Vested Retirement Benefit. Subject
to the terms and conditions of the Plan, a Participant who
commences his monthly Deferred Vested Income payments in
accordance with subsection 6.1 will be entitled to receive a
Deferred Vested Income, in a monthly amount determined as
follows:
(a) If Deferred Vested Income is to commence at his Normal
Retirement Date, the Participant's Deferred Vested
Income will be his Normal Retirement Income determined
according to subsection 5.1, using the Participant's
Earnings and Credited Service as of the date he
terminated employment with the Employers and Related
Companies.
(b) If Deferred Vested Income is to commence on or after
his Early Retirement Date, but prior to his Normal
Retirement Date, the Participant's Deferred Vested
Income will be determined according to subsection 5.1,
using the Participant's Earnings and Credited Service
as of the date he terminated employment with the
Employers and Related Companies and reduced for early
commencement according to the following table:
Age at Retirement Actuarial Factor
65 1.000
64 0.9140
63 0.8390
62 0.7710
61 0.7120
60 0.6590
59 0.6110
58 0.5700
57 0.5310
56 0.4970
55 0.4660
If the Participant's age as of the date his Deferred Vested
Income commences is a fractional number of years prior to his
Normal Retirement Date, the appropriate factor shall be
determined by interpolation.
SECTION 7
Limitations on Benefits
7.1. General Limitation. Notwithstanding any other
provision of the Plan or any Supplement thereto, in no event may
a Participant's annual Retirement Income attributable to Company
contributions exceed an amount equal to:
(a) the lesser of:
(i) $90,000, or such other amount as may hereafter be
set forth in section 415 of the Code or determined
by Treasury regulations issued pursuant to section
415(d) of the Code; or
(ii) one hundred percent (100%) of the Participant's
section 415 compensation (as defined below) for
the three consecutive Plan Years of his active
participation in the plan in which he received his
highest aggregate section 415 compensation;
adjusted for each Plan Year (including each Plan Year
after the commencement of a Participant's annual
Retirement Income to take into account any applicable
cost-of-living adjustment for that year determined by
Treasury regulations issued pursuant to Section 415 of
the Code);
MULTIPLIED BY
(b) a fraction, the numerator of which is his number of
years of participation (not exceeding 10 such years)
and the denominator of which is 10;
REDUCED BY
(c) the annual pension income payable to the Participant
under any related defined benefit plan (as defined
below); and
FURTHER ADJUSTED
(d) to the extent required by subsections 7.2, 7.3 and 7.4.
Notwithstanding the foregoing provisions of this subsection
7.1, the limitation described in subsection (a) will not
apply to a Participant if the amount of his annual benefit
under this Plan and all related defined benefit plans
maintained by the Employer and each section 415 affiliate
(as defined below) does not in the aggregate exceed $10,000
and the Participant never participated in any related
defined contribution (as defined below) plan maintained by
any Employer or section 415 affiliate.
For purposes of this Section 7 of the Plan, (1) "related defined
benefit plan" or "related defined contribution plan" means any
other defined benefit plan or defined contribution plan (as
defined in section 415(k) of the Code) maintained by any Employer
or by any section 415 affiliate (as defined below); (2) "section
415 affiliate" means any corporation or trade or business that
is, along with the any Employer, a member of a controlled group
of corporations or a controlled group of trades or businesses (as
described in sections 414(b) and (c), respectively, of the Code,
as modified by section 415(h) thereof; (3) "section 415
compensation" means a Participant's compensation (as described in
Treas. Reg. Section 1.415-2(d)(1) paid during the Plan Year for personal
services actually rendered in the course of employment with any
employer or any section 415 affiliate, excluding deferred
compensation and other amounts to which special tax treatment
applies (as described in Treas. Reg. Section 1.415-2(d)(2); (4)
"Limitation Year" means the period to be used in determining the
Plan's compliance with Section 415 of the Code and the
regulations thereunder, which shall be the same period as the
Plan Year.
7.2. Adjustments for Other Payment Forms. The limitations
of subsection 7.1(a) shall be subject to the following
adjustments:
(a) If the Retirement Income under the Plan is payable in
any form other than a straight life annuity, the
determination as to whether the limitation described in
subsection 7.1(a) has been satisfied shall be made in
accordance with regulations prescribed by the Secretary
of the Treasury, by adjusting such benefit so that it
is the equivalent to the benefit described in
subsection 7.1(a). For purposes of this subsection
7.2(a), any ancillary benefit which is not directly
related to Retirement Income benefits shall not be
taken into account and that portion of any annuity
which constitutes a 50% joint and survivor annuity with
the Participant's spouse as joint annuitant shall not
be taken into account.
(b) If the Retirement Income under the Plan begins before
age 62, the determination as to whether the $90,000
limitation set forth in subsection 7.1(a) has been
satisfied shall be made, in accordance with regulations
prescribed by the Secretary of the Treasury, by
adjusting such Retirement Income so that it is
equivalent to such a Retirement Income beginning at age
62; provided, however, that such amount shall not be
reduced to less than: (i) if the Retirement Income
begins at or after age 55, $75,000, or (ii) if the
Retirement Income begins before age 55, the amount
which is the equivalent of the $75,000 limitation for
age 55.
(c) If the Retirement Income under the Plan begins after
age 65, the determination as to whether the $90,000
limitation set forth in paragraph (a) of this Section
has been satisfied shall be made, in accordance with
regulations prescribed by the Secretary of the
Treasury, by adjusting such Retirement Income so that
it is equivalent to such a Retirement Income beginning
at age 65.
(d) For purposes of adjusting any Retirement Income under
subsection 7.2(a), the interest rate assumption shall
be the greater of five (5) percent or the rate
specified in subsection 8.12 of the Plan.
For purposes of adjusting any Retirement Income under
subsection 7.2(b), the interest rate assumption shall
be the greater of five (5) percent or the rate applied
in reducing the amount of Retirement Income payable to
a Participant on account of commencement prior to such
Participant's Normal Retirement Date under subsection
6.2(b) of the Plan.
For purposes of adjusting any Retirement Income under
subsection 7.2(c), the interest rate assumption shall
be five (5) percent.
7.3. Related Defined Contribution Plan Adjustment. In the
event that any Participant under this Plan is a Participant in a
related defined contribution plan maintained by any Employer or
section 415 affiliate, the sum of the defined benefit plan
fraction (as defined in Code Section 415(e)(2)) and the defined
contribution plan fraction (as defined in Code Section 415(e)(3))
for any Limitation Year with respect to such Participant shall
not exceed one (1.0). If such sum exceeds one (1.0), then the
Participant's Retirement Income under this Plan shall be reduced
to obtain such compliance before any reductions to the annual
additions (as defined in section 415(c) (2) of the Code) for such
Participant to such related defined contribution plan. For
purposes of this subsection 7.3, the total annual benefit payable
to a Participant under all qualified plans maintained by the
Company will not exceed the limits under Section 415 of the Code
as set forth in subsection 7.1(a).
SECTION 8
Payment of Retirement Income
and Deferred Vested Income
8.1. Payment of Retirement Income and Deferred Vested
Income in Normal Form. Except as otherwise specifically provided
below in this Section 8, the Retirement Income or the Deferred
Vested Income to which a Participant is entitled under Section 5
or 6, respectively, shall be paid in accordance with the
following provisions of this subsection 8.1:
(a) The Normal, Postponed or Early Retirement Income or
Deferred Vested Income payable to a Participant will be
paid to him monthly, commencing as of the date
determined under the provisions of Section 4 or 6,
whichever is applicable, and ending with the payment
made for the month during which his death occurs.
(b) Subject to Section 10, no payments shall be made to or
on behalf of a Participant if the Participant dies
prior to his Annuity Starting Date (as defined in
paragraph 8.2(d)); provided, however, that, to the
extent that this paragraph (b) is applicable, payment
of a Participant's Accumulation may be made according
to the provisions of subsection 10.4.
8.2. Payment in Surviving Spouse Annuity Form and
Revocation Thereof. Notwithstanding the foregoing provisions of
this Section 8, if a Participant is eligible to receive monthly
benefit payments under paragraph 8.1(a) and he is legally married
under the laws of any jurisdiction on the Annuity Starting Date,
then the form of his benefit payments will be determined in
accordance with the following provisions of this subsection 8.2:
(a) In lieu of the normal form and amount of monthly
benefit payment provided by paragraph 8.1(a), a
Participant's monthly benefit shall be paid in the form
of a Surviving Spouse Annuity (as defined in paragraph
(b) next below) except that such a Participant may
elect at any time during his Retirement Election Period
(as described in subsection 8.3) to revoke payment in
accordance with this subsection and to have his monthly
benefit paid to him in the normal form described in
subsection 8.1; provided, however, that a Participant's
revocation will be effective only if the consent of his
Spouse (as defined in paragraph (c) below) is obtained
with respect thereto during the Participant's
Retirement Election Period in accordance with
subsection 8.4. A Participant may elect, at any time
during his Retirement Election Period, to rescind any
prior revocation made by him in accordance with this
subsection 8.2, in which case his monthly benefit will
be paid in the form of a Surviving Spouse Annuity.
(b) The term "Surviving Spouse Annuity" means an annuity
providing monthly benefits (i) for the life of the
Participant, and, as of the first day of the month next
following the Participant's death, a survivor annuity
for the life of the Participant's Spouse (if the Spouse
survives him) in an amount equal to (i) or (ii) below,
as applicable:
(i) A Participant who is married on his Annuity
Starting Date but who was not married to his
Spouse for the twelve consecutive months
immediately prior to his Annuity Starting Date
will receive a reduced Retirement Income or
Deferred Vested Income, as applicable, which is
the Actuarial Equivalent of the benefit computed
under subsection 5.1 or 6.2, as applicable, and
such Spouse will receive 50% of such reduced
Retirement Income (or Deferred Vested Income)
following the death of the Participant for the
remaining lifetime of such Spouse; or
(ii) A Participant who was married to his Surviving
Spouse on his Annuity Starting Date will receive
the greater of (A) the reduced Retirement Income
(or Deferred Vested Income) computed according
to the provisions of subparagraph (i) next
above, or (B) the Retirement Income computed
according to the provisions of Section 5 (or the
Deferred Vested Income computed according to the
provisions of Section 6), multiplied by a factor
of 0.9000 (reduced by 0.0050 for each year by
which the Spouse is more than 10 years younger
than the Participant), and such Spouse will
receive 50% of such reduced Retirement Income
(or Deferred Vested Income) following the death
of the Participant for the remaining lifetime of
such Spouse.
(c) For purposes of this Section 8, the term "Spouse" means
the person to whom the Participant is married on the
Annuity Starting Date and the term "Surviving Spouse"
means person to whom a deceased participant was legally
married under the laws of any jurisdiction throughout
the twelve-month period ending on the date of the
Participant's death. A Participant's former spouse
shall be treated as his Spouse or Surviving Spouse to
the extent required by and consistent with the terms of
a qualified domestic relations order within the meaning
of section 414(p) of the Code.
(d) The term "Annuity Starting Date" means, with respect to
any Participant, the first day of the first period for
which an amount is paid to such Participant pursuant to
Section 5 or 6 as an annuity or any other form,
including that described in subsection 8.8.
(e) Any election permitted under subsection 8.2(a) shall be
made in writing and filed with the Company in such form
as it may require.
8.3. Retirement Election Period and Retirement Election
Information. A Participant's "Retirement Election Period" is the
90-day period ending on his Annuity Starting Date. For Plan
Years beginning on or after January 1, 1990, the Company shall
make Retirement Election Information (as described below)
available to a Participant no less than 30 and no more than 90
days before the Annuity Starting Date. For purposes of the Plan,
the term "Retirement Election Information" means:
(a) a written description of the terms and conditions of
the Surviving Spouse Annuity and the relative financial
effect of payment of monthly benefits in that form and
in the Plan's normal form (the single life annuity);
(b) a notification of the Participant's right to revoke
payment in accordance with subsection 8.2 and the
Participant's Spouse's right, if any, with respect to
that revocation;
(c) a notification of the Participant's right to rescind a
prior revocation of payment in the Surviving Spouse
Annuity form and the effect thereof;
(d) with respect to Retirement Election Information
provided to a Participant on and after January 1, 1988,
a notification of the Participant's right to defer
commencement of his benefits; and
(e) with respect to Retirement Election Information
provided to a Participant on and after January 1, 1988,
a general description of the eligibility conditions and
other material features of the optional forms of
benefit under the Plan (as set forth in subsection 8.4)
and information explaining the relative values of such
optional forms of benefit, the availability of an
election to receive benefits in such optional forms and
the procedures applicable thereto, including the period
during which such an election may be made or revoked,
and the availability and method of obtaining additional
information.
The Company may make Retirement Election Information available to
a Participant by:
(1) personal delivery to him;
(2) first class mail, postage prepaid, addressed to
the Participant at his last known address as shown
on the Company's records; or
(3) permanent posting on a bulletin board located at
the Participant's work site, if he is not a
retired or terminated Participant.
A Participant may request, by writing filed with the Company
during his Retirement Election Period, an explanation, written in
nontechnical language, of the terms, conditions and financial
effect (in terms of dollars per monthly benefit payment) of
payment in accordance with subsection 8.2 and in accordance with
subsection 8.1. If not previously provided to the Participant,
the Company shall provide him with such explanation within
30 days of his request by one of the methods described in items
(1) and (2) next above, and the Participant's Retirement Election
Period will be extended, if necessary, to include the 90th day
next following the date on which he receives such explanation.
In no event shall payment of a Participant's monthly benefits
commence before Retirement Election Information is made available
to the Participant and he has had an opportunity to make the
election described in subsection 8.2.
8.4. Optional Forms of Benefit. A Participant may, prior
to his Annuity Starting Date, elect to receive a benefit which is
the Actuarial Equivalent of the benefit computed under Section 5
or Section 6, as applicable, in one of the following optional
forms of benefit, subject to the conditions set forth in this
Section 8; provided, however, that if a contingent annuitant form
is elected by a married Participant with his Spouse named as
contingent annuitant, and if the Participant and his Spouse were
married for the twelve consecutive months immediately prior to
his Annuity Starting Date, such Participant will receive a
benefit equal to the greater of the reduced Normal Retirement
Income (or Deferred Vested Income) computed according to the
terms of subparagraph (a) next below, and the Actuarial
Equivalent of the Surviving Spouse Annuity computed according to
the terms of subsection 8.2(b)(ii):
(a) A reduced Retirement Income (or Deferred Vested Income)
commencing on the date the option becomes effective and
terminating with the last monthly payment before his
death. Following the death of the Participant after
this option becomes effective, all or a portion of such
reduced Retirement Income (or Deferred Vested Income),
as specified by the Participant in his election of this
option, shall be paid to the person named as his
contingent annuitant for such contingent annuitant's
remaining lifetime. Notwithstanding the foregoing, a
Participant may not elect payment to a contingent
annuitant who is not his Spouse unless the Actuarial
Equivalent of the payments expected to be made to the
Participant is more than 50% of the Actuarial
Equivalent of the total payments expected to be made
under such contingent annuity form of benefit. In no
event, however, shall the amount of each monthly
payment to a contingent annuitant exceed the amount of
each monthly payment made to the Participant.
(b) If the Participant's Retirement Date occurs before the
earliest date he can begin receiving payments of
benefits under Title II of the Federal Social Security
Act, he may elect to receive an adjusted Retirement
Income (or Deferred Vested Income), payable in a
greater amount before such date as he becomes entitled
to Social Security Benefits and a reduced amount after
such date, so that the sum of his Retirement Income (or
Deferred Vested Income) and said Social Security
benefits shall be as nearly uniform as possible both
before and after the date on which he becomes entitled
to said Social Security Benefits.
8.5. Election and Discontinuance of Options. If a
Participant has elected an optional form of monthly benefit
payment under subsection 8.4 and he is legally married on the
Annuity Starting Date, then the option elected by the Participant
will be automatically canceled and the Participant's benefits
will be paid to him in accordance with the provisions of
subsection 8.2 unless the Participant has elected, during his
Retirement Election Period and in accordance with subsection 8.2,
to revoke payment in the form of a Surviving Spouse Annuity and
such revocation is in effect on such date and is effective with
respect to the person who is his Spouse on such date;
furthermore, a divorce shall be deemed to revoke any prior
designation of the Participant's divorced spouse if written
evidence of such divorce shall be received by the Committee
before distribution shall have been made in accordance with such
designation. A Participant may, in his sole discretion, cancel
any option elected under subsection 8.4 at any time prior to the
Annuity Starting Date and he may make a new election, subject to
the foregoing provisions of this subsection 8.5, in accordance
with the provisions of subsection 8.4, if he then is eligible to
do so. If a Participant who elected an optional form of monthly
benefit payment dies before the Annuity Starting Date, no
benefits will be payable to any person under the optional form.
If a Participant elects an optional form of monthly benefit
payment under paragraph 8.4(a) or (b) and the Beneficiary dies
prior to the Annuity Starting Date, the optional form elected by
the Participant will be automatically canceled and the
Participant's benefits will be paid in accordance with the
provisions of subsection 8.1 or 8.2, as the case may be, unless
an optional form of payment is again elected by the Participant
in accordance with the provisions of subsection 8.4.
8.6. Beneficiary Designation. The term "Beneficiary" shall
mean the Participant's Surviving Spouse (as defined in subsection
10.1). However, if the Participant is not married on his Annuity
Starting Date, or if the Participant is married but his spouse
consents to the designation of a person other than the spouse as
Beneficiary in accordance with subsection 8.7, the term
Beneficiary shall mean: (i) such person as the Participant
designates as contingent annuitant to receive a benefit under
paragraph 8.4(a) if such person survives the Participant, or (ii)
such person or persons as the Participant designates to receive
payment of his Accumulation upon his death according to the terms
of subsection 10.4. Such designation may be made, revoked or
changed (without the consent of any previously designated
Beneficiary except his spouse) only by an instrument signed by
the Participant and filed with the Committee prior to his death,
subject to the provisions of subsection 8.2. If a Participant
fails to designate a Beneficiary, if such designation is found to
be illegal or ineffective, or if no Beneficiary is living on the
date payment is to be made according to the terms and condition
of the Plan, the Participant's benefits shall be paid in
accordance with the following order of priority:
(a) to the Participant's surviving spouse;
(b) to the Participant's surviving descendants (including
any children by adoption) per stirpes;
(c) to the legal representative or representatives of the
estate of the Participant; or
(d) if no legal representative or representatives of the
estate of the Participant has been appointed within six
months of the Participant's death, in equal shares to
the person or persons who would be entitled under the
intestate succession laws of the state of the
Participant's domicile to receive the Participant's
personal estate.
If the Company in the exercise of reasonable diligence has been
unable to locate the person or persons entitled to benefits as
set forth above, the Company shall direct the Trustee to pay such
benefit or benefits to the person or persons next entitled
thereto under the order of priority set forth in items (1)
through (4) above.
8.7. Spousal Consent. For Plan Years beginning on or after
January 1, 1989, any waiver or election or other action by a
Participant under the Plan which, by its terms, requires consent
of the Participant's Spouse, shall be effective only if:
(a) such consent is in writing;
(b) in the case of a Spouse's consent to a beneficiary
designation, such designation specifies the non-spouse
beneficiary (including any class of beneficiaries or
any contingent beneficiaries) who will receive the
benefit, which beneficiary may not be changed without
consent of the Participant's Spouse, or the consent
expressly permits designations by the Participant
without any requirement of further consent by the
Spouse;
(c) the consent acknowledges the effect of the election or
other action and is witnessed either by a notary public
or a Plan representative appointed or approved by the
Company; and
(d) in the case of a waiver of the Surviving Spouse
Annuity, the waiver specifies the optional form of
benefit elected, which form of benefit may not be
changed without consent of the Participant's Spouse
(except back to a Surviving Spouse Annuity or a
contingent annuity under which the Spouse is designated
as the contingent annuitant and which provides a
benefit that is greater than or equal to the Actuarial
Equivalent of the Surviving Spouse Annuity), or the
consent expressly permits the Participant to change the
form of benefit without any requirement of further
consent by the Spouse;
provided, however, that, unless otherwise provided by a qualified
domestic relations order within the meaning of section 414(p) of
the Code, no consent of the Participant's Spouse shall be
required if:
(1) the Participant and his Spouse are legally
separated or the Participant has been abandoned
(within the meaning of local law) and the
Participant has a court order to such effect; or
(2) it is established to the satisfaction of a Plan
representative appointed or approved by the
Company that consent of the Spouse cannot be
obtained because there is no Spouse, because the
Spouse cannot be located or because of such other
circumstances as the Secretary of the Treasury may
prescribe in regulations.
8.8. Distributions To Persons Under Disability. In the
event a Participant or Beneficiary is declared incompetent and a
conservator or other person legally charged with the care of his
person or of his estate is appointed, any benefits to which such
member or Beneficiary is entitled shall be paid to such
conservator or other person legally charged with the care of his
person or of his estate.
8.9. Interests Not Transferable. The interests of
Participants and other persons entitled to benefits under the
Plan are not subject to the claims of their creditors and may not
be voluntarily or involuntarily assigned, alienated or
encumbered, except in the case of qualified domestic relations
orders which relate to the provision of child support, alimony
payments or marital property rights of a spouse, child or other
dependent and which meet such other requirements as may be
imposed by section 414(p) of the Code or regulations issued
thereunder.
8.10. Limitation on Payment Period. Notwithstanding any
other provision of the Plan to the contrary, benefits payable
under the Plan to or on account of any Participant shall be
subject to the following:
(a) All distributions under the Plan shall be made in
accordance with sections 401(a)(9) and 401(a)(14) of
the Code and applicable regulations thereunder
including the minimum incidental benefit requirement of
Treas. Reg. Section 1.401(a)(9)-2, and shall supersede any
other provision of the Plan to the contrary.
(b) In no event shall distribution of a Participant's
benefit commence later than 60 days after the close of
the Plan Year in which the latest of the following
events occurs: (i) the Participant's Normal Retirement
Date; (ii) the Participant's termination of employment
with the Employers and Related Companies; or (iii) the
tenth anniversary of the commencement of the
Participant's Service.
(c) Distribution of a Participant's vested benefits shall
commence in such form as the Participant may elect in
accordance with the foregoing provisions of this
Section 8 no later than April 1 of the calendar year
following the calendar year in which the Participant
attains age 70-1/2; provided, however, that if the
Participant (other than a Participant who was a 5%
owner as defined in section 416(i)(1)(B) of the Code)
attained age 70-1/2 prior to January 1, 1988,
distribution shall be deferred until his Postponed
Retirement Date.
(d) Distribution shall be made over a period no greater
than the life of the Participant or the lives of such
Participant and his Beneficiary (or a period not
extending beyond the life expectancy of such
Participant or the life expectancies of such
Participant and his Beneficiary).
(e) If a Participant dies prior to the date as of which his
benefits, if any, commence (determined in accordance
with section 401(a)(9) of the Code), then his benefits
shall be paid over a period no greater than the life of
the Participant's Surviving Spouse (as defined in
subsection 10.1) or Beneficiary or a period not
exceeding the life expectancy of such Surviving Spouse
or Beneficiary.
(f) If a Participant dies after distribution of benefits to
him has commenced, but before his entire interest in
the Plan has been distributed to him, then the
remaining portion of that interest will be distributed
at least as rapidly as under the method of distribution
being used under paragraph (d) next above as of the
date of the Participant's death.
(g) For purposes of this subsection 8.10, life expectancies
shall be determined in accordance with Tables V and VI
of Treas. Reg. Section 1.72-9 and will not be recalculated
following the commencement of benefits.
8.11. Cashout of Small Benefit Amounts.
(a) If the present value of any vested benefit payable to
any person, including any benefits payable under
Section 10, does not exceed $3,500 (and did not exceed
$3,500 at the time of any prior distribution), the
Company shall direct the Trustee to distribute (as soon
as practicable after the Participant's termination of
employment with the Employers and Related Companies or,
in the case of a benefit payable under Section 10, the
Participant's death) to the payee the present value of
the benefit payable to that person in a lump sum
without regard to whether the payee consents to such
distribution, which payment shall be in full discharge
of all obligations under the Plan with respect to the
Participant. For purposes of this subsection 8.11, the
present value of a benefit shall be determined as of
the Annuity Starting Date by using the mortality
assumptions and interest rates set forth in subsection
8.12.
(b) If at the time of his termination of employment with
the Employer and all Related Companies the present
value of a Participant's vested benefit is zero, the
Participant shall be deemed to have received a
distribution of such vested benefit and the nonvested
portion of his benefit will be treated as a forfeiture.
If a Participant is deemed to have received a
distribution pursuant to the immediately preceding
sentence, and the Participant resumes employment
covered under the Plan before the date he incurs five
consecutive One Year Breaks in Service, upon the
Participant's reemployment his benefit will be restored
to the amount of such benefit on the date of the deemed
distribution. The provisions of this paragraph (b)
shall apply to the Plan as in effect on, and shall be
effective as of, January 1, 1986.
(c) At the request of the Participant or other payee, any
distribution made in accordance with subsection 8.11(a)
or under any other provision of this Plan that
qualifies as an "Eligible Rollover Distribution" under
Code Section 401(a)(31) which is paid after
December 31, 1992, shall be transferred by the Trustee
directly to the trustee or trustees under another
qualified retirement plan (the "Transferee Plan") or to
the custodian of an Individual Retirement Account
("IRA"), provided that the Transferee Plan or IRA
provides for the receipt of such a transfer, and such
Participant or other payee properly completes such
forms and provides such evidence regarding the status
of such Transferee Plan or IRA as may be required by
the Company.
8.12. Actuarial Equivalent. For purposes of this Plan, a
benefit is the "Actuarial Equivalent" of any other benefit if the
actuarial reserve required to provide the benefit is equal to the
actuarial reserve required to provide such other benefit,
computed on the basis of the interest rates and mortality rates
specified below:
(a) For the purpose of converting from one periodic form of
payment to another periodic form of payment, including,
without limitation, where not otherwise specified by an
appropriate table, different commencement dates for
payment:
(i) Interest: 7% per annum, provided, however, that
if at any time the interest rate specified by the
Pension Benefit Guaranty Corporation ("PBGC") to
be used to value immediate annuities for
terminating plans falls below 7% per annum, such
rate shall be used for this purpose.
(ii) Mortality: 86 PET - 88.70, a table, prepared by
the Wyatt Company, based on experience underlying
the 1971 Group Annuity Mortality Table, without
margins, with a projection of mortality
improvement to 1986.
(b) For the purpose of converting from a periodic form of
payment into a lump sum form of payment under
subsection 8.11:
(i) Interest: The interest rates specified by the
PBGC for valuing immediate annuities and deferred
annuities for plans terminating on the relevant
date.
(ii) Mortality: The UP-1984 Table or such other table
adopted by PBGC for this purpose.
(c) A Participant's Accumulation will be converted into a
periodic form of payment on a single life basis
beginning at Normal Retirement Date by increasing such
Accumulation as of December 1, 1981 with interest to
his Normal Retirement Date at a rate of 5% per annum
and multiplying such result by 10%. These factors are
subject to change by government regulation.
(d) In the event of termination or partial termination of
the Plan, the basis for converting from one periodic
form of payment to another periodic form of payment,
shall be the basis used by the insurer in the
qualifying bid (as defined in PBGC regulations) under
which the Plan administrator will purchase annuities to
provide for the payment of benefits.
8.13. Delayed Benefit Commencement. Notwithstanding the
foregoing provisions of this Section 8, commencement of a
Participant's Retirement Income shall be delayed if, and only to
the extent, necessary to ensure that he shall have received
Retirement Election Information at least 30 days prior to the
Annuity Starting Date. If commencement of a Participant's
Retirement Income is delayed in accordance with the foregoing
sentence, the amount of such Participant's Retirement Income
shall include any amount of Retirement Income otherwise payable
to the Participant without regard to the delay required under
this subsection 8.13.
8.14 Transfers to Salaried Plan. If an employee of the
Company or a Related Company:
(a) ceases to satisfy the requirements of Section 2.1;
(b) continues to be employed by the Company or a Related
Company; and
(c) coincident with his failure to satisfy the requirements
of Section 2.1, he becomes eligible to participate in
the Salaried Plan;
then assets and liabilities attributable to his Retirement Income
under the Plan (including, if applicable, the amount of his
Participant Accumulation plus accrued interest as described in
Section 5.4 of the Plan), determined as of the date described in
paragraph (a) next above, shall be transferred to the Salaried
Plan in accordance with the requirements of section 414(l) of the
Code and regulations thereunder and, for periods thereafter, he
shall cease to be a Participant in the Plan and shall be a
participant in the Salaried Plan, subject to the terms and
conditions of the Salaried Plan.
8.15 Absence of Guaranty. Neither the Company nor the
Trustee in any way guarantee the Trust Fund from loss or
depreciation. The Company does not guarantee any payment to any
person. The liability of the Company and the Trustee to make any
payment is limited to the available assets of the Trust Fund.
SECTION 9
Employment Beyond Normal Retirement
Date and Reemployment
9.1. Employment Beyond Normal Retirement Date. Except as
provided in subsection 9.2(b), if a Participant is employed by
the Employer or a Related Company for any period commencing on or
after his Normal Retirement Date, no Retirement Income (or
Deferred Vested Income) will be paid to such Participant until
his termination of employment, other than amounts required to be
distributed under subsection 8.10(c).
9.2. Reemployment After Benefit Commencement. The
following provisions apply in the event a Participant is
reemployed by an Employer or Related Company after payment of his
Normal Retirement Income, Early Retirement Income or Deferred
Vested Income has commenced:
(a) Resumption of Employment Prior to Age Sixty-Five. If a
Participant is rehired by an Employer or Related
Company before his sixty-fifth birthday, his benefit
payments shall be discontinued and shall not be paid or
accrued during the period of such reemployment, his
previous election of form of payment shall be canceled,
and he shall have all Vesting Service and Credited
Service he had at the time of his termination of
employment reinstated. Upon his subsequent termination
of employment, his eligibility for a benefit and the
amount of the benefit shall be determined, calculated
and paid as if he then first incurred a termination of
employment based upon both reinstated Vesting Service
and Credited Service and any additional Vesting Service
and Credited Service earned, but such benefit shall be
actuarially reduced to recognize any benefit payments
he received prior to his reemployment. In no event
will a Participant's benefit at his subsequent
termination of employment be less than his benefit at
his earlier termination of employment. Notwithstanding
the foregoing, if a Participant rehired as described
above, subsequently reaches his sixty-fifth birthday
and is employed at a rate of fewer than forty Hours of
Service per month, he shall be entitled to receive a
benefit determined under Section 5 or Section 6 of the
Plan, as applicable, during such period of
reemployment. Such payments shall continue every month
thereafter until his rate of employment equals or
exceeds forty Hours of Service per month, at which time
his benefit payments shall be suspended under the terms
and conditions described below.
(b) Resumption of Employment After Sixty-Five. If a
participant is rehired by an Employer or Related
Company after his sixty-fifth birthday, at a rate of at
least forty Hours of Service per month, his benefit
payments shall be discontinued and shall not be paid or
accrued during the period of such reemployment. Such
suspension of benefits shall be done in accordance with
Department of Labor regulation 2530.203-3 and shall
include the notice described below. Such Participant
shall thereafter continue to accrue further benefits,
and his previous election of form of payment shall
remain in effect. Upon the Participant's subsequent
termination of employment, he shall resume receiving
payments in the same form as he elected at his earlier
termination of employment but such benefit amount shall
be increased to reflect the value of any additional
accrued benefit. If a Participant is rehired by an
Employer or Related Company after his sixty-fifth
birthday and his rate of employment is fewer than forty
Hours of Service per month, he shall receive the same
type and amount of his benefit payment he was entitled
to receive preceding his reemployment during such
period of reemployment. Such payments shall continue
every month thereafter until his rate of employment
equals or exceeds forty Hours of Service per month, at
which time his benefit payments shall be suspended as
described above. If a Participant continues in
employment with an Employer or Related Company after
his sixty-fifth birthday at a rate of at least forty
Hours of Service per month, his benefit payments shall
not commence during the period of such employment.
Such suspension of benefits shall be done in accordance
with Department of Labor regulation 2530.203-3 and
shall include the notice described below. Such
Participant shall continue to accrue further benefits
under the Plan. During such employment the provisions
of Section 10 of the Plan shall remain in effect and
shall determine what Pre-Retirement Surviving Spouse
Annuity is payable under the Plan. If a Participant
continues in employment with an Employer or Related
Company after his sixty-fifth birthday and his rate of
employment is fewer than forty Hours of Service per
month, he shall receive a benefit from the Plan under
the same terms and conditions as a Participant who
incurred a termination of employment. Such payments
shall continue every month thereafter until his rate of
employment equals or exceeds forty Hours of Service per
month, at which time his benefit payments shall be sus-
pended as described above.
(c) Notice of Benefit Suspension. If a Participant's
benefits are to be suspended after age sixty-five, due
to either reemployment or continued employment, the
Plan Administrator shall notify the Participant by
personal delivery or first class mail during the first
calendar month in which the Plan withholds payments,
that benefits are suspended. The notice shall contain
the following information:
(i) a general description of the reasons why payments
are suspended;
(ii) a general description of Plan provisions relating
to the suspension of benefits;
(iii) a copy of such Plan provisions;
(iv) a statement that applicable Department of Labor
Regulations may be found in Section 2530.203-3 of
the Code of Federal Regulations;
(v) a statement that a review of the suspension may
be requested under the Plan's claims procedure;
and
(vi) if the Plan requires a benefit resumption notice
or verification by the Participant that his
benefits should not be suspended, the procedure
and forms for such purposes.
The Plan shall adopt a procedure whereby a Participant may
request a determination of whether specific contemplated
employment after age sixty-five will result in the suspension of
benefits.
SECTION 10
Pre-Retirement Surviving Spouse Annuity
10.1. Pre-Retirement Surviving Spouse Annuity. Subject to
the following provisions of this Section 10, if a Participant who
has a nonforfeitable right to a benefit under the Plan dies
before the Annuity Starting Date (whether or not such Participant
is then employed by an Employer or a Related Company), then a
Pre-Retirement Surviving Spouse Annuity (as defined below) shall
be paid to his Surviving Spouse, if any, as set forth in
subsection 10.2. The term "Pre-Retirement Surviving Spouse
Annuity" means a monthly payment made to the Participant's
Surviving Spouse for life, which shall commence as of the first
day of the month coincident with or next following the later of
the date of the Participant's death or the date which otherwise
would have been the Participant's Normal Retirement Date, and
ending with the last payment made before the Surviving Spouse's
death occurs; provided, however, that the Surviving Spouse may
elect to have the Pre-Retirement Surviving Spouse Annuity
commence as of the first day of any month prior to the
Participant's Normal Retirement Date and, except as otherwise
provided in subsection 10.2(a), after the Participant would have
reached age 55.
10.2. Amount and Payment of Pre-Retirement Surviving Spouse
Annuity. The Pre-Retirement Surviving Spouse Annuity payable
under the Plan shall be paid in accordance with the following
provisions of this subsection 10.2:
(a) If a Participant dies leaving a Surviving Spouse and at
any time while in the employ of the Employer or Related
Company, or while receiving an Employer-provided
disability allowance, and, in either case, on or after
attaining age 50, then his Surviving Spouse shall be
entitled to receive a monthly annuity for life. Such
annuity may, at the election of the surviving spouse,
commence as of the first day of the month following the
Participant's death. Such annuity shall be in an
amount equal to 50% of the monthly amount that the
Participant would have been eligible to receive as an
Early Retirement Income if he had retired on the date
of his death under circumstances described in
subsection 5.3 of the Plan, and had elected to receive
an Early Retirement Income for his life alone, except
that no reduction shall be made under subsection 5.3(b)
of the Plan (i) to reflect the fact that Early
Retirement Income payments commenced before his Normal
Retirement Date, or (ii) to reflect payment of his
Accumulation under subsection 10.4; provided, however,
that if the Surviving Spouse is more than 10 years
younger than the Participant, the amount of the annuity
payable to such Surviving Spouse shall be reduced by
1/2 of 1 percent thereof for each year in excess of 10
years difference in their ages.
(b) If a Participant who has received credit for at least
one Hour of Service on or after August 23, 1984 dies
leaving a Surviving Spouse (i) on or after August 23,
1984, (ii) while in the employ of the Employer or
Related Company or while receiving an Employer-provided
disability allowance, (iii) after completing at least 5
years of Service, and (iv) prior to attaining age 50,
then his Surviving Spouse shall be entitled to receive
a monthly annuity for life. Such annuity shall be in
an amount equal to 50% of the monthly amount that the
Participant would have been entitled to receive as an
Early Retirement Income under subsection 5.3, payable
in the form set forth in subsection 8.2(b)(ii) without
any reduction to reflect payment of his Accumulation
under subsection 10.4, but reduced as set forth under
subsection 5.3(b) to reflect the fact that payments
commenced before the Participant's Normal Retirement
Date), if the Participant had terminated his employment
with an Employer or Related Company on the date of his
death, survived to age 55, retired on his 55th birthday
and then commenced receiving such Early Retirement
Income and died on the day after his 55th birthday.
(c) If a Participant leaves the employ of an Employer or
Related Company on or after attaining age 55 and
subsequently dies leaving a Surviving Spouse prior to
the date as of which his Normal Retirement Income
payments commence, then his Surviving Spouse shall be
entitled to receive a monthly annuity for life. Such
annuity shall be in a monthly amount equal to 50% of
the monthly amount that would have been payable to such
Surviving Spouse if the Participant had commenced
receiving an Early Retirement Income in the form
described in 8.2(b)(ii) of the Plan on the first day of
the month preceding his death (reduced to reflect any
withdrawal of his Accumulation under subsection 5.5 and
reduced as set forth under subsection 5.3(b) to reflect
the fact that payments commenced before the
Participant's Normal Retirement Date).
(d) If a Participant who has received credit for at least
one Hour of Service on or after August 23, 1984 (i)
completes at least 5 years of Service, (ii) leaves the
employ of an Employer or Related Company before
attaining age 55, and (iii) subsequently dies leaving a
Surviving Spouse (A) on or after August 23, 1984, and
(B) prior to the date as of which his Normal Retirement
Income payments commence, then his Surviving Spouse
shall be entitled to receive a monthly annuity for
life. If the Participant dies on or prior to attaining
age 55 such annuity shall be in a monthly amount equal
to 50% of the monthly amount that the Participant would
have been eligible to receive as an Early Retirement
Income under subsection 5.3, (payable in the form set
forth in subsection 8.2(b)(ii), and reduced (i) to
reflect any withdrawal of his Accumulation under
subsection 5.5, and (ii) as set forth under subsection
5.3(b) to reflect the fact that payments commence
before the Participant's Normal Retirement Date), if
the Participant had survived to age 55, and then
commenced receiving such Early Retirement Income, and
died on the day after his 55th birthday. If the
Participant dies after attaining age 55, such annuity
shall be in a monthly amount equal to 50% of the
monthly amount that the Participant would have been
eligible to receive as an Early Retirement Income under
subsection 5.3 (payable in the form set forth in
subsection 8.2(b)(ii), and reduced (i) to reflect any
withdrawal of his Accumulation under subsection 5.5,
and (ii) as set forth in subsection 5.3(b) to reflect
the fact that payments commence before the
Participant's Normal Retirement Date), if the
Participant had retired and commenced receiving such
Early Retirement Income on the day before his date of
death.
10.3. Death After Benefit Commencement. Subject to the
provisions of subsection 10.4, on the death of a Participant
after his Annuity Starting Date, no benefits shall be payable
except to the extent provided under the form of benefit in which
he was receiving his Retirement Income or his Deferred Vested
Income, in accordance with the provisions in Section 8.
10.4. Payment of Accumulation. If a Participant dies
before his Annuity Starting Date, his Accumulation will be paid
to his Beneficiary in a single sum. If a Participant dies after
his Annuity Starting Date, and if Retirement Income payments are
not to be continued following his death to his spouse or
contingent annuitant pursuant to subsections 8.2, 8.4 or 10.2,
the excess, if any, of his Accumulation as of his Annuity
Starting Date over the sum of the Early, Normal, Postponed
Retirement Income payments or Deferred Vested Income payments
made to him, if any, as of the date of his death shall be paid in
a lump sum to the Beneficiary designated by the Participant. If
a Participant dies after his Annuity Starting Date, upon the
death of the second to die of the Participant and his contingent
annuitant or his Surviving Spouse, the excess, if any, of the
Participant's Accumulation at his Annuity Starting Date over the
sum of the Early or Normal Retirement Income or Deferred Vested
Income payments made to the Participant and to his contingent
annuitant or his spouse as of the date of the death of the second
to die of the Participant and his contingent annuitant or his
Surviving Spouse shall be paid in a lump sum to the Beneficiary
designated by the Participant according to the terms of
subsection 8.6.
SECTION 11
Funding Plan Benefits
11.1. Contributions. Subject to the provisions of
Section 11, the Company and any Employers will make contributions
from time to time to the Trustee in amounts that are sufficient
(as determined in accordance with the funding method and policy
adopted by the Company) to maintain the Plan in sound actuarial
condition and as are consistent with the provisions of section
412 of the Code. Participants are not required or permitted to
make contributions under the Plan.
11.2. Forfeitures. Forfeitures arising under the Plan for
any reason shall not be used to increase the benefits any person
would otherwise receive under the Plan and shall be applied to
reduce the Plan contributions of the Company or participating
Employers.
11.3. No Reversion to Employers. No part of the corpus or
income of the Trust Fund shall revert to the Company or any
Employer or be used for, or diverted to, purposes other than for
the exclusive benefit of Participants and other persons entitled
to benefits under the Plan, except as specifically provided in
the Trust Agreement and the provisions set forth below:
(a) The contributions of the Company and each Employer
under the Plan are conditioned upon the deductibility
thereof under section 404 of the Code, and, to the
extent any such deduction is disallowed, the Trustee
shall, to the extent cash is available and upon written
request, return the amount of the contribution (to the
extent disallowed), reduced by the amount of any losses
thereon, to the Company or Employer, as applicable,
within one year after the date the deduction is
disallowed.
(b) If a contribution or any portion thereof is made by the
Company or an Employer by a mistake of fact, the
Trustee shall, upon written request, return the amount
of the contribution or such portion, reduced by the
amount of any losses thereon, to the Company or
Employer, as applicable, within one year after the date
of payment to the Trustee.
SECTION 12
Administration of the Plan
12.1. Administration by Company. The Company shall be
responsible for the general operation and administration of the
Plan and for carrying out the provisions thereof, and is hereby
designated as the "administrator" and the "named fiduciary"
within the meaning of ERISA.
12.2. Expenses of Administration. Except as otherwise
determined by the Company, the reasonable expenses of
administering the Plan and the fees and expenses incurred in
connection with the collection, administration, management,
investment, protection and distribution of the Trust Fund shall
be paid directly by the Trust out of Plan assets or, if paid by
the Company, reimbursed by the Trust to the maximum extent
permitted by law.
12.3. Administrative Powers and Duties. The Company shall
have the following specific powers and duties:
(a) To interpret and construe the provisions of the
Plan and to remedy ambiguities, inconsistencies
and omissions;
(b) To adopt, and apply in a uniform and non-
discriminatory manner to all persons similarly
situated, such rules of procedure and regulations
as, in its opinion, may be necessary for the
proper and efficient administration of the Plan,
and as are consistent with the provisions of the
Plan;
(c) To conclusively determine all questions arising
under the Plan, including the power to determine
the rights or eligibility of employees and former
employees, and the respective benefits of the
Participants and others entitled thereto;
(d) To maintain and keep adequate records concerning
the Plan and concerning its proceedings and acts
in such form and detail as the Company may decide;
(e) To direct all benefit payments under the Plan;
(f) To furnish the Employers with such information
with respect to the Plan as may be required by
them for tax or other purposes;
(g) to employ agents and counsel (who also may be
employed by the Employers or the Trustee) and to
delegate to them, in writing, such powers as the
Company considers desirable; and
(h) to act as the "Plan Administrator" (as defined in
section 414(g) of the Code) for purposes of
subsections 8.2 and 8.3 and for purposes of
establishing and implementing procedures to
determine the qualified status of domestic
relations orders (in accordance with the
requirements of section 414(p) of the Code) and to
administer distributions under such qualified
orders.
12.4. Claims Procedure. All applications for benefits
under the Plan shall be submitted to: Illinois Power Company, 500
South 27th Street, Decatur, Illinois 62525. Applications for
benefits must be in writing on the forms prescribed by the
Company and must be signed by the Participant and, where required
by the Company, his Spouse, beneficiary, joint annuitant or legal
representative. The Company reserves the right to require that
the Participant furnish proof of his age and that of his Spouse
or contingent annuitant, if any, prior to processing any
application. In the event a claim for benefits is wholly or
partially denied by the Company, the Company shall, within a
reasonable period of time, but no later than ninety (90) days
after receipt of the claim, notify the claimant in writing of the
denial of the claim. If the claimant shall not be notified in
writing of the denial of the claim within ninety (90) days after
it is received by the Company, the claim shall be deemed denied.
A notice of denial shall be written in a manner calculated to be
understood by the claimant, and shall contain (a) the specific
reason or reasons for denial of the claim, (b) a specific
reference to the pertinent Plan provisions upon which the denial
is based, (c) a description of any additional material or
information necessary for the claimant to perfect the claim,
together with an explanation of why such material or information
is necessary, and (d) an explanation of the Plan's review
procedure. Within sixty (60) days of the receipt by the claimant
of the written notice of denial of the claim, or within sixty
(60) days after the claim is deemed denied as set forth above, if
applicable, the claimant may file a written request with the
Company that it conduct a full and fair review of the denial of
the claimant's claim for benefits, including the conducting of a
hearing, if deemed necessary by the Company. In connection with
the claimant's appeal of the denial of his benefit, the claimant
may review pertinent documents and may submit issues and comments
in writing. The Company shall render a decision on the claim
appeal promptly, but not later than sixty (60) days after the
receipt of the claimant's request for review, unless special
circumstances (such as the need to hold a hearing, if necessary)
require an extension of time for processing, in which case the
sixty (60) day period may be extended to one hundred and twenty
(120) days. The Company shall notify the claimant in writing of
any such extension. The decision upon review shall (i) include
specific reasons for the decision, (ii) be written in a manner
calculated to be understood by the claimant and (iii) contain
specific references to the pertinent Plan provisions upon which
the decision is based. If the Participant does not accept the
decision of the Company denying his application for benefits in
whole or in part pursuant to this Section, the Participant shall
have a right to submit his claim to arbitration by the
arbitration board established pursuant to paragraph 6 of the
joint agreement dated January 15, 1991 between the Company and
certain employee collective bargaining agents.
12.5. Reliance on Information Furnished. The Company will
be entitled to rely conclusively upon all tables, valuations,
certificates, opinions and reports furnished by an actuary,
accountant, controller, counsel or other person employed or
engaged by the Company for such purposes.
12.6. Agent for Service of Process. The individual
designated as agent for service of legal process on the Plan and
his address are as follows:
Corporate Secretary
Illinois Power Company
500 South 27th Street
Decatur, Illinois 62525
SECTION 13
Amendment or Termination
13.1. Amendment. While the Company expects to continue the
Plan, it must necessarily reserve and reserves the right, subject
to the provisions of the Trust Agreement, to amend the Plan from
time to time by written instrument duly adopted by its Board of
Directors; provided, however, that no amendment shall reduce a
Participant's accrued benefit to less than the accrued benefit
that he would have been entitled to receive if he had resigned
from the employ of the Employers and Related Companies on the day
of the amendment (except to the extent permitted by section
412(c)(8) of the Code).
13.2. Termination. The Plan will terminate as to all of
the Employers on any day specified by the Company if advance
written notice of the termination is given to the other
Employers. The Plan will terminate as to any Employer on the
first to occur of the following:
(a) the date it is terminated by that Employer if
advance written notice of the termination is given
to the Company, the other Employers, and the
Trustee;
(b) the date that Employer completely discontinues its
contributions under the Plan; provided, however,
that the mere failure of the Company to make a
contribution for any Plan Year shall not be
considered to be a termination of the Plan so long
as the full current costs of the Plan have been
met;
(c) the date that Employer is judicially declared
bankrupt or insolvent; or
(d) the dissolution, merger, consolidation or
reorganization of, or sale of all of the stock of
that Employer (the "Original Employer"), or the
sale by that Employer of all or substantially all
of its assets, except that, subject to the
provisions of subsection 12.3, with the consent of
the Company, in any such event arrangements may be
made whereby the Plan will be continued by any
successor to the Original Employer or any
purchaser of all or substantially all of the
Original Employer's assets, in which case the
successor or purchaser will be substituted for the
Original Employer under the Plan.
13.3. Merger and Consolidation of Plan, Transfer of Plan
Assets. In the case of any merger or consolidation with, or
transfer of assets and liabilities to, any other plan, provisions
shall be made so that each Participant in the Plan on the date
thereof, if the Plan then terminated, would receive a benefit
immediately after the merger, consolidation or transfer which is
equal to or greater than the benefit to which he would have been
entitled immediately prior to the merger, consolidation or
transfer which is equal to or greater than the benefit he would
have been entitled to receive immediately prior to the merger,
consolidation or transfer if the Plan had then terminated.
13.4. Vesting and Distribution on Termination and Partial
Termination. On termination of the Plan in accordance with
subsection 13.2 or on partial termination of the Plan by
operation of law, the accrued Plan interests of Participants
affected by such termination or partial termination, as the case
may be, shall, to the extent then funded, be fully vested and
nonforfeitable. After payment of all expenses, the Plan
Administrator shall allocate the remainder of the trust assets
and cause them to be distributed by the Trustee in the manner and
order set forth in section 4044 of ERISA to the extent of the
sufficiency of such assets. On partial termination of the Plan
by operation of law, the Trustee shall segregate the portion of
the Trust assets allocable to affected Participants. After
payment of all expenses relating to such partial termination, the
Plan Administrator shall allocate the remainder of such portion
of the trust assets and cause them to be distributed to affected
Participants by the Trustee in the manner and order set forth in
section 4044 of ERISA to the extent of the sufficiency of such
assets. If any assets remain after the satisfaction of all
liabilities of the Plan to Participants and beneficiaries, they
shall be distributed to the Employers.
13.5. Notice of Amendment, Termination or Partial
Termination. Affected persons will be notified of an amendment,
termination or partial termination of the Plan within the time
required by law.
SECTION 14
Miscellaneous
14.1. Duty to Furnish Information and Documents.
Participants, spouses and Beneficiaries must furnish to the
Company and the Trustee such evidence, data or information as the
Company considers necessary or desirable for the purpose of
administering the Plan, and the provisions of the Plan for each
person are upon the condition that he will furnish promptly full,
true, and complete evidence, data, and information requested by
the Company. All parties to, or claiming any interest under, the
Plan hereby agree to perform any and all acts, and to execute any
and all documents and papers, necessary or desirable for carrying
out the Plan.
14.2. Annual Statements and Available Information. The
Company shall advise employees of the eligibility requirements
and benefits under the Plan. As soon as practicable after the
close of each Plan Year, and at such other times as the Company
may determine, the Company shall provide each Participant, and
each former Participant, spouse and Beneficiary entitled to a
benefit under the Plan, with a statement reflecting the current
status of his benefits. No Participant shall have the right to
inspect the records relating to any other Participant. The
Company shall make available for inspection at reasonable times
by Participants, spouses and Beneficiaries, copies of the Plan,
any amendments thereto, a Plan summary, and all reports of Plan
operations required by law.
14.3. Unclaimed Funds. Each Participant shall keep the
Company informed of his current address and the current address
of his spouse, or Beneficiaries. Neither the Company nor any
Trustee shall be obligated to search for the whereabouts of any
person. If the location of a Participant is not made known to
the Company within three (3) years after the date on which
distribution of the Participant's benefits may first be made,
distribution may be made as though the Participant had died at
the end of the three-year period. If, within one additional year
after such three-year period has elapsed, or, within three years
after the actual death of a Participant, the Company is unable to
locate any individual who would receive a distribution under the
Plan upon the death of the Participant pursuant to Article VII of
the Plan, any benefit payable under the Plan to such individual
shall be deemed a forfeiture and shall be used to reduce Company
contributions to the Plan for the Plan Year next following the
year in which the forfeiture occurs in a manner determined by the
Board; provided, however, that in the event that the Participant,
spouse or Beneficiary makes a claim for any amount which has been
so forfeited, the benefits which have been forfeited shall be
reinstated.
14.4. Prudent Person Rule. Notwithstanding any other
provision of the Plan, the Company and the Trustee shall exercise
their powers and discharge their duties under the Plan for the
exclusive purpose of providing benefits to Participants and their
spouses and Beneficiaries, and shall act with the care, skill,
prudence and diligence under the circumstances that a prudent
person acting in a like capacity and familiar with such matters
would use in the conduct of an enterprise of a like character and
with like aims.
14.5. ERISA and Approval Under Internal Revenue Code. This
Plan is intended to qualify as a Plan meeting the requirements of
section 401(a) of the Code, as now in effect or hereafter
amended, so that the income from the assets held by the Trustees
may be exempt from taxation under section 501(a) of the Code and
contributions of the Company under the Plan may be deductible for
Federal income tax purposes under section 404 of the Code, as now
in effect or hereafter amended. Any modification or amendment of
the Plan may be made retroactively, as necessary or appropriate,
to establish and maintain such qualification and to meet any
requirement of the Code or ERISA.
SUPPLEMENT A
Early Retirement Program
A-1. Application. This Supplement A shall form a part of
the Illinois Power Retirement Income Plan for Employees covered
under a Collective Bargaining Agreement (the "Plan").
A-2. Effective Date. The "Effective Date" of this
Supplement A is April 1, 1989.
A-3. Definitions. Unless the content clearly implies or
indicates to the contrary, a word, term, or phrase used or
defined in the Plan is similarly used for purposes of this
Supplement A.
A-4. Early Retirement Program. Participants of the Plan may
be eligible for the Early Retirement Program, as set forth below:
(a) As used in this subsection A-4(a): (i) "ERP" means the
Early Retirement Program described in this Supplement
A; (ii) "ERP Benefits" means the benefits described
under paragraph (b) of this Supplement A;
(iii) "Eligible ERP Participant" means a Participant
under the Plan on April 1, 1989 who is not then on a
Company-approved leave of absence or receiving a
Company-provided disability allowance, and who on or
before his ERP Retirement Date has attained age 60 and
completed (10) or more years of continuous Service;
(iv) "ERP Election Period" means the period from
April 1, 1989 through May 31, 1989; (v) ERP Retirement
Date means July 1, 1989, as applicable; and (vi)
"Accrued Benefit" means the Normal Retirement Income
payable to a Participant commencing at his Normal
Retirement Date.
(b) An Eligible ERP Participant who elects, during the ERP
Election Period, by written instrument provided by and
delivered to the Company, to retire from the employ of
the Employer or Related Company effective on his ERP
Retirement Date, will be eligible to receive:
(i) a monthly Retirement Income for life in an amount
equal to his Accrued Benefit determined as of his
ERP Retirement Date, but calculated by adding
five (5) years to his age for purposes of
determining the appropriate factor under
subsection 5.3(b), and five (5) years to his
years of Credited Service on his ERP Retirement
Date; provided that in no event shall he receive
credit for more than 30 years of Credited
Service; and
(ii) a supplement payment in the amount of $675 per
month payable for each month commencing with the
month in which his ERP Retirement Date occurs and
continuing until and including the later to occur
of the month in which he attains age 62 and the
month in which he receives the twenty-fourth of
such supplement payments; provided, however, that
any Eligible ERP Participant who has attained age
62 on or prior to his ERP Retirement Date, shall
receive a lump sum supplement payment in the
amount of $16,2000, in lieu of the aforementioned
monthly payments; and provided further, that any
Participant who has not attained age 62 on or
prior to his ERP Retirement Date but who attains
age 62 prior to receiving twenty-four of such
supplement payments shall receive the balance of
such payments in one lump sum in the month he
attains age 62. Notwithstanding anything to the
contrary contained herein, in the event that an
Eligible ERP Participant dies prior to receiving
his entire supplement payment, as determined
under the provisions of the preceding sentence,
the balance of such supplement payment shall be
paid in a lump sum to his surviving spouse if he
is married at the time of his death, or to his
Beneficiary if he is not married at the time of
his death, as soon as practicable after the date
of his death.
The Retirement Income set forth in clause (i) above,
shall be payable in the normal form set forth in
subsection 8.1, 8.2, or 8.4(a). Such Retirement Income
shall be payable effective as of an Eligible ERP
Participant's ERP Retirement Date, however the first
payment thereof shall be made as soon as practicable
after the first to occur of (A) the date on which an
election as to the form of payment is made pursuant to
subsection 8.2 above, or (B) the expiration of the
Election Period set forth in subsection 8.3. The
monthly payments, if any, payable pursuant to clause
(ii) above shall commence, or be paid in a lump sum if
applicable, on or as soon as practicable after his ERP
Retirement Date. Notwithstanding the preceding
sentence, in no event shall the Retirement Income set
forth in clause (i) above be paid out under the
optional form of payment described in subsection
8.4(b).
(c) Each Eligible ERP Participant shall receive from the
Company on or before his ERP Retirement Date, a
notification, in writing, of his eligibility to elect
the ERP, which notification shall specify the ERP
Benefits and include a form for electing the ERP.
(d) Any Eligible ERP Participant who does not elect to
participate in the ERP during the ERP Election Period
shall not thereafter be eligible to make such election
or to receive ERP Benefits and except as stated in the
following sentence, his Normal Retirement Income under
the Plan shall be determined without reference to this
subsection A-4. Notwithstanding the preceding sentence
and anything elsewhere contained in the Plan, any
Eligible ERP Participant who does not elect to
participate in the ERP during the ERP Election Period
and who subsequently retires on or after his Normal
Retirement Age shall be entitled to a Normal Retirement
Income equal to the greater of (i) his Normal
Retirement Income determined on his actual retirement
date pursuant to the provisions of Section 5; and (ii)
the Normal Retirement Income he would have received
under paragraph (b)(1) of this subsection A-4 if he had
elected to participate in the ERP.
SUPPLEMENT B
Enhanced Retirement Program
B-1. Application. This Supplement B shall form a part of
the Illinois Power Retirement Income Plan for Employees covered
under a Collective Bargaining Agreement (the "Plan").
B-2. Effective Date. The "Effective Date" of this
Supplement A is April 16, 1990.
B-3. Definitions. Unless the content clearly implies or
indicates to the contrary, a word, term, or phrase used or
defined in the Plan is similarly used for purposes of this
Supplement B.
B-4. Enhanced Retirement Program. Participants of the Plan
may be eligible for the Enhanced Retirement Program, as set forth
below:
(a) As used in this subsection B-4(a): (i) "ERP" means the
Enhanced Retirement Program described in this
Supplement B; (ii) "ERP Benefits" means the benefits
described under paragraph (b) of this Supplement B;
(iii) "Eligible ERP Participant" means a Participant
under the Plan on April 16, 1990 who is not then on a
Company-approved leave of absence or receiving a
Company-provided disability allowance, and who on or
before December 31, 1990 has attained age 57; (iv) "ERP
Election Period" means the period from August 10, 1990
through September 10, 1990; (v) ERP Retirement Date
means January 1, 1991; and (vi) "Accrued Benefit" means
the Normal Retirement Income payable to a Participant
commencing at his Normal Retirement Date.
(b) An Eligible ERP Participant who elects, during the ERP
Election Period, by written instrument provided by and
delivered to the Company, to retire from the employ of
the Employer or Related Company effective on his ERP
Retirement Date, will be eligible to receive:
(i) a monthly Retirement Income for life in an amount
equal to his Accrued Benefit determined as of his
ERP Retirement Date, but calculated by adding
five (5) years to his age for purposes of
determining the appropriate factor under
subsection 5.3(b), and five (5) years to his
years of Credited Service on his ERP Retirement
Date; provided that in no event shall he receive
credit for more than 30 years of Credited
Service; and
(ii) a supplement payment in the amount of $675 per
month payable for each month commencing with the
month in which his ERP Retirement Date occurs and
continuing until and including the later to occur
of the month in which he attains age 62 and the
month in which he receives the twenty-fourth of
such supplement payments; provided, however, that
any Eligible ERP Participant who has attained age
62 on or prior to his ERP Retirement Date, shall
receive a lump sum supplement payment in the
amount of $16,2000, in lieu of the aforementioned
monthly payments; and provided further, that any
Participant who has not attained age 62 on or
prior to his ERP Retirement Date but who attains
age 62 prior to receiving twenty-four of such
supplement payments shall receive the balance of
such payments in one lump sum in the month he
attains age 62. Notwithstanding anything to the
contrary contained herein, in the event that an
Eligible ERP Participant dies prior to receiving
his entire supplement payment, as determined
under the provisions of the preceding sentence,
the balance of such supplement payment shall be
paid in a lump sum to his surviving spouse if he
is married at the time of his death, or to his
Beneficiary if he is not married at the time of
his death, as soon as practicable after the date
of his death.
The Retirement Income set forth in clause (i) above,
shall be payable in the normal form set forth in
subsection 8.1, 8.2, or 8.4(a). Such Retirement Income
shall be payable effective as of an Eligible ERP
Participant's ERP Retirement Date, however the first
payment thereof shall be made as soon as practicable
after the first to occur of (A) the date on which an
election as to the form of payment is made pursuant to
subsection 8.2 above, or (B) the expiration of the
Election Period set forth in subsection 8.3. The
monthly payments, if any, payable pursuant to clause
(ii) above shall commence, or be paid in a lump sum if
applicable, on or as soon as practicable after his ERP
Retirement Date. Notwithstanding the preceding
sentence, in no event shall the Retirement Income set
forth in clause (i) above be paid out under the
optional form of payment described in subsection
8.4(b).
(c) Each Eligible ERP Participant shall receive from the
Company on or before his ERP Retirement Date, a
notification, in writing, of his eligibility to elect
the ERP, which notification shall specify the ERP
Benefits and include a form for electing the ERP.
(d) Any Eligible ERP Participant who does not elect to
participate in the ERP during the ERP Election Period
shall not thereafter be eligible to make such election
or to receive ERP Benefits and except as stated in the
following sentence, his Normal Retirement Income under
the Plan shall be determined without reference to this
subsection B-4. Notwithstanding the preceding sentence
and anything elsewhere contained in the Plan, any
Eligible ERP Participant who does not elect to
participate in the ERP during the ERP Election Period
and who subsequently retires on or after his Normal
Retirement Age shall be entitled to a Normal Retirement
Income equal to the greater of (i) his Normal
Retirement Income determined on his actual retirement
date pursuant to the provisions of Section 5; and (ii)
the Normal Retirement Income he would have received
under paragraph (b)(1) of this subsection B-4 if he had
elected to participate in the ERP.
SUPPLEMENT C
Benefit Enhancement
Effective January 1, 1994
C-1. Purpose. The purpose of this Supplement C to the Plan
is to set forth the benefit formula under the Salaried Plan as in
effect on January 1, 1994 as it relates to the benefit
enhancement described in Section 5.2(b) of the Plan.
C-2. Definitions. A word, term or phrase used or defined
in the Plan is similarly used or defined for purposes of this
Supplement C. In determining the benefits described in this
Supplement C, the following definitions will be used in applying
the benefit formula enhancement under the Plan as of January 1,
1994.
"Covered Compensation" used for a Plan Year is one-twelfth
of the average (without indexing) of the Taxable Wage Base
in effect for each calendar year during the 35-year period
ending with the last day of the calendar year in which a
Participant attains (or will attain) his Social Security
Retirement Age (as defined in paragraph (d) below). A
Participant's Covered Compensation shall automatically be
adjusted for each Plan Year, taking into consideration the
following factors:
(a) The Taxable Wage Base for the current Plan Year
and any subsequent Plan Year shall be assumed to
be the same as the Taxable Wage Base in effect as
of the beginning of the Plan Year for which the
determination is made;
(b) A Participant's Covered Compensation for a Plan
Year after the 35-year period described above
shall be the Participant's Covered Compensation
for the Plan Year during which the Participant
attained Social Security Retirement Age; and
(c) A Participant's Covered Compensation for a Plan
Year prior to such 35-year period shall be the
Taxable Wage Base in effect as of the beginning
of such Plan Year.
(d) For purposes of this Section 1.9, Social Security
Retirement Age shall have the meaning set forth
in Section 5.6(m).
"Earnings" means a Participant's regular basic compensation,
including any amount contributed by the Company on behalf of
the Participant and pursuant to the Participant's election
under a "qualified cash or deferred arrangement" (as defined
in Section 401(k) of the Code) that is part of any qualified
profit sharing plan maintained by the Company, but excluding
overtime and all extra compensation, and any matching
contribution made by the Company under any qualified profit
sharing plan maintained by the Company. Notwithstanding
anything to the contrary contained herein, compensation for
any Plan Year in excess of the limits set forth in Code
Section 401(a)(17) shall not be considered for any purpose
of the Plan.
"Final Average Compensation" means the average of a
Participant's monthly Earnings from the Company for the 36
consecutive months preceding the date his Credited Service
ceases. If a Participant's entire period of employment with
the Company is less than 36 consecutive months, his Final
Average Compensation shall be determined by averaging (on a
monthly basis) the Earnings received by him from the Company
during his entire period of employment with the Company. In
determining a Participant's Final Average Compensation under
this Section 1.14, Earnings for any Plan Year in excess of
the Taxable Wage Base in effect at the beginning of such
Plan Year shall not be taken into account.
"Final Average Earnings" means the average of a
Participant's monthly Earnings from the Company for the 60
consecutive months during the last 120 months preceding the
date his Credited Service ceases, producing the highest such
average, as determined in a uniform manner by the Company
based on records maintained by the Company. If a
Participant's entire period of employment with the Company
is less than 60 consecutive months, his Final Average
Earnings shall be determined by averaging (on a monthly
basis) the Earnings received by him from the Company during
his entire period of employment with the Company.
"Social Security Benefit" means 33.12% of a Participant's
Final Average Compensation for a Participant whose social
security retirement age (as defined in Section 5.6(m) of the
Plan) is age 65; provided, however, that 30.36% shall be
substituted in this definition of Social Security Benefit if
the Participant's social security retirement age is 66, and
27.60% shall be substituted for a Participant whose social
security retirement age is 67. Notwithstanding the
foregoing, if a Participant's Final Average Compensation
exceeds Covered Compensation for a Plan Year, the Social
Security Benefit for such Participant for such Plan Year
shall be calculated in accordance with the Following table:
<PAGE>
If the ratio of Final Then the Social Security
Average Compensation to Benefit should be multiplied
Covered Compensation is: by:
1.00 100%
1.25 86.96%
1.50 76.81%
1.75 68.12%
2.00 60.87%
If the ratio of Final Average Compensation to Covered
Compensation falls between the ratios listed above, the
appropriate factor shall be determined by interpolation.
"Social Security Retirement Age" means the age used as the
retirement age for a Participant under Section 216(1) of the
Social Security Act, except that such Section shall be
applied (i) without regard to the age increase factor, and
(ii) as if the early retirement age under Section 216(1) (2)
of the Act were 62.
"Taxable Wage Base" means, for a Plan Year, the contribution
and benefit base under Section 230 of the Social Security
Act in effect at the beginning of such Plan Year.
A-3. Benefit Formula. Pursuant to Section 5.2(b) of the Plan,
a Participant's accrued benefit as of January 1, 1994 will be
equal to the greater of (a) or (b) below:
(a) The Participant's Retirement Income as determined in
accordance with Section 5.2(a) of the Plan; or
(b) The Participant's Retirement Income as determined in
accordance with the following in an amount equal to the
greater of (i) or (ii) below:
(i) the amount of the Participant's benefit as of
December 31, 1991, disregarding Credited Service,
Earnings, or any other changes occurring after
that date; or
(ii) an amount equal to 2% of the Participant's Final
Average Earnings (the "Base Formula") less 1-2/3%
of his Social Security Benefit (the "Offset"),
multiplied by his years of Credited Service (up to
30 years).
Notwithstanding the foregoing, the maximum Offset will not
be greater than 50% of the Base Formula, multiplied by a
fraction (not to exceed one), the numerator of which is the
Participant's final Average Earnings, and the denominator of
which is the Participant's Final Average Compensation.
APPENDIX
Defined Terms
5.4 - Accumulation
8.12 - Actuarial Equivalent
8.2(d) - Annuity Starting Date
8.6 - Beneficiary
1.1 - Code
1.1 - Company
3.2 - Credited Service
6.1 - Deferred Vested Income
4.3 - Early Retirement Date
5.3 - Early Retirement Income
5.1 - Earnings
1.1 - Effective Date
1.3 - Employer
1.4 - ERISA
3.4 - Hour of Service
2.3 - Leased Employee
3.8 - Normal Retirement Age
4.1 - Normal Retirement Date
5.2 - Normal Retirement Income
3.5 - One Year Break in Service
2.1 - Participant
3.7 - Period of Severance
1.1 - Plan
1.5 - Plan Year
5.2 - Postponed Retirement Benefit
4.2 - Postponed Retirement Date
10.2(a) - Pre-Retirement Surviving Spouse Annuity
1.3 - Related Company
4.4 - Retirement Date
8.3 - Retirement Election Information
8.3 - Retirement Election Period
5.1 - Retirement Income
2.4 - Salaried Plan
7.1 - Section 415 Affiliate
3.7 - Severance from Service
3.1 - Service
8.2(c) - Spouse
8.2(c) - Surviving Spouse
8.2(b) - Surviving Spouse Annuity
1.4 - Trust
1.4 - Trust Agreement
1.4 - Trust Fund
1.4 - Trustee
<PAGE>
Conformed Copy
ILLINOIS POWER COMPANY INCENTIVE SAVINGS PLAN
(As Amended and Restated Effective January 1, 1991
and as further amended through amendments
adopted December 28, 1994)
<PAGE>
TABLE OF CONTENTS
ARTICLE Page
------- ----
ARTICLE I -- DEFINITIONS . . . . . . . . . . . . . . . 1
1.1 "Account" . . . . . . . . . . . . . . . . . . . . 1
1.2 "Actual Deferral Percentage" . . . . . . . . . . 1
1.3 "Adjusted Balance" . . . . . . . . . . . . . . . 1
1.4 "Annual Additions" . . . . . . . . . . . . . . . 1
1.5 "Beneficiary" . . . . . . . . . . . . . . . . . . 1
1.6 "Board" . . . . . . . . . . . . . . . . . . . . . 1
1.7 "Code" . . . . . . . . . . . . . . . . . . . . . 2
1.8 "Company" . . . . . . . . . . . . . . . . . . . . 2
1.9 "Company Common Stock" . . . . . . . . . . . . . 2
1.10 "Company Contributions Common Stock Fund" . . . 2
1.11 "Company Contributions TRASOP Common Stock Fund" 2
1.12 "Company Incentive Contribution" . . . . . . . . 2
1.13 "Company Incentive Contribution Account" . . . . 2
1.14 "Compensation" . . . . . . . . . . . . . . . . . 2
1.15 "Earnings" . . . . . . . . . . . . . . . . . . . 4
1.15A "Elective Company Common Stock Fund" . . . . . 4
1.16 "Eligible Employee" . . . . . . . . . . . . . . 4
1.17 "Employee" . . . . . . . . . . . . . . . . . . . 4
1.18 "Employee Contributions TRASOP Common Stock Fund"4
1.19 "Employment Year" . . . . . . . . . . . . . . . 5
1.20 "Entry Date" . . . . . . . . . . . . . . . . . . 5
1.21 "ERISA" . . . . . . . . . . . . . . . . . . . . 5
1.22 "Highly Compensated Eligible Employee" . . . . . 5
1.23 "Hour of Service" . . . . . . . . . . . . . . . 5
1.24 "Incentive Savings Agreement" . . . . . . . . . 6
1.25 "Investment Fund" or "Fund" . . . . . . . . . . 6
1.26"Limitation Year" . . . . . . . . . . . . . . . . 6
1.27 "Loan" . . . . . . . . . . . . . . . . . . . . . 6
1.28 "Loan Suspense Account" . . . . . . . . . . . . 7
1.29 "Matching Contribution" . . . . . . . . . . . . 7
1.30 "Matching Contribution Account" . . . . . . . . 7
1.31 "Maximum Permissible Amount" . . . . . . . . . . 7
1.32 "Normal Retirement Date" . . . . . . . . . . . . 7
1.33 "Participant" . . . . . . . . . . . . . . . . . 7
1.34 "Plan" . . . . . . . . . . . . . . . . . . . . . 7
1.35 "Plan Year" . . . . . . . . . . . . . . . . . . 7
1.36 "Qualified Election Period" . . . . . . . . . . 7
1.37 "Qualified Participant" . . . . . . . . . . . . 7
1.38 "Related Plan" . . . . . . . . . . . . . . . . . 8
1.39 "Rollover Contribution" . . . . . . . . . . . . 8
1.40 "Salary Deferral Contribution Account" . . . . . 8
1.41 "Salary Deferral Contributions" . . . . . . . . 8
1.42 "Stock Fund" . . . . . . . . . . . . . . . . . . 8
1.43 "Transfer Account" . . . . . . . . . . . . . . . 8
1.44 "TRASOP" . . . . . . . . . . . . . . . . . . . . 8
1.45 "TRASOP Transfer Account" . . . . . . . . . . . 8
1.46 "Trust" or "Trust Fund" . . . . . . . . . . . . 8
1.47 "Trust Agreement" . . . . . . . . . . . . . . . 8
1.48 "Trustee" . . . . . . . . . . . . . . . . . . . 8
1.49 "Valuation Date" . . . . . . . . . . . . . . . . 9
1.50 "Valuation Period" . . . . . . . . . . . . . . . 9
1.51 "Voluntary Contribution Account" . . . . . . . . 9
1.52 "Voluntary Contributions" . . . . . . . . . . . 9
1.53 "Wage Payment Date" . . . . . . . . . . . . . . 9
ARTICLE II -- PARTICIPATION . . . . . . . . . . . . . 9
2.1 Eligibility Requirement . . . . . . . . . . . . . 9
2.2 Election to Participate in Salary Deferral Contributions9
2.3 Reemployment of a Participant . . . . . . . . . . 10
ARTICLE III -- SALARY DEFERRAL CONTRIBUTIONS . . . . . 10
3.1 Salary Deferral Contributions . . . . . . . . . . 10
3.2 Administrative Rules Governing Incentive Savings
Agreements . . . . . . . . . . . . . . . . . . . 11
3.3 Suspension of Incentive Savings Agreements . . . 11
3.4 Limitations on Salary Deferral Contributions . . 12
3.5 Recharacterization and Return of Certain Salary Deferral
Contributions . . . . . . . . . . . . . . . . . . 13
3.6 Distributions from Salary Deferral Contribution Accounts14
ARTICLE IV -- MATCHING CONTRIBUTIONS . . . . . . . . . 15
4.1 Matching Contributions . . . . . . . . . . . . . 15
4.2 Form of Matching Contributions . . . . . . . . . 15
4.3 Limitations on Contributions . . . . . . . . . . 16
ARTICLE V -- VOLUNTARY AND ROLLOVER CONTRIBUTIONS . . 16
5.1 Voluntary Contributions . . . . . . . . . . . . . 16
5.2 Rules Governing Voluntary Contributions . . . . . 16
5.3 Suspension of Voluntary Contributions . . . . . . 16
5.4 Additional Voluntary Contributions . . . . . . . 17
5.5 Rollover Contributions . . . . . . . . . . . . . 17
5.6 TRASOP Transfers . . . . . . . . . . . . . . . . 18
ARTICLE VI -- SPECIAL RULES APPLICABLE TO VOLUNTARY
CONTRIBUTIONS AND MATCHING CONTRIBUTIONS . . . 18
6.1 Contribution Percentage Tests . . . . . . . . . . 18
ARTICLE VII -- COMPANY INCENTIVE CONTRIBUTIONS . . . . 21
7.1 Company Incentive Contributions . . . . . . . . . 21
7.2 Form of Company Incentive Contribution . . . . . 22
ARTICLE VIII -- EXEMPT LOANS . . . . . . . . . . . . . 22
8.1 Loans . . . . . . . . . . . . . . . . . . . . . . 22
8.2 Loan Payments . . . . . . . . . . . . . . . . . . 23
ARTICLE IX -- ALLOCATIONS TO PARTICIPANTS' ACCOUNTS . 25
9.1 Separate Accounts . . . . . . . . . . . . . . . . 25
9.2 Company Account . . . . . . . . . . . . . . . . . 26
9.3 Allocation of Matching Contributions . . . . . . 26
9.4 Allocation of Salary Deferral Contributions . . . 26
9.5 Allocation of Company Incentive Contributions . . 26
9.6 Allocation of Voluntary and Rollover Contributions26
9.7 Allocation of TRASOP Transfers . . . . . . . . . 27
9.8 Maximum Allocation . . . . . . . . . . . . . . . 27
9.9 Vesting . . . . . . . . . . . . . . . . . . . . . 29
9.10 Allocations and Adjustments to Accounts . . . . 29
9.11 Accounting for Allocations of Company Common Stock31
ARTICLE X -- PAYMENT OF BENEFITS . . . . . . . . . . . 31
10.1 Payments on Termination for Reasons Other Than Death31
10.2 Payments on Death . . . . . . . . . . . . . . . 31
10.3 Commencement of Payments . . . . . . . . . . . . 33
10.4 Method of Payment . . . . . . . . . . . . . . . 37
10.5 Hardship Distributions . . . . . . . . . . . . . 38
10.6 In-Service Distributions From Participants'Salary Deferral
Contribution Accounts . . . . . . . . . . . . . . . 39
10.7 In-Service Distributions From Participants' Matching Contribution
Accounts . . . . . . . . . . . . . . . . . . . . . . 39
10.8 Withdrawals from Voluntary Contribution and Transfer Accounts40
10.9 Withdrawals from TRASOP Transfer Accounts . . . 40
10.10 Form of Withdrawal . . . . . . . . . . . . . . 40
10.11 Rules Governing In-Service Distributions . . . 41
10.12 Distributions of Unallocated Employee Contributions41
10.13 Administrative Powers Relating to Payments . . 41
10.14 Diversification of Investments . . . . . . . . 42
ARTICLE XI -- PLAN ADMINISTRATION . . . . . . . . . . 42
11.1 Company Responsibility . . . . . . . . . . . . . 42
11.2 Powers and Duties of Company . . . . . . . . . . 43
11.3 Records and Reports of Company . . . . . . . . . 43
11.4 Claims Procedure . . . . . . . . . . . . . . . . 43
11.5 Interested Participants . . . . . . . . . . . . 44
ARTICLE XII -- TRUST AGREEMENT . . . . . . . . . . . . 44
12.1 Establishment of Trust . . . . . . . . . . . . . 44
ARTICLE XIII -- LOANS TO PARTICIPANTS . . . . . . . . 44
13.1 Loans to Participants . . . . . . . . . . . . . 44
13.2 Maximum Loan Amount . . . . . . . . . . . . . . 45
13.3 Repayment of Loans . . . . . . . . . . . . . . . 45
13.4 Terms . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE XIV -- INVESTMENT FUNDS . . . . . . . . . . . 49
14.1 Investment Funds . . . . . . . . . . . . . . . . 49
14.2 Initial Investment . . . . . . . . . . . . . . . 49
14.3 Selection of Investment Funds . . . . . . . . . 50
14.4 Investment in Company Common Stock . . . . . . . 51
14.5 Valuation of Company Common Stock . . . . . . . 51
14.6 Transactions by Insiders . . . . . . . . . . . . 51
ARTICLE XV -- AMENDMENT AND TERMINATION . . . . . . . 52
15.1 Amendment of Plan . . . . . . . . . . . . . . . 52
15.2 Voluntary Termination of or Permanent Discontinuance of
Contributions to the Plan . . . . . . . . . . . . . 52
15.3 Involuntary Termination of Plan . . . . . . . . 52
15.4 Payments on Termination of, or Permanent Discontinuance of
Contributions to, the Plan . . . . . . . . . . . . 53
ARTICLE XVI -- MISCELLANEOUS . . . . . . . . . . . . . 54
16.1 Duty to Furnish Information and Documents . . . 54
16.2 Statements and Available Information . . . . . . 54
16.3 No Enlargement of Employment Rights . . . . . . 54
16.4 Applicable Law . . . . . . . . . . . . . . . . . 54
16.5 No Guarantee . . . . . . . . . . . . . . . . . . 54
16.6 Unclaimed Funds . . . . . . . . . . . . . . . . 54
16.7 Federal and State Security Law Compliance . . . 55
16.8 Merger or Consolidation of Plan . . . . . . . . 55
16.9 Interest Non-Transferable . . . . . . . . . . . 55
16.10 Prudent Man Rule . . . . . . . . . . . . . . . 56
16.11 Limitations on Liability . . . . . . . . . . . 56
16.12 Headings . . . . . . . . . . . . . . . . . . . 56
16.13 Gender and Number . . . . . . . . . . . . . . . 56
16.14 ERISA and Approval Under Internal Revenue Code 57
16.15 Company Common Stock - Voting and Consents . . 57
16.16 Company Common Stock - Tendering . . . . . . . 57
16.17 Named Fiduciary . . . . . . . . . . . . . . . . 58
16.18 Rights of Spouses and Beneficiaries . . . . . . 58
16.19 Exclusive Benefit of Employees . . . . . . . . 58
16.20 Expenses of the Plan and Trust . . . . . . . . 59
ARTICLE XVII -- TOP-HEAVY PROVISIONS . . . . . . . . . 59
17.1 Top-Heavy Status . . . . . . . . . . . . . . . . 59
17.2 Definitions . . . . . . . . . . . . . . . . . . 60
17.3 Determination of Top-Heavy Status . . . . . . . 61
17.4 Minimum Contribution . . . . . . . . . . . . . . 62
17.5 Compensation . . . . . . . . . . . . . . . . . . 62
17.6 Maximum Allocation . . . . . . . . . . . . . . . 62
17.7 Safe-Harbor Rule . . . . . . . . . . . . . . . . 62
17.8 Limitation on Benefits to Key Employees . . . . 62||
<PAGE>
ILLINOIS POWER COMPANY
INCENTIVE SAVINGS PLAN
The Illinois Power Company Incentive Savings Plan (the "Plan") is herein
amended and restated, effective January 1, 1991 (except as otherwise noted).
The Plan, which was originally adopted effective June 1, 1984, and the related
trust agreement (the "Trust") have been established by Illinois Power Company
(the "Company") to defer the Federal income tax on certain portions of
certain employees' salaries as provided by the Internal Revenue Code, to
increase certain of its employees' interest in the Company by providing a
medium through which they may share in the profitable operations of the
Company and to reward certain of its employees for past service.
ARTICLE I
DEFINITIONS
Whenever used herein the following words and phrases shall have the meanings
stated below unless a different meaning is plainly required by the context:
1.1 "Account" means all or any one of the Salary Deferral Contribution
Account, Matching Contribution Account, Company Incentive Contribution Account
and, if applicable, TRASOP Transfer Account, Transfer Account and/or Voluntary
Contribution Account maintained for an individual Participant or Beneficiary
pursuant to the terms of the Plan.
1.2 "Actual Deferral Percentage" for a specified group of Eligible Employees
for a given Plan Year means the average of the ratios, calculated separately
for each Eligible Employee in such group, of: (i) the Salary Deferral
Contribution, if any, contributed by the Company on behalf of each such Eligible
Employee for the Plan Year; to (ii) the Eligible Employee's Earnings for such
Plan Year.
1.3 "Adjusted Balance" means the balance in a Participant's Account, as
adjusted in accordance with Article IX of the Plan as to the applicable
Valuation Date.
1.4 "Annual Additions" means the total of: (i) Company contributions,
including Company Incentive Contributions to the extent derived from Company
contributions, allocated to a Participant's accounts under this Plan and any
Related Plan during any Limitation Year; (ii) the amount of employee
contributions made by the Participant under this Plan and any Related
Plan; and (iii) forfeitures allocated to a Participant's accounts under any
Related Plan.
1.5 "Beneficiary" means the person, persons, or entity designated or
determined pursuant to the provisions of Section 10.2(b) of the Plan.
1.6 "Board" means the Board of Directors of the Company.
1.7 "Code" means the Internal Revenue Code of 1986, as amended from time to
time. Reference to a section of the Code shall include that section and any
comparable section or sections of any future legislation that amends,
supplements or supersedes said section.
1.8 "Company" means Illinois Power Company, an Illinois corporation, or any
successor corporation resulting from a merger or consolidation with the
Company or transfer of substantially all of the assets of the Company, if
such successor or transferee shall adopt and continue the Plan by appropriate
corporate action pursuant to Section 15.3 of the Plan. All employees of:
(i) any corporation that is a member of a controlled group of corporations (as
defined in Section 414(b) of the Code) that includes the Company; (ii) any
trade or business (whether or not incorporated) that is under common control
(as defined in Section 414(c) of the Code) with the Company; and (iii) any
corporation or other entity that is a member of an affiliated service group
(as defined in Section 414(m) of the Code) that includes the Company
shall be treated as employed by the Company for purposes of the Plan; provided,
however, that no provision of this Section 1.8 shall be construed or interpreted
to require the Company to make a contribution under the Plan for any individual
who is not an Employee.
1.9 "Company Common Stock" means shares of common stock, without par value,
of the Company; provided, however, that effective May 27, 1994, Company Common
Stock means shares of common stock, without par value, of Illinova Corporation.
1.10 "Company Contributions Common Stock Fund" means the Investment Fund
described in the Trust Agreement consisting only of shares of Company Common
Stock attributable to Matching Contributions and Company Incentive
Contributions.
1.11 "Company Contributions TRASOP Common Stock Fund" means the Investment
Fund described in the Trust Agreement consisting only of shares of Company
Common Stock transferred from the TRASOP and attributable to Company
contributions to the TRASOP; provided, however, that effective as of January
1, 1993, all amounts held under the Company Contributions TRASOP Common Stock
Fund shall be transferred to the Elective Company Common Stock Fund, and
effective as of January 1, 1993, the Company Contributions TRASOP
Common Stock Fund shall cease to exist.
1.12 "Company Incentive Contribution" means a contribution made by the Company
on or after January 1, 1991 pursuant to the provisions of Section 7.1.
1.13 "Company Incentive Contribution Account" means the record of money and
assets held by the Trustee for an individual Participant or Beneficiary pursuant
to the provisions of the Plan, derived from Company Incentive Contributions to
the Trust.
1.14 "Compensation" means a Participant's regular basic compensation from the
Company paid during a Plan Year for services rendered, excluding bonuses,
overtime, and commissions, any amounts subject to an Incentive Savings
Agreement, any other contributions or benefits under this Plan or any other
pension, profit sharing, insurance, hospitalization or other plan or policy
maintained by the Company for the benefit of such Participant, and all other
extraordinary and unusual payments. For purposes of Article V, Compensation
shall include bonuses, overtime and commissions. For purposes of Section 1.31
and Section 9.8, Compensation shall mean wages, salaries, fees for professional
services and other amounts received for personal services actually rendered in
the course of employment with the Company (including, but not limited to,
commissions paid salesmen, compensation for services on the basis of a
percentage of profits, tips and bonuses); shall include all compensation
actually paid or made available to a Participant for an entire Limitation
Year (other than amounts subject to the Incentive Savings Agreement of such
Participant); and shall not include:
(i) Contributions made by the Company to a plan of deferred compensation to
the extent that, before the application of the limitations of Section 415 of the
Code to that plan, the contributions are not includable in the gross income of
the Participant for the taxable year in which contributed. In addition, Company
contributions made on behalf of a Participant to a simplified employee pension
described in Section 408(k) of the Code are not considered as compensation for
the taxable year in which contributed to the extent such contributions are not
taxable to, or are deductible by, the Participant. Additionally,
any distributions from a plan of deferred compensation are not considered as
compensation for purposes of Section 415 of the Code, regardless of whether
such amounts are includable in the gross income of the Participant when
distributed. However, any amounts received by a Participant pursuant to an
unfunded non-qualified plan may be considered as compensation for purposes of
Section 415 of the Code in the year such amounts are includable in the gross
income of the Participant;
(ii) Amounts realized from the exercise of a non-qualified stock option, or
when restricted stock (or property) held by a Participant either becomes freely
transferable or is no longer subject to a substantial risk of forfeiture under
Section 83 of the Code and the regulations issued thereunder;
(iii) Amounts realized from the sale, exchange, or other disposition of stock
acquired under a qualified stock option;
(iv) Other amounts that receive special tax benefits, such as premiums for
group term life insurance (but only to the extent that the premiums are not
includable in the gross income of the Participant), or contributions made by the
Company (whether or not under a salary reduction agreement) towards the purchase
of an annuity contract described in Section 403(b) of the Code (whether or not
the contributions are excludable from the gross income of the Participant); or
(v) Any other items or amounts paid to or for the benefit of a Participant.
Notwithstanding the foregoing, the maximum amount of Compensation for any Plan
Year shall not exceed $150,000 ($200,000 for Plan Years beginning prior to
January 1, 1994) or such other amount as may be permitted for any such year
under section 401(a)(17) of the Code.
1.15 "Earnings" means a Participant's Compensation paid during a Plan Year,
increased by the amount subject to any Incentive Savings Agreement entered into
by the Participant for such Year. Notwithstanding the foregoing, the maximum
amount of Compensation for any Plan Year shall not exceed $150,000 ($200,000 for
Plan Years beginning prior to January 1, 1994) or such other amount as may be
permitted for any such year under section 401(a)(17) of the Code.
1.15A "Elective Company Common Stock Fund" means the Investment Fund described
in the Trust Agreement consisting only of shares of Company Common Stock held in
the Participant's Salary Deferral Contribution Account, Voluntary Account,
Transfer Account, and TRASOP Transfer Account.
1.16 "Eligible Employee" means any Employee who has met the eligibility
requirements contained in Section 2.1(a).
1.17 "Employee" means an individual employed by the Company; provided,
however, that "Employee" does not include any individual covered under the terms
and conditions of a collective bargaining agreement to which the Company is a
party (unless such agreement provides for the participation of such individual
in the Plan) if retirement benefits were the subject of good faith bargaining
between employee representatives and the Company. A person who is not
employed by the Company but who performs services for the Company pursuant to
an agreement between the Company and a leasing organization shall be considered
a "leased employee" after such person performs such services on a substantially
full-time basis for at least twelve months and if the services are of a type
historically performed by employees in the business field of the Company. A
person who is considered a leased employee of the Company shall not be
considered an Employee for purposes of the Plan. If a leased employee
subsequently becomes an Employee, and thereafter participates in Company
Incentive Contributions pursuant to Article VII of the Plan, such leased
employee shall be given credit for Hours of Service for the period of employment
of the Employee as a leased employee, except to the extent that the requirements
of Section 414(n)(5) of the Code were satisfied with respect
to such Employee while the Employee was a leased employee.
1.18 "Employee Contributions TRASOP Common Stock Fund" means the Investment
Fund described in the Trust Agreement consisting only of shares of Company
Common Stock transferred from the TRASOP and attributable to Employee
contributions to the TRASOP; provided, however, that effective as of January 1,
1993, all amounts held under the Employee Contributions TRASOP Common Stock Fund
shall be transferred to the Elective Company Common Stock Fund, and effective as
of January 1, 1993, the Employee Contributions TRASOP
Common Stock Fund shall cease to exist.
1.19 "Employment Year" means a twelve consecutive month period commencing
with an Employee's initial date of hire (or last date of rehire) or with any
anniversary date thereof. For purposes hereof, an Employee's date of rehire
shall be the first day on which an Employee
completes an Hour of Service following reemployment.
1.20 "Entry Date" means:
(a)for calendar years before calendar year 1993, each July 1 and January 1;
(b)for calendar year 1993, January 1, 1993, April 1, 1993, and October 1,
1993; and
(c)for calendar years after 1993, each April 1 and October 1.
1.21 "ERISA" means Public Law No. 93-406, the Employee Retirement Income
Security Act of 1974, as from time to time amended.
1.22 "Highly Compensated Eligible Employee" means an Eligible Employee who
during the current Plan Year or the preceding Plan Year, (a) was at any time
a five-percent owner of the Company; (b) received Compensation from the Company
in excess of $75,000 (or such greater amount provided by the Secretary of the
Treasury pursuant to Section 414(q) of the Code); (c) received Compensation
from the Company in excess of $50,000 (or such greater amount provided by the
Secretary of the Treasury pursuant to Section 414(q) of the Code) and
was in the top-paid group of Employees for such Year; or (d) was at any time an
officer of the Company and received compensation from the Company greater than
50% of the amount in effect under Section 415(b)(1)(A) of the Code for such Plan
Year. The provisions of Section 414(q) of the Code shall apply in determining
whether an Eligible Employee is a Highly Compensated Eligible Employee. The
Company for any Plan Year may elect to identify Highly Compensated Eligible
Employees based upon only the current Plan Year to the extent permitted
by Section 414(q) of the Code and regulations issued thereunder. A "Highly
Compensated Participant" means a Highly Compensated Eligible Employee who has
entered into an Incentive Savings Agreement for the relevant Plan Year.
1.23 "Hour of Service" means (i) each hour for which an Employee is paid or
entitled to payment for the performance of duties for the Company; and (ii) each
hour for which an Employee is directly or indirectly paid by the Company or is
entitled to payment from the Company during which no duties are performed by
reason of vacation, holiday, illness, incapacity (including disability), layoff,
jury duty, military duty or leave of absence (but not in excess of 501 hours in
any continuous period during which no duties are performed). Each Hour of
Service for which back pay, irrespective of mitigation of damages, is either
awarded or agreed to by the Company shall be included under either (i) or (ii)
as may be appropriate.
Hours of Service shall be credited:
(a) in the case of Hours referred to in clause (i) of the first sentence of
this Section, for the computation period in which the duties are performed;
(b) in the case of Hours referred to in clause (ii) of the first sentence of
this Section, for the computation period or periods in which the period during
which no duties are performed occurs; and
(c) in the case of Hours for which back pay is awarded or agreed to by the
Company, for the computation period or periods to which the award or agreement
pertains, rather than the computation period in which the award, agreement or
payment is made.
In determining Hours of Service, an Employee who is employed by the Company on
other than an hourly-rated basis shall be credited with ten (10) Hours of
Service per day for each day the Employee would, if hourly-rated, be credited
with service pursuant to clause (i) of the first sentence of this Section 1.23.
If an Employee is paid for reasons other than the performance
of duties pursuant to clause (ii) of the first sentence of this Section 1.23:
(i) in the case of a payment made or due which is calculated on the basis of
units of time, an Employee shall be credited with the number of regularly
scheduled working hours included in the units of time on the basis of which the
payment is calculated; and (ii) an Employee without a regular work schedule
shall be credited with eight (8) Hours of Service per day (to a maximum of forty
(40) Hours of Service per week) for each day that the Employee is so paid.
Hours of Service shall be calculated in accordance with Department of Labor
Regulations Section 2530.200b-2 or any future legislation or regulation that
amends, supplements or supersedes said section.
1.24 "Incentive Savings Agreement" means a written agreement entered into
by a Participant pursuant to the provisions of Section 3.1 of the Plan.
1.25 "Investment Fund" or "Fund" means any fund as described on the schedule
attached to the Trust Agreement.
1.26 "Limitation Year" means the twelve (12) consecutive month period to be
used in determining the Plan's compliance with Code Section 415 and the
regulations thereunder. The Company shall take all actions necessary to ensure
that the Limitation Year is the same twelve (12) month period as the Plan Year.
1.27 "Loan" means any loan as described in Section 4975(d)(1) of the Code to
the Trustee made or guaranteed by a disqualified person (within the meaning of
Section 4975(e)(2) of the Code), including, but not limited to, a direct loan of
cash, a purchase money transaction, an assumption of an obligation of the
Trustee, an unsecured guarantee or the use of assets of a disqualified person
(within the meaning of Section 4975(e)(2) of the Code (as collateral for a
loan).
1.28 "Loan Suspense Account" means the record of Company Common Stock,
purchased with any Loan and held by the Trustee pursuant to the provisions of
Article VIII of the Plan pending release and allocation to other Accounts as the
Loan is repaid.
1.29 "Matching Contribution" means a contribution made by the Company pursuant
to the provisions of Section 4.1 of the Plan.
1.30 "Matching Contribution Account" means the record of money and assets held
by the Trustee for an individual Participant or Beneficiary pursuant to the
provisions of the Plan, derived from Matching Contributions to the Trust.
1.31 "Maximum Permissible Amount" means the lesser of: (a) 25% of a
Participant's Compensation; or (b) thirty thousand (30,000) dollars (or, if
greater, one-quarter (1/4) of the dollar limitation in effect pursuant to
Section 415(b)(1)(A) of the Code).
1.32 "Normal Retirement Date" means the date a Participant attains age 65.
1.33 "Participant" means either:
(a) an Eligible Employee entitled to enter into an Incentive Savings Agreement
pursuant to Section 2.1(a) and Article III and to share in the allocation of
Matching Contributions pursuant to Article IV; or
(b) an Employee who has met the eligibility requirements set forth in Section
2.1(b) and is entitled to share in the allocation of Company Incentive
Contributions pursuant to Article VII.
1.34 "Plan" means the ILLINOIS POWER COMPANY INCENTIVE SAVINGS PLAN.
The Plan is hereby designated a profit sharing plan for purposes of Section
401(a)(27) of the Code. The Plan shall constitute in part a profit sharing plan
with a cash or deferred arrangement intended to be qualified under Sections
401(a) and 401(k) of the Code, and in part an employee stock ownership plan
under Section 4975(e)(7) of the Code and Section 407(d)(6) of ERISA and
a stock bonus plan intended to be qualified under Section 401(a) of the Code.
1.35 "Plan Year" means the twelve-month period from January 1 through
December 31 of each year.
1.36 "Qualified Election Period" means the six-Plan Year period beginning with
the first Plan Year in which a Participant first becomes a Qualified
Participant.
1.37 "Qualified Participant" means any Participant who has attained age 55 and
has been a Participant in the Plan for at least ten years after December 31,
1990.
1.38 "Related Plan" means any other defined contribution plan (as defined in
Section 415 of the Code) maintained by the Company or by any other employer that
is, along with the Company, a member of a controlled group of corporations or
under common control (as defined in Sections 414(b) and (c) of the Code as
modified by Section 415(h) thereof) or by any member of an affiliated service
group (as defined in section 414(m) of the Code).
1.39 "Rollover Contribution" means an amount received by the Trustee pursuant
to the provisions of Section 5.5 of the Plan.
1.40 "Salary Deferral Contribution Account" means the record of money and
assets held by the Trustee for an individual Participant or Beneficiary pursuant
to the provisions of the Plan, derived from Salary Deferral Contributions.
1.41 "Salary Deferral Contributions" means amounts contributed by the Company
pursuant to the provisions of Section 3.1 of the Plan.
1.42 "Stock Fund" means any of the Company Contributions TRASOP Common Stock
Fund, the Employee Contributions TRASOP Common Stock Fund, the Elective Company
Common Stock Fund, and the Company Contributions Common Stock Fund.
1.43 "Transfer Account" means the record of money and assets held by the
Trustee for an individual Participant or Beneficiary pursuant to the provisions
of the Plan, derived from a Rollover Contribution.
1.44 "TRASOP" means the Illinois Power Company Tax Reduction Act Stock
Ownership Plan, which was terminated effective October 31, 1988.
1.45 "TRASOP Transfer Account" means the record of money and assets held by
the Trustee for an individual Participant or Beneficiary pursuant to the
provisions of the Plan, derived from a direct trustee-to-trustee transfer from
the TRASOP. Separate records shall be maintained reflecting the portion of
each Participant's TRASOP Transfer Account that is attributable to Company
contributions to the TRASOP, and the portion of the TRASOP Transfer
Account that is attributable to Employee contributions to the TRASOP.
1.46 "Trust" or "Trust Fund" means all money, securities and other property
held under the Trust Agreement for the purposes of the Plan.
1.47 "Trust Agreement" means the agreement between the Company and the Trustee
governing the administration of the Trust, as it may be amended from time to
time.
1.48 "Trustee" means the corporation or individuals appointed by the Board of
Directors of the Company to administer the Trust.
1.49 "Valuation Date" means a date on which the Investment Funds are valued
and the Accounts of Participants are adjusted. Valuation Dates shall be the
last day of each month.
1.50 "Valuation Period" means each calendar month.
1.51 "Voluntary Contribution Account" means the record of money and assets
held by the Trustee for an individual Participant or Beneficiary pursuant to the
provisions of the Plan, derived from Voluntary Contributions.
1.52 "Voluntary Contributions" means contributions made pursuant to the
provisions of Sections 5.1 and 5.4 of the Plan.
1.53 "Wage Payment Date" means a date on which an Employee receives
Compensation from the Company.
ARTICLE II
PARTICIPATION
2.1 Eligibility Requirement. (a) Each Employee who is eligible to participate
in the Plan on December 31, 1990 shall continue to be an Eligible Employee for
purposes of entering into an Incentive Savings Agreement pursuant to Article III
and sharing in the allocation of Matching Contributions pursuant to Article IV.
Each other Employee shall become an Eligible Employee for purposes of Articles
III and IV on the Entry Date coinciding with or next following the later to
occur of January 1, 1991 and the date of employment of the Employee by
the Company.
(b) Each Employee who, on December 31, 1990, had completed one
Employment Year during which the Employee had completed 1,000 Hours of Service,
shall become a Participant entitled to share in Company Incentive Contributions
pursuant to Article VII on January 1, 1991. Each other Employee shall become a
Participant entitled to share in the allocation of Company Incentive
Contributions upon the completion of one Employment Year during which the
Employee has completed 1,000 Hours of Service. Notwithstanding the
preceding provisions of this subsection (b), no Employee shall be a
Participant for purposes of sharing in the allocation of Company Incentive
Contributions during any Plan Year or portion thereof in which the Employee is a
participant in the Illinois Power Company Executive Incentive Compensation
Plan or any successor plan.
2.2 Election to Participate in Salary Deferral Contributions. (a) An Eligible
Employee, as described in Section 2.1(a), may become a Participant by executing
and filing with the Company an Incentive Savings Agreement, and such other forms
as may be required by the Company, which will be provided by the Company.
(b) An Eligible Employee who was a Participant in the Plan on December 31,
1990 shall continue to be a Participant for purposes of Articles III and IV
from and after January 1, 1991. Each other Eligible Employee shall become a
Participant for purposes of Articles III and IV on the first Wage Payment Date
of the Eligible Employee following any subsequent Entry Date designated by the
Eligible Employee if such Eligible Employee executes and files with the Company
an Incentive Savings Agreement and any other forms required by the Company no
later than the beginning of the first business day of the month next preceding
the applicable Entry Date.
2.3 Reemployment of a Participant. (a) If the employment of an Eligible
Employee shall be terminated and if the Eligible Employee shall thereafter be
reemployed by the Company, the Eligible Employee shall again become eligible to
participate under the Plan for purposes of Articles III and IV on the date of
the resumption of employment of the Eligible Employee.
(b) If the employment of a Participant for purposes of Article VII shall be
terminated, and if the former Participant shall thereafter be reemployed by the
Company, the former Participant shall again become a Participant for purposes
of Article VII on the date of the resumption of employment of the Participant.
Each other Employee who is reemployed by the Company shall become a
Participant for purposes of Article VII upon the completion by the
Employee of an Employment Year following the date of reemployment of the
Employee during which the Employee has completed 1,000 Hours of Service.
ARTICLE III
SALARY DEFERRAL CONTRIBUTIONS
3.1 Salary Deferral Contributions. (a) Each Participant shall elect, by
entering into an Incentive Savings Agreement with the Company, to reduce the
Earnings of the Participant from the Company by a percentage not less than one
percent (1%) (in increments of one percent (1%)), as elected by the
Participant. Reductions to a Participant's Earnings pursuant to the
Incentive Savings Agreement of the Participant shall be effected through
payroll deductions, commencing with the Wage Payment Date of the Participant on
which the Participant becomes a Participant pursuant to Section 2.2(b), in
accordance with procedures established by the Company. Incentive Savings
Agreements shall be subject to the special rules set forth in this
Article III.
(b) Effective January 1, 1987, and notwithstanding any provision of the Plan
to the contrary, the elective deferrals (as defined in Section 402(g)(3) of the
Code) of any Participant for any taxable year of the Participant shall not
exceed $7,000 (or such greater amount provided by the Secretary of the Treasury
pursuant to Sections 402(g)(5) and 415(d) of the Code). Any amount contributed
to the Plan by the Company on behalf of a Participant during any Plan Year,
pursuant to the Participant's Incentive Savings Agreement, in excess of
the limitation set forth in this subsection, adjusted for earnings, gains and
losses allocable thereto, shall be returned to such Participant, as provided in
Section 402(g)(2) of the Code.
(c) The Company shall contribute to the Trust for each Valuation Period a
Salary Deferral Contribution in an amount equal to the amounts designated by
Participants pursuant to Incentive Savings Agreements and deducted from payroll
during such Valuation Period and not reduced pursuant to subsection (b) of this
Section 3.1.
3.2 Administrative Rules Governing Incentive Savings Agreements. (a) A
Participant may change the percentage of the Earnings of the Participant that
are subject to an Incentive Savings Agreement, within the percentage limits set
forth in Section 3.1(a) of the Plan, effective as of the first Wage Payment
Date of the Participant following any Entry Date, if such Participant
executes and delivers an amendment to such Incentive Savings Agreement
designating such change, and any other forms required by the Company, no
later than the beginning of the first business day of the month next preceding
the applicable Entry Date.
(b) Salary Deferral Contributions shall be held in trust uninvested by the
Company and shall not accrue earnings until remitted to the Trustee, which shall
be as of the earliest date on which such Salary Deferral Contributions can
reasonably be segregated from the Company's general assets, but in any event
within ninety (90) days from the date on which such amounts are received by the
Company or would otherwise have been payable to the Participant in cash. In any
event, the Company shall pay to the Trustee its Salary Deferral Contribution
with respect to a particular Plan Year or Valuation Period ending within a
Plan Year within the period of time prescribed by law for filing the Company's
Federal income tax return for such Plan Year, including extensions duly granted.
3.3 Suspension of Incentive Savings Agreements. (a) A Participant may
voluntarily suspend an Incentive Savings Agreement for an indefinite period of
time. A suspension shall be effective as of the Participant's first
administratively feasible Wage Payment Date that is within thirty (30) days
after the receipt of a written notice of suspension by the Company from
the Participant. A Participant will not be permitted to make up amounts subject
to an Incentive Savings Agreement for any period of suspension. A Participant
who makes an election to suspend an Incentive Savings Agreement pursuant to this
Section may reinstate such Agreement effective as of the first Wage Payment Date
of the Participant following any subsequent Entry Date designated by the
Participant if such Participant again executes and files with the Company
an Incentive Savings Agreement and any other forms required by the Company no
later than the beginning of the first business day of the month next preceding
the applicable Entry Date.
(b) The Company, at its election, may amend, suspend or revoke an Incentive
Savings Agreement with a Participant at any time if the Company determines that
such amendment or revocation is necessary to ensure that the Annual Additions to
the accounts of a Participant do not exceed the Maximum Permissible Amount for
such Participant for that Year or to ensure that the requirements of Section 3.4
are met for such Year.
3.4 Limitations on Salary Deferral Contributions.
(a) Effective January 1, 1987, and notwithstanding anything to the contrary
contained elsewhere in the Plan or contained in any Incentive Savings Agreement,
all Incentive Savings Agreements entered into with respect to any Plan Year
shall be valid only if one of the tests set forth in subsection (b) next below
is satisfied for such Plan Year. In determining whether such tests are
satisfied, all Salary Deferral Contributions made with respect to such Plan
Year shall be considered.
(b) For each Plan Year the Actual Deferral Percentage for Highly Compensated
Eligible Employees shall bear to the Actual Deferral Percentage for all other
Eligible Employees a relationship that satisfies either of the following tests:
(i) The Actual Deferral Percentage for Highly Compensated Eligible
Employees is not more than the Actual Deferral Percentage of all other Eligible
Employees multiplied by 1.25; or
(ii) The Actual Deferral Percentage for Highly Compensated Eligible
Employees is not more than the Actual Deferral Percentage for all other
Eligible Employees multiplied by two and the excess of the Actual Deferral
Percentage for the group of High Compensated Eligible Employees over that of all
other Eligible Employees is not more than two percentage points.
(c) If at the end of any Plan Year neither of the tests set forth in
subsection (b) next above is satisfied for such Year, then:
(i) Incentive Savings Agreements entered into for such Year by Highly
Compensated Participants shall be valid only to the extent permitted by one of
the tests set forth in subsection (b) next above, and Salary Deferral
Contributions made by the Company for such Year for Highly Compensated
Participants shall be reduced in the manner set forth in subsection (ii) next
below to the extent necessary to comply with one of the tests set forth in
subsection (b) next above. All Salary Deferral Contributions so reduced,
adjusted for earnings, gains and losses allocable thereto, shall be allocated
and distributed in the manner provided in Section 3.5.
(ii) Reductions pursuant to subsection (i) next above shall be effected with
respect to Highly Compensated Participants pursuant to the following procedure:
the Actual Deferral Percentage of the Highly Compensated Participant with the
highest Actual Deferral Percentage shall be reduced to the extent necessary to
cause such Highly Compensated Participant's Actual Deferral Percentage to equal
the Actual Deferral Percentage of the Highly Compensated Participant with the
next highest Actual Deferral Percentage. This process shall be repeated until
the Plan satisfies one of the tests set forth in subsection (b) for such Plan
Year.
(iii) Incentive Savings Agreements entered into by all Participants who are
not Highly Compensated shall be valid and Salary Deferral Contributions made by
the Company for such Participants shall not be changed.
The calculations, reductions and allocations required by this Section 3.4(c) and
Section 3.5 shall be made by the Company with respect to a Plan Year at any time
prior to the close of the following Plan Year.
(d) If at any time during a Plan Year the Company, in its sole discretion,
determines that both of the tests set forth in subsection (b) of this Section
3.4 may not be met for such Plan Year, then:
(i) The Company shall have the unilateral right during the Plan Year to
require the prospective reduction, for the balance of such Year or any part
thereof, of the percentage of the Earnings of Highly Compensated Participants
that may be subject to Incentive Savings Agreements. Such reductions shall be
made to the extent necessary, in the discretion of the Company, to assure that
one of the tests set forth in subsection (b) of this Section 3.4 shall be met
for the Plan Year and shall be based upon estimates made
from data available to the Company at any time during the Plan Year.
(ii) Reductions pursuant to subsection (i) next above shall be effected with
respect to Highly Compensated Participants pursuant to the following procedure:
the Actual Deferral Percentage of the Highly Compensated Participant with the
highest Actual Deferral Percentage shall be reduced to the extent necessary to
cause such Highly Compensated Participant's Actual Deferral Percentage to equal
the Actual Deferral Percentage of the Highly Compensated Participant with the
next highest Actual Deferral Percentage. This process shall be repeated to the
extent necessary to assure that one of the tests set forth in subsection (b)
shall not be exceeded for such Plan Year.
3.5 Recharacterization and Return of Certain Salary Deferral Contributions.
If a Salary Deferral Contribution made by the Company for a Highly Compensated
Participant is reduced pursuant to Section 3.4(c), the amount so reduced shall
be allocated and distributed as follows:
(a) To the extent permitted by regulations issued by the Secretary of the
Treasury and as elected by the Highly Compensated Participant, if the
Participant has not made Voluntary Contributions equal to the maximum amount
permitted under Sections 5.1, 5.4 and 6.1(a) of the Plan, the amount reduced
pursuant to Section 3.4(c), adjusted for earnings, gains and losses allocable
thereto for the Plan Year and for the period from the end of the Plan Year to
the date of allocation, shall be deemed to be Voluntary Contributions made by
the Participant and shall (within the limits contained in Sections 5.1, 5.4
and 6.1(a)) be allocated to the Participant's Voluntary Contribution Account; or
(b) To the extent that the procedure set forth in subsection (a) is not
permitted, or is not elected by the Highly Compensated Participant, or if the
Highly Compensated Participant makes or is deemed to have made Voluntary
Contributions equal to the maximum amount permitted by Sections 5.1, 5.4 and
6.1(a) (through contributions made pursuant to Article V of the Plan, through
the operation of subsection (a) next above, or both) any portion
of the amount so reduced pursuant to Section 3.4(c) that is not allocated to the
Participant's Voluntary Contribution Account pursuant to subsection (a) next
above, adjusted for earnings, gains and losses allocable thereto for the
Plan Year and for the period from the end of the Plan Year to the date of
distribution, pursuant to Section 401(k)(8) of the Code, shall be returned to
the Company and as soon as practicable thereafter paid by the Company directly
to the applicable Highly Compensated Participant.
3.6 Distributions From Salary Deferral Contribution Accounts. Notwithstanding
anything to the contrary contained elsewhere in the Plan, a Participant's Salary
Deferral Contribution Account shall not be distributable other than upon:
(i) the Participant's separation from service, death, or disability;
(ii) termination of the Plan without establishment or maintenance of another
defined contribution plan (other than an employee stock ownership plan as
defined in Section 4975(e)(7) of the Code);
(iii) the date of the sale or other disposition by the Company to an unrelated
entity of substantially all of the assets (within the meaning of Section 409(d)
(2) of the Code) used by the Company in a trade or business of the Company, but
only if (a) the Participant is employed by such trade or business and continues
employment with the entity acquiring such assets, and (b) the Company continues
to maintain the Plan after the sale or other disposition. The sale of 85% of
the assets used in the trade or business shall be deemed a sale of
"substantially all" the assets used in such trade or business;
(iv) the date of the sale or other disposition by the Company of the Company's
interest in a subsidiary (within the meaning of Section 409(d)(3) of the Code)
to an unrelated entity, but only if (a) the Participant is employed by such
subsidiary and continues employment with such subsidiary following such sale or
other disposition, and (b) the Company continues to maintain the Plan after
the sale or other disposition;
(v) the Participant's attainment of age 59 1/2; or
(vi) the Participant's hardship (as defined in Section 10.5(b)).
Notwithstanding anything to the contrary contained herein, an event shall not be
treated as described in clause (ii), (iii) or (iv) above with respect to any
Participant unless the Participant receives a lump sum distribution (as defined
in Section 401(k)(10)(B)(ii) of the Code) by reason
of the event.
ARTICLE IV
MATCHING CONTRIBUTIONS
4.1 Matching Contributions.
(a) For Plan Years ending before January 1, 1995, for each Valuation Period
the Company shall contribute to the Trust for each Participant a Matching
Contribution in an amount equal to twenty-five percent (25%) of the first one
hundred and sixty (160) dollars of Salary Deferral Contributions made on behalf
of the Participant for the Valuation Period. Matching Contributions shall
be remitted to the Trustee as soon as practicable following the end of such
Valuation Period.
(b) For Plan years beginning on or after January 1, 1995, for each Valuation
Period the Company shall contribute to the Trust for each Participant a Matching
Contribution in an amount equal to the sum of:
(i) fifty percent (50%) of the first eighty (80) dollars of Salary Deferral
Contributions for that Participant for the Valuation Period, plus
(ii) twenty-five percent (25%) of the amount by which his Salary Deferral
Contributions exceed eighty (80) dollars for the Valuation Period;
provided, however, that the amount of Salary Deferral Contributions for which a
Matching Contribution is made shall not exceed 6% of Earnings for the Valuation
Period. Matching Contributions shall be remitted to the Trustee as soon as
practicable following the end of such Valuation Period.
(c) Matching Contributions made with respect to a Plan Year or any part
thereof pursuant to this Section 4.1 shall in no event be made later than the
time prescribed by law for filing the income tax return of the Company for the
fiscal year of the Company (including extensions thereto) that corresponds to
such Plan Year.
(d) Matching Contributions shall be subject to the special rules set forth in
this Article IV and in Article VI.
4.2 Form of Matching Contributions. Matching Contributions to the Trust for
any Valuation Period shall be allocated in shares of Company Common Stock
acquired with the proceeds of a Loan, and released from the Loan Suspense
Account pursuant to Section 8.1(b) as a result of (a) Company contributions
applied by the Trustee to principal and interest payments on the Loan for such
Valuation Period and (b) cash dividends paid by the Company, in any Plan Year in
which the Company declares a dividend on Company Common Stock, with
respect to shares of Company Common Stock acquired with the proceeds of the Loan
and applied by the Trustee on principal and interest payments on the Loan for
such Valuation Period.
4.3 Limitations on Contributions. In no event shall the aggregate amount of
Salary Deferral Contributions, Matching Contributions and Company Incentive
Contributions (to the extent derived from Company contributions) contributed by
the Company for any Plan Year exceed the maximum deduction allowable by Section
404 of the Code.
ARTICLE V
VOLUNTARY AND ROLLOVER CONTRIBUTIONS
5.1 Voluntary Contributions. Each Participant may elect, by executing a form
provided by the Company, to contribute a percentage of the Compensation of the
Participant, between one percent (1%) and ten percent (10%) (in increments of
one percent (1%)), as elected by the Participant. Voluntary Contributions shall
be effected through payroll deductions, commencing with the Participant's first
Wage Payment Date following any Entry Date designated by the Participant if such
Participant executes and files with the Company any forms required by the
Company, in accordance with procedures established by the Company, no later
than the beginning of the first business day of the month next preceding the
applicable Entry Date. Voluntary Contributions shall be subject to the special
rules set forth in this Article V and in Article VI.
5.2 Rules Governing Voluntary Contributions. (a) A Participant may change the
percentage of the Compensation of the Participant contributed to the Trust Fund
as Voluntary Contributions within the percentage limits set forth in Section 5.1
of the Plan, effective as of the first Wage Payment Date of the Participant
following any Entry Date if such Participant executes and delivers a written
notice designating such change by the Company, on such forms as shall
be required by the Company, no later than the beginning of the first business
day of the month next preceding the applicable Entry Date.
(b) Voluntary Contributions shall be held in trust uninvested by the Company
and shall not accrue earnings until remitted to the Trustee, which shall be as
of the earliest date on which such Voluntary Contributions can reasonably be
segregated from the Company's general assets, but in any event within ninety
(90) days from the date on which such amounts are received by the Company or
would otherwise have been payable to the Participant in cash.
5.3 Suspension of Voluntary Contributions. A Participant may voluntarily
suspend the Voluntary Contributions of the Participant for an indefinite period
of time. A suspension shall be effective as of the Participant's first
administratively feasible Wage Payment Date that is within thirty (30) days
after the receipt of a written notice of suspension by the Company from
the Participant. A Participant who makes an election to suspend Voluntary
Contributions pursuant to this Section may reinstate such Contributions
effective as of the first Wage Payment Date of the Participant following any
subsequent Entry Date designated by the Participant if such Participant files
with the Company an executed reinstatement form and any other forms required
by the Company no later than the beginning of the first business day of the
month next preceding the applicable Entry Date.
5.4 Additional Voluntary Contributions. A Participant may at any time (but no
more often than twice during a Plan Year) elect to make a lump sum Voluntary
Contribution to the Plan. Such Voluntary Contribution shall be paid to the
Company in cash (including payment by check or other method approved by the
Company), in an amount determined by the Participant, provided that each such
contribution may not be less than $200, and may not exceed
the otherwise applicable limits set forth in the Plan.
5.5 Rollover Contributions. (a) An Employee who has received a distribution
of the interest of the Employee in a qualified plan of a former employer
under circumstances meeting the requirements of Section 402(a)(5) of the Code
relating to lump-sum distributions from qualified plans may elect to deposit all
or any portion (as designated by such Employee in writing to the Company) to the
amount of such distribution as a Rollover Contribution to this Plan. A Rollover
Contribution may be made only within sixty (60) days following the date the
Employee receives the distribution from the plan of the former employer of the
Employee (or within such additional period as may be provided under Section 408
of the Code if the Employee shall have made a timely deposit of the distribution
in an individual retirement account). Rollover Contributions must be made in
cash (including payment by check or other method approved by the Company).
The Company shall establish rules and procedures to implement this Section 5.5,
including, without limitation, such procedures as may be appropriate to permit
the Company to verify the tax qualified status of the plan of the former
employer and compliance with any applicable provisions of the Code relating to
Rollover Contributions. The amount contributed or transferred to the Trustee
pursuant to this Section shall be allocated to the Employee's Transfer Account
for the benefit of the Employee. Each Transfer Account shall share in the
earnings, gains and losses of the Trust Fund as set forth in Section 9.10 of the
Plan and shall be distributed at the same times and in the manner set forth in
Article X below.
(b) On the first day of each calendar month, with respect to each Participant
in this Plan who was a participant under the Illinois Power Company Incentive
Savings Plan for Employees Covered Under a Collective Bargaining Agreement
(the "Collective Bargaining Plan") at any time during the immediately preceding
month, the Trustee shall receive directly from the trustee under the Collective
Bargaining Plan all, but not less than all, of the vested amount credited to the
accounts of the Participant under the Collective Bargaining Plan.
Amounts so transferred shall be allocated to the Participant's Salary Deferral
Contribution Account, TRASOP Transfer Account, Transfer Account, Matching
Contributions Account, Company Incentive Contribution Account and Voluntary
Contribution Account in the Plan in the same proportions that such amounts were
credited to the Salary Deferral Contribution Account, TRASOP Transfer Account,
Transfer Account, Matching Contributions Account, Company Incentive Contribution
Account and Voluntary Contribution Account in the Collective Bargaining Plan,
respectively, immediately prior to such transfer and shall be held for the
benefit of the Participant pursuant to the terms of this Plan. If the
Participant has a loan outstanding under the Collective Bargaining Plan at the
time of the transfer, such loan shall be transferred to and assumed by the
Trustee and shall thereafter be treated as a loan made pursuant to Article XIII
of this Plan. A transfer to the Trustee of amounts from the Collective
Bargaining Plan shall be governed by this subsection (b) and not by subsection
(a) next above.
(c) On the first day of each calendar month, with respect to each Participant
in this Plan who becomes a participant under the Collective Bargaining Plan at
any time during the immediately preceding month, the Trustee shall transfer
directly to the trustee of the Collective Bargaining Plan all, but not less than
all, of the amounts credited to the Account of the Participant, as well as any
outstanding loan made to such Participant pursuant to Article XIII of the Plan,
to be held and assumed in accordance with the provisions of the Collective
Bargaining Plan for the benefit of the Participant.
5.6 TRASOP Transfers. In connection with the termination of the TRASOP on
October 31, 1988, each Employee who was an active participant in the TRASOP on
October 31, 1988 was given an opportunity to elect to have the account balances
of the Employee under the TRASOP transferred from the trustee under the TRASOP
directly to the Trustee to be placed in a TRASOP Transfer Account established
under the Plan on behalf and for the benefit of such Employee. The Trustee
received amounts so transferred directly from the trustee of the
TRASOP and allocated such amounts to the respective TRASOP Transfer Accounts of
the Employees electing such transfer. Each TRASOP Transfer Account shall share
in the earnings, gains and losses of the Trust Fund as set forth in Section
9.10 of the Plan and shall be distributed at the same times and in the manner
set forth in Article X below.
ARTICLE VI
SPECIAL RULES APPLICABLE TO VOLUNTARY CONTRIBUTIONS
AND MATCHING CONTRIBUTIONS
6.1 Contribution Percentage Tests. (a) Effective January 1, 1987 and
notwithstanding any provision of the Plan to the contrary, the Contribution
Percentage for Highly Compensated Eligible Employees shall bear to the
Contribution Percentage for all other Eligible Employees
a relationship that satisfies either of the following tests:
(i) The Contribution Percentage for Highly Compensated Eligible
Employees is not more than the Contribution Percentage for all other Eligible
Employees multiplied by 1.25; or
(ii) The Contribution Percentage for Highly Compensated Eligible
Employees is not more than the Contribution Percentage for all other Eligible
Employees multiplied by two and the excess of the Contribution Percentage for
the group of Highly Compensated Eligible Employees over that of all other
Eligible Employees is not more than two percentage points.
(b) For purposes of subsection (a), the term "Contribution Percentage" for a
specified group of Eligible Employees for a given Plan Year means the average of
the ratios calculated separately for each Eligible Employee in such group, of
(A) the aggregate of: (i) the Voluntary Contributions, if any, contributed by
the Eligible Employee to the Plan for such Plan Year, plus (B) the Matching
Contributions, if any, contributed by the Company to the Plan for
such Plan Year on behalf of such Eligible Employee; to (ii) the Eligible
Employee's Earnings for such Plan Year.
(c) If, at the end of any Plan Year, the Plan does not comply with subsection
(a), then the Voluntary Contributions made for such Plan Year by, and Matching
Contributions made for such Plan Year on behalf of, Highly Compensated
Participants shall be reduced in the manner set forth in the next sentence to
the extent necessary to comply with subsection (a). Reductions pursuant to the
preceding sentence shall be effected with respect to Highly Compensated
Participants pursuant to the following procedure: the Contribution Percentage
of the Highly Compensated Participant with the highest Contribution Percentage
shall be reduced to the extent necessary to cause such Highly Compensated
Participant's Contribution Percentage to equal the Contribution Percentage of
the Highly Compensated Participant with the next highest Contribution
Percentage. This process shall be repeated until the Plan satisfies one of the
tests set forth in subsection (a) for such Plan Year.
(d) Voluntary Contributions made by, and Matching Contributions made on
behalf of, Participants who are not Highly Compensated Participants shall be
valid and shall not be affected. Voluntary Contributions and Matching
Contributions that are reduced pursuant to the preceding provisions of this
Section for a Plan Year, adjusted for earnings, gains and losses
allocable thereto for such Plan Year and for the period between the end of such
Plan Year and the date of distribution, pursuant to Section 401(m) of the Code,
shall be returned to the Company and as soon as practicable thereafter paid by
the Company directly to the applicable Highly Compensated Participant. The
calculations, reductions and payments required by this Section shall be made by
the Company with respect to a Plan Year at any time prior to the close
of the following Plan Year.
(e) If at any time during a Plan Year the Company, in its sole discretion,
determines that neither of the tests set forth in subsection (a) of this Section
6.1 may be met for such Plan Year, then:
(i) The Company shall have the unilateral right during the Plan Year to
require the prospective reduction, for the balance of the Year or any part
thereof, of the percentage of Compensation of Highly Compensated Participants
that may be contributed as Voluntary Contributions. Such reductions shall
be made to the extent necessary, in the discretion of the Company, to assure
that one of the tests set forth in subsection (a) of this Section 6.1 shall be
met for the Plan Year and shall be based upon estimates made from
data available to the Company at any time during the Plan Year.
(ii) Reductions pursuant to subsection (i) next above shall be effected with
respect to Highly Compensated Participants pursuant to the following procedure:
the Contribution Percentage of the Highly Compensated Participant with the
highest Contribution Percentage shall be reduced to the extent necessary to
cause such Highly Compensated Participant's Contribution Percentage to equal the
Contribution Percentage of the Highly Compensated Participant with the next
highest Contribution Percentage. This process shall be repeated to the extent
necessary to assure that one of the tests set forth in subsection (a) shall not
be exceeded for such Plan Year.
(f) If a "Multiple Use of the Alternative Limitation" occurs in a Plan Year,
then, notwithstanding any other provisions of Section 3.4 or of this Section
6.1, the test in paragraph (a)(ii) of this Section shall not be used to satisfy
the requirements of this Section for Voluntary Contributions and Matching
Contributions in the same Plan Year that the test contained in Section 3.4(b)
(ii) is used to satisfy the requirements of Section 3.4 with respect to Salary
Deferral Contributions. If the preceding sentence shall be applicable for a
Plan Year, then the Company shall determine whether to use the test in
paragraph (a)(ii) of this Section to satisfy the requirements of this Section
6.1, or to use the test in paragraph (b)(ii) of Section 3.4 to
satisfy the requirements of Section 3.4, for such Plan Year.
A Multiple Use of the Alternative Limitation shall occur in a Plan Year if
all of the following conditions are satisfied in the Plan Year:
(1) At least one Highly Compensated Participant is eligible to authorize
Salary Deferral Contributions to be made on behalf of the Highly Compensated
Participant, and to make Voluntary Contributions or have Matching Contributions
allocated to the Matching Contributions Account of the Highly Compensated
Participant, pursuant to the Plan during such Plan Year;
(2) The sum of the Actual Deferral Percentage of the entire group of
Highly Compensated Eligible Employees and the Contribution Percentage of the
entire group of Highly Compensated Eligible Employees for such Plan Year exceeds
the greater of:
A. the sum of:
(i) 125% of the greater of (I) the Actual Deferral Percentage
of the group of Eligible Employees who are not Highly Compensated
Eligible Employees for such Plan Year, or (II) the Contribution Percentage
of the group of Eligible Employees who are not Highly Compensated
Eligible Employees for such Plan Year, and
(ii) Two plus the lesser of A(i)(I) or A(i)(II) above. In no
event, however, shall this amount exceed 200% of the lesser of A(i)(I) or
A(i)(II) above, or
B. the sum of:
(i) 125% of the lesser of (I) the Actual Deferral Percentage of
the group of Eligible Employees who are not Highly Compensated Eligible
Employees for such Plan Year, or (II) the Contribution Percentage of the
<PAGE>
group of Eligible Employees who are not Highly Compensated Eligible
Employees for such Plan Year, and
(ii) Two (2) plus the greater of B(i)(I) or B(i)(II) above. In
no event, however, shall this amount exceed 200% of the greater of B(i)(I)
or B(i)(II) above;
(3) The Actual Deferral Percentage of the entire group of Highly
Compensated Eligible Employees exceeds the amount described in Section 3.4(b)
(i); and
(4) The Contribution Percentage of the entire group of Highly
Compensated Eligible Employees exceeds the amount described in Section 6.1(a)
(i).
ARTICLE VII
COMPANY INCENTIVE CONTRIBUTIONS
7.1 Company Incentive Contributions. (a) For each Plan Year in which the
Company attains the minimum Incentive Target established by the Company for such
Plan Year, and in which the Company declares a dividend on Company Common Stock,
the Company shall contribute to the Trust for each Participant a Company
Incentive Contribution equal to a percentage of such Participant's Earnings
(up to two percent (2%)) as determined pursuant to such Incentive Targets.
Company Incentive Contributions shall be remitted to the Trustee as
soon as practicable following the end of such Plan Year.
(b) Notwithstanding the provisions of paragraph (a) next above, if the
required payments of principal and interest on a Loan in any Plan Year require
a release in that Plan Year of Company Common Stock from the Loan Suspense
Account, pursuant to Section 8.1(b), with an aggregate value in excess of the
sum of (1) the amount of Matching Contributions for such Plan Year, and (2) the
amount of unpaid Matching Contributions for the preceding Plan Year, required
pursuant to Section 4.2, such Company Common Stock so released shall constitute
a Company Incentive Contribution for such Plan Year, and shall be allocated
among the Company Incentive Contribution Accounts of all Participants either
pursuant to Sections 7.1 and 9.5 if the Company attains the minimum Incentive
Target established by the Company for that Plan Year, or in proportion to the
Earnings of all Participants if the Company does not attain the minimum
Incentive Target established for that Plan Year.
(c) Company Incentive Contributions made with respect to a Plan Year pursuant
to this Section 7.1 shall in no event be made later than the time prescribed by
law for filing the income tax return of the Company for the fiscal year of the
Company (including extensions thereto) that corresponds to such Plan Year.
7.2 Form of Company Incentive Contribution. Company Incentive Contributions to
the Trust for any Plan Year shall be allocated in shares of Company Common Stock
acquired with the proceeds of a Loan, and released from the Loan Suspense
Account pursuant to Section 8.1(b) as a result of (a) Company contributions
applied by the Trustee on principal and interest payments on the Loan for such
Plan Year and (b) cash dividends paid by the Company with
respect to shares of Company Common Stock acquired with the proceeds of the Loan
and applied by the Trustee on principal and interest payments on the Loan for
such Plan Year, in excess of the payments of principal and interest on the Loan
attributable to Matching Contributions for such Plan Year pursuant to Section
4.2.
ARTICLE VIII
EXEMPT LOANS
8.1 Loans. (a) The Company may direct the Trustee to obtain Loans. Any such
Loan will meet all requirements necessary to constitute an "exempt loan" within
the meaning of Section 4975(d)(3) of the Code and Treasury Regulations
Section 54.4975-7(b)(1)(iii) and shall be used primarily for the benefit of the
Participants and Beneficiaries. The proceeds of any such Loan shall be used,
within a reasonable time after the Loan is obtained, only to purchase Company
Common Stock from the Company or any shareholder of the Company, repay the Loan
or repay any prior Loan. The only assets of the Plan that may be given as
collateral on a Loan are shares of Company Common Stock acquired with the
proceeds of the Loan and shares of Company Common Stock that were used as
collateral on a prior Loan repaid with the proceeds of the current Loan.
Company Common Stock purchased with the proceeds of a Loan shall be placed
in a Loan Suspense Account. No person entitled to payment under a Loan shall
have recourse against Trust assets other than such collateral, contributions
(other than contributions of Company Common Stock) that are available under the
Plan to meet obligations under the Loan and earnings attributable to such
collateral and the investment of such contributions. All Matching Contributions
and Company Incentive Contributions paid during the Plan Year in which a Loan is
made (whether before or after the date the proceeds of the Loan are received),
all Matching Contributions and Company Incentive Contributions paid thereafter
until the Loan has been repaid in full, and all earnings from investment of such
Matching Contributions and Company Incentive Contributions, without regard to
whether any such Matching Contributions and Company Incentive Contributions and
earnings have been allocated to Participants' Matching Contribution Accounts or
Company Incentive Contribution Accounts, shall be available to meet obligations
under the Loan as such obligations accrue, or prior to the time such
obligations accrue, unless otherwise provided by the Company at the time any
such Contribution is made.
(b) Shares of Company Common Stock purchased with the proceeds of a Loan
shall be released from the Loan Suspense Account upon the payment of any portion
of the Loan in a minimum amount required pursuant to applicable provisions of
Section 4975(d)(3) of the Code and Treasury Regulation Section 54.4975-7(b)(8)
issued thereunder.
(c) If the Company Common Stock purchased with the proceeds of a Loan
includes more than one class of Company Common Stock, the number of shares of
each class to be released for a Plan Year must be determined by applying the
same fraction to each class. If interest on any Loan is variable, the interest
to be paid in future years under the Loan shall be computed by using the
interest rate applicable as of the end of the Plan Year. Should a loan
initially satisfying the conditions stated in subparagraph (b)(1) at some
subsequent date cease to satisfy the conditions of such subparagraph, by reason
of a renewal, extension, or refinancing of the Loan, then subparagraph (b)(2)
shall be applied in determining the shares released upon
payment of any principal or interest after such date.
8.2 Loan Payments. (a) Payments of principal and interest on any Loan during
a Plan Year shall be made by the Trustee (as directed by the Company) only
from (1) Matching Contributions and Company Incentive Contributions to the Trust
made to meet the Plan's obligation under a Loan (other than contributions of
Company Common Stock) and from any cash dividends attributable to Company Common
Stock acquired with the proceeds of a Loan, and investments of such
contributions (both received during or prior to the Plan Year); (2) the
proceeds of a subsequent Loan made to repay a prior Loan; and (3) the
proceeds of the sale of any Company Common Stock purchased with the proceeds of
a Loan. Such contribution and cash dividends must be accounted for separately
by the Plan until the Loan is repaid.
(b) Company Common Stock released by reason of the payment of principal or
interest on a Loan shall, following such payment, be allocated as set forth in
Sections 9.3 and 9.5 to Participants' Matching Contribution Accounts and Company
Incentive Contribution Accounts.
(c) While any Loan is outstanding, the Company shall make Matching
Contributions and Company Incentive Contributions to the Trust required by
Sections 4.1 and 7.1, in cash, in sufficient amounts to enable the Trustee to
pay principal and interest payments on such Loan as they are due, except to the
extent that such principal and interest payments have been satisfied by the
Trustee from cash dividends paid to it with respect to Company Common
Stock acquired with the proceeds of the Loan pursuant to subsection (d) next
below; provided, however, that no such contribution shall exceed the limitations
in Section 9.8. In the event that such Contributions, by reason of the
limitations in Section 9.8, are insufficient to enable the Trust to pay
principal and interest payments on such Loan as they are due, then upon the
Trustee's request the Company shall:
(1) Make a Loan to the Trust as described in Treasury Regulation
Section 54.4975-7(b)(4)(iii), in sufficient amounts to meet such principal and
interest payments. Such new Loan shall also meet all requirements of an
"exempt loan" within the meaning of Treasury Regulation Section
54.4975-7(b)(1)(iii) and shall be subordinated to the prior Loan. Company
Common Stock purchased with the proceedsof the prior Loan will be allocated to
the Accounts of the Participants in accordance with applicable provisions of the
Plan;
(2) Purchase any Company Common Stock purchased with the proceeds
of the prior Loan in an amount necessary to provide the Trustee with sufficient
funds to meet the principal and interest repayments. Any such sale by the Plan
shall meet the requirements of Section 408(e) of ERISA; or
(3) Any combination of the foregoing.
(d) While any Loan is outstanding, cash dividends received by the Trustee
with respect to Company Common Stock acquired with the proceeds of such Loan
shall be applied by the Trustee to principal and interest payments due on such
Loan, to the extent that such payments are not made by the Trustee with
contributions made by the Company pursuant to Section 8.2(c). Such payments
shall first be made with cash dividends received with respect to Company Common
Stock held in the Matching Contribution Accounts of Participants and
attributable to Matching Contributions made on or after January 1, 1991, or held
in the Company Incentive Contribution Accounts of Participants, and thereafter,
to the extent necessary, with cash dividends received with respect to Company
Common Stock held in the Loan Suspense Account. Any cash dividends received
with respect to Company Common Stock held in Matching Contribution Accounts or
Company Incentive Contribution Accounts that are not applied by the Trustee to
principal and interest payments due on the Loan pursuant to the preceding
provisions of this paragraph shall be allocated to such Matching Contribution
Accounts or Company Incentive Contribution Accounts. Any cash dividends
received with respect to Company Common Stock held in the Loan Suspense Account
that are not applied by the Trustee to principal and interest payments due on
the Loan pursuant to the preceding provisions of this paragraph shall be
allocated to the Loan Suspense Account and applied by the Trustee to principal
and interest payments due on the Loan in subsequent Plan Years. Any such cash
dividends allocated to Matching Contribution Accounts or Company Incentive
Contribution Accounts shall be invested by the Trustee in the Company
Contributions Common Stock Fund pursuant to Section 14.4. Any such cash
dividends allocated to the Loan Suspense Account shall be invested by the
Trustee in such manner as the Trustee shall determine pursuant to the terms
of the Trust Agreement. To the extent principal and interest payments on a
Loan are repaid by cash dividends on shares of Company Common Stock held in the
Matching Contribution Account and attributable to Matching Contributions made on
or after January 1, 1991, or in the Company Incentive Contribution Account, of a
Participant, a number of shares of Company Common Stock shall be released from
the Loan Suspense Account and allocated to the Matching Contribution Account or
Company Incentive Contribution Account, as the case may be, of such Participant.
To the extent principal and interest payments due on a Loan are repaid by cash
dividends on shares of Company Common Stock held in the Loan Suspense Account, a
number of shares of Company Common Stock shall be released from the Loan
Suspense Account and allocated among the Company Incentive Contribution Accounts
of all Participants pursuant to Sections 7.1 and 9.5. The number of shares of
Company Common Stock to be released from the Loan Suspense Account pursuant to
either of the preceding sentences shall have an aggregate fair market value,
determined as of the date of allocation pursuant to Section 14.5, equal to the
amount of such dividends received with respect to such shares that are applied
to payments on a Loan.
(e) The Company shall not, pursuant to the provisions of this Section, do, or
cause to be done any act or thing, or fail to do any act or thing, that would
result in a disqualification of the Plan as an employee stock ownership plan
under Section 4975(e)(7) of the Code.
(f) Notwithstanding any amendment to or termination of the Plan that causes it
to cease to qualify as an employee stock ownership plan within the meaning of
Section 4975(e)(7) of the Code, or any repayment of a Loan, no shares of Company
Common Stock acquired with the proceeds of a Loan obtained by the Trust to
purchase Company Common Stock may be subject to a put, call or other option, or
buy-sell similar arrangement while such shares are held by and when distributed
from the Plan.
(g) In order to assure that the number of shares of Company Common Stock
released from the Loan Suspense Account for any Plan Year in accordance with the
provisions of Section 4975 of the Code, Section 408(b) of ERISA, and the
regulations promulgated thereunder and this Article VIII, is sufficient to
satisfy the Company's obligation to make Matching Contributions and Company
Incentive Contributions in accordance with the terms of the Plan, a Loan, by its
terms, shall permit both its prepayment and refinancing by the Trustee,
as well as the corresponding acceleration or deceleration of the rate at which
shares of Company Common Stock are released from the Loan Suspense Account.
(h) Notwithstanding the foregoing, if as of December 31, 2015, any of the
principal or accrued and unpaid interest of any Loan is then outstanding, the
Company shall make contributions to the Trust in accounts that, together with
cash dividends paid to the Trustee with respect to Company Common Stock acquired
with the proceeds of the Loan, shall satisfy all payment of principal and
interest then remaining on such Loan, and all shares of Company
Common Stock acquired with the proceeds of such Loan and then held in the Loan
Suspense Account shall be allocated to Participants' Accounts, regardless of
whether the value of such shares exceeds the aggregate Matching Contributions
and Company Incentive Contributions required for such Plan Year pursuant to
Sections 4.1 and 7.1.
ARTICLE IX
ALLOCATIONS TO PARTICIPANTS' ACCOUNTS
9.1 Separate Accounts. The Company shall create and maintain a separate
Account for each Participant as shall be needed. Such Accounts shall consist of
such of the following as shall be applicable to the Participant: a Matching
Contribution Account, a Salary Deferral Contribution Account, a TRASOP Transfer
Account, a Transfer Account, a Company Incentive Contribution Account and a
Voluntary Contribution Account. Participants' Accounts are primarily for
accounting purposes and do not require a segregation of the Trust Fund. The
Company may delegate the responsibility for the maintenance of the Accounts
to the Trustee or any agent or agents.
9.2 Company Account. The Company shall maintain a Limitation Account, if
necessary, pursuant to the provisions of Section 9.8. The investment of the
balance in the Limitation Account shall be within the sole discretion of the
Company.
9.3 Allocation of Matching Contributions. (a) As of each Valuation Date there
shall be allocated to the Matching Contribution Account of each Participant the
Matching Contribution made by the Company for such Participant pursuant to
Section 4.1(a) for the Valuation Period ending on such Date. An allocation
pursuant to this Section shall be made only to the Matching Contribution Account
of a Participant whose Earnings were reduced through payroll deductions
pursuant to an Incentive Savings Agreement during the Valuation Period ending on
such Date.
(b) Any Matching Contribution, reduced by any applicable amounts pursuant to
the provisions of Sections 6.1(c) or (f), shall be allocated to the Matching
Contribution Account of a Participant in shares of Company Common Stock,
including fractional shares, pursuant to Sections 4.2 and 8.2; provided,
however, that no fractional shares of Company Common Stock
will be issued pursuant to the Plan.
9.4 Allocation of Salary Deferral Contributions. As of each Valuation Date
there shall be allocated to the Salary Deferral Contribution Account of each
Participant a Salary Deferral Contribution equal to (i) the amount by which the
Participant's Earnings were reduced by payroll deductions during the Valuation
Period ending on such Date pursuant to such Participant's Incentive Savings
Agreement, reduced by (ii) any applicable amounts pursuant to the provisions
of Sections 3.1(b), 3.1(c), 3.4(c) and 6.1(f).
9.5 Allocation of Company Incentive Contributions. (a) As of the last day of
each Plan Year, there shall be allocated to the Company Incentive Contribution
Account of each Participant the Company Incentive Contribution, if any, made by
the Company pursuant to Section 7.1 for such Plan Year.
(b) Any Company Incentive Contribution shall be allocated to the Company
Incentive Contribution Account of a Participant in shares of Company Common
Stock, including fractional shares, pursuant to Sections 7.2 and 8.2; provided,
however, that no fractional shares of Company Common Stock will be issued
pursuant to the Plan.
9.6 Allocation of Voluntary and Rollover Contributions. Voluntary
Contributions made by a Participant, reduced by any applicable amounts pursuant
to the provisions of Sections 6.1(c) and (f), shall be allocated to the
Voluntary Contribution Account of the Participant as of the Valuation Date
coinciding with or next following receipt of such Contributions by the Trustee.
Rollover contributions made by or for an Employee shall be allocated to the
Transfer Account of the Participant as of the Valuation Date coinciding with or
next following receipt of such Contributions by the Trustee.
9.7 Allocation of TRASOP Transfers. Amounts transferred from an Employee's
account balances under the TRASOP were allocated to the TRASOP Transfer Account
of the Employee as of the Valuation Date coinciding with or next following
receipt of such amounts by the Trustee.
9.8 Maximum Allocation. (a) Except as provided in subsection (b) below, the
allocations to the Account of any Participant in any Limitation Year shall be
limited so that the Participant's Annual Additions for such year do not exceed
the Maximum Permissible Amount.
(b) If no more than one-third of the Company contributions for a Limitation
Year that are deductible as principal or interest payments on a Loan, pursuant
to the provisions of Section 404(a) of the Code, are allocated to Highly
Compensated Participants, then the limitations imposed by subsection
(a) shall not apply to:
(i) Forfeitures of Company Common Stock if the Company Common
Stock was acquired with the proceeds of a Loan, or
(ii) Company contributions that are deductible as the interest payments on
a Loan under Section 404(a)(9)(B) of the Code and charged against a
Participant's Account.
(c) If the foregoing limitation on allocations would be exceeded in any
Limitation Year for any Participant as a result of reasonable error in
estimating a Participant's Compensation or under such other limited facts and
circumstances that the Commissioner of the Internal Revenue Service, pursuant to
Treasury Regulation 1.415-6(6), finds justify the availability of this Section
9.8, the amount in excess of the limits of this Section 9.8 shall be placed,
unallocated to any Participant, in a Limitation Account. If a Limitation
Account is in existence at any time during a particular Limitation Year, other
than the Limitation Year described in the preceding sentence, all amounts in the
Limitation Account must be allocated to Participants' Accounts (subject to the
limits of this Section 9.8) before any contributions that would constitute
Annual Additions may be made to the Plan for that Limitation Year. The
excess amount allocated pursuant to this Section 9.8 shall be used to reduce
Matching Contributions and Company Incentive Contributions for the next
Limitation Year (and succeeding Limitation Years, as necessary) for all of the
Participants in the Plan. The Limitation Account
will not share in the valuation of Participants' Accounts and the allocation of
earnings set forth in Section 9.10 of the Plan, and the change in fair market
value and allocation of earnings attributable to the Limitation Account shall be
allocated to the remaining Accounts hereunder as set forth in Section 9.10.
(d) Upon termination of the Plan, any amounts in a Limitation Suspense
Account at the time of such termination shall revert to the Company.
(e) In the event that any Participant under this Plan is also a Participant
in a defined benefit plan (as defined in Section 415(k) of the Code) maintained
by the Company, the sum of the defined plan fraction and the defined
contribution plan fraction for any Limitation Year with respect to such
Participant shall not exceed one (1). If such sum exceeds one (1),
then no reduction in contributions or allocations to obtain compliance with
Section 415(e) of the Code shall occur under this Plan until the Participant's
benefits under such defined benefit plan have been reduced pursuant to the terms
thereof. Any reduction under this Plan shall be made only to the extent
necessary so that the sum of such fractions shall equal one (1). For purposes
of this Section 9.8, a plan is deemed to be maintained by the Company if the
plan is maintained by any employer that is, along with the Company, a member of
a controlled group of corporations or under common control (as defined in
Sections 414(b) and (c) of the Code, as modified by Section 415(h) thereof)
or a member of an affiliated service group (as defined in
Section 414(m) of the Code). For purposes of this paragraph (e):
(1) The term "defined benefit plan fraction" for any Limitation Year
means a fraction:
A. the numerator of which is the projected annual benefit of the
Participant under all defined benefit plans maintained by the Company
(determined as of the close of the Limitation Year), and
B. the denominator of which is the lesser of (i) the product of 1.25
multiplied by the dollar limitation in effect under Subsection 415(b)(1)(A) of
the Code for such Limitation Year, or (ii) the product of 1.4 multiplied by the
amount taken into account under Section 415(b)(1)(A) of the Code for the
Participant for such Limitation Year; and
(2) The term "defined contribution plan fraction" for any Limitation Year
means a fraction:
A. the numerator of which is the sum of the Annual Additions to
the Participant's Account as of the close of the Limitation Year, and
B. the denominator of which is the sum of the lesser of the
following amounts determined for such Limitation Year and for each prior
Limitation Year of service with the Company:
(i) the product of 1.25 multiplied by the dollar limitation in
effect under Subsection 415(c)(1)(A) of the Code for such Limitation Year
(determined without regard to Subsection 415(c)(6) of the Code), or
(ii) the product of 1.4 multiplied by the amount which may
be taken into account under Subsection 415(c)(1)(B) of the Code (or
Subsection 415(c)(7) if applicable) with respect to such Participant under
such defined contribution plan for such Limitation Year.
(f) If a Participant shall be entitled to receive an allocation under this
Plan and any Related Plan and, in the absence of the limitations contained in
this Section 9.8 and Section 4.3, the Company would have contributed or
allocated to the Account of any Participant an amount for a Limitation Year that
would have caused the Annual Additions to the Account of a Participant to exceed
the Maximum Permissible Amount for such Year, then the contributions or
allocations under such Related Plan shall be reduced prior to any reduction in
contributions or allocations made with respect to the Participant under this
Plan to the extent necessary so that the allocation of such Annual Additions
does not exceed the Maximum Permissible Amount.
(g) Any reduction in allocations under this Plan for a Participant's Account
required pursuant to this Section 9.8 and Section 415 of the Code shall be
effected, to the extent necessary, in the following manner: (i) first,
Voluntary Contributions made by such Participant that are included in the Annual
Additions to the Account of Participant, adjusted for earnings, gains and losses
allocable thereto, shall be returned to the Participant; (ii) next, the Salary
Deferral Contribution that would have been made by the Company for the
applicable Plan Year with respect to such Participant shall be reduced; (iii)
next, the Matching Contribution that would have been made by the Company for the
applicable Plan Year with respect to such Participant shall be reduced; and (iv)
next the Company Incentive Contribution that would have been made by the Company
for the applicable Plan Year with respect to such Participant shall be reduced.
The amount of any reductions to Voluntary Contributions and Salary Deferral
Contributions pursuant to clauses (i) or (ii) of this subsection (g),
adjusted for gains, earnings and losses allocable thereto, shall be paid by the
Company directly to the affected Participant.
(h) The provisions of this Section shall be interpreted by the Company, in
the administration of the Plan, to reduce allocations (as required by this
Section) only to the minimum extent necessary to reflect the requirements of
Section 415 of the Code, as amended and in force from time to time, and Treasury
Regulations promulgated pursuant to said Section.
9.9 Vesting. Each Participant shall at all times be fully vested in the
Adjusted Balance of the Account of the Participant under the Plan.
9.10 Allocations and Adjustments to Accounts. As of each Valuation Date, and
subject to Section 13.4(e), the Company shall determine, on an accrual basis
of accounting, the Adjusted Balance of each Account of each Participant in the
following manner:
(a) As soon as practicable after each Valuation Date, the Company shall
determine the earnings and the amount of any realized or unrealized appreciation
or depreciation in the fair market value of each of the Investment Funds (other
than the Stock Funds), during the Valuation Period ending on such Valuation Date
as determined as of such Valuation Date or the next previous business day if
such Valuation Date falls on a Saturday, Sunday or holiday. In determining such
value the Company shall use such generally accepted methods and bases as the
Company, in its discretion, shall deem advisable. The judgment of the Company
as to the fair market value of any asset shall be presumptively conclusive and
binding on all persons.
(b) The earnings on contributions made pursuant to Sections 3.1, 5.1, 5.4,
5.5 and 5.6 that have been initially invested in short term investment
obligations selected by the Trustee from time to time during the Valuation
Period ending on such Valuation Date pending allocation to one or more of the
Investment Funds (other than the Stock Funds) shall be allocated to a
Participant's applicable Account in the same proportion as such contributions
are allocated. The amount of such earnings on such contributions shall be
determined by multiplying the total amount of such earnings by a fraction the
numerator of which is the amount of such contributions allocated to a
Participant's Account for that Valuation Period and the denominator
of which is the total amount of such contributions allocated to all
Participants' Accounts for that Valuation Period.
(c) The earnings and market appreciation or depreciation of each Investment
Fund (other than the Stock Funds) for the Valuation Period ending on such
Valuation Date (including earnings and appreciation or depreciation attributable
to the investment of any Limitation Account in such Investment Fund) shall be
allocated to each applicable Account (excluding any Limitation Account) that is
invested in such Investment Fund on such Valuation Date by multiplying the
earnings and market appreciation or depreciation of such Fund by a fraction the
numerator of which is the Adjusted Balance of such Account invested in the
applicable Fund as of the prior Valuation Date and the denominator of which
is the total of the Adjusted Balances of all such Accounts (excluding any
Limitation Account) invested in such Fund as of the prior Valuation Date. Each
such Account (excluding any Limitation Account) shall be adjusted by adding
thereto or subtracting therefrom its share of the earnings and market
appreciation or depreciation of each Investment Fund as determined by the
preceding sentence.
(d) Subject to the provisions of Section 8.2(d) above, all Company Common
Stock and other property received by the Trustee during the Valuation Period
ending on such Valuation Date as dividends or other distributions by the Company
with respect to any Account of a Participant invested in one or more Stock
Funds, and all shares of Company Common Stock released from the Loan Suspense
Account pursuant to Section 8.1(b), shall be allocated to that Account.
Notwithstanding anything to the contrary contained herein, no Company Common
Stock or other property declared or paid by the Company as a dividend on Company
Common Stock shall be allocable to any Account if the Company Common Stock or
other property was declared or paid as a dividend with respect to any period
prior to the date of receipt of the contribution or transfer of the underlying
Company Common Stock by the Trustee.
(e) Each Account shall then be further adjusted by adding to it the amount of
contributions allocable thereto for each Participant pursuant to Sections 9.3,
9.4, 9.5 and 9.6 for the Valuation Period or, if applicable, the Plan Year
ending on such Valuation Date.
(f) Following the above adjustments to each Account there shall be deducted
from each Account the distributions and withdrawals made therefrom since the
prior Valuation Date.
9.11 Accounting for Allocations of Company Common Stock. The Company shall
adopt accounting procedures for the purpose of making the allocations,
valuations and adjustments to Participants' Accounts provided for in this
Article. Except as provided in Treasury Regulation Section 54.4975-11(d),
Company Common Stock acquired by the Plan shall be accounted for as provided
under Treasury Regulation Section 1.402(a)-1(b)(2)(ii),
allocations of Company Common Stock shall be made separately for each class
of stock, and the Company shall maintain adequate records of the cost basis
of all shares of the Company Common Stock allocated to each Participant's
Matching Contribution Account, Company Incentive Contribution Account, Salary
Deferral Contribution Account, Transfer Account, TRASOP Transfer Account, and
Voluntary Contribution Account.
ARTICLE X
PAYMENT OF BENEFITS
10.1 Payments on Termination for Reasons Other Than Death. A Participant who
attains the Normal Retirement Date and continues to be an Employee thereafter
shall continue to share in the allocation of Matching Contributions, Company
Incentive Contributions and Salary Deferral Contributions; may elect or continue
to enter into Incentive Savings Agreements; and may elect or continue to make
Voluntary Contributions. Upon the termination of employment of a Participant
for any reason other than death, the Company shall notify the Trustee in
writing of the Participant's termination and shall direct the Trustee to make
payment of the Adjusted Balance of the Participant's Account in accordance with
Sections 10.3 and 10.4.
10.2 Payments on Death.
(a) Upon the death of a Participant the Company shall promptly notify the
Trustee in writing of the Participant's death and the name of the Beneficiary of
the Participant (or surviving spouse if subsection (c) is applicable) and shall
direct the Trustee to make payment of the Adjusted Balance of the Participant's
Account in accordance with Sections 10.3 and 10.4.
(b) Each Participant who is not married to a surviving spouse at the date of
the death of the Participant, or each married Participant whose surviving spouse
has consented to an alternative Beneficiary designation as provided in
subsection (c), shall have the right to designate, by giving a written
designation to the Company, a person or persons or entity as Beneficiary to
receive the death benefit provided under this Section 10.2. Successive
designations may be made, and the last designation received by the Company
prior to the death of the Participant shall be effective and shall revoke all
prior designations. If a designated Beneficiary shall die before the
Participant the interest of the Beneficiary shall terminate and, unless
otherwise provided in the Participant's designation, such interest shall be paid
in equal shares to those Beneficiaries, if any, who survive the Participant.
A Participant shall have the right to designate different Beneficiaries to
receive the Adjusted Balance in the Participant's Matching Contribution
Account, Company Incentive Contribution Account, Salary Deferral Contribution
Account, TRASOP Transfer Account, Transfer Account and Voluntary
Contribution Account under the Plan. The Participant shall have the right to
revoke the designation of any Beneficiary without the consent of the
Beneficiary.
(c) The Beneficiary of each married Participant shall be the surviving spouse
of the Participant and the death benefits of any Participant who is married at
the date of the death of the Participant shall be paid in full to the surviving
spouse of the Participant in a single lump sum. Notwithstanding the preceding
sentence, the death benefits provided pursuant to subsection (a) shall be
distributed to any other Beneficiary designated by the Participant as provided
in subsection (b) of this Section, and pursuant to the method, if any,
designated by the Participant as provided in subsection (b), if the
Participant's surviving spouse consented to such designation by the Participant,
prior to the date of the Participant's death, in writing. Such consent must
acknowledge the effect of the election and the identity of any non-surviving
spouse Beneficiary, including any class of Beneficiaries or contingent
Beneficiaries, and must be witnessed by a representative of the Plan or a notary
public. The consent of the Participant's surviving spouse shall not be required
if the Participant establishes to the satisfaction of the Company that consent
may not be obtained because there is no surviving spouse or the surviving spouse
cannot be located, or because of such other circumstances as the Secretary of
the Treasury may prescribe by regulations. The Participant may not subsequently
change the method of distribution elected by the Participant or the designation
of the Beneficiary of the Participant unless the surviving spouse of the
Participant consents to the new election or designation in accordance with the
requirements set forth in the preceding sentences, or unless the surviving
spouse's consent permits the Participant to change the election of method of
payment or the designation of the Beneficiary of the Participant without the
spouse's further consent. A spouse's consent is irrevocable. Any consent by a
surviving spouse, or establishment that the consent of the surviving spouse
may not be obtained, shall be effective only with respect to that surviving
spouse.
(d) If a Participant shall fail to designate a Beneficiary, or if such
designation shall for any reason be illegal or ineffective, or if no Beneficiary
shall survive the Participant, the death benefits of the Participant otherwise
payable pursuant to subsections (b) or (c) shall be paid:
(i) to the surviving spouse of the Participant;
(ii) if there is no surviving spouse, to the descendants of the Participant
(including legally adopted children or their descendants) per stirpes;
(iii) if there is neither surviving spouse nor surviving descendants, to the
duly appointed and qualified or other personal representative of the Participant
to be distributed in accordance with the Participant's will or applicable
intestacy law; or
(iv) in the event that there shall be no representative duly appointed and
qualified within six (6) months after the date of death of such deceased
Participant, then to such persons as, at the date of the death of the
Participant, would be entitled to sharein the distribution of such deceased
Participant's personal estate under the provisions of the applicable statute
then in force governing the descent of intestate property, in the
proportions specified in such statute.
(e) The Company may determine the identity of the distributees and in so
doing may act and rely upon any information it may deem reliable upon reasonable
inquiry, and upon any affidavit, certificate, or other paper believed by it to
be genuine, and upon any evidence believed by it sufficient.
10.3 Commencement of Payments.
(a) Subject to the succeeding provisions of this Section, upon the termination
of a Participant's employment with the Company (by reason of death or otherwise)
the Adjusted Balance of the Account of the Participant shall be payable to the
Participant (or the surviving spouse or Beneficiary of the Participant,
if applicable) during the first one hundred and twenty (120) days of the
Plan Year next following the Plan Year in which such termination occurs.
(b) A Participant (or the surviving spouse or Beneficiary of the Participant,
if applicable) may elect to receive payment of all, but not less than all, of
the Adjusted Balance of the Participant's Account during the sixty (60) day
period after the Valuation Date next following the date of termination of the
Participant's employment with the Company. Such election shall be made in
writing to the Company within thirty (30) days after such termination
of employment, shall be irrevocable, and shall be made pursuant to such
other rules as the Company may promulgate.
(c) Notwithstanding the provisions of Sections 10.3(a) and (b) next above,
if the value of the nonforfeitable portion of the Adjusted Balance of a
Participant's Account (including any participant loans outstanding on such date)
exceeds $3,500, such distribution shall be made in accordance with the
provisions of this Article X to the Participant (or the surviving spouse
or Beneficiary of the Participant, if applicable) as soon as practicable
after the Valuation Date next following the Participant's date of termination of
employment with the Company.
(d) Notwithstanding the foregoing provisions of this Section other than those
that require the consent of a Participant to a distribution of the Adjusted
Balance of the Account of the Participant in excess of $3,500:
(i) Unless a Participant otherwise elects, the distribution of the Adjusted
Balance of (A) the Matching Contribution Account of the Participant attributable
to Matching Contributions made on and after January 1, 1991, and (B) the Company
Incentive Contribution Account will commence not later than 12 months after the
close of the Plan Year (1) in which the Participant's employment with the
Company terminates because of retirement on or after the Normal Retirement
Date of the Participant, permanent disability, or death, or (2) that is the
fifth Plan Year in which the Participant's employment with the Company
terminates for any other reason, except that this clause (2)shall not apply
if the Participant is reemployed by the Company before the first day of
such fifth Plan Year.
(ii) Unless the Participant otherwise elects, the distribution of the Adjusted
Balance of the Matching Contribution Account and Company Incentive Contribution
Account of the Participant pursuant to paragraph (i) above will be in
substantially equal annual or more frequent payments over a period not longer
than the greater of (1) five years, or (2) in the case of a Participant the
Adjusted Balance of whose Matching Contribution Account attributable to Matching
Contributions made on or after January 1, 1991 and Company Incentive
Contribution Account exceeds $500,000, five years plus one additional year
(but not more than five additional years) for each $100,000 or fraction
thereof by which such Adjusted Balance exceeds $500,000. The dollar amounts
contained in this paragraph (ii) shall be adjusted by the Secretary of the
Treasury pursuant to Section 409(o)(2) of the Code.
(e) The Adjusted Balance of a Participant's Account that is paid pursuant to
Section 10.1 or 10.2 and this Section shall be determined as of the Valuation
Date coinciding with or next preceding the date of such payment.
(f) If any distribution is made to a Participant (or the surviving spouse of
the Participant or Beneficiary, if applicable) pursuant to this Section prior to
the payment to the Trustee of any Matching Contribution or Company Incentive
Contribution, such Matching Contribution or Company Incentive Contribution
otherwise allocable to the Matching Contribution Account of such Participant
pursuant to Sections 9.3, 9.5 and 9.10 shall be paid by the Trustee directly to
such Participant, surviving spouse or Beneficiary as soon as practicable
following the payment of such Matching Contribution or Company Incentive
Contribution to the Trustee.
(g) Effective January 1, 1993, if the distributee of any eligible rollover
distribution (as defined in section 402 of the Code or related regulations or
notices) under the Plan of $200 or more:
(i) elects in such form and at such time as the Company may prescribe
to have the distribution paid directly to an eligible retirement plan (as
defined in section 401(a)(31)(D) of the Code), and
(ii) specifies an eligible retirement plan to which the distribution is to
be paid,
the distribution shall be made in the form of a direct trustee-to-trustee
rollover to the eligible plan so specified.
(h) If a distribution is one to which sections 401(a)(11) and 417 of the Code
do not apply, such distribution may commence less than 30 days after the notice
required under section 1.411(a)-11(c) of the Income Tax Regulations is given,
provided that:
(i) The Plan Administrator clearly informs the Participant that the
Participant has a right to a period of at least 30 days after receiving the
notice to consider the decision of whether or not to elect a distribution (and,
if applicable, a particular distribution option), and
(ii) the Participant, after receiving the notice, affirmatively elects a
distribution.
(i) Unless the participant elects otherwise, the payment of benefits under the
Plan will commence not later than 60 days after the close of the Plan Year in
which the latest of the following events occurs:
(i) the date on which the Participant attains the age of 65;
(ii) the tenth anniversary of the date on which the Participant commenced
participation in the Plan; or
(iii) the date on which the Participant's employment with the Company
terminates.
For Plan Years beginning prior to January 1, 1995, in the event a Participant
does not receive a distribution of the Adjusted Balance of the Participant's
Account prior to the date he attains age sixty-five (65), such distribution
shall be made to the Participant in accordance with the provisions of
subsections (a) and (b) above; provided, however, that in such event and solely
for such purpose, the Participant's sixty-fifth (65th) birthday shall
be treated as the Participant's date of termination of employment with the
Company, and distribution shall be made not later than the one hundred and
twentieth (120th) day of the Plan Year next following the Plan Year in which the
Participant's sixty-fifth (65th) birthday occurs. For plan years beginning on
or after January 1, 1995, subject to the provisions of Section 10.3(j) next
below, a Participant may elect to defer distribution of his Account in
accordance with the provisions of this Section 10.3(i). A Participant's
Account retained in the Plan pursuant to this Section 10.3(i) shall be
invested and distributed in accordance with the provisions of Articles X and XIV
hereof.
(j) Notwithstanding anything to the contrary contained elsewhere in the Plan:
(i) A Participant's benefits under the Plan will:
(1) be distributed to the Participant not later than the Required
Distribution Date (as defined in subsection (iii)), or
(2) be distributed commencing not later than the Required
Distribution Date in accordance with regulations prescribed by the Secretary of
the Treasury over a period not extending beyond the life expectancy of the
Participant or the life expectancy of the Participant and the Beneficiary of the
Participant.
(ii) (1) If the Participant dies after distribution has commenced pursuant
to subsection (i)(2) but before the entire interest of the Participant in the
Plan has been distributed to the Participant, then the remaining portion of that
interest will be distributed at least as rapidly as under the method of
distribution being used under subsection (i)(2) at the date of the death of the
Participant.
(2) If a Participant dies before distribution has commenced pursuant
to subsection (i)(2), then, except as provided in subsections (ii)(3) and (ii)
(4), the entire interest of the Participant in the Plan will be distributed
within five years after the death of the Participant.
(3) Notwithstanding the provisions of subsection (ii)(2), if the
Participant dies before distribution has commenced pursuant to subsection (i)(2)
and if any portion of the interest of the Participant in the Plan is payable (A)
to or for the benefit of a Beneficiary, (B) in accordance with regulations
prescribed by the Secretary of the Treasury over a period not extending beyond
the life expectancy of the Beneficiary, and (C) beginning not later than one
year after the date of the Participant's death or such later date as the
Secretary of the Treasury may prescribe by regulations, then the portion
referred to in this subsection (ii)(3) shall be treated as distributed on the
date on which such distribution begins.
(4) Notwithstanding the provisions of subsections (ii)(2) and (ii)(3),
if the Beneficiary referred to in subsection (ii)(3) is the spouse of the
Participant, then
(A) the date on which the distributions are required to begin
under subsection (ii)(3)(C) of this Section shall not be earlier than the date
on which the Participant would have attained age 70 1/2, and
(B) if the spouse dies before the distributions to that spouse
begin, then this subsection (ii)(4) shall be applied as if the surviving spouse
were the Participant.
(iii) For purposes of this subsection (h), the Required Distribution Date
means April 1 of the calendar year following the calendar year in which the
Participant attains age 70 1/2; provided, however, that if the Participant
attained age 70 1/2 in calendar year 1988, distribution shall commence on April
1, 1990 and further provided that if the Participant attained age 70 1/2 prior
to January 1, 1988, distribution shall commence on the April 1 following the
later of the calendar yearin which the Participant: (A) attained age 70 1/2,
or (B) terminated service with the Company, unless he was a five-percent owner
(as defined in Section 416 of the Code) of the Company with respect to the
Plan Year ending in the calendar year in which he attained age 70 1/2, in which
case clause (B) shall not apply.
(iv) For purposes of this subsection (h), the life expectancy of a Participant
and the spouse of the Participant may be redetermined, but not more frequently
than annually.
(v) A Participant may not elect a form of distribution pursuant to
subsection (h) providing payments to a Beneficiary who is other than the spouse
of the Participant unless the actuarial value of the payments expected to be
paid to the Participant is more than 50% of the actuarial value of the total
payments expected to be paid under such form of distribution.
10.4 Method of Payment. Whenever the Company shall direct the Trustee to
make payment to a Participant or the surviving spouse or Beneficiary of the
Participant upon termination of the Participant's employment, or as a
distribution pursuant to any of Sections 10.5 through 10.9, the Company shall
direct the Trustee to pay the Adjusted Balance of the Participant's Accounts to
or for the benefit of the Participant or the surviving spouse or
Beneficiary of the Participant in a lump sum:
(a)To the extent the Participant's Accounts are invested in Funds other than
Stock Funds, the distribution shall be made in cash.
(b)To the extent that the Participant's Accounts are invested in Stock Funds,
the distribution shall be made entirely in shares of Company Common Stock or
entirely in cash in an amount equal to the value of the Company Common Stock in
the Participant's Accounts, as elected by the Participant; provided, however,
that if distribution to the Participant is to be made in Company Common Stock,
the value of any fractional share of Company Common Stock will be distributed in
cash.
Notwithstanding the preceding provisions of this Section, the distribution of
the Adjusted Balance of the Matching Contribution Account of the Participant
attributable to Matching Contributions made on and after January 1, 1991, and of
the Company Incentive Contribution Account of the Participant, will be made
pursuant to the provisions of Section 10.3(d)(ii) as the Participant shall
elect by written instrument delivered to the Company. If the Participant
fails to make the election described herein prior to the date on which
distribution of the Participant's Account commences (in accordance with the
provisions of Section 10.3), distribution of such portion of the Matching
Contributions Account and of the Company Incentive Contribution Account of the
Participant will be made in a lump sum pursuant to the preceding provisions of
this Section 10.4.
10.5 Hardship Distributions. The Company may, upon the request of a
Participant at any time prior to the termination of employment of the
Participant, direct the Trustee to make a lump sum distribution to the
Participant from the Salary Deferral Contribution Account and Matching
Contribution Account of the Participant for the purposes set forth below,
subject to the following rules:
(i) Each request for a distribution must be made by written application to the
Company supported by such evidence as the Company may require;
(ii) Each distribution made pursuant to this Section 10.5 shall be on account
of a hardship suffered by the Participant. For purposes of this Section 10.5,
a hardship shall be limited to:
(1)Medical expenses described in Code Section 213(d) incurred by the
Participant, the Participant's spouse, or any dependents of the
Participant (as defined in Code Section 152);
(2)Purchase (excluding mortgage payments) of a principal residence for
the Participant;
(3)Payment of tuition for the next semester or quarter of post-secondary
education for the Participant, the spouse, children or dependents of the
Participant;
(4)The need to prevent eviction of the Participant from the principal
residence of the Participant or foreclosure on the mortgage of the
Participant's principal residence;
(5)Funeral expenses of a family member of the Participant; and
(6)Such other expenses and events related to the Participant's service in
the military of the United States determined by the Internal Revenue
Service to constitute a hardship;
(iii) The amount distributed shall not be in excess of the immediate and
heavy financial need of the Participant;
(iv) The Participant shall first obtain all distributions, other than
hardship distributions, and all nontaxable loans currently available under the
Plan and all other plans maintained by the Company;
(v) The Participant's elective contributions and employee contributions (as
defined in Treasury Regulation Section 1.401(k)) shall be suspended under the
Plan and all other plans maintained by the Company for twelve (12) months after
the receipt of the hardship distribution by the Participant;
(vi) The Participant may not make elective contributions (as defined in
Treasury Regulation Section 1.401(k)) under the Plan or any other plan
maintained by the Company for the Participant's taxable year immediately
following the taxable year of the hardship distribution in excess of the
applicable limit under Code Section 402(g) for such next taxable year less the
amount of such Participant's elective contributions for the taxable year of the
hardship distribution;
(vii) The amount distributed to a Participant in accordance with this Section
10.5 shall not exceed: (A) the Adjusted Balance of the Salary Deferral
Contribution Account of the Participant plus (B) the Adjusted Balance of the
Matching Contribution Account of the Participant, less (C) that portion of the
Salary Deferral Contribution Account of the Participant being used as security
for a loan made under Article XIII, determined as of the Valuation Date
next succeeding the date of receipt of the written request for distribution.
Notwithstanding the foregoing, the amount distributed shall not include earnings
allocated to such Participant's Salary Deferral Contribution Account after
December 31, 1988; provided, however, that in any event the amount available for
distribution under this Section 10.5 shall not be less than the sum of
(1) the Adjusted Balance of the Participant's Salary Deferral Contribution
Account on December 31, 1988 plus (2) the Adjusted Balance of the Matching
Contribution Account of the Participant determined as of the Valuation Date next
succeeding the date of receipt of the written request for distribution, less (3)
that portion of the Salary Deferral Contribution Account of the Participant
being used as security for a loan made under Article XIII as of the Valuation
Date next succeeding the date of receipt of the written request for
distribution.
(viii) If a Participant's termination of employment occurs after a request is
approved in accordance with this Section 10.5 but prior to distribution of the
full amount approved, the approval of the request of the Participant shall be
automatically void and the benefits the Participant or the Participant's
Beneficiary are entitled to receive under the Plan shall be distributed in
accordance with the preceding provisions of this Article.
10.6 In-Service Distributions From Participants' Salary Deferral Contribution
Accounts. A Participant who has attained the age of 59 1/2 may elect, by written
instrument delivered to the Company, to withdraw from the Salary Deferral
Contribution Account of the Participant an amount not in excess of (i) the
Adjusted Balance thereof determined on the Valuation Date next succeeding the
date of receipt of the written request for withdrawal; (ii) reduced by any
portion of such Adjusted Balance that is being used as security for a loan made
under Article XIII as of the Valuation Date next succeeding the date of receipt
of the written request for withdrawal.
10.7 In-Service Distributions From Participants' Matching Contribution
Accounts. (a) A Participant who has completed sixty (60) months as a
Participant may elect, by written instrument delivered to the Company to receive
a distribution of all or any part of the Matching Contribution Account of the
Participant determined as of the Valuation Date next succeeding the
date of receipt of the written request for distribution.
(b) A Participant, regardless of the period of participation of the
Participant in the Plan, may elect, by written instrument delivered to the
Company, to receive a distribution of all or any part of that portion of the
Matching Contribution Account of the Participant derived from Matching
Contributions in excess of Matching Contributions allocated to the Matching
Contribution Account of the Participant during the two (2) Plan Years preceding
the Plan Year in which the withdrawal takes place, adjusted for gain, earnings
and losses attributable thereto determined as of the Valuation Date next
succeeding the date of receipt of the written request for distribution.
10.8 Withdrawals from Voluntary Contribution and Transfer Accounts. A
Participant, regardless of the period of participation of the Participant in the
Plan, may elect, by written instrument delivered to the Company, to withdraw
from the Voluntary Contribution Account and Transfer Account of the Participant
an amount not in excess of the Adjusted Balance thereof determined as of the
Valuation Date next succeeding the date of receipt of the written request
for withdrawal.
10.9 Withdrawals from TRASOP Transfer Accounts. A Participant who, pursuant to
Section 5.6, has transferred the account balance of the Participant under the
TRASOP to the TRASOP Transfer Account of the Participant may elect, by written
instrument given to the Company, to withdraw from the TRASOP Transfer Account of
the Participant an amount not in excess of (i) the Adjusted Balance thereof
determined as of the Valuation Date next succeeding the date of receipt of the
request for distribution; (ii) reduced by any portion of such Adjusted Balance
that is being used as security for a loan made under Article XIII as of the
Valuation Date next succeeding the date of receipt of the written request for
withdrawal.
10.10 Form of Withdrawal. A Participant electing to make a withdrawal from
the Account of the Participant pursuant to Section 10.5, 10.7 or 10.9 may make
such withdrawal, at the election of the Participant, delivered in writing to the
Company, subject to the following:
(a)To the extent the Participant's Account is invested in Funds other than
Stock Funds, the distribution shall be made in cash.
(b)To the extent that the Participant's Account is invested in Stock Funds, the
distribution shall be made entirely in shares of Company Common Stock or
entirely in cash in an amount equal to the value of the Company Common Stock
in the Participant's Account, as elected by the Participant; provided, however,
that if distribution to the Participant is to be made in Company Common Stock,
the value of any fractional share of Company Common Stock will be distributed in
cash.
10.11 Rules Governing In-Service Distributions.
(a) In the event a Participant requests a distribution pursuant to Sections
10.5, 10.6, 10.7, 10.8 and 10.9, the distribution shall be paid to the
Participant as soon as is reasonably practicable after the Valuation Date next
succeeding the date of receipt of the written request for such distribution.
If a Participant's termination of employment occurs after an election is made in
accordance with these Sections, but prior to distribution of the full amount
elected, such election shall be automatically void and the benefits the
Participant or the Participant's Beneficiary are entitled to receive under the
Plan shall be distributed in accordance with the preceding provisions of this
Article.
(b) No distribution made pursuant to Section 10.6, 10.7, 10.8 or 10.9 may be
for an amount which is less than the lesser of: (i) $200; or (ii) that portion
of the Adjusted Balance of the Participant's Salary Deferral Contribution
Account, Matching Contribution Account, Voluntary Contribution Account, Transfer
Account or TRASOP Transfer Account (whichever is applicable) that is subject to
withdrawal pursuant to such Section.
(c) A Participant may not make more than one withdrawal pursuant to each of
Sections 10.6, 10.7, 10.8 or 10.9 in any Plan Year.
10.12 Distribution of Unallocated Employee Contributions.
(a) If on the date of termination of a Participant's employment, the Company
shall be holding Voluntary Contributions or a Rollover Contribution (including
amounts transferred from the TRASOP) made by the Participant, but not yet
allocated to the Voluntary Contribution Account, Transfer Account or TRASOP
Transfer Account of the Participant (whichever is applicable), the Company shall
pay such amounts either directly to the Participant (or the Beneficiary of the
Participant, as the case may be) or to the Trustee, to be distributed by the
Trustee in accordance with Sections 10.3 and 10.4.
(b) If on the date of termination of a Participant's employment, a
Participant's Earnings have been reduced by any amount pursuant to an Incentive
Savings Agreement, and such amount has not yet been allocated to the Salary
Deferral Contribution Account of the Participant, the Company shall pay such
amounts to the Trustee to be credited to the Participant's Salary Deferral
Contribution Account, to be distributed by the Trustee in accordance with
Sections 10.3 and 10.4.
10.13 Administrative Powers Relating to Payments. If a Participant or
Beneficiary is under a legal disability or, by reason of illness or mental or
physical disability, is in the opinion of the Company unable properly to attend
to the personal financial matters of the Participant, the Trustee may make
such payments in such of the following ways as the Company shall direct:
(i) directly to such Participant or Beneficiary;
(ii) to the legal representative of such Participant or Beneficiary; or
(iii) to some relative by blood or marriage, or friend, for the benefit of such
Participant or Beneficiary.
Any payment made pursuant to this Section shall be in complete discharge of the
obligation therefor under the Plan.
10.14 Diversification of Investments. (a) Notwithstanding any other
provisions of the Plan or the Trust, each Qualified Participant in the Plan may
elect within 90 days after the close of each Plan Year in the Qualified Election
Period, by written instrument delivered to the Company, to direct the
investment of not more than 25% (in whole multiples of 1%) of the
Participant's Adjusted Balance of the Company Incentive Contribution Account of
the Participant and the portion of the Adjusted Balance of the Matching
Contribution Account of the Participant attributable to Matching Contributions
made on and after January 1, 1991 (to the extent that such portion exceeds the
amount to which a prior election under this Section applies). In the case of
an election year in which the Participant can make the last such election, the
preceding sentence shall be applied by substituting "50%" for "25%". The
Company shall direct the Trustee to invest the Company Incentive Contribution
Account and the applicable portion of Matching Contribution Account of Qualified
Participants pursuant to their valid and timely elections within
90 days after the last day of the period during which the election can be
made. Notwithstanding the foregoing, a Qualified Participant shall not be
entitled to make the election hereunder for a Plan Year within the Qualified
Election Period if the fair market value of the Company Incentive
Contribution Account of the Participant and the portion of the Adjusted
Balance of the Matching Contribution Account of the Participant attributable
to Matching Contributions made on and after January 1, 1991, as of the last
day of such Plan Year is less than $500.
(b) A Qualified Participant's election pursuant to this Section 10.14 shall
direct the investment of the amount subject to the election among one or more of
the Investment Funds (other than any of the Stock Funds). The Company will
provide a written description of each such Investment Fund to the Qualified
Participant within a reasonable time prior to the Qualified Election Period.
Such an investment election shall comply with such rules and regulations as
the Company may prescribe.
ARTICLE XI
PLAN ADMINISTRATION
11.1 Company Responsibility. The Company shall be responsible for and shall
control and manage the operation and administration of the Plan. It shall be
the "Plan Administrator" and "Named Fiduciary" for purposes of ERISA and shall
be subject to service of process on behalf of the Plan. The Company may, in
its discretion, appoint or designate employees or agents to act on behalf of
the Company in performing these duties.
11.2 Powers and Duties of Company. The Company shall administer the Plan in
accordance with its terms and shall have all powers necessary to carry out the
provisions of the Plan. The Company shall direct the Trustee concerning all
payments that shall be made out of the Trust pursuant to the Plan. The Company
shall interpret the Plan and shall determine all questions arising in the
administration, interpretation, and application of the Plan, including but
not limited to, questions of eligibility and the status and rights of
Participants, Beneficiaries and other persons. Any such determination by the
Company shall presumptively be conclusive and binding on all persons. The
regularly kept records of the Company shall be conclusive and binding upon
all persons with respect to an Employee's age, time and amount of Compensation
and Earnings and the manner of payment thereof, and all other matters contained
therein relating to Employees. All rules and determinations of the Company
shall be uniformly and consistently applied to all persons in similar
circumstances.
11.3 Records and Reports of Company. The Company shall keep all such books of
account, records, and other data as may be necessary for proper administration
of the Plan. The Company shall notify the Trustee of any action taken by the
Company and, when required, shall notify any other interested person or persons.
11.4 Claims Procedure. Claims for benefits under the Plan shall be made in
writing to the Company. The Company shall render a decision on the claim
promptly, but not later than ninety (90) days after the receipt of the
claimant's request, unless special circumstances require an extension of time
for processing, in which case the ninety (90) day period may be extended
to one hundred and eighty (180) days. The Company shall notify the claimant
in writing of any such extension. If the claimant shall not be notified in
writing of the denial of the claim within ninety (90) days (as extended) after
it is received by the Company, the claim shall be deemed denied. A notice of
denial shall be written in a manner calculated to be understood by the
claimant, and shall contain (i) the specific reason or reasons for denial of
the claim, (ii) a specific reference to the pertinent Plan provisions upon which
the denial is based, (iii) a description of any additional material or
information necessary for the claimant to perfect the claim, together with an
explanation of why such material or information is necessary, and (iv)
an explanation of the Plan's review procedure. Within sixty (60) days of the
receipt by the claimant of the written notice of denial of the claim, or within
sixty (60) days after the claim is deemed denied as set forth above, if
applicable, the claimant may file a written request with the Company that it
conduct a full and fair review of the denial of the claimant's claim for
benefits, including the conducting of a hearing, if deemed necessary by the
Company. In connection with the claimant's appeal of the denial of the benefit
of the claimant, the claimant may review pertinent documents and may submit
issues and comments in writing. The Company shall render a decision on the
claim appeal promptly, but not later than sixty (60) days after the
receipt of the claimant's request for review, unless special circumstances (such
as the need to hold a hearing, if necessary), require an extension of time for
processing, in which case the sixty (60) day period may be extended to one
hundred and twenty (120) days. The Company shall notify the claimant in writing
of any such extension. The decision upon review shall (i) include
specific reasons for the decision, (ii) be written in a manner calculated to
be understood by the claimant and (iii) contain specific references to the
pertinent Plan provisions upon which the decision is based.
11.5 Interested Participants. If the Company shall designate an Employee who
is a Participant to act on behalf of the Company in administering the Plan and
exercising fiduciary responsibilities with respect to the Plan, such Participant
shall not in such capacity participate in discussions of, or in decisions
relating to, matters uniquely pertaining to the participation of the
Participant in the Plan or to any distributions or loans made to the
Participant under the Plan.
ARTICLE XII
TRUST AGREEMENT
12.1 Establishment of Trust. A Trust has been created and will be maintained
for the purposes of the Plan. All contributions under the Plan will be paid
into the Trust. The Trust Fund will be held, invested and disposed of by the
Trustee from time to time acting in accordance with the Trust Agreement.
All withdrawals and distributions payable under the Plan will be paid solely
from the Trust Fund.
ARTICLE XIII
LOANS TO PARTICIPANTS
13.1 Loans to Participants. (a) The Company shall direct the Trustee to make
a loan or loans to active Participants and, to the extent not inconsistent with
Section 401(a) of the Code, to former Participants who are parties in interest
(as defined in Section 3(14) of ERISA) and who retain Account balances under the
Plan pursuant to Section 10.3 ("Former Participants"), applied for pursuant
to the terms of this Article. Such loan or loans shall be in an amount or
amounts which does not in the aggregate exceed the amount set forth in Section
13.2 below. Loans shall be made on the written application of the Participant
to the Company and on such terms and conditions as are set forth in this Section
13.1 and Sections 13.2 and 13.3 below. In making such loans the Company shall
pursue uniform policies and shall not discriminate in favor of or
against any Participant or group of Participants. No Participant shall be
entitled to receive a loan under the Plan following termination of the
employment of the Participant with the Company for any reason.
(b) Each borrowing Participant shall, as a condition of receiving a loan
hereunder, specify in the loan application of the Participant the Investment
Funds in which the Salary Deferral Contribution Account and TRASOP Transfer
Account of the Participant are invested from which any loan shall be paid and
the allocation of the loan proceeds among such Investment Funds; provided, that
such allocation shall be in increments of one percent (1%). Each such loan shall
be made in accordance with the specification of the borrowing Participant
except that if any Investment Fund imposes any restriction or penalty on a
distribution as a loan,the loan shall be paid from the Investment Funds in such
manner as will comply with such restriction and avoid such penalty.
(c) The Company may impose such additional uniform and nondiscriminatory
requirements upon Participants applying for loans as the Company may determine.
13.2 Maximum Loan Amount. (a) In no event shall any loan made pursuant to
this Article to any Participant be in an amount which shall cause the
outstanding aggregate balance of all loans made to such Participant under this
Plan and all other qualified plans (as defined in Section 72(p)(4) of the Code)
maintained by the Company or any Related Employer to exceed the least of:
(i) $50,000, reduced by the excess (if any) of:
(A)the highest outstanding balance of loans from the Plan and all such
other qualified plans to the Participant during the one-year period
ending on the day before the date such loan is made, over
(B)the outstanding balance of loans from the Plan and all such other
qualified plans to the Participant on the date on which such loan is
made;
(ii) fifty percent (50%) of the Adjusted Balances of the Salary Deferral
Contribution Account and TRASOP Transfer Account of the Participant determined
as of the Valuation Date for which a valuation of the Account of the Participant
is most recently available on the date of the loan proceeds are disbursed.
(b) For purposes of this Article the term "Related Employer" shall mean any
related employer within the meaning of Section 72(p)(2)(D) of the Code.
13.3 Repayment of Loans. All loans made under this Article shall mature and be
payable in full no earlier than one year, and no later than five (5) years, from
the date such loan is made, except that a loan to a Participant used to acquire
any dwelling unit which, within a reasonable time after the loan is made, is to
be used (determined at the time the loan is made) as the principal residence
of the Participant shall mature and be payable in full no earlier than
one year, and no later than ten (10) years, from the date such loan is made.
13.4 Terms. (a) Loans to Participants shall be made according to the
following terms:
(i) Not more than one loan shall be made under the Plan to any
Participant in any Plan Year and, effective for Plan Years beginning on or after
January 1, 1995, no additional loans shall be approved for a Participant who has
three (3) loans outstanding at the time he applies for a new loan;
(ii) The minimum principal amount of the loan, at the time it is made,
shall be $200;
(iii) Loans made under this Article XIII shall conform to the
requirements of Labor Regulation Section 2550.408b-1;
(iv) Interest shall be charged on a loan at a rate that is commensurate
with the interest rates charged by persons in the business of lending money for
loans that would be made under similar circumstances in the local geographic
area;
(v) Payments of principal and interest shall be made through payroll
deductions, which deductions shall be irrevocably authorized by the borrowing
Participant in writing on a form supplied by the Company at the time the loan is
made to the borrowing Participant, and such payroll deductions shall be
sufficient to amortize the principal and interest payable pursuant to the loan
during the term thereof in equal monthly (or more frequent) installments;
(vi) The borrowing Participant shall have the right to prepay all or any
portion of the interest and principal of such loan without penalty;
(vii) For loans made prior to June 1, 1992, if the borrowing Participant
is married at the time for disbursement of the loan proceeds, disbursement may
not be made unless such Participant's spouse consents in writing to the loan and
the terms thereof pursuant to procedures established by the Company;
(viii) The loans shall be evidenced by such forms of obligations, and shall
be made upon such additional terms as to default, prepayment, security and
otherwise as the Company shall determine;
(ix) The Company may charge a borrowing Participant such reasonable
administrative fees with respect to each loan as the Company shall, in its
discretion, decide; and
(x) To the extent that the borrowing Participant requests a loan from any
portion of the Account of the borrowing Participant that is invested in any
of the Stock Funds, the Trustee, as soon as practicable after the first day of
the Valuation Period next succeeding receipt of the loan application, shall sell
a sufficient number of whole shares of Company Common Stock and the net proceeds
of such sale shall be disbursed to the Participant as part of the loan proceeds.
Any such sale shall be made by the Trustee on a national securities exchange at
market prices current at the time of sale or in such other manner as the
Trustee, in its sole discretion, shall determine.
(b) The entire unpaid balance of any loan made under this Article and all
interest due thereon, including all arrearages thereon, shall immediately become
due and payable without further notice or demand, upon the occurrence, with
respect to the borrowing Participant, of any of the following events of default:
(i) Any payments of principal and/or accrued interest on the loan
remain due and unpaid for a period of ten (10) days after the same becomes due
and payable under the terms of the loan;
(ii) A proceeding in bankruptcy, receivership or insolvency is
commenced by or against the borrowing Participant;
(iii) The borrowing Participant receives a distribution of all of the
Adjusted Balance of the Account of the borrowing Participant at any time
following the termination of employment of the borrowing Participant with the
Company;
(iv) The borrowing Participant attempts to make an assignment, for the
benefit of creditors, of any security for the loan; or
(v) The borrowing Participant marries or remarries and the new spouse
of the borrowing Participant does not consent in writing to the loan, and the
terms thereof pursuant to procedures established by the Company within 30 days
after marrying the Participant, except that the provisions of this Section
13.4(b)(v) shall not apply on or after June 1, 1992.
Any payments of principal and/or interest on the loan not paid when due shall
bear interest thereafter, to the extent permitted by law, at the rate specified
by the terms of the loan. The payment and acceptance of any sum or sums at any
time on account of the loan after an event of default, or any failure to act or
enforce the rights granted hereunder upon an event of default, shall not be
a waiver of the right of acceleration set forth in this subsection.
(c) A borrowing Participant who terminates employment with the Company, and
who does not receive a distribution of the Adjusted Balance of the Account of
the borrowing Participant pursuant to subsection (a) or subsection (b) of
Section 10.3, may, at the election of the borrowing Participant, either:
(i) pay the entire unpaid balance of any outstanding loan, including all
interest and arrearages thereon, made under this Article, or (ii) subject to the
default provisions set forth in subsection (b) above, continue to make payments
of principal and interest in accordance with the terms of such loan. The
minimum security for any loan with respect to which an eligible borrowing
Participant elects to continue payments under clause (ii), as well as with
respect to any loan obtained by a Former Participant who has terminated
employment with the Company, shall be a percentage not in excess of fifty
percent (50%) of the Adjusted Balance of the Account of the borrowing
Participant. Payments made pursuant to clause (ii) above, as well as
payments made by a Former Participant who obtains a loan following
termination of employment with the Company, shall, at the Participant's
election, bemade through either (A) personal payments delivered to the Company
no later than the first day of each calendar month, or (B) deductions from the
Participant's monthly pension benefit under the Illinois Power Company
Retirement Income Plan for Salaried Employees or the Illinois Power Company
Retirement Income Plan for Employees Covered Under a Collective Bargaining
Agreement (the "pension benefit"); provided, however, that to the extent that
payments made through deductions from monthly pension benefits exceed the 10%
limitation on assignments under Section 401(a)(13) of the Code and regulations
thereunder, the excess shall be paid by personal payments in accordance with
clause (A) above. All elections pursuant to this subsection (c) by a
Participant who has a loan outstanding at the time the Participant terminates
employment with the Company shall be made in writing and delivered to the
Company within 30 days after the date of termination of the Participant's
employment with the Company. All elections pursuant to this subsection (c) by a
Former Participant who obtains a loan following termination
of employment with the Company shall be made on the application of the
Participant for such loan. Any such election made pursuant to this
subsection (c) may be changed, at the Participant's election, upon 30 days
written notice to the Company.
(d) If an event of default and an acceleration of the unpaid balance of the
loan and interest due thereon shall occur, the Company shall have the right to
direct the Trustee to pursue any remedies available to a creditor at law or
under the terms of the loan, including the right to execute on the security for
the loan; provided, however, that neither the Trustee nor the Company may
execute on any amount in the borrowing Participant's Salary Deferral
Contribution Account at any time prior to the first to occur of the termination
of the Participant's employment with the Company and the Participant's
attainment of age 59-1/2 .
(e) Each such loan shall be a first lien against the Salary Deferral
Contribution Account and TRASOP Transfer Account of the borrowing Participant.
If: (i) any portion of a loan or loans shall be outstanding; and (ii) an event
occurs pursuant to which the Participant or the estate or the surviving spouse
or the Beneficiaries of the Participant will receive a distribution from the
Salary Deferral Contribution Account or TRASOP Transfer Account of such
Participant under the provisions of the Plan, then such Participant, if living,
shall pay to the Trustee an amount equal to the portion of the loan or loans
then outstanding, including all accrued interest thereon, and such Participant
shall then receive the full amount of the distribution under the provisions of
the Plan to which the Participant is otherwise entitled. If such Participant
is not then living, or if such Participant does not make full payment of the
portion of the loan or loans then outstanding within 15 days after the date of
the event pursuant to which the distribution is to be made, then such
distribution shall, to the extent necessary to liquidate the unpaid portion of
the loan or loans, be made to the Trustee as payment on the loan or loans.
No distribution shall be made to a participant or the estate or the surviving
spouse or the Beneficiaries of the Participant from the Salary Deferral
Contribution Account or TRASOP Transfer Account of the Participant in an amount
greater than the excess of the portion of the Salary Deferral Contribution
Account or TRASOP Transfer Account of the Participant otherwise distributable
over the aggregate of the amounts owing with respect to such loan or loans plus
interest, if any, thereon, taking into consideration any portion of the loan or
loans paid by the Participant pursuant to the provisions of this subsection (e).
(f) All loans made pursuant to this Article shall be funded from the borrowing
Participant's Salary Deferral Contribution Account and TRASOP Transfer Account
as set forth in Section 13.1(b). The Salary Deferral Contribution Account and
TRASOP Transfer Account of a Participant shall, to the extent used to fund such
loan, not participate in the allocation of earnings and losses pursuant to
Section 9.10. All interest paid by a Participant with respect to a loan
shall be credited to the borrowing Participant's Salary Deferral Contribution
Account and TRASOP Transfer Account and shall not be allocated pursuant to
Section 9.10 as earnings of the Investment Funds. All payments of principal and
interest made by a Participant with respect to a loan shall be allocated to one
or more of the Investment Funds (including the Elective Company Common Stock
Fund, but not including the other Stock Funds) based upon the form relating
to the selection of Investment Funds which is in effect at the time such payment
is received by the Trustee. If such a form is not in effect at the time such
payment is received, the payments shall be allocated based upon the last such
form which was in effect for such Participant.
ARTICLE XIV
INVESTMENT FUNDS
14.1 Investment Funds. The Adjusted Balance of each Participant's Salary
Deferral Contribution Account, Transfer Account and Voluntary Contribution
Account will be invested in the various Investment Funds (including the Elective
Company Common Stock Fund, but not including the other Stock Funds) as described
in the schedule attached to the Trust Agreement. The Company shall have the
right to appoint an Investment Manager (as defined in Section 3(38) of
ERISA), with respect to any Investment Fund (other than the Stock Funds) in
accordance with Section 402(c)(3) of ERISA and the terms of the Trust Agreement.
14.2 Initial Investment. (a) All Salary Deferral Contributions, Voluntary
Contributions, and Rollover Contributions received by the Trustee will be
initially invested in such short-term investment obligations as selected by the
Trustee from time to time pending investment pursuant to Section 14.3 below.
These deposits and earnings will be allocated among the Investment Funds
(including the Elective Company Common Stock Fund, but not including the other
Stock Funds) as of the Valuation Date next following receipt by the Trustee of
such deposits and earnings in accordance with Participants' selection of
Investment Funds pursuant to Section 14.3.
(b) As soon as administratively feasible following a transfer from the trustee
of the TRASOP to the Trustee pursuant to Section 5.6: (i) all shares of Company
Common Stock so transferred that were attributable to Company contributions to
the TRASOP were initially allocated to the Company Contributions TRASOP Common
Stock Fund; and (ii) all shares of Company Common Stock so transferred that were
attributable to employee contributions to the TRASOP were initially allocated to
the Employee Contributions TRASOP Common Stock Fund. All cash so transferred,
if any, were allocated in accordance with the provisions of subsection
(a) above and Section 14.3(e) below.
(c) All stock dividends paid with respect to Company Common Stock held in
an Account shall be allocated to the applicable Stock Fund. All cash dividends
paid with respect to Company Common Stock held in the Company Contributions
TRASOP Common Stock Fund, the Employee Contributions TRASOP Common Stock Fund,
the Elective Company Common Stock Fund, and all cash dividends paid with respect
to Company Common Stock held in the Company Contributions Common Stock Fund that
is attributable to Matching Contributions made prior to January 1, 1991, shall
automatically be reinvested in additional whole shares of Company Common Stock.
All cash remaining, if any, after such cash dividends have been reinvested in
whole shares of Company Common Stock to the maximum extent possible, shall
be allocated pursuant to subsection (a) above and Section 14.3(e) below.
All cash dividends paid with respect to Company Common Stock held in the Company
Contributions Common Stock Fund that is attributable to Matching Contributions
made on or after January 1, 1991 or to Company Incentive Contributions shall be
applied as set forth in Section 8.2(d) while any Loan is outstanding and
otherwise pursuant to the preceding provisions of this subsection(c).
14.3 Selection of Investment Funds. (a) Each Participant shall have the
right to file a form with the Company directing that the Salary Deferral
Contributions, Voluntary Contributions and Rollover Contribution of the
Participant be invested, in specified multiples of 1%, in any one of the
Investment Funds (including the Elective Company Common Stock Fund, but not
including the other Stock Funds). In default of any Participant's direction,
a Participant's Salary Deferral Contributions, Voluntary Contributions and
Rollover Contribution will be invested in such short-term obligations as the
Trustee shall select from time to time until a form designating a different
Investment Fund is submitted to the Company and forwarded to the Trustee.
(b) Each Participant shall have the right to modify the direction made in
subsection (a) above with respect to subsequent Salary Deferral Contributions
and Voluntary Contributions under the Plan.
(c) Each Participant shall have the right to file a written form with the
Company directing that the portion of the Salary Deferral Contribution Account,
TRASOP Transfer Account, Transfer Account and Voluntary Contribution Account of
the Participant held in any one Investment Fund be transferred, in whole or in
part, to any other Investment Fund (including the Elective Company Common Stock
Fund, but not including the other Stock Funds). This direction shall be made
by designating the percentage (which shall not be less than ten percent (10%))
of the Adjusted Balances of such Accounts which is to be divided among the
various applicable Funds (in multiples of one percent (1%)) as of the date set
forth in subsection (d) next below.
(d) Any investment form submitted pursuant to subsections (a), (b) or (c) of
this Section shall be filed with the Company, pursuant to rules it establishes,
prior to the first day of the Valuation Period for which it is to be effective.
Modifications pursuant to subsection (b) and transfers pursuant to subsection
(c) may be made only once during each Valuation Period.
(e) Any cash transferred from the TRASOP pursuant to Section 5.6 and any
cash remaining pursuant to Section 14.2(c) shall be invested, in the discretion
of the Company, in the various Investment Funds (other than the Stock Funds).
(f) The Company will maintain or cause to be maintained individual Accounts,
as described in Section 1.1, representing the interests of Participants in the
several Investment Funds. Each Investment Fund may be invested as a single
fund, however, without segregation of Fund assets to the Accounts of
Participants.
14.4 Investment in Company Common Stock. (a) The Adjusted Balance of each
Participant's Matching Contribution Account attributable to Matching
Contributions made on or after January 1, 1991 and Company Incentive
Contribution Account, and the Limitation Account, if any, established on
behalf of the Company, shall be invested in the Company Contributions Common
Stock Fund.
(b) The Adjusted Balance of each Participant's Matching Contribution Account,
attributable to Matching Contributions made prior to January 1, 1991 may, in the
discretion of the Company, be invested in the Company Contributions Common Stock
Fund or in such other Investment Fund (other than the Company Contributions
TRASOP Common Stock Fund and the Employee Contributions TRASOP Common Stock
Fund) as the Company shall elect.
(c) Any Account invested in any of the Stock Funds shall be expressed in terms
of number of shares of Company Common Stock including fractional shares,
provided, however, that no fractional shares of Company Common Stock will be
issued pursuant to the Plan.
14.5 Valuation of Company Common Stock. For all purposes of the Plan, Company
Common Stock shall be valued at the closing price on the Composite Tape for the
trading day coincident with, or last preceding, the date with respect to which
such Company Common Stock is being valued.
14.6 Transactions by Insiders. The provisions of this Section 14.6 are
intended to permit Participants to conform to the requirements of Rule 16b-3,
issued under the Securities Exchange Act of 1934 (the "Act").
(a)For purposes of Section 10.14, a Participant's election under Section 10.14
shall be deemed to be made within 90 days after the end of a Plan Year if
it is made not later than the last day of such 90 day period, and it is made
on an irrevocable basis at least six months in advance of the effective date
of such election.
(b)To the extent that a Participant is otherwise entitled to elect to have
contributions invested in the Elective Company Stock Fund, or to elect to
have all or any portion of his Accounts transferred to a Stock Fund from
another Investment Fund, or to have all or any portion of his Accounts
transferred from a Stock Fund to another Investment Fund, the Participant
may have his election made on an irrevocable basis at least six months in
advance of the effective date of the election.
(c)Except as otherwise specifically provided in this Section 4.8, nothing in
this Section 4.8 shall be construed as waiving any obligation or restriction
otherwise applicable to any Participant under the Plan.
(d)To the extent necessary to comply with Rule 16b-3(c)(2)(ii), issued under
the Act, the provisions of the Plan that set forth the formula that determines
the amount, price and timing of Company Incentive Contributions shall not
be amended more than once every six months, other than to comport with
changes in Title I of the Code, ERISA or the rules thereunder.
ARTICLE XV
AMENDMENT AND TERMINATION
15.1 Amendment of Plan. The Company shall have the right to amend the Plan at
any time and from time to time, and the Company and all persons claiming any
interest hereunder shall be bound thereby; provided, however, that no amendment
shall have the effect of: (i) directly or indirectly divesting the interest of
any Participant in any amount that the Participant would have received had the
Participant terminated employment with the Company immediately prior to the
effective date of such amendment, or the interest of any Beneficiary as such
interest existed immediately prior to the effective date of such amendment; (ii)
directly or indirectly affecting the vested interest of a Participant under the
Plan as determined by Section 9.9 unless the conditions of Section 203(c) of
ERISA are satisfied; (iii) vesting in the Company any right, title or interest
in or to any Trust assets; (iv) causing or effecting discrimination in favor of
officers, shareholders, or highly compensated Employees; or (v) causing any part
of the Plan assets to be used for any purpose other than for the exclusive
benefit of the Participants and their Beneficiaries. Any amendment to the
Plan shall conform to the limitations of Section 14.6, relating to transactions
by insiders.
15.2 Voluntary Termination of or Permanent Discontinuance of Contributions to
the Plan. The Company shall have the right to terminate the Plan in whole or in
part, or to permanently discontinue contributions to the Plan, at any time by
giving written notice of such termination or permanent discontinuance to the
Trustee. Such resolution shall specify the effective date of termination or
permanent discontinuance, which shall not be earlier than the first day of the
Plan Year that includes the date of the resolution.
15.3 Involuntary Termination of Plan. The Plan shall automatically terminate
if the Company is legally adjudicated a bankrupt, makes a general assignment for
the benefit of creditors, or is dissolved. In the event of the merger or
consolidation of the Company with or into any other corporation, or in the event
substantially all of the assets of the Company shall be transferred to another
corporation, the successor corporation resulting from the consolidation
or merger, or transfer of such assets, as the case may be, shall have the right
to adopt and continue the Plan and succeed to the position of the Company
hereunder. If, however, the Plan is not so adopted within ninety (90) days
after the effective date of such consolidation, merger or sale, the Plan shall
automatically be deemed terminated as of the effective date of such
transaction. Nothing in this Plan shall prevent the dissolution, liquidation,
consolidation or merger of the Company, or the sale or transfer of all or
substantially all of its assets.
15.4 Payments on Termination of, or Permanent Discontinuance of Contributions
to, the Plan. (a) If the Plan is terminated as herein provided, or if it
should be partially terminated, or upon the complete discontinuance of Company
contributions to the Plan, the following procedure shall be followed, except
that in the event of a partial termination it shall be followed only in case
of those Participants and Beneficiaries directly affected:
(i) The Company may continue to administer the Plan, but if it fails to
do so, its records, books of account and other necessary data shall be turned
over to the Trustee and the Trustee shall act on its own motion as hereinafter
provided.
(ii) Notwithstanding any other provisions of the Plan all interests of
Participants shall be fully vested and nonforfeitable.
(iii) The value of the Trust Fund and the Accounts of all Participants and
Beneficiaries shall be determined as of the date of termination or
discontinuance.
(iv) Distribution to Participants and Beneficiaries shall be made at such
time after termination of or discontinuance of contributions to the Plan as
provided in Section 10.3 above and subsection (b) next below and not later than
the time specified in Section 10.3.
(b) If the Plan is terminated while any Loan is outstanding, the Trustee
shall, on or prior to the date of termination, pay the entire unpaid principal
balance of the Loan, plus interest thereon, with Company contributions and cash
dividends attributable to shares of Company Common Stock acquired with the
proceeds of a Loan. In such event, all shares of Company Common Stock shall be
released from the Loan Suspense Account and allocated among Participants'
Company Incentive Contribution Accounts pursuant to Sections 7.1, 7.2, 8.2
and 9.5 However, if the minimum Incentive Target set forth in Section 7.1 is
not attained for the portion of the Plan Year ending on the date of termination
of the Plan, shares of Company Common Stock with fair market value equal to such
Company Contributions and dividends shall be allocated among Participants'
Company Incentive Contribution Accounts in proportion to Earnings and any shares
of Company Common Stock thereafter remaining in the Loan Suspense Account
shall, only to the extent permissible under applicable provisions of the Code
and ERISA and regulations issued thereunder, be returned to the Company.
ARTICLE XVI
MISCELLANEOUS
16.1 Duty to Furnish Information and Documents. Participants and their
Beneficiaries must furnish to the Company and the Trustee such evidence, data or
information as the Company considers necessary or desirable for the purpose of
administering the Plan, and the provisions of the Plan for each person are upon
the condition that each person will furnish promptly full, true, and complete
evidence, data and information requested by the Company. All parties to,
or claiming any interest under, the Plan, by virtue of participating in the
Plan, are deemed to agree to perform any and all acts, and to execute any and
all documents and papers, necessary or desirable for carrying out the Plan and
the Trust.
16.2 Statements and Available Information. The Company shall advise its
Employees of the eligibility requirements and benefits under the Plan. As soon
as practicable after the end of each calendar quarter, the Company shall provide
each Participant, and each former Participant and Beneficiary with respect to
whom an Account is maintained, with a statement reflecting the current status of
the Account of the Participant including the Adjusted Balance thereof. No
Participant shall have the right to inspect the records reflecting the Account
of any other Participant. The Company shall make available for inspection at
reasonable times by Participants and Beneficiaries copies of the Plan, any
amendments thereto, Plan summary, and all reports of Plan and Trust operations
required by law.
16.3 No Enlargement of Employment Rights. Nothing contained in the Plan shall
be construed as a contract of employment between the Company and any person, nor
shall the Plan be deemed to give any person the right to be retained in the
employ of the Company or limit the right of the Company to employ or discharge
any person with or without cause, or to discipline any Employee.
16.4 Applicable Law. All questions pertaining to the validity, construction
and administration of the Plan shall be determined in conformity with the laws
of Illinois to the extent that such laws are not preempted by ERISA and valid
regulations published thereunder.
16.5 No Guarantee. Neither the Trustee, nor the Company in any way guarantees
the Trust Fund from loss or depreciation nor the payment of any benefits which
may be or become due to any person from the Trust Fund. No Participant or other
person shall have any recourse against the Trustee, or the Company if the Trust
Fund is insufficient to provide Plan benefits in full. Nothing herein contained
shall be deemed to give any Participant, former Participant, or Beneficiary an
interest in any specific part of the Trust Fund or any other interest except the
right to receive benefits out of the Trust Fund in accordance with the
provisions of the Plan and Trust.
16.6 Unclaimed Funds. Each Participant shall keep the Company informed of the
current address of the Participant and the current address of the Beneficiary or
Beneficiaries of the Participant. Neither the Company nor the Trustee shall be
obligated to search for the whereabouts of any person. If the location of a
Participant is not made known to the Company within three (3) years after the
date on which distribution of the Participant's Account may first be made,
distribution may be made as though the Participant had died at the end of the
three-year period. If, within one additional year after such three year period
has elapsed, or, within three years after the actual death of a Participant, the
Company is unable to locate any individual who would receive a distribution
under the Plan upon the death of the Participant pursuant to Section 10.2 of the
Plan, the Adjusted Balance in the Participant's Account shall be deemed a
forfeiture and shall be used to reduce Matching Contributions and Company
Incentive Contributions to the Plan for the Plan Year next following the year in
which the forfeiture occurs and for succeeding years to the extent necessary;
provided, however, that in the event that the Participant or a Beneficiary
makes a valid claim for any amount which has been forfeited, the
benefits which have been forfeited shall be reinstated.
16.7 Federal and State Security Law Compliance. (a) Each Participant or
Beneficiary shall, to the extent necessary, prior to the transfer of Company
Common Stock to such Participant or Beneficiary, execute and deliver an
agreement, in form and substance acceptable to the Company, certifying such
person's intent to hold such Company Common Stock and containing such other
representations and agreements relating to the Company Common Stock
as the Company may reasonably request.
(b) The Company will take all necessary steps to comply with any applicable
registration or other requirements of federal or state securities laws from
which no exemption is available.
(c) Stock certificates distributed to Participants may bear such legends
concerning restrictions imposed by federal or state securities laws, and
concerning other restrictions and rights under the Plan, as the Company in its
discretion may determine.
16.8 Merger or Consolidation of Plan. Any merger or consolidation of the Plan
with another plan, or transfer of Plan assets or liabilities to any other plan,
shall be effected in accordance with such regulations, if any, as may be issued
pursuant to Section 208 of ERISA, in such a manner that each Participant in the
Plan would receive, if the merged, consolidated or transferee plan were
terminated immediately following such event, a benefit which is equal to or
greater than the benefit the Participant would have been entitled to receive if
the Plan had terminated immediately before such event.
16.9 Interest Non-Transferable. (a) Except as provided in Article XIII of
the Plan, no interest of any person or entity in, or right to receive
distributions from, the Trust Fund shall be subject in any manner to sale,
transfer, assignment, pledge, attachment, garnishment, or other alienation or
encumbrance of any kind; nor may such interest or right to receive distributions
be taken, either voluntarily or involuntarily, for the satisfaction of the debts
of, or other obligations or claims against, such person or entity, including
claims in bankruptcy proceedings. The Account of any Participant, however, shall
be subject to and payable in accordance with the applicable requirements of any
qualified domestic relations order, as that term is defined in Section 414(p) of
the Code, and the Company shall direct the Trustee to provide for payment
from a Participant's Account in accordance with such order and with the
provisions of Section 414(p) of the Code, and any regulations promulgated
thereunder. A payment from a Participant's Account may be made to an alternate
payee (as defined in Section 414(p)(8) of the Code) of the Participant prior
to the date the Participant attains the earliest retirement age of the
Participant (as defined in Section 414(p)(4)(B) of the Code) if such payment
is made pursuant to the terms of a qualified domestic relations order. All such
payments pursuant to a qualified domestic relations order shall be subject to
reasonable rules and regulations promulgated by the Company respecting the
time of payment pursuant to such order and the valuation of the Participant's
Account or Accounts from which payment is made; provided, that all such
payments are made in accordance with such order and Section 414(p) of the
Code. The balance of an Account that is subject to any qualified domestic
relations order shall be reduced by the amount of any payment made pursuant to
such order.
(b) Notwithstanding the preceding subsection of this Section, if any
Participant borrows money pursuant to Article XIII of the Plan, the Trustee and
the Company shall have all rights to collect upon such indebtedness as are
granted pursuant to Article XIII of the Plan and any agreements or documents
executed in connection with such loan.
16.10 Prudent Man Rule. Notwithstanding any other provision of the Plan and
the Trust Agreement, the Trustee and the Company shall exercise their powers and
discharge their duties under the Plan and the Trust Agreement for the exclusive
purpose of providing benefits to Employees and their Beneficiaries, and shall
act with the care, skill, prudence and diligence under the circumstances that a
prudent man acting in a like capacity and familiar with such matters would
use in the conduct of an enterprise of a like character and with like aims.
16.11 Limitations on Liability. Notwithstanding any of the preceding
provisions of the Plan, none of the Trustee, the Company and each individual
acting as an employee or agent of any of them shall be liable to any
Participant, former Participant or Beneficiary for any claim, loss, liability
or expense incurred in connection with the Plan, except when the same shall have
been judicially determined to be due to the gross negligence or willful
misconduct of such person. The Company shall indemnify and hold harmless each
individual acting as an employee or agent of the Company from any and all
claims, liabilities, costs and expense (including attorneys' fees) arising out
of any actual or alleged act or failure to act with respect to the
administration of the Plan, except that no indemnification or defense shall be
provided to any person with respect to conduct which has been judicially
determined, or agreed by the parties, to have constituted bad faith or willful
misconduct on the part of such person, or to have resulted in the receipt by
such person of personal profit or advantage to which such person is not
entitled.
16.12 Headings. The headings in this Plan are inserted for convenience of
reference only and are not to be considered in construction of the provisions
hereof.
16.13 Gender and Number. Except when otherwise required by the context, any
masculine terminology in this document shall include the feminine, and any
singular terminology shall include the plural.
16.14 ERISA and Approval Under Internal Revenue Code. This Plan is intended
to constitute an employee stock ownership plan and meet the requirements of
Sections 401(a), 401(k), 401(m), 409, 501(a) and 4975(d)(3) and (e)(7) of the
Code, and Sections 407(d)(6) and 408(b)(3) of ERISA, to the extent applicable,
as now in effect or hereafter amended, so that the income of the Trust Fund will
be exempt from taxation under Section 501(a) of the Code, contributions of
the Company under the Plan will be deductible for Federal income tax purposes
under Section 404 of the Code, Loans will be exempt under Section 4975(d)(2) of
the Code and Section 408(b)(3) of ERISA from the prohibited transaction
provisions of Section 4975(c) of the Code and Section 406 of ERISA, and amounts
subject to Incentive Savings Agreements will not be treated as distributed to
Participants for Federal income tax purposes under Section 402(a)(8) of the
Code, all as now in effect or hereafter amended. Any modification or amendment
of the Plan and/or Trust may be made retroactively, as necessary or
appropriate, to establish and maintain such qualification and to meet any
requirement of the Code or ERISA.
16.15 Company Common Stock - Voting and Consents. (a) Each Participant is
entitled to direct the Trustee as to the manner in which any Company Common
Stock allocated to each of the Accounts of the Participant is to be voted. The
Company shall furnish the Trustee with notices and information statements when
voting rights are to be exercised. The Trustee will notify Participants of each
occasion for the exercise of voting rights and will forward copies of
any proxy material within a reasonable time after it is secured from the
Company. A Participant shall elect to exercise such right by filing written
voting instructions with the Trustee, at such time and in such form as the
Trustee may reasonably specify. Individual instructions received
from Participants by the Trustee shall be held in the strictest confidence and
shall not be divulged or released to any person including officers, directors
or employees of the Company.
(b) The Trustee shall vote shares of Company Common Stock for which it does
not receive timely instructions from Participants, or that have not been
allocated to Participants' Accounts, pro rata in accordance with the timely
instructions it has received from the Participants.
(c) Participants will be allowed to direct the voting of fractional shares or
fractional rights to shares. This requirement will be satisfied if the Trustee,
or such other person or persons as the Trustee may designate, votes the combined
fractional shares or rights to shares to the extent possible to reflect the
instructions of the Participants holding fractional shares or rights to shares.
16.16 Company Common Stock - Tendering. (a) The provisions of this Section
16.16 shall apply in the event a tender offer or exchange offer, including but
not limited to a tender offer or exchange offer within the meaning of the
Securities Exchange Act of 1934, as from time to time amended and in effect,
(hereinafter, a Tender Offer") for Company Common Stock is commenced by a person
or persons. In the event a Tender Offer for Company Common Stock
is commenced, the functions under the Plan applicable to the participation of
Company Common Stock in such Tender Offer shall be undertaken by the Trustee at
the time the Tender Offer is commenced, and the Company shall not undertake any
record keeping functions under the Plan that would serve to violate the
confidentiality of any individual directions given by the Participants in
connection with the Tender Offer. The Trustee shall have no discretion or
authority to sell, exchange or transfer any of such Company Common Stock
pursuant to such Tender Offer except to the extent, and only to the extent, that
the Trustee is timely directed to do so in writing as follows:
(i) Each Participant shall direct, in writing, the Trustee with respect to
the sale, exchange or transfer of shares of Company Common Stock allocated to
his Accounts to the extent that such Accounts are invested in any of the Stock
Funds. Individual instructions received from Participants by the Trustee shall
not be released to any person including officers, directors or employees of the
Company.
(ii) The Trustee shall tender or not tender shares of Company Common
Stock allocated to Participants' Accounts for which it does not receive timely
instructions from the Participants, or that have not been allocated to
Participants' Accounts, pro rata in accordance with the timely instructions it
has received from the Participants.
(b) The Trustee shall keep confidential any individual instructions that it
may receive from Participants relating to the Tender Offer.
16.17 Named Fiduciary. Each Participant shall be, and is hereby designated
as, a "named fiduciary" (as defined in Section 402(a)(2) of ERISA) with respect
to the rights of the Participant under Sections 16.15 and 16.16 to direct the
voting or Tender Offer decision with respect to (a) Company Common Stock
allocated to the Participant's Account, or (b) Company Common Stock for which
timely instructions are not received or that have not been allocated to
Participants' Accounts.
16.18 Rights of Spouses and Beneficiaries. The rights of any Participant
under Sections 16.15 and 16.16 shall, in the case of a deceased Participant, be
exercisable by the spouse or Beneficiaries of the Participant.
16.19 Exclusive Benefit of Employees. (a) All contributions made pursuant to
the Plan shall be held by the Trustee in accordance with the terms of the Trust
Agreement for the exclusive benefit of those Employees who are Participants
under the Plan, including former Participants and their surviving spouses and
Beneficiaries, and shall be applied to provide benefits under the Plan and to
pay expenses of administration of the Plan and the Trust, to the extent that
such expenses are not otherwise paid. Except as otherwise provided in Section
15.4(b), at no time prior to the satisfaction of all liabilities with respect to
such Employees and their surviving spouses and Beneficiaries shall any part of
the Trust Fund (other than such part as may be required to pay administration
expenses and taxes), be used for, or diverted to, purposes other than for the
exclusive benefit of such Employees and their surviving spouses and
Beneficiaries. However, without regard to the provisions of this Section 16.19:
(i) If a contribution under the Plan is conditioned on initial qualification
of the Plan under Section 401 of the Code, and the Plan receives an adverse
determination with respect to its initial qualification, the Trustee shall, upon
written request of the Company, return to the Company the amount of such
contribution (increased by earnings attributable thereto and reduced by losses
attributable thereto) within one calendar year after the date that qualification
of the Plan is denied, provided that the application for the determination is
made by the time prescribed by law for filing the Company's return for the
taxable year in which the Plan is adopted, or such later date as the Secretary
of the Treasury may prescribe;
(ii) Each contribution of the Company under the Plan is conditioned
upon the deductibility of the contribution under Section 404 of the Code, and,
to the extent such deduction is disallowed, the Trustee shall, upon written
request of the Company, return the amount of the contribution (to the extent
disallowed) to the Company within one year after the date the deduction is
disallowed;
(iii) If a contribution or any portion thereof is made by the Company by
a mistake of fact, the Trustee shall, upon written request of the Company,
return the contribution or such portion to the Company within one year after the
date of payment to the Trustee; and
(iv) Earnings attributable to amounts to be returned to the Company
pursuant to subsection (ii) or (iii) above shall not be returned, and losses
attributable to amounts to be returned pursuant to subsection (ii) or (iii)
above shall reduce the amount to be so returned.
(b) All Company contributions made under the Plan are conditioned upon the
qualification of the Plan under Section 401(a) of the Code.
16.20 Expenses of the Plan and Trust. All compensation of, and all reasonable
and properly documented expenses incurred by, the Trustee in the administration
of the Plan and Trust shall be withdrawn, in accordance with the provisions of
the Trust Agreement, by the Trustee out of the Trust Fund, unless paid by the
Company. If at any time the Trust is insufficient for this purpose, the same
shall be paid by the Company.
ARTICLE XVII
TOP-HEAVY PROVISIONS
17.1 Top-Heavy Status. The provisions of this Article shall not apply to the
Plan with respect to any Plan Year for which the Plan is not Top-Heavy. If the
Plan is or becomes Top-Heavy in any Plan Year, the provisions of this Article
will supersede any conflicting provisions elsewhere in the Plan.
17.2 Definitions. For purposes of this Article XVII, the following words and
phrases shall have the meanings stated below unless a different meaning is
plainly required by the context:
(a) "Determination Date" means, with respect to any Plan Year: (i) the last
day of the preceding Plan Year, or (ii) in the case of the first Plan Year of
the Plan, the last day of such Plan Year.
(b) "Key Employee" means any Employee (including any deceased Employee)
who at any time during the Plan Year containing the Determination Date for the
Plan Year in question or the four preceding Plan Years (including Plan Years
commencing before January 1, 1984) is:
(i) an officer of the Company having annual Compensation from the
Company for a Plan Year greater than 150% of the dollar limitation in effect
under Section 415(c)(1)(A) of the Code for the calendar year in which such Plan
Year ends;
(ii) one of the ten Employees having annual Compensation from the
Company for a Plan Year greater than the dollar limitation in effect under
Section 415(c)(1)(A) of the Code for the calendar year in which such Plan Year
ends and owning (or considered as owning within the meaning of Section 318 of
the Code) both more than a one-half percent interest and the largest interest in
the Company;
(iii) a five percent owner of the Company; and
(iv) a one percent owner of the Company having annual Compensation
from the Company for a Plan Year of more than $150,000.
For purposes of determining whether an Employee is a Key Employee, the
definition of Compensation set forth in Section 17.5 shall apply.
(c) "Non-key Employee" means any Employee who is not a Key Employee.
(d) "Related Employer" means (i) any corporation which is a member of a
controlled group of corporations (as defined in Section 414(b) of the Code)
which includes the Company; (ii) any trade or business (whether or not
incorporated) which is under common control (as defined in Section 414(c) of the
Code) with the Company; and (iii) any member of an affiliated service group (as
defined in Section 414(m) of the Code) which includes the Company.
(e) "Valuation Date" means with respect to a particular Determination Date,
the most recent Valuation Date (as defined in Section 1.50) occurring within a
twelve-month period ending on the applicable Determination Date.
17.3 Determination of Top-Heavy Status.
(a) The Plan will be "Top-Heavy" with respect to any Plan Year if, as of the
Determination Date applicable to such Year, the ratio of the Adjusted Balances
in the Accounts of Key Employees (determined as of the Valuation Date applicable
to such Determination Date) to the Adjusted Balances in the Accounts of all
Employees (determined as of such Valuation Date) exceeds 60%. For purposes of
computing such ratio, and for all other purposes of applying and interpreting
this subsection (a), (i) the amount of the Account of any Employee shall be
increased by the aggregate distributions made with respect to such Employee
under the Plan during the five-year period ending on any Determination Date;
(ii) benefits provided under all plans that are aggregated pursuant to
subsection (b) of the Section must be considered; and (iii) the provisions of
Section 416 of the Code, and all Treasury Regulations and other governmental
releases interpreting said Section shall be applied. If any Employee has not
performed services for the Company or any Related Employer at any time during
the five-year period ending on any Determination Date, the balance of the
Account of such Employee shall not be taken into consideration for purposes
of determining whether the Plan is Top-Heavy with respect to the Plan Year to
which such Determination Date applies.
(b) For purposes of determining whether the Plan is Top-Heavy, all qualified
plans maintained by the Company and each Related Employer which are part of a
Required Aggregation Group shall be aggregated to the extent such aggregation is
required under the applicable provisions of Section 416 of the Code and the
Treasury Regulations and other governmental releases interpreting said Section.
The term Required Aggregation Group includes (i) each qualified retirement plan
maintained by the Company or any Related Employer in which a Key Employee
participates in the Plan Year containing the Determination Date, or any of the
four preceding Plan Years and (ii) each other qualified retirement plan
maintained by the Company or any Related Employer that, during the
aforementioned period, enables any qualified retirement plan maintained by the
Company or any Related Employer in which a Key Employee participates to meet
the requirements of Section 401(a)(4) or 410 of the Code. All other qualified
retirement plans maintained by the Company and each Related Employer shall be
aggregated only to the extent permitted by Section 416 of the Code and such
Treasury Regulations and other governmental releases and as elected by the
Company.
(c) For purposes of determining whether the Plan is Top-Heavy, the Adjusted
Balance of a Participant's Account shall not include (i) the amount of a
Rollover Contribution (or similar transfer) and earnings thereon attributable to
a Rollover Contribution (or similar transfer) accepted after December 31, 1983,
initiated by the Participant and derived from a plan not maintained by the
Company or any Related Employer, or (ii) a distribution made with respect to
an Employee which is a Rollover Contribution (or similar transfer) that is
either not initiated by the Employee or that is made to a plan maintained by the
Company or any Related Employer.
(d) Solely, for purposes of determining whether the Plan is Top-Heavy, the
accrued benefit of any Non-key employee shall be determined (i) under the
method, if any, that uniformly applies for accrual purposes under all plans of
the Company or any Related Employer, or (ii) if there is no such method, as if
such benefit accrued not more rapidly than the slowest accrual rate permitted
under the fractional accrual rule of Section 411 (b)(1)(C) of the Code.
17.4 Minimum Contribution. For each Plan Year that the Plan is Top-Heavy, the
Company will contribute and allocate to the Matching Contribution Account of
each Participant who is a Non-key Employee and is employed by the Company on the
last day of such Plan Year an amount equal to the lesser of (i) 3% of such
Participant's Compensation (as defined in Section 17.5) for such Plan Year and
(ii) the largest percentage of Company contributions and forfeitures, as a
percentage of the Key Employee's Compensation (as described in Section 17.5),
allocated to the Matching Contribution Account and Company Incentive
Contribution Account of any Key Employee for such Year. The minimum contribution
allocable pursuant to this Section 17.4 will be determined without regard to any
contributions by the Company for any Employee under the Federal Social Security
Act. A Non-key Employee will not be excluded merely because the Compensation of
the non-Key Employee is less than a stated amount or because the non-Key
Employee fails to complete 1000 hours of service in a Plan Year in which the
Plan is Top-Heavy. A Non-key Employee who is an Eligible Employee and who
declined to elect to have Salary Deferral Contributions made to the Account of
the non-Key Employee for the Plan Year shall receive an allocation for that
Plan Year pursuant to this Section.
17.5 Compensation. For any Plan Year in which the Plan is Top-Heavy, annual
Compensation, for purposes of this Article XVII, shall have the meaning set
forth in Section 414(q)(7) of the Code. Notwithstanding anything to the
contrary contained herein, Compensation for any Plan Year in excess of the
limits set forth in Code Section 401(a)(17) shall not be considered for any
purpose of the Plan.
17.6 Maximum Allocation. For purposes of determining whether the Plan would
be Top-Heavy if "90%" were substituted for "60%" each place it appears in
subsections (1)(A) and (2)(B) of Section 416(g) of the Code, as required by
Section 416(h) of the Code, all of the preceding provisions of this Article XVII
shall be applicable except that the phrase "90%" shall be substituted for the
phrase "60%" where it appears in subsection (a) of Section 17.3. If, pursuant
to the preceding sentence, it is determined that the Plan would be Top-Heavy if
"90%" were so substituted for "60%", then for purposes of applying Sections
415(e) and 416(h) of the Code and Section 9.8 of the Plan to the allocations to
the Account of any Participant for any Limitation Year, "1.0" shall be
substituted for "1.25" in each applicable place in subsections
(2)(B) and (3)(B) of Section 415(e) of the Code.
17.7 Safe-Harbor Rule. Each Non-key Employee who is a Participant in both
this Plan and a Top-Heavy defined benefit plan maintained by the Company or any
Related Employer must receive the minimum benefit under the provisions of
such defined benefit plan in lieu of the minimum contribution set forth in
Section 17.4.
17.8 Limitation on Benefits to Key Employees. Subject to the exception
provided below, if for any Plan Year, this Plan is a Top-Heavy Plan, then the
overall limitation imposed by Section 415(e) and (h)of the Code and Section 9.8
of the Plan in the case of a Key Employee who is a Participant in both this Plan
and a Top-Heavy defined benefit plan maintained by the Company or any Related
Employer shall be applied by substituting "1.0" for "1.25" in each applicable
place in subsections (2)(B) and (3)(B) of Section 415(e) of the Code. The change
in the Section 415(e) limitation specified in the preceding sentence shall not
be applicable to a Participant for a Plan Year in which this Plan is a Top-Heavy
Plan if (a) the sum of the present values of the accrued benefits and account
balances of all participants in all defined benefit plans and defined
contribution plans maintained by the Company or any Related Employer who are
Key Employees does not exceed 90% of the sum of the present values of the
accrued benefits and account balances of all participants in all defined benefit
plans and defined contribution plans maintained by the Company or Related
Employer, and (b) the minimum contribution percentage in Section 17.4 is
increased to 7.5 percent.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed on
its behalf by its officer duly authorized this ___ day of December, 1990
effective January 1, 1991.
ILLINOIS POWER COMPANY
By:_________________________________________________
<PAGE>
Conformed Copy
ILLINOIS POWER COMPANY INCENTIVE SAVINGS PLAN
FOR EMPLOYEES COVERED UNDER A COLLECTIVE BARGAINING AGREEMENT
(As Amended and Restated Effective January 1, 1991
and as further amended through amendments
adopted December 28, 1994)
<PAGE>
TABLE OF CONTENTS
ARTICLE Page
------- ----
ARTICLE I -- DEFINITIONS . . . . . . . . . . . . . . 1
1.1 "Account" . . . . . . . . . . . . . . . . . . . 1
1.2 "Actual Deferral Percentage" . . . . . . . . . 1
1.3 "Adjusted Balance" . . . . . . . . . . . . . . 1
1.4 "Annual Additions" . . . . . . . . . . . . . . 1
1.5 "Beneficiary" . . . . . . . . . . . . . . . . . 1
1.6 "Board" . . . . . . . . . . . . . . . . . . . . 2
1.7 "Code" . . . . . . . . . . . . . . . . . . . . 2
1.8 "Company" . . . . . . . . . . . . . . . . . . . 2
1.9 "Company Common Stock" . . . . . . . . . . . . 2
1.10 "Company Contributions Common Stock Fund" . . 2
1.11 "Company Contributions TRASOP Common Stock
Fund" . . . . . . . . . . . . . . . . . . . . 2
1.12 "Company Incentive Contribution" . . . . . . . 2
1.13 "Company Incentive Contribution Account" . . . 2
1.14 "Compensation" . . . . . . . . . . . . . . . . 2
1.15 "Earnings" . . . . . . . . . . . . . . . . . . 4
1.15A "Elective Company Common Stock Fund" . . . . 4
1.16 "Eligible Employee" . . . . . . . . . . . . . 4
1.17 "Employee" . . . . . . . . . . . . . . . . . . 4
1.18 "Employee Contributions TRASOP Common Stock
Fund" . . . . . . . . . . . . . . . . . . . . 4
1.19 "Employment Year" . . . . . . . . . . . . . . 5
1.20 "Entry Date" . . . . . . . . . . . . . . . . . 5
1.21 "ERISA" . . . . . . . . . . . . . . . . . . . 5
1.22 "Highly Compensated Eligible Employee" . . . . 5
1.23 "Hour of Service" . . . . . . . . . . . . . . 5
1.24 "Incentive Savings Agreement" . . . . . . . . 6
1.25 "Investment Fund" or "Fund" . . . . . . . . . 6
1.26 "Limitation Year" . . . . . . . . . . . . . . 6
1.27 "Loan" . . . . . . . . . . . . . . . . . . . . 6
1.28 "Loan Suspense Account" . . . . . . . . . . . 7
1.29 "Matching Contribution" . . . . . . . . . . . 7
1.30 "Matching Contribution Account" . . . . . . . 7
1.31 "Maximum Permissible Amount" . . . . . . . . . 7
1.32 "Normal Retirement Date" . . . . . . . . . . . 7
1.33 "Participant" . . . . . . . . . . . . . . . . 7
1.34 "Plan" . . . . . . . . . . . . . . . . . . . . 7
1.35 "Plan Year" . . . . . . . . . . . . . . . . . 7
1.36 "Qualified Election Period" . . . . . . . . . 7
1.37 "Qualified Participant" . . . . . . . . . . . 7
1.38 "Related Plan" . . . . . . . . . . . . . . . 8
1.39 "Rollover Contribution" . . . . . . . . . . . 8
1.40 "Salary Deferral Contribution Account" . . . . 8
1.41 "Salary Deferral Contributions" . . . . . . . 8
1.42 "Stock Fund" . . . . . . . . . . . . . . . . . 8
1.43 "Transfer Account" . . . . . . . . . . . . . . 8
1.44 "TRASOP" . . . . . . . . . . . . . . . . . . . 8
1.45 "TRASOP Transfer Account" . . . . . . . . . . 8
1.46 "Trust" or "Trust Fund" . . . . . . . . . . . 8
1.47 "Trust Agreement" . . . . . . . . . . . . . . 8
1.48 "Trustee" . . . . . . . . . . . . . . . . . . 8
1.49 "Valuation Date" . . . . . . . . . . . . . . . 9
1.50 "Valuation Period" . . . . . . . . . . . . . . 9
1.51 "Voluntary Contribution Account" . . . . . . . 9
1.52 "Voluntary Contributions" . . . . . . . . . . 9
1.53 "Wage Payment Date" . . . . . . . . . . . . . 9
ARTICLE II -- PARTICIPATION . . . . . . . . . . . . 9
2.1 Eligibility Requirement . . . . . . . . . . . . 9
2.2 Election to Participate in Salary Deferral
Contributions . . . . . . . . . . . . . . . . . 9
2.3 Reemployment of a Participant . . . . . . . . . 10
ARTICLE III -- SALARY DEFERRAL CONTRIBUTIONS . . . . 10
3.1 Salary Deferral Contributions . . . . . . . . . 10
3.2 Administrative Rules Governing Incentive
Savings Agreements . . . . . . . . . . . . . . 11
3.3 Suspension of Incentive Savings Agreements . . 11
3.4 Limitations on Salary Deferral Contributions . 11
3.5 Recharacterization and Return of Certain
Salary Deferral Contributions . . . . . . . . . 13
3.6 Distributions from Salary Deferral
Contribution Accounts . . . . . . . . . . . . . 14
ARTICLE IV -- MATCHING CONTRIBUTIONS . . . . . . . . 15
4.1 Matching Contributions . . . . . . . . . . . . 15
4.2 Form of Matching Contributions . . . . . . . . 15
4.3 Limitations on Contributions . . . . . . . . . 16
ARTICLE V -- VOLUNTARY AND ROLLOVER CONTRIBUTIONS . 16
5.1 Voluntary Contributions . . . . . . . . . . . . 16
5.2 Rules Governing Voluntary Contributions . . . . 16
5.3 Suspension of Voluntary Contributions . . . . . 16
5.4 Additional Voluntary Contributions . . . . . . 17
5.5 Rollover Contributions . . . . . . . . . . . . 17
5.6 TRASOP Transfers . . . . . . . . . . . . . . . 18
ARTICLE VI -- SPECIAL RULES APPLICABLE TO VOLUNTARY
CONTRIBUTIONS AND MATCHING CONTRIBUTIONS . . . . . 18
6.1 Contribution Percentage Tests . . . . . . . . . 18
ARTICLE VII -- COMPANY INCENTIVE CONTRIBUTIONS . . . 21
7.1 Company Incentive Contributions . . . . . . . . 21
7.2 Form of Company Incentive Contribution . . . . 22
ARTICLE VIII -- EXEMPT LOANS . . . . . . . . . . . . 22
8.1 Loans . . . . . . . . . . . . . . . . . . . . . 22
8.2 Loan Payments . . . . . . . . . . . . . . . . . 23
ARTICLE IX -- ALLOCATIONS TO PARTICIPANTS' ACCOUNTS 25
9.1 Separate Accounts . . . . . . . . . . . . . . . 25
9.2 Company Account . . . . . . . . . . . . . . . . 26
9.3 Allocation of Matching Contributions . . . . . 26
9.4 Allocation of Salary Deferral Contributions . . 26
9.5 Allocation of Company Incentive
Contributions . . . . . . . . . . . . . . . . . 26
9.6 Allocation of Voluntary and Rollover
Contributions . . . . . . . . . . . . . . . . . 26
9.7 Allocation of TRASOP Transfers . . . . . . . . 26
9.8 Maximum Allocation . . . . . . . . . . . . . . 27
9.9 Vesting . . . . . . . . . . . . . . . . . . . . 29
9.10 Allocations and Adjustments to Accounts . . . 29
9.11 Accounting for Allocations of Company
Common Stock . . . . . . . . . . . . . . . . . . . 31
ARTICLE X -- PAYMENT OF BENEFITS . . . . . . . . . . 31
10.1 Payments on Termination for Reasons
Other Than Death . . . . . . . . . . . . . . . . . 31
10.2 Payments on Death . . . . . . . . . . . . . . 31
10.3 Commencement of Payments . . . . . . . . . . . 33
10.4 Method of Payment . . . . . . . . . . . . . . 37
10.5 Hardship Distributions . . . . . . . . . . . . 38
10.6 In-Service Distributions from Participants'
Salary Deferral Contribution Accounts . . . . . . 39
10.7 In-Service Distributions from Participants'
Matching Contribution Accounts . . . . . . . . . . 39
10.8 Withdrawals from Voluntary Contribution
and Transfer Accounts . . . . . . . . . . . . . . 40
10.9 Withdrawals from TRASOP Transfer Accounts . . 40
10.10 Form of Withdrawal . . . . . . . . . . . . . 40
10.11 Rules Governing In-Service Distributions . . 41
10.12 Distribution of Unallocated Employee
Contributions . . . . . . . . . . . . . . . . . . 41
10.13 Administrative Powers Relating to Payments . 41
10.14 Diversification of Investments . . . . . . . 42
ARTICLE XI -- PLAN ADMINISTRATION . . . . . . . . . 42
11.1 Company Responsibility . . . . . . . . . . . . 42
11.2 Powers and Duties of Company . . . . . . . . . 43
11.3 Records and Reports of Company . . . . . . . . 43
11.4 Claims Procedure . . . . . . . . . . . . . . . 43
11.5 Interested Participants . . . . . . . . . . . 44
ARTICLE XII -- TRUST AGREEMENT . . . . . . . . . . . 44
12.1 Establishment of Trust . . . . . . . . . . . . 44
ARTICLE XIII -- LOANS TO PARTICIPANTS . . . . . . . 44
13.1 Loans to Participants . . . . . . . . . . . . 44
13.2 Maximum Loan Amount . . . . . . . . . . . . . 45
13.3 Repayment of Loans . . . . . . . . . . . . . . 45
13.4 Terms . . . . . . . . . . . . . . . . . . . . 45
ARTICLE XIV -- INVESTMENT FUNDS . . . . . . . . . . 49
14.1 Investment Funds . . . . . . . . . . . . . . . 49
14.2 Initial Investment . . . . . . . . . . . . . . 49
14.3 Selection of Investment Funds . . . . . . . . 50
14.4 Investment in Company Common Stock . . . . . . 51
14.5 Valuation of Company Common Stock . . . . . . 51
14.6 Transactions by Insiders . . . . . . . . . . . 51
ARTICLE XV -- AMENDMENT AND TERMINATION . . . . . . 52
15.1 Amendment of Plan . . . . . . . . . . . . . . 52
15.2 Voluntary Termination of or Permanent
Discontinuance of Contributions to the Plan . . . 52
15.3 Involuntary Termination of Plan . . . . . . . 53
15.4 Payments on Termination of, or Permanent
Discontinuance of Contributions to, the Plan . . . 53
ARTICLE XVI -- MISCELLANEOUS54
16.1 Duty to Furnish Information and Documents . . 54
16.2 Statements and Available Information . . . . . 54
16.3 No Enlargement of Employment Rights . . . . . 54
16.4 Applicable Law . . . . . . . . . . . . . . . . 54
16.5 No Guarantee . . . . . . . . . . . . . . . . . 54
16.6 Unclaimed Funds . . . . . . . . . . . . . . . 55
16.7 Federal and State Security Law Compliance . . 55
16.8 Merger or Consolidation of Plan . . . . . . . 55
16.9 Interest Non-Transferable . . . . . . . . . . 56
16.10 Prudent Man Rule . . . . . . . . . . . . . . 56
16.11 Limitations on Liability . . . . . . . . . . 56
16.12 Headings . . . . . . . . . . . . . . . . . . 57
16.13 Gender and Number . . . . . . . . . . . . . . 57
16.14 ERISA and Approval Under Internal
Revenue Code . . . . . . . . . . . . . . . . . . . 57
16.15 Company Common Stock - Voting and Consents . 57
16.16 Company Common Stock - Tendering . . . . . . 58
16.17 Named Fiduciary . . . . . . . . . . . . . . . 58
16.18 Rights of Spouses and Beneficiaries . . . . . 58
16.19 Exclusive Benefit of Employees . . . . . . . 59
16.20 Expenses of the Plan and Trust . . . . . . . 59
<PAGE>
--ILLINOIS POWER COMPANY
INCENTIVE SAVINGS PLAN
FOR EMPLOYEES COVERED UNDER A
COLLECTIVE BARGAINING AGREEMENT
The Illinois Power Company Incentive Savings Plan for Employees Covered
Under a Collective Bargaining Agreement (the "Plan") is herein amended and
restated, effective January 1, 1991 (except as otherwise noted). The Plan,
which was originally adopted effective January 1, 1987, and the related trust
agreement (the "Trust") have been established by Illinois Power Company (the
"Company") to defer the Federal income tax on certain portions of certain
employees' salaries as provided by the Internal Revenue Code, to increase
certain of its employees' interest in the Company by providing a medium through
which they may share in the profitable operations of the Company and to reward
certain of its employees for past service.
ARTICLE I
DEFINITIONS
Whenever used herein the following words and phrases shall have the meanings
stated below unless a different meaning is plainly required by the context:
1.1 "Account" means all or any one of the Salary Deferral Contribution Account,
Matching Contribution Account, Company Incentive Contribution Account and, if
applicable, TRASOP Transfer Account, Transfer Account and/or Voluntary
Contribution Account maintained for an individual Participant or Beneficiary
pursuant to the terms of the Plan.
1.2 "Actual Deferral Percentage" for a specified group of Eligible Employees
for a given Plan Year means the average of the ratios, calculated separately for
each Eligible Employee in such group, of: (i) the Salary Deferral Contribution,
if any, contributed by the Company on behalf of each such Eligible Employee for
the Plan Year; to (ii) the Eligible Employee's Earnings for such Plan Year.
1.3 "Adjusted Balance" means the balance in a Participant's Account, as
adjusted in accordance with Article IX of the Plan as to the applicable
Valuation Date.
1.4 "Annual Additions" means the total of: (i) Company contributions,
including Company Incentive Contributions to the extent derived from Company
contributions, allocated to a Participant's accounts under this Plan and any
Related Plan during any Limitation Year; (ii) the amount of employee
contributions made by the Participant under this Plan and any Related Plan;
and (iii) forfeitures allocated to a Participant's accounts under any Related
Plan.
1.5 "Beneficiary" means the person, persons, or entity designated or determined
pursuant to the provisions of Section 10.2(b) of the Plan.
1.6 "Board" means the Board of Directors of the Company.
1.7 "Code" means the Internal Revenue Code of 1986, as amended from time to
time. Reference to a section of the Code shall include that section and any
comparable section or sections of any future legislation that amends,
supplements or supersedes said section.
1.8 "Company" means Illinois Power Company, an Illinois corporation, or any
successor corporation resulting from a merger or consolidation with the Company
or transfer of substantially all of the assets of the Company, if such successor
or transferee shall adopt and continue the Plan by appropriate corporate action
pursuant to Section 15.3 of the Plan. All employees of: (i) any corporation
that is a member of a controlled group of corporations (as defined in Section
414(b) of the Code) that includes the Company; (ii) any trade or business
(whether or not incorporated) that is under common control (as defined in
Section 414(c) of the Code) with the Company; and (iii) any corporation or other
entity that is a member of an affiliated service group (as defined in Section
414(m) of the Code) that includes the Company shall be treated as employed by
the Company for purposes of the Plan; provided, however, that no provision of
this Section 1.8 shall be construed or interpreted to require the Company to
make a contribution under the Plan for any individual who is not an Employee.
1.9 "Company Common Stock" means shares of common stock, without par value,
of the Company; provided, however, that effective May 27, 1994, Company Common
Stock means shares of common stock, without par value, of Illinova Corporation.
1.10 "Company Contributions Common Stock Fund" means the Investment Fund
described in the Trust Agreement consisting only of shares of Company Common
Stock attributable to Matching Contributions and Company Incentive
Contributions.
1.11 "Company Contributions TRASOP Common Stock Fund" means the Investment
Fund described in the Trust Agreement consisting only of shares of Company
Common Stock transferred from the TRASOP and attributable to Company
contributions to the TRASOP; provided, however, that effective as of January 1,
1993, all amounts held under the Company Contributions TRASOP Common Stock Fund
shall be transferred to the Elective Company Common Stock Fund, and effective as
of January 1, 1993, the Company Contributions TRASOP Common Stock Fund shall
cease to exist.
1.12 "Company Incentive Contribution" means a contribution made by the Company
on or after January 1, 1991 pursuant to the provisions of Section 7.1.
1.13 "Company Incentive Contribution Account" means the record of money and
assets held by the Trustee for an individual Participant or Beneficiary
pursuant to the provisions of the Plan, derived from Company Incentive
Contributions to the Trust.
1.14 "Compensation" means a Participant's regular basic compensation from the
Company paid during a Plan Year for services rendered, excluding bonuses,
overtime, andcommissions, any amounts subject to an Incentive Savings Agreement,
any other contributions or benefits under this Plan or any other pension, profit
sharing, insurance, hospitalization or other plan or policy maintained by the
Company for the benefit of such Participant, and all other extraordinary and
unusual payments. For purposes of Article V, Compensation shall include
bonuses, overtime and commissions. For purposes of Section 1.31 and Section
9.8, Compensation shall mean wages, salaries, fees for professional services
and other amounts received for personal services actually rendered in the course
of employment with the Company (including, but not limited to, commissions paid
salesmen, compensation for services on the basis of a percentage of profits,
tips and bonuses); shall include all compensation actually paid or made
available to a Participant for an entire Limitation Year (other than amounts
subject to the Incentive Savings Agreement of such Participant); and shall not
include:
(i) Contributions made by the Company to a plan of deferred compensation
to the extent that, before the application of the limitations of Section 415 of
the Code to that plan, the contributions are not includable in the gross income
of the Participant for the taxable year in which contributed. In addition,
Company contributions made on behalf of a Participant to a simplified employee
pension described in Section 408(k) of the Code are not considered as
compensation for the taxable year in which contributed to the extent such
contributions are not taxable to, or are deductible by, the Participant.
Additionally, any distributions from a plan of deferred compensation are not
considered as compensation for purposes of Section 415 of the Code, regardless
of whether such amounts are includable in the gross income of the Participant
when distributed. However, any amounts received by a Participant pursuant to an
unfunded non-qualified plan may be considered as compensation for purposes of
Section 415 of the Code in the year such amounts are includable in the gross
income of the Participant;
(ii) Amounts realized from the exercise of a non-qualified stock option, or
when restricted stock (or property) held by a Participant either becomes freely
transferable or is no longer subject to a substantial risk of forfeiture under
Section 83 of the Code and the regulations issued thereunder;
(iii) Amounts realized from the sale, exchange, or other disposition of stock
acquired under a qualified stock option;
(iv) Other amounts that receive special tax benefits, such as premiums for
group term life insurance (but only to the extent that the premiums are not
includable in the gross income of the Participant), or contributions made by the
Company (whether or not under a salary reduction agreement) towards the purchase
of an annuity contract described in Section 403(b) of the Code (whether or not
the contributions are excludable from the gross income of the Participant); or
(v) Any other items or amounts paid to or for the benefit of a Participant.
Notwithstanding the foregoing, the maximum amount of Compensation for any Plan
Year shall not exceed $150,000 ($200,000 for Plan Years beginning prior to
January 1, 1994) or such other amount as may be permitted for any such year
under section 401(a)(17) of the Code.
1.15 "Earnings" means a Participant's Compensation paid during a Plan Year,
increased by the amount subject to any Incentive Savings Agreement entered into
by the Participant for such Year. Notwithstanding the foregoing, the maximum
amount of Compensation for any Plan Year shall not exceed $150,000 ($200,000 for
Plan Years beginning prior to January 1, 1994) or such other amount as may be
permitted for any such year under section 401(a)(17) of the Code.
1.15A "Elective Company Common Stock Fund" means the Investment Fund described
in the Trust Agreement consisting only of shares of Company Common Stock held in
the Participant's Salary Deferral Contribution Account, Voluntary Account,
Transfer Account, and TRASOP Transfer Account.
1.16 "Eligible Employee" means any Employee who has met the eligibility
requirements contained in Section 2.1(a).
1.17 "Employee" means an individual employed by the Company who is covered
under the terms and conditions of a collective bargaining agreement to which the
Company is a party and that provides for the participation of such individual in
the Plan. A person who is not employed by the Company but who performs services
for the Company pursuant to an agreement between the Company and a leasing
organization shall be considered a "leased employee" after such person performs
such services on a substantially full-time basis for at least twelve months
and if the services are of a type historically performed by employees in the
business field of the Company. A person who is considered a leased employee of
the Company shall not be considered an Employee for purposes of the Plan. If a
leased employee subsequently becomes an Employee, and thereafter participates in
Company Incentive Contributions pursuant to Article VII of the Plan, such leased
employee shall be given credit for Hours of Service for the period of
employment of the Employee as a leased employee, except to the extent that the
requirements of Section 414(n)(5) of the Code were satisfied with respect to
such Employee while the Employee was a leased employee.
1.18 "Employee Contributions TRASOP Common Stock Fund" means the Investment
Fund described in the Trust Agreement consisting only of shares of Company
Common Stock transferred from the TRASOP and attributable to Employee
contributions to the TRASOP; provided, however, that effective as of January 1,
1993, all amounts held under the Employee Contributions TRASOP Common Stock Fund
shall be transferred to the Elective Company Common Stock Fund, and effective as
of January 1, 1993, the Employee Contributions TRASOP Common Stock Fund shall
cease to exist.
1.19 "Employment Year" means a twelve consecutive month period commencing with
an Employee's initial date of hire (or last date of rehire) or with any
anniversary date thereof. For purposes hereof, an Employee's date of rehire
shall be the first day on which an Employee completes an Hour of Service
following reemployment.
1.20 "Entry Date" means:
(a)for calendar years before calendar year 1993, each July 1 and January 1;
(b)for calendar year 1993, January 1, 1993, April 1, 1993, and October 1,
1993; and
(c)for calendar years after 1993, each April 1 and October 1.
1.21 "ERISA" means Public Law No. 93-406, the Employee Retirement Income
Security Act of 1974, as from time to time amended.
1.22 "Highly Compensated Eligible Employee" means an Eligible Employee who
during the current Plan Year or the preceding Plan Year, (a) was at any time a
five-percent owner of the Company; (b) received Compensation from the Company in
excess of $75,000 (or such greater amount provided by the Secretary of the
Treasury pursuant to Section 414(q) of the Code); (c) received Compensation from
the Company in excess of $50,000 (or such greater amount provided by the
Secretary of the Treasury pursuant to Section 414(q) of the Code) and was in
the top-paid group of Employees for such Year; or (d) was at any time an officer
of the Company and received compensation from the Company greater than 50% of
the amount in effect under Section 415(b)(1)(A) of the Code for such Plan Year.
The provisions of Section 414(q) of the Code shall apply in determining whether
an Eligible Employee is a Highly Compensated Eligible Employee. The Company for
any Plan Year may elect to identify Highly Compensated Eligible Employees based
upon only the current Plan Year to the extent permitted by Section 414(q) of the
Code and regulations issued thereunder. A "Highly Compensated Participant"
means a Highly Compensated Eligible Employee who has entered into an Incentive
Savings Agreement for the relevant Plan Year.
1.23 "Hour of Service" means (i) each hour for which an Employee is paid or
entitled to payment for the performance of duties for the Company; and (ii) each
hour for which an Employee is directly or indirectly paid by the Company or is
entitled to payment from the Company during which no duties are performed by
reason of vacation, holiday, illness, incapacity (including disability), layoff,
jury duty, military duty or leave of absence (but not in excess of 501 hours in
any continuous period during which no duties are performed). Each Hour of
Service for which back pay, irrespective of mitigation of damages, is either
awarded or agreed to by the Company shall be included under either (i) or (ii)
as may be appropriate.
Hours of Service shall be credited:
(a) in the case of Hours referred to in clause (i) of the first sentence of
this Section, for the computation period in which the duties are performed;
(b) in the case of Hours referred to in clause (ii) of the first sentence of
this Section, for the computation period or periods in which the period during
which no duties are performed occurs; and
(c) in the case of Hours for which back pay is awarded or agreed to by the
Company, for the computation period or periods to which the award or agreement
pertains, rather than the computation period in which the award, agreement or
payment is made.
In determining Hours of Service, an Employee who is employed by the Company on
other than an hourly-rated basis shall be credited with ten (10) Hours of
Service per day for each day the Employee would, if hourly-rated, be credited
with service pursuant to clause (i) of the first sentence of this Section 1.23.
If an Employee is paid for reasons other than the performance of duties pursuant
to clause (ii) of the first sentence of this Section 1.23: (i) in the
case of a payment made or due which is calculated on the basis of units of time,
an Employee shall be credited with the number of regularly scheduled working
hours included in the units of time on the basis of which the payment is
calculated; and (ii) an Employee without a regular work schedule shall be
credited with eight (8) Hours of Service per day (to a maximum of forty (40)
Hours of Service per week) for each day that the Employee is so paid. Hours of
Service shall be calculated in accordance with Department of Labor Regulations
Section 2530.200b-2 or any future legislation or regulation that amends,
supplements or supersedes said section.
1.24 "Incentive Savings Agreement" means a written agreement entered into by a
Participant pursuant to the provisions of Section 3.1 of the Plan.
1.25 "Investment Fund" or "Fund" means any fund as described on the schedule
attached to the Trust Agreement.
1.26 "Limitation Year" means the twelve (12) consecutive month period to be
used in determining the Plan's compliance with Code Section 415 and the
regulations thereunder. The Company shall take all actions necessary to ensure
that the Limitation Year is the same twelve (12) month period as the Plan Year.
1.27 "Loan" means any loan as described in Section 4975(d)(1) of the Code to
the Trustee made or guaranteed by a disqualified person (within the meaning of
Section 4975(e)(2) of the Code), including, but not limited to, a direct loan of
cash, a purchase money transaction, an assumption of an obligation of the
Trustee, an unsecured guarantee or the use of assets of a disqualified person
(within the meaning of Section 4975(e)(2) of the Code (as collateral for a
loan).
1.28 "Loan Suspense Account" means the record of Company Common Stock,
purchased with any Loan and held by the Trustee pursuant to the provisions of
Article VIII of the Plan pending release and allocation to other Accounts as the
Loan is repaid.
1.29 "Matching Contribution" means a contribution made by the Company pursuant
to the provisions of Section 4.1 of the Plan.
1.30 "Matching Contribution Account" means the record of money and assets held
by the Trustee for an individual Participant or Beneficiary pursuant to the
provisions of the Plan, derived from Matching Contributions to the Trust.
1.31 "Maximum Permissible Amount" means the lesser of: (a) 25% of a
Participant's Compensation; or (b) thirty thousand (30,000) dollars (or, if
greater, one-quarter (1/4) of the dollar limitation in effect pursuant to
Section 415(b)(1)(A) of the Code).
1.32 "Normal Retirement Date" means the date a Participant attains age 65.
1.33 "Participant" means either:
(a) an Eligible Employee entitled to enter into an Incentive Savings
Agreement pursuant to Section 2.1(a) and Article III and to share in the
allocation of Matching Contributions pursuant to Article IV; or
(b) an Employee who has met the eligibility requirements set forth in Section
2.1(b) and is entitled to share in the allocation of Company Incentive
Contributions pursuant to Article VII.
1.34 "Plan" means the ILLINOIS POWER COMPANY INCENTIVE SAVINGS PLAN
FOR EMPLOYEES COVERED UNDER A COLLECTIVE BARGAINING AGREEMENT.
The Plan is hereby designated a profit sharing plan for purposes of Section
401(a)(27) of the Code. The Plan shall constitute in part a profit sharing plan
with a cash or deferred arrangement intended to be qualified under Sections
401(a) and 401(k) of the Code, and in part an employee stock ownership plan
under Section 4975(e)(7) of the Code and Section 407(d)(6) of ERISA and
a stock bonus plan intended to be qualified under Section 401(a) of the Code.
1.35 "Plan Year" means the twelve-month period from January 1 through December
31 of each year.
1.36 "Qualified Election Period" means the six-Plan Year period beginning with
the first Plan Year in which a Participant first becomes a Qualified
Participant.
1.37 "Qualified Participant" means any Participant who has attained age 55 and
has been a Participant in the Plan for at least ten years after December 31,
1990.
1.38 "Related Plan" means any other defined contribution plan (as defined in
Section 415 of the Code) maintained by the Company or by any other employer that
is, along with the Company, a member of a controlled group of corporations or
under common control (as defined in Sections 414(b) and (c) of the Code as
modified by Section 415(h) thereof) or by any member of an affiliated service
group (as defined in section 414(m) of the Code).
1.39 "Rollover Contribution" means an amount received by the Trustee pursuant
to the provisions of Section 5.5 of the Plan.
1.40 "Salary Deferral Contribution Account" means the record of money and
assets held by the Trustee for an individual Participant or Beneficiary
pursuant to the provisions of the Plan, derived from Salary Deferral
Contributions.
1.41 "Salary Deferral Contributions" means amounts contributed by the Company
pursuant to the provisions of Section 3.1 of the Plan.
1.42 "Stock Fund" means any of the Company Contributions TRASOP Common Stock
Fund, the Employee Contributions TRASOP Common Stock Fund, the Elective Company
Common Stock Fund, and the Company Contributions Common Stock Fund.
1.43 "Transfer Account" means the record of money and assets held by the
Trustee for an individual Participant or Beneficiary pursuant to the
provisions of the Plan, derived from a Rollover Contribution.
1.44 "TRASOP" means the Illinois Power Company Tax Reduction Act Stock
Ownership Plan, which was terminated effective October 31, 1988.
1.45 "TRASOP Transfer Account" means the record of money and assets held by the
Trustee for an individual Participant or Beneficiary pursuant to the provisions
of the Plan, derived from a direct trustee-to-trustee transfer from the TRASOP.
Separate records shall be maintained reflecting the portion of each
Participant's TRASOP Transfer Account that is attributable to Company
contributions to the TRASOP, and the portion of the TRASOP Transfer Account
that is attributable to Employee contributions to the TRASOP.
1.46 "Trust" or "Trust Fund" means all money, securities and other property
held under the Trust Agreement for the purposes of the Plan.
1.47 "Trust Agreement" means the agreement between the Company and the Trustee
governing the administration of the Trust, as it may be amended from time to
time.
1.48 "Trustee" means the corporation or individuals appointed by the Board of
Directors of the Company to administer the Trust.
1.49 "Valuation Date" means a date on which the Investment Funds are valued and
the Accounts of Participants are adjusted. Valuation Dates shall be the last
day of each month.
1.50 "Valuation Period" means each calendar month.
1.51 "Voluntary Contribution Account" means the record of money and assets held
by the Trustee for an individual Participant or Beneficiary pursuant to the
provisions of the Plan, derived from Voluntary Contributions.
1.52 "Voluntary Contributions" means contributions made pursuant to the
provisions of Sections 5.1 and 5.4 of the Plan.
1.53 "Wage Payment Date" means a date on which an Employee receives
Compensation from the Company.
ARTICLE II
PARTICIPATION
2.1 Eligibility Requirement. (a) Each Employee who is eligible to participate
in the Plan on December 31, 1990 shall continue to be an Eligible Employee for
purposes of entering into an Incentive Savings Agreement pursuant to Article III
and sharing in the allocation of Matching Contributions pursuant to Article IV.
Each other Employee shall become an Eligible Employee for purposes of Articles
III and IV on the Entry Date coinciding with or next following the later to
occur of January 1, 1991 and the date of employment of the Employee by the
Company.
(b) Each Employee who, on December 31, 1990, had completed one
Employment Year during which the Employee had completed 1,000 Hours of Service,
shall become a Participant entitled to share in Company Incentive Contributions
pursuant to Article VII on January 1, 1991. Each other Employee shall become a
Participant entitled to share in the allocation of Company Incentive
Contributions upon the completion of one Employment Year during which the
Employee has completed 1,000 Hours of Service.
2.2 Election to Participate in Salary Deferral Contributions. (a) An Eligible
Employee, as described in Section 2.1(a), may become a Participant by executing
and filing with the Company an Incentive Savings Agreement, and such other forms
as may be required by the Company, which will be provided by the Company.
(b) An Eligible Employee who was a Participant in the Plan on December 31,
1990 shall continue to be a Participant for purposes of Articles III and IV from
and after January 1, 1991. Each other Eligible Employee shall become a
Participant for purposes of Articles III and IV on the first Wage Payment Date
of the Eligible Employee following any subsequent Entry Date designated by the
Eligible Employee if such Eligible Employee executes and files with the Company
an Incentive Savings Agreement and any other forms required by
the Company no later than the beginning of the first business day of the month
next preceding the applicable Entry Date.
2.3 Reemployment of a Participant. (a) If the employment of an Eligible
Employee shall be terminated and if the Eligible Employee shall thereafter be
reemployed by the Company, the Eligible Employee shall again become eligible to
participate under the Plan for purposes of Articles III and IV on the date of
the resumption of employment of the Eligible Employee.
(b) If the employment of a Participant for purposes of Article VII shall be
terminated, and if the former Participant shall thereafter be reemployed by the
Company, the former Participant shall again become a Participant for purposes of
Article VII on the date of the resumption of employment of the Participant.
Each other Employee who is reemployed by the Company shall become a Participant
for purposes of Article VII upon the completion by the Employee of an Employment
Year following the date of reemployment of the Employee during
which the Employee has completed 1,000 Hours of Service.
ARTICLE III
SALARY DEFERRAL CONTRIBUTIONS
3.1 Salary Deferral Contributions. (a) Each Participant shall elect, by
entering into an Incentive Savings Agreement with the Company, to reduce the
Earnings of the Participant from the Company by a percentage not less than one
percent (1%) (in increments of one percent (1%)), as elected by the Participant.
Reductions to a Participant's Earnings pursuant to the Incentive Savings
Agreement of the Participant shall be effected through payroll deductions,
commencing with the Wage Payment Date of the Participant on which the
Participant becomes a Participant pursuant to Section 2.2(b), in accordance with
procedures established by the Company. Incentive Savings Agreements shall be
subject to the special rules set forth in this Article III.
(b) Effective January 1, 1987, and notwithstanding any provision of the Plan
to the contrary, the elective deferrals (as defined in Section 402(g)(3) of the
Code) of any Participant for any taxable year of the Participant shall not
exceed $7,000 (or such greater amount provided by the Secretary of the Treasury
pursuant to Sections 402(g)(5) and 415(d) of the Code). Any amount contributed
to the Plan by the Company on behalf of a Participant during any Plan Year,
pursuant to the Participant's Incentive Savings Agreement, in excess of
the limitation set forth in this subsection, adjusted for earnings, gains and
losses allocable thereto, shall be returned to such Participant, as provided in
Section 402(g)(2) of the Code.
(c) The Company shall contribute to the Trust for each Valuation Period a
Salary Deferral Contribution in an amount equal to the amounts designated by
Participants pursuant to Incentive Savings Agreements and deducted from
payroll during such Valuation Period and not reduced pursuant to subsection (b)
of this Section 3.1.
3.2 Administrative Rules Governing Incentive Savings Agreements. (a) A
Participant may change the percentage of the Earnings of the Participant that
are subject to an Incentive Savings Agreement, within the percentage limits set
forth in Section 3.1(a) of the Plan, effective as of the first Wage Payment Date
of the Participant following any Entry Date, if such Participant executes and
delivers an amendment to such Incentive Savings Agreement designating
such change, and any other forms required by the Company, no later than the
beginning of the first business day of the month next preceding the applicable
Entry Date.
(b) Salary Deferral Contributions shall be held in trust uninvested by the
Company and shall not accrue earnings until remitted to the Trustee, which shall
be as of the earliest date on which such Salary Deferral Contributions can
reasonably be segregated from the Company's general assets, but in any event
within ninety (90) days from the date on which such amounts are received by the
Company or would otherwise have been payable to the Participant in cash. In any
event, the Company shall pay to the Trustee its Salary Deferral Contribution
with respect to a particular Plan Year or Valuation Period ending within a Plan
Year within the period of time prescribed by law for filing the Company's
Federal income tax return for such Plan Year, including extensions duly granted.
3.3 Suspension of Incentive Savings Agreements. (a) A Participant may
voluntarily suspend an Incentive Savings Agreement for an indefinite period of
time. A suspension shall be effective as of the Participant's first
administratively feasible Wage Payment Date that is within thirty (30) days
after the receipt of a written notice of suspension by the Company from
the Participant. A Participant will not be permitted to make up amounts subject
to an Incentive Savings Agreement for any period of suspension. A Participant
who makes an election to suspend an Incentive Savings Agreement pursuant to this
Section may reinstate such Agreement effective as of the first Wage Payment Date
of the Participant following any subsequent Entry Date designated by the
Participant if such Participant again executes and files with the Company an
Incentive Savings Agreement and any other forms required by the Company no later
than the beginning of the first business day of the month next preceding the
applicable Entry Date.
(b) The Company, at its election, may amend, suspend or revoke an Incentive
Savings Agreement with a Participant at any time if the Company determines that
such amendment or revocation is necessary to ensure that the Annual Additions to
the accounts of a Participant do not exceed the Maximum Permissible Amount
for such Participant for that Year or to ensure that the requirements of Section
3.4 are met for such Year.
3.4 Limitations on Salary Deferral Contributions.
(a) Effective January 1, 1987, and notwithstanding anything to the contrary
contained elsewhere in the Plan or contained in any Incentive Savings Agreement,
all Incentive Savings Agreements entered into with respect to any Plan Year
shall be valid only if one of the tests set forth in subsection (b) next below
is satisfied for such Plan Year. In determining whether such tests are
satisfied, all Salary Deferral Contributions made with respect to such Plan
Year shall be considered.
(b) For each Plan Year the Actual Deferral Percentage for Highly
Compensated Eligible Employees shall bear to the Actual Deferral Percentage for
all other Eligible Employees a relationship that satisfies either of the
following tests:
(i) The Actual Deferral Percentage for Highly Compensated Eligible
Employees is not more than the Actual Deferral Percentage of all other Eligible
Employees multiplied by 1.25; or
(ii) The Actual Deferral Percentage for Highly Compensated Eligible
Employees is not more than the Actual Deferral Percentage for all other Eligible
Employees multiplied by two and the excess of the Actual Deferral Percentage for
the group of High Compensated Eligible Employees over that of all other Eligible
Employees is not more than two percentage points.
(c) If at the end of any Plan Year neither of the tests set forth in
subsection (b) next above is satisfied for such Year, then:
(i) Incentive Savings Agreements entered into for such Year by Highly
Compensated Participants shall be valid only to the extent permitted by one of
the tests set forth in subsection (b) next above, and Salary Deferral
Contributions made by the Company for such Year for Highly Compensated
Participants shall be reduced in the manner set forth in subsection (ii) next
below to the extent necessary to comply with one of the tests set forth in
subsection (b) next above. All Salary Deferral Contributions so reduced,
adjusted for earnings, gains and losses allocable thereto, shall be allocated
and distributed in the manner provided in Section 3.5.
(ii) Reductions pursuant to subsection (i) next above shall be effected
with respect to Highly Compensated Participants pursuant to the following
procedure: the Actual Deferral Percentage of the Highly Compensated Participant
with the highest Actual Deferral Percentage shall be reduced to the extent
necessary to cause such Highly Compensated Participant's Actual Deferral
Percentage to equal the Actual Deferral Percentage of the Highly Compensated
Participant with the next highest Actual Deferral Percentage. This process
shall be repeated until the Plan satisfies one of the tests set forth in
subsection (b) for such Plan Year.
(iii) Incentive Savings Agreements entered into by all Participants who
are not Highly Compensated shall be valid and Salary Deferral Contributions made
by the Company for such Participants shall not be changed.
The calculations, reductions and allocations required by this Section 3.4(c) and
Section 3.5 shall be made by the Company with respect to a Plan Year at any time
prior to the close of the following Plan Year.
(d) If at any time during a Plan Year the Company, in its sole discretion,
determines that both of the tests set forth in subsection (b) of this Section
3.4 may not be met for such Plan Year, then:
(i) The Company shall have the unilateral right during the Plan Year
to require the prospective reduction, for the balance of such Year or any part
thereof, of the percentage of the Earnings of Highly Compensated Participants
that may be subject to Incentive Savings Agreements. Such reductions shall be
made to the extent necessary, in the discretion of the Company, to assure that
one of the tests set forth in subsection (b) of this Section 3.4 shall be met
for the Plan Year and shall be based upon estimates made from data available
to the Company at any time during the Plan Year.
(ii) Reductions pursuant to subsection (i) next above shall be effected
with respect to Highly Compensated Participants pursuant to the following
procedure: the Actual Deferral Percentage of the Highly Compensated Participant
with the highest Actual Deferral Percentage shall be reduced to the extent
necessary to cause such Highly Compensated Participant's Actual Deferral
Percentage to equal the Actual Deferral Percentage of the Highly Compensated
Participant with the next highest Actual Deferral Percentage. This process
shall be repeated to the extent necessary to assure that one of the tests set
forth in subsection (b) shall not be exceeded for such Plan Year.
3.5 Recharacterization and Return of Certain Salary Deferral Contributions.
If a Salary Deferral Contribution made by the Company for a Highly Compensated
Participant is reduced pursuant to Section 3.4(c), the amount so reduced shall
be allocated and distributed as follows:
(a) To the extent permitted by regulations issued by the Secretary of the
Treasury and as elected by the Highly Compensated Participant, if the
Participant has not made Voluntary Contributions equal to the maximum amount
permitted under Sections 5.1, 5.4 and 6.1(a) of the Plan, the amount reduced
pursuant to Section 3.4(c), adjusted for earnings, gains and losses allocable
thereto for the Plan Year and for the period from the end of the Plan Year
to the date of allocation, shall be deemed to be Voluntary Contributions made by
the Participant and shall (within the limits contained in Sections 5.1, 5.4
and 6.1(a)) be allocated to the Participant's Voluntary Contribution Account; or
(b) To the extent that the procedure set forth in subsection (a) is not
permitted, or is not elected by the Highly Compensated Participant, or if the
Highly Compensated Participant makes or is deemed to have made Voluntary
Contributions equal to the maximum amount permitted by Sections 5.1, 5.4 and
6.1(a) (through contributions made pursuant to Article V of the Plan, through
the operation of subsection (a) next above, or both) any portion of the amount
so reduced pursuant to Section 3.4(c) that is not allocated to the Participant's
Voluntary Contribution Account pursuant to subsection (a) next above, adjusted
for earnings, gains and losses allocable thereto for the Plan Year and for the
period from the end of the Plan Year to the date of distribution, pursuant to
Section 401(k)(8) of the Code, shall be returned to the Company and as soon
as practicable thereafter paid by the Company directly to the
applicable Highly Compensated Participant.
3.6 Distributions From Salary Deferral Contribution Accounts. Notwithstanding
anything to the contrary contained elsewhere in the Plan, a Participant's Salary
Deferral Contribution Account shall not be distributable other than upon:
(i) the Participant's separation from service, death, or disability;
(ii) termination of the Plan without establishment or maintenance of another
defined contribution plan (other than an employee stock ownership plan as
defined in Section 4975(e)(7) of the Code);
(iii) the date of the sale or other disposition by the Company to an
unrelated entity of substantially all of the assets (within the meaning of
Section 409(d)(2) of the Code) used by the Company in a trade or business of the
Company, but only if (a) the Participant is employed by such trade or business
and continues employment with the entity acquiring such assets, and (b) the
Company continues to maintain the Plan after the sale or other disposition. The
sale of 85% of the assets used in the trade or business shall be deemed a
sale of "substantially all" the assets used in such trade or business;
(iv) the date of the sale or other disposition by the Company of the Company's
interest in a subsidiary (within the meaning of Section 409(d)(3) of the Code)
to an unrelated entity, but only if (a) the Participant is employed by such
subsidiary and continues employment with such subsidiary following such sale or
other disposition, and (b) the Company continues to maintain the Plan after the
sale or other disposition;
(v) the Participant's attainment of age 59 1/2; or
(vi) the Participant's hardship (as defined in Section 10.5(b)).
Notwithstanding anything to the contrary contained herein, an event shall not be
treated as described in clause (ii), (iii) or (iv) above with respect to any
Participant unless the Participant receives a lump sum distribution (as defined
in Section 401(k)(10)(B)(ii) of the Code) by reason of the event.
ARTICLE IV
MATCHING CONTRIBUTIONS
4.1 Matching Contributions.
(a) For Plan Years ending before January 1, 1995, for each Valuation Period
the Company shall contribute to the Trust for each Participant a Matching
Contribution in an amount equal to twenty-five percent (25%) of the first one
hundred and sixty (160) dollars of Salary Deferral Contributions made on behalf
of the Participant for the Valuation Period. Matching Contributions shall be
remitted to the Trustee as soon as practicable following the end of such
Valuation Period.
(b) For Plan years beginning on or after January 1, 1995, for each Valuation
Period the Company shall contribute to the Trust for each Participant a Matching
Contribution in an amount equal to the sum of:
(i) fifty percent (50%) of the first eighty (80) dollars of Salary
Deferral Contributions for that Participant for the Valuation Period, plus
(ii) twenty-five percent (25%) of the amount by which his Salary
Deferral Contributions exceed eighty (80) dollars for the Valuation Period;
provided, however, that the amount of Salary Deferral Contributions for which a
Matching Contribution is made shall not exceed 6% of Earnings for the Valuation
Period. Matching Contributions shall be remitted to the Trustee as soon as
practicable following the end of such Valuation Period.
(c) Matching Contributions made with respect to a Plan Year or any part
thereof pursuant to this Section 4.1 shall in no event be made later than the
time prescribed by law for filing the income tax return of the Company for
the fiscal year of the Company (including extensions thereto) that corresponds
to such Plan Year.
(d) Matching Contributions shall be subject to the special rules set forth in
this Article IV and in Article VI.
4.2 Form of Matching Contributions. Matching Contributions to the Trust for
any Valuation Period shall be allocated in shares of Company Common Stock
acquired with the proceeds of a Loan, and released from the Loan Suspense
Account pursuant to Section 8.1(b) as a result of (a) Company contributions
applied by the Trustee to principal and interest payments on the Loan for such
Valuation Period and (b) cash dividends paid by the Company, in any Plan Year in
which the Company declares a dividend on Company Common Stock, with respect
to shares of Company Common Stock acquired with the proceeds of the Loan and
applied by the Trustee on principal and interest payments on the Loan for such
Valuation Period.
4.3 Limitations on Contributions. In no event shall the aggregate amount of
Salary Deferral Contributions, Matching Contributions and Company Incentive
Contributions (to the extent derived from Company contributions) contributed
by the Company for any Plan Year exceed the maximum deduction allowable by
Section 404 of the Code.
ARTICLE V
VOLUNTARY AND ROLLOVER CONTRIBUTIONS
5.1 Voluntary Contributions. Each Participant may elect, by executing a form
provided by the Company, to contribute a percentage of the Compensation of the
Participant, between one percent (1%) and ten percent (10%) (in increments of
one percent (1%)), as elected by the Participant. Voluntary Contributions shall
be effected through payroll deductions, commencing with the Participant's first
Wage Payment Date following any Entry Date designated by the Participant if such
Participant executes and files with the Company any forms required by the
Company, in accordance with procedures established by the Company, no later
than the beginning of the first business day of the month next preceding the
applicable Entry Date. Voluntary Contributions shall be subject to the special
rules set forth in this Article V and in Article VI.
5.2 Rules Governing Voluntary Contributions. (a) A Participant may change the
percentage of the Compensation of the Participant contributed to the Trust Fund
as Voluntary Contributions within the percentage limits set forth in Section 5.1
of the Plan, effective as of the first Wage Payment Date of the Participant
following any Entry Date if such Participant executes and delivers a written
notice designating such change by the Company, on such forms as shall be
required by the Company, no later than the beginning of the first business day
of the month next preceding the applicable Entry Date.
(b) Voluntary Contributions shall be held in trust uninvested by the Company
and shall not accrue earnings until remitted to the Trustee, which shall be as
of the earliest date on which such Voluntary Contributions can reasonably be
segregated from the Company's general assets, but in any event within ninety
(90) days from the date on which such amounts are received by the Company or
would otherwise have been payable to the Participant in cash.
5.3 Suspension of Voluntary Contributions. A Participant may voluntarily
suspend the Voluntary Contributions of the Participant for an indefinite period
of time. A suspension shall be effective as of the Participant's first
administratively feasible Wage Payment Date that is within thirty (30) days
after the receipt of a written notice of suspension by the Company from the
Participant. A Participant who makes an election to suspend Voluntary
Contributions pursuant to this Section may reinstate such Contributions
effective as of the first Wage Payment Date of the Participant following any
subsequent Entry Date designated by the Participant if such Participant files
with the Company an executed reinstatement form and any other forms required
by the Company no later than the beginning of the first business day of the
month next preceding the applicable Entry Date.
5.4 Additional Voluntary Contributions. A Participant may at any time (but no
more often than twice during a Plan Year) elect to make a lump sum Voluntary
Contribution to the Plan. Such Voluntary Contribution shall be paid to the
Company in cash (including payment by check or other method approved by the
Company), in an amount determined by the Participant, provided that each such
contribution may not be less than $200, and may not exceed the otherwise
applicable limits set forth in the Plan.
5.5 Rollover Contributions. (a) An Employee who has received a distribution of
the interest of the Employee in a qualified plan of a former employer under
circumstances meeting the requirements of Section 402(a)(5) of the Code relating
to lump-sum distributions from qualified plans may elect to deposit all or any
portion (as designated by such Employee in writing to the Company) to the amount
of such distribution as a Rollover Contribution to this Plan. A Rollover
Contribution may be made only within sixty (60) days following the date the
Employee receives the distribution from the plan of the former employer of the
Employee (or within such additional period as may be provided under Section 408
of the Code if the Employee shall have made a timely deposit of the distribution
in an individual retirement account). Rollover Contributions must be made in
cash (including payment by check or other method approved by the Company).
The Company shall establish rules and procedures to implement this Section
5.5, including, without limitation, such procedures as may be appropriate to
permit the Company to verify the tax qualified status of the plan of the former
employer and compliance with any applicable provisions of the Code relating to
Rollover Contributions. The amount contributed or transferred to the Trustee
pursuant to this Section shall be allocated to the Employee's Transfer
Account for the benefit of the Employee. Each Transfer Account shall
share in the earnings, gains and losses of the Trust Fund as set forth in
Section 9.10 of the Plan and shall be distributed at the same times and in the
manner set forth in Article X below.
(b) On the first day of each calendar month, with respect to each Participant
in this Plan who was a participant under the Illinois Power Company Incentive
Savings Plan (the "Salaried Plan") at any time during the immediately preceding
month, the Trustee shall receive directly from the trustee under the Salaried
Plan all, but not less than all, of the vested amount credited to the accounts
of the Participant under the Salaried Plan. Amounts so transferred shall
be allocated to the Participant's Salary Deferral Contribution Account, TRASOP
Transfer Account, Transfer Account, Matching Contributions Account, Company
Incentive Contribution Account and Voluntary Contribution Account in the Plan in
the same proportions that such amounts were credited to the Salary Deferral
Contribution Account, TRASOP Transfer Account, Transfer Account, Matching
Contributions Account, Company Incentive Contribution Account and Voluntary
Contribution Account in the Salaried Plan, respectively, immediately prior to
such transfer and shall be held for the benefit of the Participant pursuant to
the terms of this Plan. If the Participant has a loan outstanding under the
Salaried Plan at the time of the transfer, such loan shall be transferred to and
assumed by the Trustee and shall thereafter be treated as a loan made
pursuant to Article XIII of this Plan. A transfer to the Trustee of amounts
from the Salaried Plan shall be governed by this subsection (b) and not by
subsection (a) next above.
(c) On the first day of each calendar month, with respect to each Participant
in this Plan who becomes a participant under the Salaried Plan at any time
during the immediately preceding month, the Trustee shall transfer directly
to the trustee of the Salaried Plan all, but not less than all, of the amounts
credited to the Account of the Participant, as well as any outstanding loan made
to such Participant pursuant to Article XIII of the Plan, to be held
and assumed in accordance with the provisions of the Salaried Plan for the
benefit of the Participant.
5.6 TRASOP Transfers. In connection with the termination of the TRASOP on
October 31, 1988, each Employee who was an active participant in the TRASOP on
October 31, 1988 was given an opportunity to elect to have the account balances
of the Employee under the TRASOP transferred from the trustee under the TRASOP
directly to the Trustee to be placed in a TRASOP Transfer Account established
under the Plan on behalf and for the benefit of such Employee. The Trustee
received amounts so transferred directly from the trustee of the TRASOP and
allocated such amounts to the respective TRASOP Transfer Accounts of the
Employees electing such transfer. Each TRASOP Transfer Account shall share
in the earnings, gains and losses of the Trust Fund as set forth in Section
9.10 of the Plan and shall be distributed at the same times and in the manner
set forth in Article X below.
ARTICLE VI
SPECIAL RULES APPLICABLE TO VOLUNTARY CONTRIBUTIONS
AND MATCHING CONTRIBUTIONS
6.1 Contribution Percentage Tests. (a) Effective January 1, 1987 and
notwithstanding any provision of the Plan to the contrary, the Contribution
Percentage for Highly Compensated Eligible Employees shall bear to the
Contribution Percentage for all other Eligible Employees a relationship that
satisfies either of the following tests:
(i) The Contribution Percentage for Highly Compensated Eligible
Employees is not more than the Contribution Percentage for all other Eligible
Employees multiplied by 1.25; or
(ii) The Contribution Percentage for Highly Compensated Eligible
Employees is not more than the Contribution Percentage for all other Eligible
Employees multiplied by two and the excess of the Contribution Percentage for
the group of Highly Compensated Eligible Employees over that of all other
Eligible Employees is not more than two percentage points.
(b) For purposes of subsection (a), the term "Contribution Percentage" for a
specified group of Eligible Employees for a given Plan Year means the average of
the ratios calculated separately for each Eligible Employee in such group, of
(A) the aggregate of: (i) the Voluntary Contributions, if any, contributed by
the Eligible Employee to the Plan for such Plan Year, plus (B) the Matching
Contributions, if any, contributed by the Company to the Plan for such Plan
Year on behalf of such Eligible Employee; to (ii) the Eligible Employee's
Earnings for such Plan Year.
(c) If, at the end of any Plan Year, the Plan does not comply with subsection
(a), then the Voluntary Contributions made for such Plan Year by, and Matching
Contributions made for such Plan Year on behalf of, Highly Compensated
Participants shall be reduced in the manner set forth in the next sentence to
the extent necessary to comply with subsection (a). Reductions pursuant to the
preceding sentence shall be effected with respect to Highly Compensated
Participants pursuant to the following procedure: the Contribution Percentage
of the Highly Compensated Participant with the highest Contribution Percentage
shall be reduced to the extent necessary to cause such Highly Compensated
Participant's Contribution Percentage to equal the Contribution Percentage of
the Highly Compensated Participant with the next highest Contribution
Percentage. This process shall be repeated until the Plan satisfies one of the
tests set forth in subsection (a) for such Plan Year.
(d) Voluntary Contributions made by, and Matching Contributions made on
behalf of, Participants who are not Highly Compensated Participants shall be
valid and shall not be affected. Voluntary Contributions and Matching
Contributions that are reduced pursuant to the preceding provisions of this
Section for a Plan Year, adjusted for earnings, gains and losses allocable
thereto for such Plan Year and for the period between the end of such Plan Year
and the date of distribution, pursuant to Section 401(m) of the Code, shall be
returned to the Company and as soon as practicable thereafter paid by the
Company directly to the applicable Highly Compensated Participant. The
calculations, reductions and payments required by this Section shall be made
by the Company with respect to a Plan Year at any time prior to the close
of the following Plan Year.
(e) If at any time during a Plan Year the Company, in its sole discretion,
determines that neither of the tests set forth in subsection (a) of this Section
6.1 may be met for such Plan Year, then:
(i) The Company shall have the unilateral right during the Plan Year
to require the prospective reduction, for the balance of the Year or any part
thereof, of the percentage of Compensation of Highly Compensated Participants
that may be contributed as Voluntary Contributions. Such reductions shall be
made to the extent necessary, in the discretion of the Company, to assure that
one of the tests set forth in subsection (a) of this Section 6.1 shall be met
for the Plan Year and shall be based upon estimates made from data available
to the Company at any time during the Plan Year.
(ii) Reductions pursuant to subsection (i) next above shall be effected
with respect to Highly Compensated Participants pursuant to the following
procedure: the Contribution Percentage of the Highly Compensated Participant
with the highest Contribution Percentage shall be reduced to the extent
necessary to cause such Highly Compensated Participant's Contribution Percentage
to equal the Contribution Percentage of the Highly Compensated Participant with
the next highest Contribution Percentage. This process shall be repeated to
the extent necessary to assure that one of the tests set forth in subsection
(a) shall not be exceeded for such Plan Year.
(f) If a "Multiple Use of the Alternative Limitation" occurs in a Plan Year,
then, notwithstanding any other provisions of Section 3.4 or of this Section
6.1, the test in paragraph (a)(ii) of this Section shall not be used to satisfy
the requirements of this Section for Voluntary Contributions and Matching
Contributions in the same Plan Year that the test contained in Section
3.4(b)(ii) is used to satisfy the requirements of Section 3.4 with respect to
Salary Deferral Contributions. If the preceding sentence shall be applicable
for a Plan Year, then the Company shall determine whether to use the test in
paragraph (a)(ii) of this Section to satisfy the requirements of this Section
6.1, or to use the test in paragraph (b)(ii) of Section 3.4
to satisfy the requirements of Section 3.4, for such Plan Year.
A Multiple Use of the Alternative Limitation shall occur in a Plan Year
if all of the following conditions are satisfied in the Plan Year:
(1) At least one Highly Compensated Participant is eligible to authorize
Salary Deferral Contributions to be made on behalf of the Highly Compensated
Participant, and to make Voluntary Contributions or have Matching Contributions
allocated to the Matching Contributions Account of the Highly Compensated
Participant, pursuant to the Plan during such Plan Year;
(2) The sum of the Actual Deferral Percentage of the entire group of
Highly Compensated Eligible Employees and the Contribution Percentage of the
entire group of Highly Compensated Eligible Employees for such Plan Year exceeds
the greater of:
A. the sum of:
(i) 125% of the greater of (I) the Actual Deferral
Percentage of the group of Eligible Employees who are not Highly
Compensated Eligible Employees for such Plan Year, or (II) the
Contribution Percentage of the group of Eligible Employees who are not
Highly Compensated Eligible Employees for such Plan Year, and
(ii) Two plus the lesser of A(i)(I) or A(i)(II) above. In no
event, however, shall this amount exceed 200% of the lesser of A(i)(I) or
A(i)(II) above, or
B. the sum of:
(i) 125% of the lesser of (I) the Actual Deferral
Percentage of the group of Eligible Employees who are not Highly
Compensated Eligible Employees for such Plan Year, or (II) the
<PAGE>
Contribution Percentage of the group of Eligible Employees who are not
Highly Compensated Eligible Employees for such Plan Year, and
(ii) Two (2) plus the greater of B(i)(I) or B(i)(II) above.
In no event, however, shall this amount exceed 200% of the greater of
B(i)(I) or B(i)(II) above;
(3) The Actual Deferral Percentage of the entire group of Highly
Compensated Eligible Employees exceeds the amount described in Section
3.4(b)(i); and
(4) The Contribution Percentage of the entire group of Highly
Compensated Eligible Employees exceeds the amount described in Section
6.1(a)(i).
ARTICLE VII
COMPANY INCENTIVE CONTRIBUTIONS
7.1 Company Incentive Contributions. (a) For each Plan Year in which the
Company attains the minimum Incentive Target established by the Company for such
Plan Year, and in which the Company declares a dividend on Company Common Stock,
the Company shall contribute to the Trust for each Participant a Company
Incentive Contribution equal to a percentage of such Participant's Earnings (up
to two percent (2%)) as determined pursuant to such Incentive Targets.
Company Incentive Contributions shall be remitted to the Trustee as
soon as practicable following the end of such Plan Year.
(b) Notwithstanding the provisions of paragraph (a) next above, if the
required payments of principal and interest on a Loan in any Plan Year require a
release in that Plan Year of Company Common Stock from the Loan Suspense
Account, pursuant to Section 8.1(b), with an aggregate value in excess of the
sum of (1) the amount of Matching Contributions for such Plan Year, and (2) the
amount of unpaid Matching Contributions for the preceding Plan Year, required
pursuant to Section 4.2, such Company Common Stock so released shall constitute
a Company Incentive Contribution for such Plan Year, and shall be allocated
among the Company Incentive Contribution Accounts of all Participants either
pursuant to Sections 7.1 and 9.5 if the Company attains the minimum Incentive
Target established by the Company for that Plan Year, or in proportion to the
Earnings of all Participants if the Company does not attain the minimum
Incentive Target established for that Plan Year.
(c) Company Incentive Contributions made with respect to a Plan Year
pursuant to this Section 7.1 shall in no event be made later than the time
prescribed by law for filing the income tax return of the Company for the
fiscal year of the Company (including extensions thereto) that corresponds to
such Plan Year.
7.2 Form of Company Incentive Contribution. Company Incentive Contributions to
the Trust for any Plan Year shall be allocated in shares of Company Common Stock
acquired with the proceeds of a Loan, and released from the Loan Suspense
Account pursuant to Section 8.1(b) as a result of (a) Company contributions
applied by the Trustee on principal and interest payments on the Loan for such
Plan Year and (b) cash dividends paid by the Company with respect to shares of
Company Common Stock acquired with the proceeds of the Loan and applied by
the Trustee on principal and interest payments on the Loan for such Plan Year,
in excess of the payments of principal and interest on the Loan attributable
to Matching Contributions for such Plan Year pursuant to Section 4.2.
ARTICLE VIII
EXEMPT LOANS
8.1 Loans. (a) The Company may direct the Trustee to obtain Loans. Any such
Loan will meet all requirements necessary to constitute an "exempt loan" within
the meaning of Section 4975(d)(3) of the Code and Treasury Regulations
Section 54.4975-7(b)(1)(iii) and shall be used primarily for the benefit of the
Participants and Beneficiaries. The proceeds of any such Loan shall be used,
within a reasonable time after the Loan is obtained, only to purchase Company
Common Stock from the Company or any shareholder of the Company, repay the Loan
or repay any prior Loan. The only assets of the Plan that may be given as
collateral on a Loan are shares of Company Common Stock acquired with the
proceeds of the Loan and shares of Company Common Stock that were used as
collateral on a prior Loan repaid with the proceeds of the current Loan.
Company Common Stock purchased with the proceeds of a Loan shall be placed
in a Loan Suspense Account. No person entitled to payment under a Loan shall
have recourse against Trust assets other than such collateral, contributions
(other than contributions of Company Common Stock) that are available under the
Plan to meet obligations under the Loan and earnings attributable to such
collateral and the investment of such contributions. All Matching Contributions
and Company Incentive Contributions paid during the Plan Year in which a Loan
is made (whether before or after the date the proceeds of the Loan are
received), all Matching Contributions and Company Incentive Contributions paid
thereafter until the Loan has been repaid in full, and all earnings from
investment of such Matching Contributions and Company Incentive Contributions,
without regard to whether any such Matching Contributions and Company
Incentive Contributions and earnings have been allocated to Participants'
Matching Contribution Accounts or Company Incentive Contribution Accounts, shall
be available to meet obligations under the Loan as such obligations accrue, or
prior to the time such obligations accrue, unless otherwise provided by the
Company at the time any such Contribution is made.
(b) Shares of Company Common Stock purchased with the proceeds of a Loan
shall be released from the Loan Suspense Account upon the payment of any portion
of the Loan in a minimum amount required pursuant to applicable provisions of
Section 4975(d)(3) of the Code and Treasury Regulation Section 54.4975-7(b)(8)
issued thereunder.
(c) If the Company Common Stock purchased with the proceeds of a Loan
includes more than one class of Company Common Stock, the number of shares of
each class to be released for a Plan Year must be determined by applying the
same fraction to each class. If interest on any Loan is variable, the interest
to be paid in future years under the Loan shall be computed by using the
interest rate applicable as of the end of the Plan Year. Should a loan
initially satisfying the conditions stated in subparagraph (b)(1) at some
subsequent date cease to satisfy the conditions of such subparagraph, by reason
of a renewal, extension, or refinancing of the Loan, then subparagraph (b)(2)
shall be applied in determining the shares released upon payment of any
principal or interest after such date.
8.2 Loan Payments. (a) Payments of principal and interest on any Loan during
a Plan Year shall be made by the Trustee (as directed by the Company) only from
(1) Matching Contributions and Company Incentive Contributions to the Trust made
to meet the Plan's obligation under a Loan (other than contributions of Company
Common Stock) and from any cash dividends attributable to Company Common Stock
acquired with the proceeds of a Loan, and investments of such contributions
(both received during or prior to the Plan Year); (2) the proceeds of a
subsequent Loan made to repay a prior Loan; and (3) the proceeds of the sale of
any Company Common Stock purchased with the proceeds of a Loan. Such
contribution and cash dividends must be accounted for separately by the Plan
until the Loan is repaid.
(b) Company Common Stock released by reason of the payment of principal
or interest on a Loan shall, following such payment, be allocated as set forth
in Sections 9.3 and 9.5 to Participants' Matching Contribution Accounts and
Company Incentive Contribution Accounts.
(c) While any Loan is outstanding, the Company shall make Matching
Contributions and Company Incentive Contributions to the Trust required by
Sections 4.1 and 7.1, in cash, in sufficient amounts to enable the Trustee to
pay principal and interest payments on such Loan as they are due, except to the
extent that such principal and interest payments have been satisfied by the
Trustee from cash dividends paid to it with respect to Company Common
Stock acquired with the proceeds of the Loan pursuant to subsection (d) next
below; provided, however, that no such contribution shall exceed the limitations
in Section 9.8. In the event that such Contributions, by reason of the
limitations in Section 9.8, are insufficient to enable the Trust to pay
principal and interest payments on such Loan as they are due, then upon the
Trustee's request the Company shall:
(1) Make a Loan to the Trust as described in Treasury Regulation
Section 54.4975-7(b)(4)(iii), in sufficient amounts to meet such principal and
interestpayments. Such new Loan shall also meet all requirements of an "exempt
loan" within the meaning of Treasury Regulation Section 54.4975-7(b)(1)(iii) and
shall be subordinated to the prior Loan. Company Common Stock purchased with the
proceeds of the prior Loan will be allocated to the Accounts of the Participants
in accordance with applicable provisions of the Plan;
(2) Purchase any Company Common Stock purchased with the proceeds
of the prior Loan in an amount necessary to provide the Trustee with sufficient
funds to meet the principal and interest repayments. Any such sale by the Plan
shall meet the requirements of Section 408(e) of ERISA; or
(3) Any combination of the foregoing.
(d) While any Loan is outstanding, cash dividends received by the Trustee with
respect to Company Common Stock acquired with the proceeds of such Loan shall be
applied by the Trustee to principal and interest payments due on such Loan, to
the extent that such payments are not made by the Trustee with contributions
made by the Company pursuant to Section 8.2(c). Such payments shall first be
made with cash dividends received with respect to Company Common Stock held in
the Matching Contribution Accounts of Participants and attributable to Matching
Contributions made on or after January 1, 1991, or held in the Company
Incentive Contribution Accounts of Participants, and thereafter, to the extent
necessary, with cash dividends received with respect to Company Common Stock
held in the Loan Suspense Account. Any cash dividends received with respect to
Company Common Stock held in Matching Contribution Accounts or Company Incentive
Contribution Accounts that are not applied by the Trustee to principal and
interest payments due on the Loan pursuant to the preceding provisions of this
paragraph shall be allocated to such Matching Contribution Accounts or
Company Incentive Contribution Accounts. Any cash dividends received with
respect to Company Common Stock held in the Loan Suspense Account that are not
applied by the Trustee to principal and interest payments due on the Loan
pursuant to the preceding provisions of this paragraph shall be allocated to the
Loan Suspense Account and applied by the Trustee to principal and interest
payments due on the Loan in subsequent Plan Years. Any such cash dividends
allocated to Matching Contribution Accounts or Company Incentive Contribution
Accounts shall be invested by the Trustee in the Company Contributions Common
Stock Fund pursuant to Section 14.4. Any such cash dividends allocated to the
Loan Suspense Account shall be invested by the Trustee in such manner as the
Trustee shall determine pursuant to the terms of the Trust Agreement.
To the extent principal and interest payments on a Loan are repaid by
cash dividends on shares of Company Common Stock held in the Matching
Contribution Account and attributable to Matching Contributions made on or after
January 1, 1991, or in the Company Incentive Contribution Account, of a
Participant, a number of shares of Company Common Stock shall be released from
the Loan Suspense Account and allocated to the Matching Contribution Account
or Company Incentive Contribution Account, as the case may be, of such
Participant. To the extent principal and interest payments due on a Loan are
repaid by cash dividends on shares of Company Common Stock held in the Loan
Suspense Account, a number of shares of Company Common Stock shall be released
from the Loan Suspense Account and allocated among the Company Incentive
Contribution Accounts of all Participants pursuant to Sections 7.1 and 9.5. The
number of shares of Company Common Stock to be released from the Loan Suspense
Account pursuant to either of the preceding sentences shall have an aggregate
fair market value, determined as of the date of allocation pursuant to Section
14.5, equal to the amount of such dividends received with respect to such shares
that are applied to payments on a Loan.
(e) The Company shall not, pursuant to the provisions of this Section, do,
cause to be done any act or thing, or fail to do any act or thing, that would
result in a disqualification of the Plan as an employee stock ownership plan
under Section 4975(e)(7) of the Code.
(f) Notwithstanding any amendment to or termination of the Plan that causes
it to cease to qualify as an employee stock ownership plan within the meaning of
Section 4975(e)(7) of the Code, or any repayment of a Loan, no shares of Company
Common Stock acquired with the proceeds of a Loan obtained by the Trust to
purchase Company Common Stock may be subject to a put, call or other option,
or buy-sell similar arrangement while such shares are held by and when
distributed from the Plan.
(g) In order to assure that the number of shares of Company Common Stock
released from the Loan Suspense Account for any Plan Year in accordance with the
provisions of Section 4975 of the Code, Section 408(b) of ERISA, and the
regulations promulgated thereunder and this Article VIII, is sufficient to
satisfy the Company's obligation to make Matching Contributions and Company
Incentive Contributions in accordance with the terms of the Plan, a Loan, by its
terms, shall permit both its prepayment and refinancing by the Trustee,
as well as the corresponding acceleration or deceleration of the rate at
which shares of Company Common Stock are released from the Loan Suspense
Account.
(h) Notwithstanding the foregoing, if as of December 31, 2015, any of the
principal or accrued and unpaid interest of any Loan is then outstanding, the
Company shall make contributions to the Trust in accounts that, together with
cash dividends paid to the Trustee with respect to Company Common Stock acquired
with the proceeds of the Loan, shall satisfy all payment of principal and
interest then remaining on such Loan, and all shares of Company Common Stock
acquired with the proceeds of such Loan and then held in the Loan Suspense
Account shall be allocated to Participants' Accounts, regardless of whether the
value of such shares exceeds the aggregate Matching Contributions and Company
Incentive Contributions required for such Plan Year pursuant to Sections 4.1 and
7.1.
ARTICLE IX
ALLOCATIONS TO PARTICIPANTS' ACCOUNTS
9.1 Separate Accounts. The Company shall create and maintain a separate
Account for each Participant as shall be needed. Such Accounts shall consist of
such of the following as shall be applicable to the Participant: a Matching
Contribution Account, a Salary Deferral Contribution Account, a TRASOP Transfer
Account, a Transfer Account, a Company Incentive Contribution Account and a
Voluntary Contribution Account. Participants' Accounts are primarily for
accounting purposes and do not require a segregation of the Trust Fund. The
Company may delegate the responsibility for the maintenance of the Accounts to
the Trustee or any agent or agents.
9.2 Company Account. The Company shall maintain a Limitation Account, if
necessary, pursuant to the provisions of Section 9.8. The investment of the
balance in the Limitation Account shall be within the sole discretion of the
Company.
9.3 Allocation of Matching Contributions. (a) As of each Valuation Date there
shall be allocated to the Matching Contribution Account of each Participant the
Matching Contribution made by the Company for such Participant pursuant to
Section 4.1(a) for the Valuation Period ending on such Date. An allocation
pursuant to this Section shall be made only to the Matching Contribution
Account of a Participant whose Earnings were reduced through payroll deductions
pursuant to an Incentive Savings Agreement during the Valuation Period ending on
such Date.
(b) Any Matching Contribution, reduced by any applicable amounts pursuant
to the provisions of Sections 6.1(c) or (f), shall be allocated to the Matching
Contribution Account of a Participant in shares of Company Common Stock,
including fractional shares, pursuant to Sections 4.2 and 8.2; provided,
however, that no fractional shares of Company Common Stock will be issued
pursuant to the Plan.
9.4 Allocation of Salary Deferral Contributions. As of each Valuation Date
there shall be allocated to the Salary Deferral Contribution Account of each
Participant a Salary Deferral Contribution equal to (i) the amount by which the
Participant's Earnings were reduced by payroll deductions during the Valuation
Period ending on such Date pursuant to such Participant's Incentive Savings
Agreement, reduced by (ii) any applicable amounts pursuant to the provisions
of Sections 3.1(b), 3.1(c), 3.4(c) and 6.1(f).
9.5 Allocation of Company Incentive Contributions. (a) As of the last day of
each Plan Year, there shall be allocated to the Company Incentive Contribution
Account of each Participant the Company Incentive Contribution, if any, made
by the Company pursuant to Section 7.1 for such Plan Year.
(b) Any Company Incentive Contribution shall be allocated to the Company
Incentive Contribution Account of a Participant in shares of Company Common
Stock, including fractional shares, pursuant to Sections 7.2 and 8.2; provided,
however, that no fractional shares of Company Common Stock will be issued
pursuant to the Plan.
9.6 Allocation of Voluntary and Rollover Contributions. Voluntary
Contributions made by a Participant, reduced by any applicable amounts pursuant
to the provisions of Sections 6.1(c) and (f), shall be allocated to the
Voluntary Contribution Account of the Participant as of the Valuation Date
coinciding with or next following receipt of such Contributions by the
Trustee. Rollover contributions made by or for an Employee shall be allocated
to the Transfer Account of the Participant as of the Valuation Date coinciding
with or next following receipt of such Contributions by the Trustee.
9.7 Allocation of TRASOP Transfers. Amounts transferred from an Employee's
account balances under the TRASOP were allocated to the TRASOP Transfer Account
of theEmployee as of the Valuation Date coinciding with or next following
receipt of such amounts by the Trustee.
9.8 Maximum Allocation. (a) Except as provided in subsection (b) below, the
allocations to the Account of any Participant in any Limitation Year shall be
limited so that the Participant's Annual Additions for such year do not exceed
the Maximum Permissible Amount.
(b) If no more than one-third of the Company contributions for a Limitation
Year that are deductible as principal or interest payments on a Loan, pursuant
to the provisions of Section 404(a) of the Code, are allocated to Highly
Compensated Participants, then the limitations imposed by subsection (a) shall
not apply to:
(i) Forfeitures of Company Common Stock if the Company Common
Stock was acquired with the proceeds of a Loan, or
(ii) Company contributions that are deductible as the interest payments
on a Loan under Section 404(a)(9)(B) of the Code and charged against a
Participant's Account.
(c) If the foregoing limitation on allocations would be exceeded in any
Limitation Year for any Participant as a result of reasonable error in
estimating a Participant's Compensation or under such other limited facts and
circumstances that the Commissioner of the Internal Revenue Service, pursuant to
Treasury Regulation 1.415-6(6), finds justify the availability of this Section
9.8, the amount in excess of the limits of this Section 9.8 shall be
placed, unallocated to any Participant, in a Limitation Account. If a
Limitation Account is in existence at any time during a particular Limitation
Year, other than the Limitation Year described in the preceding sentence, all
amounts in the Limitation Account must be allocated to Participants' Accounts
(subject to the limits of this Section 9.8) before any contributions that
would constitute Annual Additions may be made to the Plan for that Limitation
Year. The excess amount allocated pursuant to this Section 9.8 shall be used to
reduce Matching Contributions and Company Incentive Contributions for the next
Limitation Year (and succeeding Limitation Years, as necessary) for all of the
Participants in the Plan. The Limitation Account will not share in the
valuation of Participants' Accounts and the allocation of earnings set forth
in Section 9.10 of the Plan, and the change in fair market value and allocation
of earnings attributable to the Limitation Account shall be allocated to the
remaining Accounts hereunder as set forth in Section 9.10.
(d) Upon termination of the Plan, any amounts in a Limitation Suspense
Account at the time of such termination shall revert to the Company.
(e) In the event that any Participant under this Plan is also a Participant in
a defined benefit plan (as defined in Section 415(k) of the Code) maintained by
the Company, the sum of the defined plan fraction and the defined contribution
plan fraction for any Limitation Year with respect to such Participant shall not
exceed one (1). If such sum exceeds one (1), then no reduction in contributions
or allocations to obtain compliance with Section 415(e) of the Code shall occur
under this Plan until the Participant's benefits under such defined benefit plan
have been reduced pursuant to the terms thereof. Any reduction under this Plan
shall be made only to the extent necessary so that the sum of such fractions
shall equal one (1). For purposes of this Section 9.8, a plan is deemed to be
maintained by the Company if the plan is maintained by any employer that is,
along with the Company, a member of a controlled group of corporations or
under common control (as defined in Sections 414(b) and (c) of the Code, as
modified by Section 415(h) thereof) or a member of an affiliated service
group (as defined in Section 414(m) of the Code). For purposes of this
paragraph (e):
(1) The term "defined benefit plan fraction" for any Limitation Year
means a fraction:
A. the numerator of which is the projected annual benefit of the
Participant under all defined benefit plans maintained by the Company
(determined as of the close of the Limitation Year), and
B. the denominator of which is the lesser of (i) the product of
1.25 multiplied by the dollar limitation in effect under Subsection 415(b)(1)(A)
of the Code for such Limitation Year, or (ii) the product of 1.4 multiplied by
the amount taken into account under Section 415(b)(1)(A) of the Code for the
Participant for such Limitation Year; and
(2) The term "defined contribution plan fraction" for any Limitation
Year means a fraction:
A. the numerator of which is the sum of the Annual Additions
to the Participant's Account as of the close of the Limitation Year, and
B. the denominator of which is the sum of the lesser of the
following amounts determined for such Limitation Year and for each prior
Limitation Year of service with the Company:
(i) the product of 1.25 multiplied by the dollar
limitation in effect under Subsection 415(c)(1)(A) of the Code for such
Limitation Year (determined without regard to Subsection 415(c)(6) of the
Code), or
(ii) the product of 1.4 multiplied by the amount which
may be taken into account under Subsection 415(c)(1)(B) of the Code (or
Subsection 415(c)(7) if applicable) with respect to such Participant under
such defined contribution plan for such Limitation Year.
(f) If a Participant shall be entitled to receive an allocation under this
Plan and any Related Plan and, in the absence of the limitations contained in
this Section 9.8 and Section 4.3, the Company would have contributed or
allocated to the Account of any Participant an amount for a Limitation Year that
would have caused the Annual Additions to the Account of a Participant to exceed
the Maximum Permissible Amount for such Year, then the contributions
or allocations under such Related Plan shall be reduced prior to any
reduction in contributions or allocations made with respect to the Participant
under this Plan to the extent necessary so that the allocation of such Annual
Additions does not exceed the Maximum Permissible Amount.
(g) Any reduction in allocations under this Plan for a Participant's Account
required pursuant to this Section 9.8 and Section 415 of the Code shall be
effected, to the extent necessary, in the following manner: (i) first,
Voluntary Contributions made by such Participant that are included in the Annual
Additions to the Account of Participant, adjusted for earnings, gains and losses
allocable thereto, shall be returned to the Participant; (ii) next, the Salary
Deferral Contribution that would have been made by the Company for the
applicable Plan Year with respect to such Participant shall be reduced; (iii)
next, the Matching Contribution that would have been made by the Company for the
applicable Plan Year with respect to such Participant shall be reduced; and (iv)
next the Company Incentive Contribution that would have been made by the Company
for the applicable Plan Year with respect to such Participant shall be
reduced. The amount of any reductions to Voluntary Contributions and Salary
Deferral Contributions pursuant to clauses (i) or (ii) of this subsection (g),
adjusted for gains, earnings and losses allocable thereto, shall be paid by the
Company directly to the affected Participant.
(h) The provisions of this Section shall be interpreted by the Company, in the
administration of the Plan, to reduce allocations (as required by this Section)
only to the minimum extent necessary to reflect the requirements of Section 415
of the Code, as amended and in force from time to time, and Treasury Regulations
promulgated pursuant to said Section.
9.9 Vesting. Each Participant shall at all times be fully vested in the
Adjusted Balance of the Account of the Participant under the Plan.
9.10 Allocations and Adjustments to Accounts. As of each Valuation Date, and
subject to Section 13.4(e), the Company shall determine, on an accrual basis of
accounting, the Adjusted Balance of each Account of each Participant in the
following manner:
(a) As soon as practicable after each Valuation Date, the Company shall
determine the earnings and the amount of any realized or unrealized appreciation
or depreciation in the fair market value of each of the Investment Funds (other
than the Stock Funds), during the Valuation Period ending on such Valuation Date
as determined as of such Valuation Date or the next previous business day if
such Valuation Date falls on a Saturday, Sunday or holiday. In determining such
value the Company shall use such generally accepted methods and bases as the
Company, in its discretion, shall deem advisable. The judgment of the Company
as to the fair market value of any asset shall be presumptively conclusive and
binding on all persons.
(b) The earnings on contributions made pursuant to Sections 3.1, 5.1, 5.4, 5.5
and 5.6 that have been initially invested in short term investment obligations
selected by the Trustee from time to time during the Valuation Period ending on
such Valuation Date pending allocation to one or more of the Investment Funds
(other than the Stock Funds) shall be allocated to a Participant's applicable
Account in the same proportion as such contributions are allocated. The amount
of such earnings on such contributions shall be determined by multiplying the
total amount of such earnings by a fraction the numerator of which is the amount
of such contributions allocated to a Participant's Account for that Valuation
Period and the denominator of which is the total amount of such contributions
allocated to all Participants' Accounts for that Valuation Period.
(c) The earnings and market appreciation or depreciation of each Investment
Fund (other than the Stock Funds) for the Valuation Period ending on such
Valuation Date (including earnings and appreciation or depreciation attributable
to the investment of any Limitation Account in such Investment Fund) shall be
allocated to each applicable Account (excluding any Limitation Account) that is
invested in such Investment Fund on such Valuation Date by multiplying the
earnings and market appreciation or depreciation of such Fund by a fraction
the numerator of which is the Adjusted Balance of such Account invested in the
applicable Fund as of the prior Valuation Date and the denominator of which is
the total of the Adjusted Balances of all such Accounts (excluding any
Limitation Account) invested in such Fund as of the prior Valuation Date. Each
such Account (excluding any Limitation Account) shall be adjusted by adding
thereto or subtracting therefrom its share of the earnings and market
appreciation or depreciation of each Investment Fund as determined by the
preceding sentence.
(d) Subject to the provisions of Section 8.2(d) above, all Company Common
Stock and other property received by the Trustee during the Valuation Period
ending on such Valuation Date as dividends or other distributions by the Company
with respect to any Account of a Participant invested in one or more Stock
Funds, and all shares of Company Common Stock released from the Loan Suspense
Account pursuant to Section 8.1(b), shall be allocated to that Account.
Notwithstanding anything to the contrary contained herein, no Company Common
Stock or other property declared or paid by the Company as a dividend on Company
Common Stock shall be allocable to any Account if the Company Common Stock or
other property was declared or paid as a dividend with respect to any period
prior to the date of receipt of the contribution or transfer of the underlying
Company Common Stock by the Trustee.
(e) Each Account shall then be further adjusted by adding to it the amount of
contributions allocable thereto for each Participant pursuant to Sections 9.3,
9.4, 9.5 and 9.6 for the Valuation Period or, if applicable, the Plan Year
ending on such Valuation Date.
(f) Following the above adjustments to each Account there shall be deducted
from each Account the distributions and withdrawals made therefrom since the
prior Valuation Date.
9.11 Accounting for Allocations of Company Common Stock. The Company shall
adopt accounting procedures for the purpose of making the allocations,
valuations and adjustments to Participants' Accounts provided for in this
Article. Except as provided in Treasury Regulation Section 54.4975-11(d),
Company Common Stock acquired by the Plan shall be accounted for as provided
under Treasury Regulation Section 1.402(a)-1(b)(2)(ii), allocations of Company
Common Stock shall be made separately for each class of stock, and the
Company shall maintainadequate records of the cost basis of all shares of the
Company Common Stock allocated to each Participant's Matching Contribution
Account, Company Incentive Contribution Account, Salary Deferral Contribution
Account, Transfer Account, TRASOP Transfer Account, and Voluntary Contribution
Account.
ARTICLE X
PAYMENT OF BENEFITS
10.1 Payments on Termination for Reasons Other Than Death. A Participant who
attains the Normal Retirement Date and continues to be an Employee thereafter
shall continue to share in the allocation of Matching Contributions, Company
Incentive Contributions and Salary Deferral Contributions; may elect or continue
to enter into Incentive Savings Agreements; and may elect or continue to make
Voluntary Contributions. Upon the termination of employment of a Participant
for any reason other than death, the Company shall notify the Trustee in writing
of the Participant's termination and shall direct the Trustee to make payment
of the Adjusted Balance of the Participant's Account in accordance with Sections
10.3 and 10.4.
10.2 Payments on Death.
(a) Upon the death of a Participant the Company shall promptly notify the
Trustee in writing of the Participant's death and the name of the Beneficiary of
the Participant (or surviving spouse if subsection (c) is applicable) and shall
direct the Trustee to make payment of the Adjusted Balance of the Participant's
Account in accordance with Sections 10.3 and 10.4.
(b) Each Participant who is not married to a surviving spouse at the date of
the death of the Participant, or each married Participant whose surviving spouse
has consented to an alternative Beneficiary designation as provided in
subsection (c), shall have the right to designate, by giving a written
designation to the Company, a person or persons or entity as Beneficiary to
receive the death benefit provided under this Section 10.2. Successive
designations may be made, and the last designation received by the Company prior
to the death of the Participant shall be effective and shall revoke all prior
designations. If a designated Beneficiary shall die before the Participant the
interest of the Beneficiary shall terminate and, unless otherwise provided in
the Participant's designation, such interest shall be paid in equal
shares to those Beneficiaries, if any, who survive the Participant.
A Participant shall have the right to designate different Beneficiaries to
receive the Adjusted Balance in the Participant's Matching Contribution Account,
Company Incentive Contribution Account, Salary Deferral Contribution Account,
TRASOP Transfer Account, Transfer Account and Voluntary Contribution Account
under the Plan. The Participant shall have the right to revoke the
designation of any Beneficiary without the consent of the Beneficiary.
(c) The Beneficiary of each married Participant shall be the surviving spouse
of the Participant and the death benefits of any Participant who is married at
the date of the death of the Participant shall be paid in full to the surviving
spouse of the Participant in a single lump sum. Notwithstanding the preceding
sentence, the death benefits provided pursuant to subsection (a) shall be
distributed to any other Beneficiary designated by the Participant as
provided in subsection (b) of this Section, and pursuant to the method, if any,
designated by the Participant as provided in subsection (b), if the
Participant's surviving spouse consented to such designation by the Participant,
prior to the date of the Participant's death, in writing. Such consent must
acknowledge the effect of the election and the identity of any non-surviving
spouse Beneficiary, including any class of Beneficiaries or contingent
Beneficiaries, and must be witnessed by a representative of the Plan or a notary
public. The consent of the Participant's surviving spouse shall not be required
if the Participant establishes to the satisfaction of the Company that
consent may not be obtained because there is no surviving spouse or the
surviving spouse cannot be located, or because of such other circumstances as
the Secretary of the Treasury may prescribe by regulations. The Participant may
not subsequently change the method of distribution elected by the Participant or
the designation of the Beneficiary of the Participant unless the surviving
spouse of the Participant consents to the new election or designation in
accordance with the requirements set forth in the preceding sentences, or unless
the surviving spouse's consent permits the Participant to change the election of
method of payment or the designation of the Beneficiary of the Participant
without the spouse's further consent. A spouse's consent is irrevocable. Any
consent by a surviving spouse, or establishment that the consent of the
surviving spouse may not be obtained, shall be effective only with respect to
that surviving spouse.
(d) If a Participant shall fail to designate a Beneficiary, or if such
designation shall for any reason be illegal or ineffective, or if no Beneficiary
shall survive the Participant, the death benefits of the Participant otherwise
payable pursuant to subsections (b) or (c) shall be paid:
(i) to the surviving spouse of the Participant;
(ii) if there is no surviving spouse, to the descendants of the Participant
(including legally adopted children or their descendants) per stirpes;
(iii) if there is neither surviving spouse nor surviving descendants, to
the duly appointed and qualified or other personal representative of the
Participant to be distributed in accordance with the Participant's will or
applicable intestacy law; or
(iv) in the event that there shall be no representative duly appointed and
qualified within six (6) months after the date of death of such deceased
Participant, thento such persons as, at the date of the death of the
Participant, would be entitled to share in the distribution of such deceased
Participant's personal estate under the provisions of the applicable statute
then in force governing the descent of intestate property, in the
proportions specified in such statute.
(e) The Company may determine the identity of the distributees and in so
doing may act and rely upon any information it may deem reliable upon reasonable
inquiry, and upon any affidavit, certificate, or other paper believed by it to
be genuine, and upon any evidence believed by it sufficient.
10.3 Commencement of Payments.
(a) Subject to the succeeding provisions of this Section, upon the termination
of a Participant's employment with the Company (by reason of death or otherwise)
the Adjusted Balance of the Account of the Participant shall be payable to the
Participant (or the surviving spouse or Beneficiary of the Participant, if
applicable) during the first one hundred and twenty (120) days of the Plan Year
next following the Plan Year in which such termination occurs.
(b) A Participant (or the surviving spouse or Beneficiary of the Participant,
if applicable) may elect to receive payment of all, but not less than all, of
the Adjusted Balance of the Participant's Account during the sixty (60) day
period after the Valuation Date next following the date of termination of the
Participant's employment with the Company. Such election shall be made in
writing to the Company within thirty (30) days after such termination
of employment, shall be irrevocable, and shall be made pursuant to such other
rules as the Company may promulgate.
(c) Notwithstanding the provisions of Sections 10.3(a) and (b) next above, if
the value of the nonforfeitable portion of the Adjusted Balance of a
Participant's Account (including any participant loans outstanding on such date)
exceeds $3,500, such distribution shall be made in accordance with the
provisions of this Article X to the Participant (or the surviving spouse or
Beneficiary of the Participant, if applicable) as soon as practicable after the
Valuation Date next following the Participant's date of termination of
employment with the Company.
(d) Notwithstanding the foregoing provisions of this Section other than those
that require the consent of a Participant to a distribution of the Adjusted
Balance of the Account of the Participant in excess of $3,500:
(i) Unless a Participant otherwise elects, the distribution of the
Adjusted Balance of (A) the Matching Contribution Account of the Participant
attributable to Matching Contributions made on and after January 1, 1991, and
(B) the Company Incentive Contribution Account will commence not later than 12
months after the close of the Plan Year (1) in which the Participant's
employment with the Company terminates because of retirement on or after the
Normal Retirement Date of the Participant, permanent disability, or death, or
(2) that is the fifth Plan Year in which theParticipant's employment with the
Company terminates for any other reason, except that this clause (2) shall not
apply if the Participant is reemployed by the Company before the first day of
such fifth Plan Year.
(ii) Unless the Participant otherwise elects, the distribution of the
Adjusted Balance of the Matching Contribution Account and Company Incentive
Contribution Account of the Participant pursuant to paragraph (i) above will be
in substantially equal annual or more frequent payments over a period not longer
than the greater of (1) five years, or (2) in the case of a Participant the
Adjusted Balance of whose Matching Contribution Account attributable to Matching
Contributions made on or after January 1, 1991 and Company Incentive
Contribution Account exceeds $500,000, five years plus one additional year (but
not more than five additional years) for each $100,000 or fraction thereof by
which such Adjusted Balance exceeds $500,000. The dollar amounts contained in
this paragraph (ii) shall be adjusted by the Secretary of the
Treasury pursuant to Section 409(o)(2) of the Code.
(e) The Adjusted Balance of a Participant's Account that is paid pursuant to
Section 10.1 or 10.2 and this Section shall be determined as of the Valuation
Date coinciding with or next preceding the date of such payment.
(f) If any distribution is made to a Participant (or the surviving spouse of
the Participant or Beneficiary, if applicable) pursuant to this Section prior to
the payment to the Trustee of any Matching Contribution or Company Incentive
Contribution, such Matching Contribution or Company Incentive Contribution
otherwise allocable to the Matching Contribution Account of such Participant
pursuant to Sections 9.3, 9.5 and 9.10 shall be paid by the Trustee directly to
such Participant, surviving spouse or Beneficiary as soon as practicable
following the payment of such Matching Contribution or Company Incentive
Contribution to the Trustee.
(g) Effective January 1, 1993, if the distributee of any eligible rollover
distribution (as defined in section 402 of the Code or related regulations or
notices) under the Plan of $200 or more:
(i) elects in such form and at such time as the Company may prescribe
to have the distribution paid directly to an eligible retirement plan (as
defined in section 401(a)(31)(D) of the Code), and
(ii) specifies an eligible retirement plan to which the distribution is to
be paid,
the distribution shall be made in the form of a direct trustee-to-trustee
rollover to the eligible plan so specified.
(h) If a distribution is one to which sections 401(a)(11) and 417 of the Code
do not apply, such distribution may commence less than 30 days after the notice
required under section 1.411(a)-11(c) of the Income Tax Regulations is given,
provided that:
(i) the Plan Administrator clearly informs the Participant that the
Participant has a right to a period of at least 30 days after receiving the
notice to consider the decision of whether or not to elect a distribution (and,
if applicable, a particular distribution option), and
(ii) the Participant, after receiving the notice, affirmatively elects a
distribution.
(i) Unless the participant elects otherwise, the payment of benefits under the
Plan will commence not later than 60 days after the close of the Plan Year in
which the latest of the following events occurs:
(i) the date on which the Participant attains the age of 65;
(ii) the tenth anniversary of the date on which the Participant
commenced participation in the Plan; or
(iii) the date on which the Participant's employment with the Company
terminates.
For Plan Years beginning prior to January 1, 1995, in the event a Participant
does not receive a distribution of the Adjusted Balance of the Participant's
Account prior to the date he attains age sixty-five (65), such distribution
shall be made to the Participant in accordance with the provisions of
subsections (a) and (b) above; provided, however, that in such event and solely
for such purpose, the Participant's sixty-fifth (65th) birthday shall be treated
as the Participant's date of termination of employment with the Company, and
distribution shall be made not later than the one hundred and twentieth (120th)
day of the Plan Year next following the Plan Year in which the Participant's
sixty-fifth (65th) birthday occurs. For plan years beginning on or after
January 1, 1995, subject to the provisions of Section 10.3(j) next below, a
Participant may elect to defer distribution of his Account in accordance with
the provisions of this Section 10.3(i). A Participant's Account retained in
the Plan pursuant to this Section 10.3(i) shall be invested and distributed
in accordance with the provisions of Articles X and XIV hereof.
(j) Notwithstanding anything to the contrary contained elsewhere in the Plan:
(i) A Participant's benefits under the Plan will:
(1) be distributed to the Participant not later than the Required
Distribution Date (as defined in subsection (iii)), or
(2) be distributed commencing not later than the Required
Distribution Date in accordance with regulations prescribed by the Secretary of
the Treasury over a period not extending beyond the life expectancy of the
Participant or the life expectancy of the Participant and the Beneficiary of the
Participant.
(ii) (1) If the Participant dies after distribution has commenced
pursuant to subsection (i)(2) but before the entire interest of the Participant
in the Plan has been distributed to the Participant, then the remaining portion
of that interest will be distributed at least as rapidly as under the method
of distribution being used under subsection (i)(2) at the date of the death of
the Participant.
(2) If a Participant dies before distribution has commenced
pursuant to subsection (i)(2), then, except as provided in subsections (ii)(3)
and (ii)(4), the entire interest of the Participant in the Plan will be
distributed within five years after the death of the Participant.
(3) Notwithstanding the provisions of subsection (ii)(2), if the
Participant dies before distribution has commenced pursuant to subsection (i)(2)
and if any portion of the interest of the Participant in the Plan is payable (A)
to or for the benefit of a Beneficiary, (B) in accordance with regulations
prescribed by the Secretary of the Treasury over a period not extending beyond
the life expectancy of the Beneficiary, and (C) beginning not later than one
year after the date of the Participant's death or such later date as the
Secretary of the Treasury may prescribe by regulations, then the portion
referred to in this subsection (ii)(3) shall be treated as distributed on the
date on which such distribution begins.
(4) Notwithstanding the provisions of subsections (ii)(2) and
(ii)(3), if the Beneficiary referred to in subsection (ii)(3) is the spouse of
the Participant, then
(A) the date on which the distributions are required to
begin under subsection (ii)(3)(C) of this Section shall not be earlier than
the date on which the Participant would have attained age 70 1/2, and
(B) if the spouse dies before the distributions to that
spouse begin, then this subsection (ii)(4) shall be applied as if the
surviving spouse were the Participant.
(iii) For purposes of this subsection (h), the Required Distribution Date
means April 1 of the calendar year following the calendar year in which the
Participant attains age 70 1/2; provided, however, that if the Participant
attained age 70 1/2 in calendar year 1988, distribution shall commence on April
1, 1990 and further provided that if the Participant attained age 70 1/2 prior
to January 1, 1988,distribution shall commence on the April 1 following the
later of the calendar year in which the Participant: (A) attained age 70 1/2,
or (B) terminated service with the Company, unless he was a five-percent owner
(as defined in Section 416 of the Code) of the Company with respect to the Plan
Year ending in the calendar year in which he attained age 70 1/2, in which case
clause (B) shall not apply.
(iv) For purposes of this subsection (h), the life expectancy of a
Participant and the spouse of the Participant may be redetermined, but not more
frequently than annually.
(v) A Participant may not elect a form of distribution pursuant to
subsection (h) providing payments to a Beneficiary who is other than the spouse
of the Participant unless the actuarial value of the payments expected to be
paid to the Participant is more than 50% of the actuarial value of the total
payments expected to be paid under such form of distribution.
10.4 Method of Payment. Whenever the Company shall direct the Trustee to make
payment to a Participant or the surviving spouse or Beneficiary of the
Participant upon termination of the Participant's employment, or as a
distribution pursuant to any of Sections 10.5 through 10.9, the Company shall
direct the Trustee to pay the Adjusted Balance of the Participant's Accounts
to or for the benefit of the Participant or the surviving spouse or Beneficiary
of the Participant in a lump sum:
(a)To the extent the Participant's Accounts are invested in Funds other than
Stock Funds, the distribution shall be made in cash.
(b)To the extent that the Participant's Accounts are invested in Stock Funds,
the distribution shall be made entirely in shares of Company Common Stock or
entirely in cash in an amount equal to the value of the Company Common Stock
in the Participant's Accounts, as elected by the Participant; provided, however,
that if distribution to the Participant is to be made in Company Common Stock,
the value of any fractional share of Company Common Stock will be distributed
in cash.
Notwithstanding the preceding provisions of this Section, the distribution of
the Adjusted Balance of the Matching Contribution Account of the Participant
attributable to Matching Contributions made on and after January 1, 1991, and of
the Company Incentive Contribution Account of the Participant, will be made
pursuant to the provisions of Section 10.3(d)(ii) as the Participant shall
elect by written instrument delivered to the Company. If the Participant fails
to make the election described herein prior to the date on which distribution of
the Participant's Account commences (in accordance with the provisions of
Section 10.3), distribution of such portion of the Matching Contributions
Account and of the Company Incentive Contribution Account of the Participant
will be made in a lump sum pursuant to the preceding provisions of this Section
10.4.
10.5 Hardship Distributions. The Company may, upon the request of a Participant
at any time prior to the termination of employment of the Participant, direct
the Trustee to make a lump sum distribution to the Participant from the Salary
Deferral Contribution Account and Matching Contribution Account of the
Participant for the purposes set forth below, subject to the following rules:
(i) Each request for a distribution must be made by written application to the
Company supported by such evidence as the Company may require;
(ii) Each distribution made pursuant to this Section 10.5 shall be on account
of a hardship suffered by the Participant. For purposes of this Section 10.5,
a hardship shall be limited to:
(1)Medical expenses described in Code Section 213(d) incurred by the
Participant, the Participant's spouse, or any dependents of the
Participant (as defined in Code Section 152);
(2)Purchase (excluding mortgage payments) of a principal residence
for the Participant;
(3)Payment of tuition for the next semester or quarter of post-
secondary education for the Participant, the spouse, children or
dependents of the Participant;
(4)The need to prevent eviction of the Participant from the principal
residence of the Participant or foreclosure on the mortgage of the
Participant's principal residence;
(5)Funeral expenses of a family member of the Participant; and
(6)Such other expenses and events related to the Participant's service
in the military of the United States determined by the Internal
Revenue Service to constitute a hardship;
(iii) The amount distributed shall not be in excess of the immediate and
heavy financial need of the Participant;
(iv) The Participant shall first obtain all distributions, other than hardship
distributions, and all nontaxable loans currently available under the Plan and
all other plans maintained by the Company;
(v) The Participant's elective contributions and employee contributions (as
defined in Treasury Regulation Section 1.401(k)) shall be suspended under the
Plan and all other plans maintained by the Company for twelve (12) months after
the receipt of the hardship distribution by the Participant;
(vi) The Participant may not make elective contributions (as defined in
Treasury Regulation Section 1.401(k)) under the Plan or any other plan
maintained by the Company for the Participant's taxable year immediately
following the taxable year of the hardship distribution in excess of the
applicable limit under Code Section 402(g) for such next taxable year less
the amount of such Participant's elective contributions for the taxable year of
the hardship distribution;
(vii) The amount distributed to a Participant in accordance with this Section
10.5 shall not exceed: (A) the Adjusted Balance of the Salary Deferral
Contribution Account of the Participant plus (B) the Adjusted Balance of the
Matching Contribution Account of the Participant, less (C) that portion of the
Salary Deferral Contribution Account of the Participant being used as security
for a loan made under Article XIII, determined as of the Valuation Date next
succeeding the date of receipt of the written request for distribution.
Notwithstanding the foregoing, the amount distributed shall not include earnings
allocated to such Participant's Salary Deferral Contribution Account after
December 31, 1988; provided, however, that in any event the amount available
for distribution under this Section 10.5 shall not be less than the sum of
(1) the Adjusted Balance of the Participant's Salary Deferral Contribution
Account on December 31, 1988 plus (2) the Adjusted Balance of the Matching
Contribution Account of the Participant determined as of the Valuation Date next
succeeding the date of receipt of the written request for distribution, less
(3) that portion of the Salary Deferral Contribution Account of the
Participant being used as security for a loan made under Article XIII as of
the Valuation Date next succeeding the date of receipt of the written request
for distribution.
(viii) If a Participant's termination of employment occurs after a request is
approved in accordance with this Section 10.5 but prior to distribution of the
full amount approved, the approval of the request of the Participant shall be
automatically void and the benefits the Participant or the Participant's
Beneficiary are entitled to receive under the Plan shall be distributed in
accordance with the preceding provisions of this Article.
10.6 In-Service Distributions From Participants' Salary Deferral Contribution
Accounts. A Participant who has attained the age of 59 1/2 may elect, by written
instrument delivered to the Company, to withdraw from the Salary Deferral
Contribution Account of the Participant an amount not in excess of (i) the
Adjusted Balance thereof determined on the Valuation Date next succeeding the
date of receipt of the written request for withdrawal; (ii) reduced by any
portion of such Adjusted Balance that is being used as security for a loan made
under Article XIII as of the Valuation Date next succeeding the date of receipt
of the written request for withdrawal.
10.7 In-Service Distributions from Participants' Matching Contribution
Accounts. (a) A Participant who has completed sixty (60) months as a
Participant may elect, by written instrument delivered to the Company to receive
a distribution of all or any part of the Matching Contribution Account of the
Participant determined as of the Valuation Date next succeeding the
date of receipt of the written request for distribution.
(b) A Participant, regardless of the period of participation of the
Participant in the Plan, may elect, by written instrument delivered to the
Company, to receive a distribution of all or any part of that portion of the
Matching Contribution Account of the Participant derived from Matching
Contributions in excess of Matching Contributions allocated to the Matching
Contribution Account of the Participant during the two (2) Plan Years preceding
the Plan Year in which the withdrawal takes place, adjusted for gain, earnings
and losses attributable thereto determined as of the Valuation Date next
succeeding the date of receipt of the written request for distribution.
10.8 Withdrawals from Voluntary Contribution and Transfer Accounts. A
Participant, regardless of the period of participation of the Participant in the
Plan, may elect, by written instrument delivered to the Company, to withdraw
from the Voluntary Contribution Account and Transfer Account of the Participant
an amount not in excess of the Adjusted Balance thereof determined as of the
Valuation Date next succeeding the date of receipt of the written request
for withdrawal.
10.9 Withdrawals from TRASOP Transfer Accounts. A Participant who, pursuant to
Section 5.6, has transferred the account balance of the Participant under the
TRASOP to the TRASOP Transfer Account of the Participant may elect, by written
instrument given to the Company, to withdraw from the TRASOP Transfer Account of
the Participant an amount not in excess of (i) the Adjusted Balance thereof
determined as of the Valuation Date next succeeding the date of receipt of the
request for distribution; (ii) reduced by any portion of such Adjusted Balance
that is being used as security for a loan made under Article XIII as of the
Valuation Date next succeeding the date of receipt of the written request for
withdrawal.
10.10 Form of Withdrawal. A Participant electing to make a withdrawal from
the Account of the Participant pursuant to Section 10.5, 10.7 or 10.9 may make
such withdrawal, at the election of the Participant, delivered in writing to the
Company, subject to the following:
(a)To the extent the Participant's Account is invested in Funds other than
Stock Funds, the distribution shall be made in cash.
(b)To the extent that the Participant's Account is invested in Stock Funds, the
distribution shall be made entirely in shares of Company Common Stock or
entirely in cash in an amount equal to the value of the Company Common Stock
in the Participant's Account, as elected by the Participant; provided, however,
that if distribution to the Participant is to be made in Company Common Stock,
the value of any fractional share of Company Common Stock will be distributed
in cash.
10.11 Rules Governing In-Service Distributions.
(a) In the event a Participant requests a distribution pursuant to Sections
10.5, 10.6, 10.7, 10.8 and 10.9, the distribution shall be paid to the
Participant as soon as is reasonably practicable after the Valuation Date next
succeeding the date of receipt of the written request for such distribution.
If a Participant's termination of employment occurs after an election is made in
accordance with these Sections, but prior to distribution of the full amount
elected, such election shall be automatically void and the benefits the
Participant or the Participant's Beneficiary are entitled to receive under
the Plan shall be distributed in accordance with the preceding provisions of
this Article.
(b) No distribution made pursuant to Section 10.6, 10.7, 10.8 or 10.9 may be
for an amount which is less than the lesser of: (i) $200; or (ii) that portion
of the Adjusted Balance of the Participant's Salary Deferral Contribution
Account, Matching Contribution Account, Voluntary Contribution Account, Transfer
Account or TRASOP Transfer Account (whichever is applicable) that is subject to
withdrawal pursuant to such Section.
(c) A Participant may not make more than one withdrawal pursuant to each
of Sections 10.6, 10.7, 10.8 or 10.9 in any Plan Year.
10.12 Distribution of Unallocated Employee Contributions.
(a) If on the date of termination of a Participant's employment, the Company
shall be holding Voluntary Contributions or a Rollover Contribution (including
amounts transferred from the TRASOP) made by the Participant, but not yet
allocated to the Voluntary Contribution Account, Transfer Account or TRASOP
Transfer Account of the Participant (whichever is applicable), the Company shall
pay such amounts either directly to the Participant (or the Beneficiary of
the Participant, as the case may be) or to the Trustee, to be distributed
by the Trustee in accordance with Sections 10.3 and 10.4.
(b) If on the date of termination of a Participant's employment, a
Participant's Earnings have been reduced by any amount pursuant to an Incentive
Savings Agreement, and such amount has not yet been allocated to the Salary
Deferral Contribution Account of the Participant, the Company shall pay such
amounts to the Trustee to be credited to the Participant's Salary Deferral
Contribution Account, to be distributed by the Trustee in accordance with
Sections 10.3 and 10.4.
10.13 Administrative Powers Relating to Payments. If a Participant or
Beneficiary is under a legal disability or, by reason of illness or mental or
physical disability, is in the opinion of the Company unable properly to attend
to the personal financial matters of the Participant, the Trustee may make
such payments in such of the following ways as the Company shall direct:
(i) directly to such Participant or Beneficiary;
(ii) to the legal representative of such Participant or Beneficiary; or
(iii) to some relative by blood or marriage, or friend, for the benefit of
such Participant or Beneficiary.
Any payment made pursuant to this Section shall be in complete discharge of the
obligation therefor under the Plan.
10.14 Diversification of Investments. (a) Notwithstanding any other
provisions of the Plan or the Trust, each Qualified Participant in the Plan may
elect within 90 days after the close of each Plan Year in the Qualified Election
Period, by written instrument delivered to the Company, to direct the investment
of not more than 25% (in whole multiples of 1%) of the Participant's Adjusted
Balance of the Company Incentive Contribution Account of the Participant
and the portion of the Adjusted Balance of the Matching Contribution Account of
the Participant attributable to Matching Contributions made on and after January
1, 1991 (to the extent that such portion exceeds the amount to which a prior
election under this Section applies). In the case of an election year in which
the Participant can make the last such election, the preceding sentence shall
be applied by substituting "50%" for "25%". The Company shall direct the
Trustee to invest the Company Incentive Contribution Account and the applicable
portion of Matching Contribution Account of Qualified Participants pursuant to
their valid and timely elections within 90 days after the last day of the period
during which the election can be made. Notwithstanding the foregoing, a
Qualified Participant shall not be entitled to make the election hereunder for a
Plan Year within the Qualified Election Period if the fair market value of the
Company Incentive Contribution Account of the Participant and the portion of the
Adjusted Balance of the Matching Contribution Account of the Participant
attributable to Matching Contributions made on and after January 1, 1991, as
of the last day of such Plan Year is less than $500.
(b) A Qualified Participant's election pursuant to this Section 10.14 shall
direct the investment of the amount subject to the election among one or more of
the Investment Funds (other than any of the Stock Funds). The Company will
provide a written description of each such Investment Fund to the Qualified
Participant within a reasonable time prior to the Qualified Election Period.
Such an investment election shall comply with such rules and regulations as
the Company may prescribe.
ARTICLE XI
PLAN ADMINISTRATION
11.1 Company Responsibility. The Company shall be responsible for and shall
control and manage the operation and administration of the Plan. It shall be
the "Plan Administrator" and "Named Fiduciary" for purposes of ERISA and shall
be subject to service of process on behalf of the Plan. The Company may, in
its discretion, appoint or designate employees or agents to act on behalf of the
Company in performing these duties.
11.2 Powers and Duties of Company. The Company shall administer the Plan in
accordance with its terms and shall have all powers necessary to carry out the
provisions of the Plan. The Company shall direct the Trustee concerning all
payments that shall be made out of the Trust pursuant to the Plan. The Company
shall interpret the Plan and shall determine all questions arising in the
administration, interpretation, and application of the Plan, including but
not limited to, questions of eligibility and the status and rights of
Participants, Beneficiaries and other persons. Any such determination by the
Company shall presumptively be conclusive and binding on all persons. The
regularly kept records of the Company shall be conclusive and binding upon all
persons with respect to an Employee's age, time and amount of Compensation
and Earnings and the manner of payment thereof, and all other matters contained
therein relating to Employees. All rules and determinations of the Company
shall be uniformly and consistently applied to all persons in similar
circumstances.
11.3 Records and Reports of Company. The Company shall keep all such books of
account, records, and other data as may be necessary for proper administration
of the Plan. The Company shall notify the Trustee of any action taken by the
Company and, when required, shall notify any other interested person or persons.
11.4 Claims Procedure. Claims for benefits under the Plan shall be made in
writing to the Company. The Company shall render a decision on the claim
promptly, but not later than ninety (90) days after the receipt of the
claimant's request, unless special circumstances require an extension of time
for processing, in which case the ninety (90) day period may be extended
to one hundred and eighty (180) days. The Company shall notify the claimant in
writing of any such extension. If the claimant shall not be notified in writing
of the denial of the claim within ninety (90) days (as extended) after it is
received by the Company, the claim shall be deemed denied. A notice of denial
shall be written in a manner calculated to be understood by the claimant, and
shall contain (i) the specific reason or reasons for denial of the claim, (ii) a
specific reference to the pertinent Plan provisions upon which the denial is
based, (iii) a description of any additional material or information necessary
for the claimant to perfect the claim, together with an explanation of why such
material or information is necessary, and (iv) an explanation of the Plan's
review procedure. Within sixty (60) days of the receipt by the claimant of
the written notice of denial of the claim, or within sixty (60) days after the
claim is deemed denied as set forth above, if applicable, the claimant may file
a written request with the Company that it conduct a full and fair review of the
denial of the claimant's claim for benefits, including the conducting of a
hearing, if deemed necessary by the Company. In connection with the
claimant's appeal of the denial of the benefit of the claimant, the claimant may
review pertinent documents and may submit issues and comments in writing. The
Company shall render a decision on the claim appeal promptly, but not later than
sixty (60) days after the receipt of the claimant's request for review, unless
special circumstances (such as the need to hold a hearing, if necessary),
require an extension of time for processing, in which case the sixty (60) day
period may be extended to one hundred and twenty (120) days. The Company shall
notify the claimant in writing of any such extension. The decision upon review
shall (i) include specific reasons for the decision, (ii) be written in a
manner calculated to be understood by the claimant and (iii) contain specific
references to the pertinent Plan provisions upon which the decision is based.
11.5 Interested Participants. If the Company shall designate an Employee who
is a Participant to act on behalf of the Company in administering the Plan and
exercising fiduciary responsibilities with respect to the Plan, such Participant
shall not in such capacity participate in discussions of, or in decisions
relating to, matters uniquely pertaining to the participation of the
Participant in the Plan or to any distributions or loans made to the Participant
under the Plan.
ARTICLE XII
TRUST AGREEMENT
12.1 Establishment of Trust. A Trust has been created and will be maintained
for the purposes of the Plan. All contributions under the Plan will be paid
into the Trust. The Trust Fund will be held, invested and disposed of by the
Trustee from time to time acting in accordance with the Trust Agreement. All
withdrawals and distributions payable under the Plan will be paid solely from
the Trust Fund.
ARTICLE XIII
LOANS TO PARTICIPANTS
13.1 Loans to Participants. (a) The Company shall direct the Trustee to make
a loan or loans to active Participants and, to the extent not inconsistent with
Section 401(a) of the Code, to former Participants who are parties in interest
(as defined in Section 3(14) of ERISA) and who retain Account balances under the
Plan pursuant to Section 10.3 ("Former Participants"), applied for pursuant
to the terms of this Article. Such loan or loans shall be in an amount or
amounts which does not in the aggregate exceed the amount set forth in Section
13.2 below. Loans shall be made on the written application of the Participant
to the Company and on such terms and conditions as are set forth in this Section
13.1 and Sections 13.2 and 13.3 below. In making such loans the Company shall
pursue uniform policies and shall not discriminate in favor of or against any
Participant or group of Participants. No Participant shall be entitled to
receive a loan under the Plan following termination of the employment of the
Participant with the Company for any reason.
(b) Each borrowing Participant shall, as a condition of receiving a loan
hereunder, specify in the loan application of the Participant the Investment
Funds in which the Salary Deferral Contribution Account and TRASOP Transfer
Account of the Participant are invested from which any loan shall be paid and
the allocation of the loan proceeds among such Investment Funds; provided, that
such allocation shall be in increments of one percent (1%). Each such loan shall
be made in accordance with the specification of the borrowing Participant
except that if any Investment Fund imposes any restriction or penalty on a
distribution as a loan, the loan shall be paid from the Investment Funds in such
manner as will comply with such restriction and avoid such penalty.
(c) The Company may impose such additional uniform and nondiscriminatory
requirements upon Participants applying for loans as the Company may determine.
13.2 Maximum Loan Amount. (a) In no event shall any loan made pursuant to
this Article to any Participant be in an amount which shall cause the
outstanding aggregate balance of all loans made to such Participant under this
Plan and all other qualified plans (as defined in Section 72(p)(4) of the Code)
maintained by the Company or any Related Employer to exceed the least of:
(i) $50,000, reduced by the excess (if any) of:
(A)the highest outstanding balance of loans from the Plan and
all such other qualified plans to the Participant during the
one-year period ending on the day before the date such loan
is made, over
(B)the outstanding balance of loans from the Plan and all such
other qualified plans to the Participant on the date on which
such loan is made;
(ii) fifty percent (50%) of the Adjusted Balances of the Salary Deferral
Contribution Account and TRASOP Transfer Account of the Participant
determined as of the Valuation Date for which a valuation of the Account of the
Participant is most recently available on the date the loan proceeds are
disbursed.
(b) For purposes of this Article the term "Related Employer" shall mean any
related employer within the meaning of Section 72(p)(2)(D) of the Code.
13.3 Repayment of Loans. All loans made under this Article shall mature and be
payable in full no earlier than one year, and no later than five (5) years, from
the date such loan is made, except that a loan to a Participant used to acquire
any dwelling unit which, within a reasonable time after the loan is made, is to
be used (determined at the time the loan is made) as the principal residence
of the Participant shall mature and be payable in full no earlier than
one year, and no later than ten (10) years, from the date such loan is made.
13.4 Terms. (a) Loans to Participants shall be made according to the
following terms:
(i) Not more than one loan shall be made under the Plan to any
Participant in any Plan Year and, effective for Plan Years beginning on or after
January 1, 1995, no additional loans shall be approved for a Participant who has
three (3) loans outstanding at the time he applies for a new loan;
(ii) The minimum principal amount of the loan, at the time it is made,
shall be $200;
(iii) Loans made under this Article XIII shall conform to the requirements
of Labor Regulation Section 2550.408b-1;
(iv) Interest shall be charged on a loan at a rate that is commensurate
with the interest rates charged by persons in the business of lending money for
loans that would be made under similar circumstances in the local geographic
area;
(v) Payments of principal and interest shall be made through payroll
deductions, which deductions shall be irrevocably authorized by the borrowing
Participant in writing on a form supplied by the Company at the time the loan is
made to the borrowing Participant, and such payroll deductions shall be
sufficient to amortize the principal and interest payable pursuant to the loan
during the term thereof in equal monthly (or more frequent) installments;
(vi) The borrowing Participant shall have the right to prepay all or any
portion of the interest and principal of such loan without penalty;
(vii) For loans made prior to June 1, 1992, if the borrowing Participant
is married at the time for disbursement of the loan proceeds, disbursement may
not be made unless such Participant's spouse consents in writing to the loan and
the terms thereof pursuant to procedures established by the Company;
(viii) The loans shall be evidenced by such forms of obligations, and
shall be made upon such additional terms as to default, prepayment, security and
otherwise as the Company shall determine;
(ix) The Company may charge a borrowing Participant such reasonable
administrative fees with respect to each loan as the Company shall, in its
discretion, decide; and
(x) To the extent that the borrowing Participant requests a loan from
any portion of the Account of the borrowing Participant that is invested in any
of the Stock Funds, the Trustee, as soon as practicable after the first day of
the Valuation Period next succeeding receipt of the loan application, shall sell
a sufficient number of whole shares of Company Common Stock and the net proceeds
of such sale shall be disbursed to the Participant as part of the loan proceeds.
Any such sale shall be made by the Trustee on a national securities exchange at
marketprices current at the time of sale or in such other manner as the Trustee,
in its sole discretion, shall determine.
(b) The entire unpaid balance of any loan made under this Article and all
interest due thereon, including all arrearages thereon, shall immediately become
due and payable without further notice or demand, upon the occurrence, with
respect to the borrowing Participant, of any of the following events of default:
(i) Any payments of principal and/or accrued interest on the loan
remain due and unpaid for a period of ten (10) days after the same becomes due
and payable under the terms of the loan;
(ii) A proceeding in bankruptcy, receivership or insolvency is
commenced by or against the borrowing Participant;
(iii) The borrowing Participant receives a distribution of all of the
Adjusted Balance of the Account of the borrowing Participant at any time
following the termination of employment of the borrowing Participant with the
Company;
(iv) The borrowing Participant attempts to make an assignment, for the
benefit of creditors, of any security for the loan; or
(v) The borrowing Participant marries or remarries and the new spouse
of the borrowing Participant does not consent in writing to the loan, and the
terms thereof pursuant to procedures established by the Company within 30 days
after marrying the Participant, except that the provisions of this Section
13.4(b)(v) shall not apply on or after June 1, 1992.
Any payments of principal and/or interest on the loan not paid when due shall
bear interest thereafter, to the extent permitted by law, at the rate specified
by the terms of the loan. The payment and acceptance of any sum or sums at any
time on account of the loan after an event of default, or any failure to act or
enforce the rights granted hereunder upon an event of default, shall not be a
waiver of the right of acceleration set forth in this subsection.
(c) A borrowing Participant who terminates employment with the Company, and
who does not receive a distribution of the Adjusted Balance of the Account of
the borrowing Participant pursuant to subsection (a) or subsection (b) of
Section 10.3, may, at the election of the borrowing Participant, either:
(i) pay the entire unpaid balance of any outstanding loan, including all
interest and arrearages thereon, made under this Article, or (ii) subject to the
default provisions set forth in subsection (b) above, continue to make payments
of principal and interest in accordance with the terms of such loan. The
minimum security for any loan with respect to which an eligible borrowing
Participant elects to continue payments under clause (ii), as well as with
respect to any loan obtained by a Former Participant who has terminated
employment with the Company, shall be a percentage not in excess of fifty
percent (50%) of theAdjusted Balance of the Account of the borrowing
Participant. Payments made pursuant to clause (ii) above, as well as payments
made by a Former Participant who obtains a loan following termination of
employment with the Company, shall, at the Participant's election, be made
through either (A) personal payments delivered to the Company no later than the
first day of each calendar month, or (B) deductions from the Participant's
monthly pension benefit under the Illinois Power Company Retirement Income Plan
for Salaried Employees or the Illinois Power Company Retirement Income Plan for
Employees Covered Under a Collective Bargaining Agreement (the "pension
benefit"); provided, however, that to the extent that payments made through
deductions from monthly pension benefits exceed the 10% limitation on
assignments under Section 401(a)(13) of the Code and regulations thereunder, the
excess shall be paid by personal payments in accordance with clause (A) above.
All elections pursuant to this subsection (c) by a Participant who has a loan
outstanding at the time the Participant terminates employment with the Company
shall be made in writing and delivered to the Company within 30 days after
the date of termination of the Participant's employment with the Company. All
elections pursuant to this subsection (c) by a Former Participant who obtains a
loan following termination of employment with the Company shall be made on the
application of the Participant for such loan. Any such election made
pursuant to this subsection (c) may be changed, at the Participant's
election, upon 30 days written notice to the Company.
(d) If an event of default and an acceleration of the unpaid balance of the
loan and interest due thereon shall occur, the Company shall have the right to
direct the Trustee to pursue any remedies available to a creditor at law or
under the terms of the loan, including the right to execute on the security for
the loan; provided, however, that neither the Trustee nor the Company may
execute on any amount in the borrowing Participant's Salary Deferral
Contribution Account at any time prior to the first to occur of the termination
of the Participant's employment with the Company and the Participant's
attainment of age 59-1/2 .
(e) Each such loan shall be a first lien against the Salary Deferral
Contribution Account and TRASOP Transfer Account of the borrowing Participant.
If: (i) any portion of a loan or loans shall be outstanding; and (ii) an event
occurs pursuant to which the Participant or the estate or the surviving spouse
or the Beneficiaries of the Participant will receive a distribution from the
Salary Deferral Contribution Account or TRASOP Transfer Account of such
Participant under the provisions of the Plan, then such Participant, if living,
shall pay to the Trustee an amount equal to the portion of the loan or loans
then outstanding, including all accrued interest thereon, and such Participant
shall then receive the full amount of the distribution under the provisions of
the Plan to which the Participant is otherwise entitled. If such Participant
is not then living, or if such Participant does not make full payment of the
portion of the loan or loans then outstanding within 15 days after the date
of the event pursuant to which the distribution is to be made, then such
distribution shall, to the extent necessary to liquidate the unpaid portion of
the loan or loans, be made to the Trustee as payment on the loan or loans.
No distribution shall be made to a participant or the estate or the surviving
spouse or the Beneficiaries of the Participant from the Salary Deferral
Contribution Account or TRASOP Transfer Account of the Participant in an amount
greater than the excess of the portion of the Salary Deferral Contribution
Account or TRASOP Transfer Account of the Participant otherwise distributable
over the aggregate of the amounts owing with respect to such loan or loans plus
interest, if any, thereon, taking into consideration any portion of the loan or
loans paid by the Participant pursuant to the provisions of this subsection (e).
(f) All loans made pursuant to this Article shall be funded from the borrowing
Participant's Salary Deferral Contribution Account and TRASOP Transfer Account
as set forth in Section 13.1(b). The Salary Deferral Contribution Account and
TRASOP Transfer Account of a Participant shall, to the extent used to fund such
loan, not participate in the allocation of earnings and losses pursuant to
Section 9.10. All interest paid by a Participant with respect to a loan
shall be credited to the borrowing Participant's Salary Deferral Contribution
Account and TRASOP Transfer Account and shall not be allocated pursuant to
Section 9.10 as earnings of the Investment Funds. All payments of principal and
interest made by a Participant with respect to a loan shall be allocated to one
or more of the Investment Funds (including the Elective Company Common Stock
Fund, but not including the other Stock Funds) based upon the form relating
to the selection of Investment Funds which is in effect at the time such payment
is received by the Trustee. If such a form is not in effect at the time such
payment is received, the payments shall be allocated based upon the last such
form which was in effect for such Participant.
ARTICLE XIV
INVESTMENT FUNDS
14.1 Investment Funds. The Adjusted Balance of each Participant's Salary
Deferral Contribution Account, Transfer Account and Voluntary Contribution
Account will be invested in the various Investment Funds (including the Elective
Company Common Stock Fund, but not including the other Stock Funds) as described
in the schedule attached to the Trust Agreement. The Company shall have the
right to appoint an Investment Manager (as defined in Section 3(38) of ERISA),
with respect to any Investment Fund (other than the Stock Funds) in accordance
with Section 402(c)(3) of ERISA and the terms of the Trust Agreement.
14.2 Initial Investment. (a) All Salary Deferral Contributions, Voluntary
Contributions, and Rollover Contributions received by the Trustee will be
initially invested in such short-term investment obligations as selected by the
Trustee from time to time pending investment pursuant to Section 14.3 below.
These deposits and earnings will be allocated among the Investment Funds
(including the Elective Company Common Stock Fund, but not including the other
Stock Funds) as of the Valuation Date next following receipt by the Trustee of
such deposits and earnings in accordance with Participants' selection of
Investment Funds pursuant to Section 14.3.
(b) As soon as administratively feasible following a transfer from the trustee
of the TRASOP to the Trustee pursuant to Section 5.6: (i) all shares of Company
Common Stock so transferred that were attributable to Company contributions to
the TRASOP were initially allocated to the Company Contributions TRASOP Common
Stock Fund; and (ii) all shares ofCompany Common Stock so transferred that were
attributable to employee contributions to the TRASOP were initially allocated to
the Employee Contributions TRASOP Common Stock Fund. All cash so transferred, if
any, were allocated in accordance with the provisions of subsection
(a) above and Section 14.3(e) below.
(c) All stock dividends paid with respect to Company Common Stock held in
an Account shall be allocated to the applicable Stock Fund. All cash dividends
paid with respect to Company Common Stock held in the Company Contributions
TRASOP Common Stock Fund, the Employee Contributions TRASOP Common Stock Fund,
the Elective Company Common Stock Fund, and all cash dividends paid with respect
to Company Common Stock held in the Company Contributions Common Stock Fund that
is attributable to Matching Contributions made prior to January 1, 1991, shall
automatically be reinvested in additional whole shares of Company Common
Stock. All cash remaining, if any, after such cash dividends have been
reinvested in whole shares of Company Common Stock to the maximum extent
possible, shall be allocated pursuant to subsection (a) above and Section
14.3(e) below. All cash dividends paid with respect to Company Common Stock
held in the Company Contributions Common Stock Fund that is attributable to
Matching Contributions made on or after January 1, 1991 or to Company
Incentive Contributions shall be applied as set forth in Section 8.2(d) while
any Loan is outstanding and otherwise pursuant to the preceding provisions of
this subsection(c).
14.3 Selection of Investment Funds. (a) Each Participant shall have the right
to file a form with the Company directing that the Salary Deferral
Contributions, Voluntary Contributions and Rollover Contribution of the
Participant be invested, in specified multiples of 1%, in any
one of the Investment Funds (including the Elective Company Common Stock Fund,
but not including the other Stock Funds). In default of any Participant's
direction, a Participant's Salary Deferral Contributions, Voluntary
Contributions and Rollover Contribution will be divided equally (in multiples of
one percent (1%)) and invested in such short-term investment obligations
as the Trustee shall select from time to time until a form designating a
different Investment Fund is submitted to the Company and forwarded to the
Trustee.
(b) Each Participant shall have the right to modify the direction made in
subsection (a) above with respect to subsequent Salary Deferral Contributions
and Voluntary Contributions under the Plan.
(c) Each Participant shall have the right to file a written form with the
Company directing that the portion of the Salary Deferral Contribution Account,
TRASOP Transfer Account, Transfer Account and Voluntary Contribution Account of
the Participant held in any one Investment Fund be transferred, in whole or in
part, to any other Investment Fund (including the Elective Company Common Stock
Fund, but not including the other Stock Funds). This direction shall be made by
designating the percentage (which shall not be less than ten percent (10%)) of
the Adjusted Balances of such Accounts which is to be divided among the
various applicable Funds (in multiples of one percent (1%)) as of the date set
forth in subsection (d) next below.
(d) Any investment form submitted pursuant to subsections (a), (b) or (c) of
this Section shall be filed with the Company, pursuant to rules it establishes,
prior to the first day of the Valuation Period for which it is to be effective.
Modifications pursuant to subsection (b) and transfers pursuant to subsection
(c) may be made only once during each Valuation Period.
(e) Any cash transferred from the TRASOP pursuant to Section 5.6 and any
cash remaining pursuant to Section 14.2(c) shall be invested, in the discretion
of the Company, in the various Investment Funds (other than the Stock Funds).
(f) The Company will maintain or cause to be maintained individual Accounts,
as described in Section 1.1, representing the interests of Participants in the
several Investment Funds. Each Investment Fund may be invested as a single
fund, however, without segregation of Fund assets to the Accounts of
Participants.
14.4 Investment in Company Common Stock. (a) The Adjusted Balance of each
Participant's Matching Contribution Account attributable to Matching
Contributions made on or after January 1, 1991 and Company Incentive
Contribution Account, and the Limitation Account, if any, established on behalf
of the Company, shall be invested in the Company Contributions Common Stock
Fund.
(b) The Adjusted Balance of each Participant's Matching Contribution Account,
attributable to Matching Contributions made prior to January 1, 1991 may, in the
discretion of the Company, be invested in the Company Contributions Common Stock
Fund or in such other Investment Fund (other than the Company Contributions
TRASOP Common Stock Fund and the Employee Contributions TRASOP Common Stock
Fund) as the Company shall elect.
(c) Any Account invested in any of the Stock Funds shall be expressed in terms
of number of shares of Company Common Stock including fractional shares,
provided, however, that no fractional shares of Company Common Stock will be
issued pursuant to the Plan.
14.5 Valuation of Company Common Stock. For all purposes of the Plan, Company
Common Stock shall be valued at the closing price on the Composite Tape for the
trading day coincident with, or last preceding, the date with respect to which
such Company Common Stock is being valued.
14.6 Transactions by Insiders. The provisions of this Section 14.6 are
intended to permit Participants to conform to the requirements of Rule 16b-3,
issued under the Securities Exchange Act of 1934 (the "Act").
(a)For purposes of Section 10.14, a Participant's election under Section 10.14
shall be deemed to be made within 90 days after the end of a Plan Year if
it is made not later than the last day of such 90 day period, and it is made
on an irrevocable basis at least six months in advance of the effective date
of such election.
(b)To the extent that a Participant is otherwise entitled to elect to have
contributions invested in the Elective Company Stock Fund, or to elect to
have all or any portion of his Accounts transferred to a Stock Fund from
another Investment Fund, or to have all or any portion of his Accounts
transferred from a Stock Fund to another Investment Fund, the Participant
may have his election made on an irrevocable basis at least six months in
advance of the effective date of the election.
(c)Except as otherwise specifically provided in this Section 4.8, nothing in
this Section 4.8 shall be construed as waiving any obligation or restriction
otherwise applicable to any Participant under the Plan.
(d)To the extent necessary to comply with Rule 16b-3(c)(2)(ii), issued under
the Act, the provisions of the Plan that set forth the formula that determines
the amount, price and timing of Company Incentive Contributions shall not
be amended more than once every six months, other than to comport with
changes in Title I of the Code, ERISA or the rules thereunder.
ARTICLE XV
AMENDMENT AND TERMINATION
15.1 Amendment of Plan. The Company shall have the right to amend the Plan at
any time and from time to time, and the Company and all persons claiming any
interest hereunder shall be bound thereby; provided, however, that no amendment
shall have the effect of: (i) directly or indirectly divesting the interest of
any Participant in any amount that the Participant would have received had the
Participant terminated employment with the Company immediately prior to the
effective date of such amendment, or the interest of any Beneficiary as such
interest existed immediately prior to the effective date of such amendment; (ii)
directly or indirectly affecting the vested interest of a Participant under the
Plan as determined by Section 9.9 unless the conditions of Section 203(c) of
ERISA are satisfied; (iii) vesting in the Company any right, title or
interest in or to any Trust assets; (iv) causing or effecting discrimination in
favor of officers, shareholders, or highly compensated Employees; or (v) causing
any part of the Plan assets to be used for any purpose other than for the
exclusive benefit of the Participants and their Beneficiaries. Any amendment to
the Plan shall conform to the limitations of Section 14.6, relating to
transactions by insiders.
15.2 Voluntary Termination of or Permanent Discontinuance of Contributions to
the Plan. The Company shall have the right to terminate the Plan in whole or in
part, or to permanently discontinue contributions to the Plan, at any time by
giving written notice of such termination or permanent discontinuance to the
Trustee. Such resolution shall specify the effective date of termination or
permanent discontinuance, which shall not be earlier than the first day of
the Plan Year that includes the date of the resolution.
15.3 Involuntary Termination of Plan. The Plan shall automatically terminate
if the Company is legally adjudicated a bankrupt, makes a general assignment for
the benefit of creditors, or is dissolved. In the event of the merger or
consolidation of the Company with or into any other corporation, or in the event
substantially all of the assets of the Company shall be transferred to
another corporation, the successor corporation resulting from the consolidation
or merger, or transfer of such assets, as the case may be, shall have the right
to adopt and continue the Plan and succeed to the position of the Company
hereunder. If, however, the Plan is not so adopted within ninety (90) days
after the effective date of such consolidation, merger or sale, the Plan shall
automatically be deemed terminated as of the effective date of such
transaction. Nothing in this Plan shall prevent the dissolution, liquidation,
consolidation or merger of the Company, or the sale or transfer of all or
substantially all of its assets.
15.4 Payments on Termination of, or Permanent Discontinuance of Contributions
to, the Plan. (a) If the Plan is terminated as herein provided, or if it
should be partially terminated, or upon the complete discontinuance of Company
contributions to the Plan, the following procedure shall be followed, except
that in the event of a partial termination it shall be followed only in case
of those Participants and Beneficiaries directly affected:
(i) The Company may continue to administer the Plan, but if it fails
to do so, its records, books of account and other necessary data shall be turned
over to the Trustee and the Trustee shall act on its own motion as hereinafter
provided.
(ii) Notwithstanding any other provisions of the Plan all interests of
Participants shall be fully vested and nonforfeitable.
(iii) The value of the Trust Fund and the Accounts of all Participants
and Beneficiaries shall be determined as of the date of termination or
discontinuance.
(iv) Distribution to Participants and Beneficiaries shall be made at such
time after termination of or discontinuance of contributions to the Plan as
provided in Section 10.3 above and subsection (b) next below and not later than
the time specified in Section 10.3.
(b) If the Plan is terminated while any Loan is outstanding, the Trustee
shall, on or prior to the date of termination, pay the entire unpaid principal
balance of the Loan, plus interest thereon, with Company contributions and cash
dividends attributable to shares of Company Common Stock acquired with the
proceeds of a Loan. In such event, all shares of Company Common Stock shall be
released from the Loan Suspense Account and allocated among Participants'
Company Incentive Contribution Accounts pursuant to Sections 7.1, 7.2, 8.2
and 9.5 However, if the minimum Incentive Target set forth in Section 7.1 is
not attained for the portion of the Plan Year ending on the date of termination
of the Plan, shares of Company Common Stock with fair market value equal to such
Company contributions anddividends shall be allocated among Participants'
Company Incentive Contribution Accounts in proportion to Earnings and any shares
of Company Common Stock thereafter remaining in the Loan Suspense Account
shall, only to the extent permissible under the Code and ERISA and the
regulations issued thereunder, be returned to the Company.
ARTICLE XVI
MISCELLANEOUS
16.1 Duty to Furnish Information and Documents. Participants and their
Beneficiaries must furnish to the Company and the Trustee such evidence, data or
information as the Company considers necessary or desirable for the purpose of
administering the Plan, and the provisions of the Plan for each person are upon
the condition that each person will furnish promptly full, true, and complete
evidence, data and information requested by the Company. All parties to,
or claiming any interest under, the Plan, by virtue of participating in the
Plan, are deemed to agree to perform any and all acts, and to execute any and
all documents and papers, necessary or desirable for carrying out the Plan and
the Trust.
16.2 Statements and Available Information. The Company shall advise its
Employees of the eligibility requirements and benefits under the Plan. As soon
as practicable after the end of each calendar quarter, the Company shall provide
each Participant, and each former Participant and Beneficiary with respect to
whom an Account is maintained, with a statement reflecting the current status of
the Account of the Participant including the Adjusted Balance thereof. No
Participant shall have the right to inspect the records reflecting the Account
of any other Participant. The Company shall make available for inspection at
reasonable times by Participants and Beneficiaries copies of the Plan, any
amendments thereto, Plan summary, and all reports of Plan and Trust operations
required by law.
16.3 No Enlargement of Employment Rights. Nothing contained in the Plan shall
be construed as a contract of employment between the Company and any person, nor
shall the Plan be deemed to give any person the right to be retained in the
employ of the Company or limit the right of the Company to employ or discharge
any person with or without cause, or to discipline any Employee.
16.4 Applicable Law. All questions pertaining to the validity, construction
and administration of the Plan shall be determined in conformity with the laws
of Illinois to the extent that such laws are not preempted by ERISA and valid
regulations published thereunder.
16.5 No Guarantee. Neither the Trustee, nor the Company in any way guarantees
the Trust Fund from loss or depreciation nor the payment of any benefits which
may be or become due to any person from the Trust Fund. No Participant or other
person shall have any recourse against the Trustee, or the Company if the Trust
Fund is insufficient to provide Plan benefits in full. Nothing herein contained
shall be deemed to give any Participant, former Participant, or Beneficiary
an interest in any specific part of the Trust Fund or any other interest except
the right to receive benefits out of the Trust Fund in accordance with the
provisions of the Plan and Trust.
16.6 Unclaimed Funds. Each Participant shall keep the Company informed of the
current address of the Participant and the current address of the Beneficiary or
Beneficiaries of the Participant. Neither the Company nor the Trustee shall be
obligated to search for the whereabouts of any person. If the location of a
Participant is not made known to the Company within three (3) years after the
date on which distribution of the Participant's Account may first be made,
distribution may be made as though the Participant had died at the end of the
three-year period. If, within one additional year after such three year period
has elapsed, or, within three years after the actual death of a Participant, the
Company is unable to locate any individual who would receive a distribution
under the Plan upon the death of the Participant pursuant to Section 10.2 of the
Plan, the Adjusted Balance in the Participant's Account shall be deemed a
forfeiture and shall be used to reduce Matching Contributions and Company
Incentive Contributions to the Plan for the Plan Year next following the year in
which the forfeiture occurs and for succeeding years to the extent necessary;
provided, however, that in the event that the Participant or a Beneficiary
makes a valid claim for any amount which has been forfeited, the
benefits which have been forfeited shall be reinstated.
16.7 Federal and State Security Law Compliance. (a) Each Participant or
Beneficiary shall, to the extent necessary, prior to the transfer of Company
Common Stock to such Participant or Beneficiary, execute and deliver an
agreement, in form and substance acceptable to the Company, certifying such
person's intent to hold such Company Common Stock and containing such other
representations and agreements relating to the Company Common Stock as the
Company may reasonably request.
(b) The Company will take all necessary steps to comply with any applicable
registration or other requirements of federal or state securities laws from
which no exemption is available.
(c) Stock certificates distributed to Participants may bear such legends
concerning restrictions imposed by federal or state securities laws, and
concerning other restrictions and rights under the Plan, as the Company in its
discretion may determine.
16.8 Merger or Consolidation of Plan. Any merger or consolidation of the Plan
with another plan, or transfer of Plan assets or liabilities to any other plan,
shall be effected in accordance with such regulations, if any, as may be issued
pursuant to Section 208 of ERISA, in such a manner that each Participant in the
Plan would receive, if the merged, consolidated or transferee plan were
terminated immediately following such event, a benefit which is equal to or
greater than the benefit the Participant would have been entitled to receive if
the Plan had terminated immediately before such event.
16.9 Interest Non-Transferable. (a) Except as provided in Article XIII of the
Plan, no interest of any person or entity in, or right to receive distributions
from, the Trust Fund shall be subject in any manner to sale, transfer,
assignment, pledge, attachment, garnishment, or other alienation or
encumbrance of any kind; nor may such interest or right to receive distributions
be taken, either voluntarily or involuntarily, for the satisfaction of the debts
of, or other obligations or claims against, such person or entity, including
claims in bankruptcy proceedings. The Account of any Participant, however, shall
be subject to and payable in accordance with the applicable requirements of any
qualified domestic relations order, as that term is defined in Section 414(p)
of the Code, and the Company shall direct the Trustee to provide for payment
from a Participant's Account in accordance with such order and with the
provisions of Section 414(p) of the Code, and any regulations promulgated
thereunder. A payment from a Participant's Account may be made to an alternate
payee (as defined in Section 414(p)(8) of the Code) of the Participant prior to
the date the Participant attains the earliest retirement age of the
Participant (as defined in Section 414(p)(4)(B) of the Code) if such payment is
made pursuant to the terms of a qualified domestic relations order. All such
payments pursuant to a qualified domestic relations order shall be subject to
reasonable rules and regulations promulgated by the Company respecting the time
of payment pursuant to such order and the valuation of the Participant's Account
or Accounts from which payment is made; provided, that all such payments are
made in accordance with such order and Section 414(p) of the Code. The balance
of an Account that is subject to any qualified domestic relations order shall be
reduced by the amount of any payment made pursuant to such order.
(b) Notwithstanding the preceding subsection of this Section, if any
Participant borrows money pursuant to Article XIII of the Plan, the Trustee and
the Company shall have all rights to collect upon such indebtedness as are
granted pursuant to Article XIII of the Plan and any agreements or documents
executed in connection with such loan.
16.10 Prudent Man Rule. Notwithstanding any other provision of the Plan and
the Trust Agreement, the Trustee and the Company shall exercise their powers and
discharge their duties under the Plan and the Trust Agreement for the exclusive
purpose of providing benefits to Employees and their Beneficiaries, and shall
act with the care, skill, prudence and diligence under the circumstances that a
prudent man acting in a like capacity and familiar with such matters would
use in the conduct of an enterprise of a like character and with like aims.
16.11 Limitations on Liability. Notwithstanding any of the preceding
provisions of the Plan, none of the Trustee, the Company and each individual
acting as an employee or agent of any of them shall be liable to any
Participant, former Participant or Beneficiary for any claim, loss, liability
or expense incurred in connection with the Plan, except when the same shall have
been judicially determined to be due to the gross negligence or willful
misconduct of such person. The Company shall indemnify and hold harmless each
individual acting as an employee or agent of the Company from any and all
claims, liabilities, costs and expense (including attorneys' fees) arising out
of any actual or alleged act or failure to act with respect to the
administration of the Plan, except that no indemnification or defense shall be
provided to any person with respect to conduct which has been judicially
determined, or agreed by the parties,to have constituted bad faith or willful
misconduct on the part of such person, or to have resulted in the receipt by
such person of personal profit or advantage to which such person is not
entitled.
16.12 Headings. The headings in this Plan are inserted for convenience of
reference only and are not to be considered in construction of the provisions
hereof.
16.13 Gender and Number. Except when otherwise required by the context, any
masculine terminology in this document shall include the feminine, and any
singular terminology shall include the plural.
16.14 ERISA and Approval Under Internal Revenue Code. This Plan is intended
to constitute an employee stock ownership plan and meet the requirements of
Sections 401(a), 401(k), 401(m), 409,501(a) and 4975(d)(3) and (e)(7) of the
Code, and Sections 407(d)(6) and 408(b)(3) of ERISA, to the extent applicable,
as now in effect or hereafter amended, so that the income of the Trust Fund will
be exempt from taxation under Section 501(a) of the Code, contributions of
the Company under the Plan will be deductible for Federal income tax purposes
under Section 404 of the Code, Loans will be exempt under Section 4975(d)(2) of
the Code and Section 408(b)(3) of ERISA from the prohibited transaction
provisions of Section 4975(c) of the Code and Section 406 of ERISA, and amounts
subject to Incentive Savings Agreements will not be treated as distributed to
Participants for Federal income tax purposes under Section 402(a)(8) of the
Code, all as now in effect or hereafter amended. Any modification or amendment
of the Plan and/or Trust may be made retroactively, as necessary or appropriate,
to establish and maintain such qualification and to meet any requirement of the
Code or ERISA.
16.15 Company Common Stock - Voting and Consents. (a) Each Participant is
entitled to direct the Trustee as to the manner in which any Company Common
Stock allocated to each of the Accounts of the Participant is to be voted. The
Company shall furnish the Trustee with notices and information statements when
voting rights are to be exercised. The Trustee will notify Participants of each
occasion for the exercise of voting rights and will forward copies of
any proxy material within a reasonable time after it is secured from the
Company. A Participant shall elect to exercise such right by filing written
voting instructions with the Trustee, at such time and in such form as the
Trustee may reasonably specify. Individual instructions received from
Participants by the Trustee shall be held in the strictest confidence and shall
not be divulged or released to any person including officers, directors or
employees of the Company.
(b) The Trustee shall vote shares of Company Common Stock for which it does
not receive timely instructions from Participants, or that have not been
allocated to Participants' Accounts, pro rata in accordance with the timely
instructions it has received from the Participants.
(c) Participants will be allowed to direct the voting of fractional shares or
fractional rights to shares. This requirement will be satisfied if the Trustee,
or such other person or persons as the Trustee may designate, votes the combined
fractional shares or rights to sharesto the extent possible to reflect the
instructions of the Participants holding fractional shares or rights to shares.
16.16 Company Common Stock - Tendering. (a) The provisions of this Section
16.16 shall apply in the event a tender offer or exchange offer, including but
not limited to a tender offer or exchange offer within the meaning of the
Securities Exchange Act of 1934, as from time to time amended and in effect
(hereinafter, a Tender Offer"), for Company Common Stock is commenced by a
person or persons. In the event a Tender Offer for Company Common Stock
is commenced, the functions under the Plan applicable to the participation of
Company Common Stock in such Tender Offer shall be undertaken by the Trustee at
the time the Tender Offer is commenced, and the Company shall not undertake any
record keeping functions under the Plan that would serve to violate the
confidentiality of any individual directions given by the Participants in
connection with the Tender Offer. The Trustee shall have no discretion or
authority to sell, exchange or transfer any of such Company Common Stock
pursuant to such Tender Offer except to the extent, and only to the extent, that
the Trustee is timely directed to do so in writing as follows:
(i) Each Participant shall direct, in writing, the Trustee with respect
to the sale, exchange or transfer of shares of Company Common Stock allocated
to his Accounts to the extent that such Accounts are invested in any of the
Stock Funds. Individual instructions received from Participants by the
Trustee shall not be released to any person including officers, directors or
employees of the Company.
(ii) The Trustee shall tender or not tender shares of Company Common
Stock allocated to Participants' Accounts for which it does not receive timely
instructions from the Participants, or that have not been allocated to
Participants' Accounts, pro rata in accordance with the timely instructions it
has received from the Participants.
(b) The Trustee shall keep confidential any individual instructions that it
may receive from Participants relating to the Tender Offer.
16.17 Named Fiduciary. Each Participant shall be, and is hereby designated
as, a "named fiduciary" (as defined in Section 402(a)(2) of ERISA) with respect
to the rights of the Participant under Sections 16.15 and 16.16 to direct the
voting or Tender Offer decision with respect to (a) Company Common Stock
allocated to the Participant's Account, or (b) Company Common Stock for which
timely instructions are not received or that have not been allocated to
Participants' Accounts.
16.18 Rights of Spouses and Beneficiaries. The rights of any Participant
under Sections 16.15 and 16.16 shall, in the case of a deceased Participant,
be exercisable by the spouse or Beneficiaries of the Participant.
16.19 Exclusive Benefit of Employees. (a) All contributions made pursuant to
the Plan shall be held by the Trustee in accordance with the terms of the Trust
Agreement for the exclusive benefit of those Employees who are Participants
under the Plan, including former Participants and their surviving spouses and
Beneficiaries, and shall be applied to provide benefits under the Plan and to
pay expenses of administration of the Plan and the Trust, to the extent that
such expenses are not otherwise paid. Except as otherwise provided in Section
15.4(b), at no time prior to the satisfaction of all liabilities with respect to
such Employees and their surviving spouses and Beneficiaries shall any part of
the Trust Fund (other than such part as may be required to pay administration
expenses and taxes), be used for, or diverted to, purposes other than for the
exclusive benefit of such Employees and their surviving spouses and
Beneficiaries. However, without regard to the provisions of this Section 16.19:
(i) If a contribution under the Plan is conditioned on initial
qualification of the Plan under Section 401 of the Code, and the Plan receives
an adverse determination with respect to its initial qualification, the
Trustee shall, upon written request of the Company, return to the Company the
amount of such contribution (increased by earnings attributable thereto and
reduced by losses attributable thereto) within one calendar year after the
date that qualification of the Plan is denied, provided that the application
for the determination is made by the time prescribed by law for filing the
Company's return for the taxable year in which the Plan is adopted, or such
later date as the Secretary of the Treasury may prescribe;
(ii) Each contribution of the Company under the Plan is conditioned
upon the deductibility of the contribution under Section 404 of the Code, and,
to the extent such deduction is disallowed, the Trustee shall, upon written
request of the Company, return the amount of the contribution (to the extent
disallowed) to the Company within one year after the date the deduction is
disallowed;
(iii) If a contribution or any portion thereof is made by the Company
by a mistake of fact, the Trustee shall, upon written request of the Company,
return the contribution or such portion to the Company within one year after the
date of payment to the Trustee; and
(iv) Earnings attributable to amounts to be returned to the Company
pursuant to subsection (ii) or (iii) above shall not be returned, and losses
attributable to amounts to be returned pursuant to subsection (ii) or (iii)
above shall reduce the amount to be so returned.
(b) All Company contributions made under the Plan are conditioned upon the
qualification of the Plan under Section 401(a) of the Code.
16.20 Expenses of the Plan and Trust. All compensation of, and all reasonable
and properly documented expenses incurred by, the Trustee in the administration
of the Plan andTrust shall be withdrawn, in accordance with the provisions of
the Trust Agreement, by the Trustee out of the Trust Fund, unless paid by the
Company. If at any time the Trust is insufficient for this purpose, the same
shall be paid by the Company.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed on
its behalf by its officer duly authorized this ___ day of ________, 19__
effective January 1, 1991.
ILLINOIS POWER COMPANY
By:____________________________________
<TABLE>
ILLINOVA CORPORATION
STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO
FIXED CHARGES
(Thousands of Dollars)
<CAPTION>
Year Ended December 31, Supplemental ** Supplemental **
-----------------------------------------------------------------------------------------------------
1990 1990 1991 1992 1993 1993 1994
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Available for Fixed Charges:
Net Income (Loss) per "Statement
of Income" ($115,323) ($115,323) $ 78,378 $ 93,234 ($81,874) ($81,874) $151,786
Add:
Income Taxes:
Current 21,307 21,307 29,369 22,930 25,260 25,260 58,354
Deferred - Net 36,545 36,545 45,990 63,739 82,057 82,057 71,177
Allocated income taxes 2,608 2,608 (1,348) (6,632) (12,599) (12,599) (8,285)
Investment tax credit - deferred (14,121) (14,121) (11) (519) (782) (782) (11,331)
Income tax effect of disallowed
costs (24,759) (24,759) - - (70,638) (70,638) -
Interest on long-term debt 191,559 191,559 176,179 160,795 154,110 154,110 135,115
Amortization of debt expense and
premium-net, and other interest
charges 13,162 13,162 9,004 12,195 17,007 17,007 15,826
One-third of all rentals (Estimated to be
representative of the interest
component 5,053 5,053 4,996 5,117 5,992 5,992 5,847
Interest on in-core fuel 6,802 6,802 8,862 8,278 6,174 6,174 7,185
Disallowed Clinton plant costs - 160,328 - - - 270,956 -
-------- -------- -------- -------- -------- -------- --------
Earnings (loss) available for
fixed charges $122,833 $283,161 $351,419 $359,137 $124,707 $395,663 $425,674
======== ======== ======== ======== ======== ======== ========
Fixed charges:
Interest on long-term debt $191,559 $191,559 $176,179 $160,795 $154,110 $154,110 $135,115
Amortization of debt expense and
premium-net, and other
interest charges 31,093 31,093 25,553 25,785 27,619 27,619 25,381
One-third of all rentals (Estimated to be
representative of the interest
component 5,053 5,053 4,996 5,117 5,992 5,992 5,847
-------- -------- -------- -------- -------- -------- --------
Total Fixed Charges $227,705 $227,705 $206,728 $191,697 $187,721 $187,721 $166,343
======== ======== ======== ======== ======== ======== ========
Ratio of earnings to fixed charges 0.54 * 1.24 1.70 1.87 0.66 * 2.11 2.56
======== ======== ======== ======== ======== ======== ========
</TABLE>
* Earnings are inadequate to cover fixed charges. Additional earnings
(thousands) of $104,872 and $63,014 for 1990 and 1993, respectively,
are required to attain a one-to-one ratio of Earnings to Fixed Charges.
** Supplemental ratio of earnings to fixed charges presented to exclude
nonrecurring item - Disallowed Clinton plant costs.
<PAGE>
<TABLE>
ILLINOIS POWER COMPANY
STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO
FIXED CHARGES
(Thousands of Dollars)
<CAPTION>
Year Ended December31, Supplemental ** Supplemental **
-----------------------------------------------------------------------------------------------------------
1990 1990 1991 1992 1993 1993 1994
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Available for Fixed Charges:
Net Income (Loss) per
"Statement of Income" ($78,484) ($78,484) $109,244 $122,088 ($56,038) ($56,038) $180,242
Add:
Income Taxes:
Current 21,307 21,307 29,369 22,930 25,260 25,260 58,354
Deferred - Net 36,545 36,545 45,990 63,739 82,057 82,057 71,177
Allocated income taxes 2,608 2,608 (1,348) (6,632) (12,599) (12,599) (8,285)
Investment tax credit - deferred (14,121) (14,121) (11) (519) (782) (782) (11,331)
Income tax effect of
disallowed costs (24,759) (24,759) - - (70,638) (70,638) -
Interest on long-term debt 191,559 191,559 176,179 160,795 154,110 154,110 135,115
Amortization of debt expense and
premium-net, and other interest
charges 13,162 13,162 9,004 12,195 17,007 17,007 15,826
One-third of all rentals (Estimated to be
representative of the interest
component) 5,053 5,053 4,996 5,117 5,992 5,992 5,847
Interest on in-core fuel 6,802 6,802 8,862 8,278 6,174 6,174 7,185
Disallowed Clinton plant costs - 160,328 - - - 270,956 -
-------- -------- -------- -------- -------- -------- --------
Earnings (loss) available
for fixed charges $159,672 $320,000 $382,285 $387,991 $150,543 $421,499 $454,130
======== ======== ======== ======== ======== ======== ========
Fixed charges:
Interest on long-term debt $191,559 $191,559 $176,179 $160,795 $154,110 $154,110 $135,115
Amortization of debt expense and
premium-net, and other
interest charges 31,093 31,093 25,553 25,785 27,619 27,619 25,381
One-third of all rentals (Estimated to be
representative of the interest
component) 5,053 5,053 4,996 5,117 5,992 5,992 5,847
-------- -------- -------- -------- -------- -------- --------
Total Fixed Charges $227,705 $227,705 $206,708 $191,697 $187,721 $187,721 $166,343
======== ======== ======== ======== ======== ======== ========
Ratio of earnings to fixed charges 0.70* 1.41 1.85 2.02 0.80* 2.25 2.73
======== ======== ======== ======== ======== ======== ========
</TABLE>
* Earnings are inadequate to cover fixed charges. Additional earnings
(thousands) of $68,033 and $37,178 for 1990 and 1993, respectively,
are required to attain a one-to-one ratio of Earnings to Fixed Charges.
** Supplemental ratio of earnings to fixed charges presented to exclude
nonrecurring item - Disallowed Clinton plant costs.
<PAGE>
ILLINOVA CORPORATION PROXY STATEMENT
AND 1994 ANNUAL REPORT TO SHAREHOLDERS
notice of annual meeting of shareholders
----------------------------------------
Proxy Statement Table of Contents
Notice of Annual Meeting . . . . . . . . . . . . . . 2
Proxy Statement . . . . . . . . . . . . . . . . . . 3
Appendix:
1994 Annual Report to Shareholders . . . . . . . . . A-1
TO THE SHAREHOLDERS OF ILLINOVA CORPORATION:
Notice is Hereby Given that the Annual Meeting of
Shareholders of Illinova Corporation (the "Company") will be
held on April 12, 1995, 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 transact any other business which may properly come
before the meeting or any adjournment.
Shareholders of record at the close of business on February
13, 1995, will be entitled to notice of and to vote at the
Annual Meeting.
By Order of the Board of Directors,
Leah Manning Stetzner,
General Counsel and Corporate Secretary
Decatur, Illinois
March 1, 1995
IMPORTANT
The Company invites each of its approximately 38,700
shareholders 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. If you are unable to
be present at the meeting, it is important that you, whether the
owner of one or many shares, sign and return the enclosed proxy.
An envelope on which postage will be paid by the Company is
enclosed for that purpose.
Return of your executed proxy will ensure you are
represented at the Annual Meeting. Your cooperation will be
greatly appreciated.
proxy statement
---------------
SOLICITATION AND REVOCATION OF PROXIES
This Proxy Statement is furnished in connection with a
solicitation of proxies by the Board of Directors of the
Company, for use at the Annual Meeting of Shareholders to be
held at the office of the Company, 500 South 27th Street,
Decatur, Illinois 62525-1805, on Wednesday, April 12, 1995, at
10:00 A.M., and at any adjournment thereof (the "Annual
Meeting"). Any shareholder giving a proxy may revoke it at any
time by giving a later proxy or by giving written notice of
revocation to the Corporate Secretary of the Company prior to
the Annual Meeting. All duly executed proxies received prior to
the Annual Meeting will be voted.
Shares credited to the accounts of participants in the
Company's Automatic Reinvestment and Stock Purchase Plan,
Employees Stock Ownership Plan and Incentive Savings Plans will
be voted in accordance with the instructions of the participants
or otherwise in accordance with the terms of such plans.
VOTING RIGHTS
Shareholders of record at the close of business on Monday,
February 13, 1995 (the "Record Date"), will be entitled to
receive notice of and to vote at the Annual Meeting. As of such
date, the Company had outstanding 75,643,937 shares of Common
Stock. 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 Stock which they held of record at the
close of business on the Record Date.
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 Stock held of
record at the close of business on the Record Date. The
affirmative vote of the holders of a majority of the shares of
Common Stock present in person or represented by proxy and
entitled to vote at the Annual Meeting is required for the
election of directors.
ANNUAL REPORT, PROXY AND PROXY STATEMENT
Accompanying this Proxy Statement, which includes
Consolidated Financial Statements, is a Notice of Annual Meeting
of Shareholders, a form of Proxy and the Summary Annual Report
to Shareholders covering operations of the Company for the year
1994. This Proxy Statement and accompanying documents are first
being mailed to shareholders on or about March 1, 1995.
BOARD OF DIRECTORS
Information Regarding
The Board Of Directors
The Board of Directors held four Board meetings from the
completion date of the holding company restructuring in May 1994
(hereinafter called the Company's organization) through December
31, 1994. Other than Ms. von Ferstel and Mr. Zimmerman, all
directors attended at least 75% of the aggregate meetings of the
Board and Committees of which they were members during 1994. The
Board has four standing committees: the Audit Committee, the
Finance Committee, the Compensation and Nominating Committee,
and the Corporate Strategy Committee.
The duties and members 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 once from the date of the Company's
organization in May 1994 through December 31, 1994.
This Committee consists of the following non-employee
directors ("Outside Directors"): Vernon K. Zimmerman, Chairman,
Richard R. Berry, Donald E. Lasater, Robert M. Powers, Walter M.
Vannoy, and Marilou von Ferstel.
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 from the date of the
Company's organization in May 1994 through December 31,
1994.
This Committee consists of the following members of the
Board: Donald E. Lasater, Chairman, Richard R. Berry, Larry
D. Haab, Walter D. Scott, Charles W. Wells, and Vernon K.
Zimmerman.
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 from the date of the Company's organization in May
1994 through December 31, 1994.
This Committee consists of the following Outside
Directors: Donald S. Perkins, Chairman, Robert M. Powers,
Walter D. Scott, Ronald L. Thompson, Marilou von Ferstel,
and John D. Zeglis.
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 development.
The Corporate Strategy Committee met three times from
the date of the Company's organization in May 1994 through
December 31, 1994. This Committee consists of the following
members of the Board: Robert M. Powers, Chairman, Larry D.
Haab, Donald S. Perkins, Walter D. Scott, Ronald L.
Thompson, Marilou von Ferstel, and John D. Zeglis.
BOARD COMPENSATION
The Outside Directors of the Company 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 Outside Director 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
representing shares of the Company's 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.
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 the Company.
The dates shown for service as a director include service as
a director of Illinois Power prior to the May 1994 merger in
which Illinois Power became a wholly owned subsidiary of the
Company. If any nominee should become unable to serve
as a director, another nominee will be selected by the
current Board of Directors.
Year in Which
First Elected
Name of Director Nominee, Age, a Director of
Business Experience and Other Information the Company
------------------------------------------------------------
Richard R. Berry, 63 1988
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.
Larry D. Haab, 57 1986
Chairman, President and Chief Executive Officer of Illinova
since December 1993, and of Illinois Power since June 1991, and
an employee of Illinois Power since 1965. He is a director of
First Decatur Bancshares, Inc., The First National Bank of
Decatur and Firstech, Incorporated.
Donald E. Lasater, 69 1981
Prior to retirement in April 1989, Mr. Lasater was Chairman of
the Board and Chief Executive Officer of Mercantile
Bancorporation, Inc., St. Louis, Missouri, a bank holding
company, since 1970. He is a director of Interco Incorporated,
General American Life Insurance Company and A.P. Green
Industries, Inc.
Donald S. Perkins, 67 1988
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 Chairman of the
Board and a director of Kmart Corporation and a director of
AT&T, Aon Corporation, Cummins Engine Company, Inc., Inland
Steel Industries, Inc., LaSalle Street Fund, Inc., The Putnam
Funds, and Time Warner, Inc.
Robert M. Powers, 63 1984
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 and a director of A. E.
Staley Manufacturing Company, and a director of Tate & Lyle,
PLC.
Walter D. Scott, 63 1990
Professor of Management and Senior Austin Fellow, J. L. Kellogg
Graduate School of Management, Northwestern 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 Services, from 1980
to 1984. Mr. Scott is a director of Chicago Title and Trust
Company, Chicago Title Insurance Company, Intermatic
Incorporated, and Orval Kent Food Company, Inc.
Ronald L. Thompson, 45 1991
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 interests in
manufacturing and service activities, from 1980 to 1993. He is
Chairman of the Board of The GR Group and a director of
McDonnell Douglas Corporation.
Walter M. Vannoy, 67 1990
Chairman of the Board and a director of Figgie International,
Inc., a diversified operating
company serving consumer, industrial, technical, and service
markets world-wide, Willoughby, Ohio, since 1994. He is a
director of Chempower, Inc.
Marilou von Ferstel, 57 1990
Executive Vice President and General Manager of Ogilvy Adams &
Rinehart, Inc., a public relations firm in Chicago, Illinois,
since June 1990. She had previously been Managing Director and
Senior Vice President of Hill and Knowlton, Chicago, Illinois, a
public relations consulting firm, from May 1981 to June 1990.
Ms. von Ferstel is a director of Walgreen Company.
Charles W. Wells, 60 1976
Executive Vice President of Illinois Power Company since 1976.
Mr. Wells has been an employee of Illinois Power since 1956. He
was elected a Vice President in 1972. He is a director of First
of America Decatur N.A.
John D. Zeglis, 47 1993
Senior Vice President, General Counsel and Government Affairs of
AT&T, Basking Ridge, New Jersey, a diversified communications
company, since 1989. He had been Senior Vice President and
General Counsel from 1986 to 1989. He is a director of the
Helmerich & Payne Corporation.
Vernon K. Zimmerman, 66 1973
Director of the Center for International Education 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 and Southwestern Life
Corporation.
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table shows shares of stock beneficially owned as
of January 25, 1995, by each director nominee, the executive
officers named in the Summary Executive Compensation Table, and
all owners of more than five percent of Illinova Common Stock.
Number
of Shares
Name of Class Beneficially Percent
Beneficial Owner of Stock Owned (1) of Class
----------------------------------------------------------------
Richard R. Berry Common 2,802 (2)
Larry D. Haab Common 9,647 (2)
Donald E. Lasater Common 3,313 (2)
Donald S. Perkins Common 7,353 (2)
Robert M. Powers Common 6,600 (2)
Walter D. Scott Common 3,200 (2)
Ronald L. Thompson Common 2,391 (2)
Walter M. Vannoy Common 2,700 (2)
Marilou von Ferstel Common 3,353 (2)
Charles W. Wells Common 8,157 (2)
John D. Zeglis Common 1,659 (2)
Vernon K. Zimmerman Common 7,432 (2)
Paul L. Lang Common 2,587 (2)
Larry F. Altenbaumer Common 3,642 (2)
Larry S. Brodsky Common 1,534 (2)
Mellon Bank Corporation (3) Common 4,103,000 5.42%
(1) The nature of beneficial ownership for shares shown is
sole voting and/or investment power, except for Mr. Wells, who
disclaims beneficial ownership of 1,000 shares held in the name
of his wife.
(2) Except as indicated above, no director or any executive
officer owns any other equity securities of the Company. No
director or executive officer owns as much as 1% of the Common
Stock. All directors and executive officers of both the Company
and Illinois Power Company as a group own 75,791 shares of
Common Stock (less than 1%).
(3) According to its February 8, 1995 Schedule 13G filing,
Mellon Bank Corporation, Mellon Bank Center, Pittsburgh, PA
15258 and its Subsidiaries beneficially owned 4,103,000 shares
of Illinova Common Stock, with sole power to vote 3,189,000
shares, sole power to dispose of 3,250,000 shares, shared power
to vote 30,000 shares and shared power to dispose of 853,000
shares.
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 and Illinois Power
Company ("Illinois Power"), its principal subsidiary, for the
years indicated. The compensation shown includes all compensation
paid for service to the Company and its subsidiaries, including
Illinois Power.
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term Compensation
-----------------------------------------
Annual Compensation Awards Payouts
------------------------- -------------------- --------
Restricted
Other Stock Securities LTIP All Other
Bonus Annual AwardsUnderlying Payourts ompensation
Name and Principal Position Year Salary (1) Compensation (2)Options (3) (4)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Larry D. Haab 1994 $451,375 $42,881 $15,783 $42,881 20,900shs. $22,869 $3,578
Chairman, President and 1993 437,500 22,531 13,199 20,000 shs.3,555
Chief Executive Officer of 1992 403,958 28,883 7,099 16,000 shs.3,373
Illinova and Illinois Power
Charles W. Wells 1994 $276,625 $25,242 $12,404 $25,242 8,500 shs. $15,152 $5,533
Executive Vice President 1993 265,875 12,629 9,697 6,500 shs 5,341
of Illinois Power 1992 252,500 16,160 7,034 6,000 shs. 5,129
Paul L. Lang 1994 $213,562 $20,289 $ 8,672 $20,289 6,800shs. $11,036 $ 543
Senior Vice President 1993 205,625 9,767 7,508 6,000shs. 527
of Illinois Power 1992 188,667 13,490 4,472 5,000 shs. 536
Larry F. Altenbaumer 1994 $196,562 $18,674 $8,975 $18,674 6,800 shs. $ 9,519 $2,007
Chief Financial Officer, 1993 187,750 8,918 7,093 6,000 shs.2,009
Treasurer and Controller 1992 166,500 10,656 3,588 5,000 shs.1,867
of Illinova
and Senior Vice President and
Chief Financial Officer of
Illinois Power
Larry S. Brodsky 1994 $174,186 $16,548 $4,973 $16,548 4,400shs. $ 8,766 $1,587
Senior Vice President 1993 157,875 8,131 4,220 4,500shs. 1,527
of Illinois Power 1992 146,791 9,395 3,676 3,000shs. 1,508
(1) The amounts shown in this column are the cash award
portion of grants made to these individuals under the Executive
Incentive Compensation Plan ("Compensation Plan"), including
amounts deferred under the Executive Deferred Compensation Plan.
See the Compensation Plan description in footnote (2) below.
(2) This table sets forth stock unit awards for 1994 under the
Company's 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 under Bonus in the Summary Compensation Table. 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, without good cause or by any
participant with good reason, all awards of the participant
become fully vested and payable. As of December
31, 1994, named executive officers were credited with the
following total aggregate number of unvested stock units under
the Compensation Plan since its inception, valued on the basis
of the closing price of Common Stock on December 31, 1994: Mr.
Haab, 4,427 units valued at $96,713; Mr. Wells, 2,535 units
valued at $55,384; Mr. Lang, 2,044 units valued at $44,653; Mr.
Altenbaumer, 1,792 units valued at $39,157; Mr. Brodsky, 1,596
units valued at $34,880. Although stock units have been rounded,
valuation is based on total stock units, including partial
shares.
(3) The amounts shown in this column reflect the cash value
of the stock units granted in 1992 for the year 1991, including
amounts deferred, under the Compensation Plan. See the
Compensation Plan description in footnote (2) above.
(4) The amounts shown in this column are Illinois Power's
contributions under the Incentive Savings Plan (including the
market value of shares of the Company's Common Stock at the time
of allocation).
The following tables summarize grants during 1994 of stock
options under the Company's 1992 Long-Term Incentive
Compensation Plan ("LTIC") and awards outstanding at year end for
the individuals named in the Summary Compensation Table. No
options were exercisable or exercised during 1994.
OPTION GRANTS IN 1994
Individual Grants
-------------------------------------
Number % of
of Securities Options ExerciseGrant
Underlying Granted to or BaseDate
Options Employees PriceExpiration Present
Granted(1) in 1994 Per Share(1) DateValue(2)
----------------------------------------------------------
Larry D. Haab 20,900 25% $20.875 6/8/2003 $158,500
Charles W. Wells 8,500 10 20.875 6/8/2003 64,100
Paul L. Lang 6,800 8 20.875 6/8/2003 51,500
Larry F. Altenbaumer 6,800 8 20.875 6/8/200351,500
Larry S. Brodsky 4,400 5 20.875 6/8/2003 33,300
(1) Each option becomes exercisable on June 30, 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 a
recipient's employment terminates. In the event of certain
changein-control circumstances, the Compensation and Nominating
Committee may declare the option immediately exercisable. The
exercise price of each option is equal to the fair market value
of the Common Stock on the date of the grant.
(2) 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 by SEC rules; 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 8, 1994, was $20.875; the exercise price of the options is
$20.875; and the term of the option is 10 years. The annual
dividend yield on the Company's Common Stock was 3.623%. The
risk-free interest rate used was 7.50%, based on the yield of a
zero-coupon government bond maturing at the end of the option
term. The volatility of the stock used was 0.1975.
AGGREGATED OPTION AND FISCAL
YEAR-END OPTION VALUE TABLE
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Fiscal Year-End at FiscalYear-End
Name Exercisable/Unexercisable Exercisable/Unexercisable
------------------------------------------------------------------
Larry D. Haab 0 shs./56,900 shs. 0/20,168
Charles W. Wells 0 shs./21,000 shs. 0/8,202
Paul L. Lang 0 shs./17,800 shs. 0/6,562
Larry F. Altenbaumer 0 shs./17,800 shs. 0/6,562
Larry S. Brodsky 0 shs./11,900 shs. 0/4,246
PENSION BENEFITS
Illinois Power maintains a Retirement Income Plan for
Salaried Employees (the "Retirement Plan") providing pension
benefits for all eligible salaried employees. In addition to the
Retirement Plan, Illinois Power 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 Retirement
Plan and provides for payments from general funds of Illinois
Power of any monthly retirement income not payable under the
Retirement Plan because of benefit limits imposed by law or
because of certain Retirement 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 Retirement
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.
ESTIMATED ANNUAL BENEFITS (ROUNDED)
Annual
Average 15 Yrs. 20 Yrs. 25 Yrs. 30 Yrs. 35 Yrs.
Earnings Service Service Service Service Service
------------------------------------------------------------
$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
650,000 195,000 260,000 325,000 390,000 455,000
The earnings used in determining pension benefits under the
Retirement Plan are the participants' regular base
compensation, as set forth under salaries in the compensation
table.
At December 31, 1994, for purposes of both the Retirement
Plan and the Supplemental Plan, Messrs. Haab, Wells, Lang,
Altenbaumer, and Brodsky had completed 29, 31, 8, 22, and 20
years of credited service, respectively.
COMPENSATION AND NOMINATING COMMITTEE
REPORT ON OFFICER COMPENSATION
The six-member Compensation and Nominating Committee of the
Board of Directors (the "Committee") is composed entirely of
Outside 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 Compensation Plan, approves payments made pursuant to the
Compensation Plan and recommends grants under the Long-Term
Incentive Compensation 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.
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 this Compensation Plan for
the Company's officers 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 this Compensation 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 1994, awards under the Compensation Plan are based on
achievement in 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 an assessment of the
individual officer's performance during the year.
Awards shown under Bonus in the Summary Compensation Table
for performance during 1994 were based on the following results.
Earnings per Share and Operating Effectiveness (as measured by
power plant availability) were better than the threshold level
for the award. Customer Satisfaction was at the threshold target
level. Employee Teamwork did not result in an award. Cost
Management was better than the maximum level for the award.
LONG-TERM INCENTIVE COMPENSATION 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 based on the review of 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 1994 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, President, and Chief Executive
Officer ("CEO") of Illinois Power on June 12, 1991, and
Chairman, President and Chief Executive Officer of the Company
in December 1993. The Company based Mr. Haab's 1994 compensation
on the policies and plans described above.
The Committee invokes the active participation of all non
management directors in reviewing Mr. Haab's performance before
it makes recommendations regarding his compensation. The
Committee is responsible for administering the processes for
completing this review. The process starts early in the year
when the Board of Directors works with Mr. Haab to establish his
personal goals and short- and long-term strategic goals for the
Company. At the conclusion of the year Mr. Haab reviews his
performance with the non-management directors. The Committee
oversees this review and recommends to the Board appropriate
adjustments to compensation. For 1994 the Committee, with the
participation of all Outside Directors, determined that almost all
goals were achieved and that the results for the Company for the
year were excellent.
They concluded that his performance continued to lead the
Company to the accomplishment of its strategic objectives.
The 1994 Compensation 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 1,963 stock
units which vest over a three-year period as described above.
The 20,900 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
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 400
Index and S&P Utilities Index from (i) December 31, 1989,
through December 31, 1994, and (ii) December 31, 1991, through
December 31, 1994. Effective May 27, 1994, Illinois Power became
a subsidiary of Illinova Corporation and each outstanding share
of Illinois Power's Common Stock was converted in a merger into
one share of Common Stock of Illinova. Information in the graphs
through May 27, 1994, reflects the performance of Illinois Power
Common Stock, and information since May 27, 1994, reflects the
performance of Illinova Common Stock.
COMPARISON OF FIVE-YEAR
CUMULATIVE TOTAL RETURN
Among Illinova, S&P 500 Index, S&P Midcap 400 Index, and S&P
Utilities Index.
</TABLE>
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among Illinova, S&P 500 Index, S&P MidCap 400 Index
and S&P Utilities Index*
<CAPTION>
Measurement Period (Fiscal Year Covered)
--------------------------------------------------
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Illinova 87 126 123 128 131
S&P 500 97 126 136 150 152
S&P MidCap 400 95 142 159 182 175
S&P Utitilies 97 112 121 139 128
</TABLE>
*Fiscal year ended December 31
Assumes $100 invested on December 31, 1989, in the Company's
Common Stock, S&P 500 Index, S&P MidCap 400 Index, and S&P
Utilities Index.
COMPARISON OF THREE-YEAR
CUMULATIVE TOTAL RETURN
Among Illinova, S&P 500 Index, S&P Midcap 400 Index, and S&P
Utilities Index.
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF 3 YEAR CUMULATIVE TOTAL RETURN
Among Illinova, S&P 500 Index, S&P MidCap 400 Index
and S&P Utilities Index*
<CAPTION>
Measurement Period (Fiscal Year Covered)
----------------------------------------
1992 1993 1994
---- ---- ----
<S> <C> <C> <C>
Illinova 98 101 104
S&P 500 108 118 120
S&P MidCap 400 112 128 123
S&P Utitilies 108 124 114
</TABLE>
*Fiscal year ended December 31
Assumes $100 invested on December 31, 1991, in the Company's
Common Stock, S&P 500 Index, S&P MidCap 400 Index, and S&P
Utilities Index.
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 1994.
INDEPENDENT AUDITORS
The Board of Directors of the Company has selected Price
Waterhouse LLP as independent auditors for the Company for 1995.
A representative of that firm will be present at the Annual
Meeting and available to make a statement and to respond to
appropriate questions.
OTHER MATTERS
The Company's 1994 Summary Annual Report to Shareholders was
mailed to shareholders commencing on March 1, 1995. Copies of
the Company's Annual Report on Form 10-K will be provided to
shareholders, after the filing thereof with the Securities and
Exchange Commission on or before March 31, 1995. Requests should
be addressed to Investor Relations, G-21, Illinois Power
Company, 500 South 27th Street, Decatur, Illinois 62525-1805.
Any proposal by a shareholder to be presented at the next
Annual Meeting must be received at the Company's executive offices
not later than October 31, 1995.
OTHER BUSINESS
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.
By Order of the Board of Directors,
Leah Manning Stetzner,
General Counsel and Corporate Secretary
Decatur, Illinois
March 1, 1995
appendix: 1994 annual report to shareholders
--------------------------------------------
TABLE OF CONTENTS
Management's Discussion and Analysis . . . . . . . . . . . A-2
Responsibility for Information . . . . . . . . . . . . . . A-10
Report of Independent Accountants . . . . . . . . . . . . A-10
Consolidated Statements of Income . . . . . . . . . . . . A-11
Consolidated Balance Sheets . . . . . . . . . . . . . . . A-12
Consolidated Statements of Cash Flows . . . . . . . . . . A-13
Consolidated Statements of Retained Earnings (Deficit) . . A-13
Notes to Consolidated Financial Statements . . . . . . . . A-14
Selected Consolidated Financial Data . . . . . . . . . . . A-32
Selected Illinois Power Company Statistics . . . . . . . . A-33
management's discussion and analysis
------------------------------------
In this report, we make reference to the Consolidated
Financial Statements, related Notes to Consolidated Financial
Statements, Selected Consolidated Financial Data and Selected
Illinois Power Company Statistics for information concerning
consolidated financial position and results of operations. The
factors having significant impact upon consolidated financial
position and consolidated results of operations since January 1,
1992, are discussed below.
ILLINOVA SUBSIDIARIES
The consolidated financial statements include the accounts
of: Illinova Corporation (Illinova), a holding company; Illinois
Power Company (IP), a combination electric and gas utility; and
Illinova Generating Company (IGC), which invests in energy-
related projects and competes in the independent power market.
Illinova Power Marketing, Inc. (IPM) is a wholly owned
subsidiary of Illinova formed in July 1994 as a Delaware
corporation. IPM plans to become active in the business of
brokering and marketing electric power to various customers. On
July 20, 1994, IPM filed a petition with the Federal Energy
Regulatory Commission (FERC) seeking approval to buy electricity
from various producers not affiliated with IP and to sell
electricity at market rates to such wholesale customers as
utilities, electric cooperatives and municipalities. IPM
eventually intends to sell electricity directly to industrial and
commercial customers. Subsequent to the IPM filing, the FERC
issued a decision in Heartland Energy Services, Inc.,
et al., setting forth the general standards governing
applications by utility-affiliated marketers, such as IPM, for
market-based rates. Among these standards is the submission, by
the marketer's affiliated utility, of an open access transmission
tariff offering transmission services and prices comparable to
those which the utility provides to its customers. Based on the
FERC decision in the Heartland case, IPM plans to submit an
amended filing and IP plans to submit the comparable open access
transmission tariff, designed to satisfy the FERC's -
comparability' requirements, to the FERC during the first quarter
of 1995. IPM will begin power marketing operations upon receipt of
FERC approval of these filings. Until that time, IPM will be
limited to the brokering of electricity. In January 1995, IPM
established operating headquarters in Salt Lake City, Utah.
See "Note 2 - Illinova Subsidiaries" of the "Notes to
Consolidated Financial Statements" for additional information.
IP's financial position and results of operations are currently
the principal factors affecting Illinova's consolidated financial
position and results of operations.
COMPETITION
Competition has become a dominant issue for the electric
utility industry. Competition has been promoted by federal
legislation, starting with the Public Utility Regulatory Policy
Act of 1978, which facilitated the development of co-generators
and independent power producers, and continuing with enactment of
the Energy Policy Act of 1992 which authorized the FERC to mandate
wholesale wheeling of electricity by utilities at the request of
certain authorized generating entities and electric service
providers. Wheeling is the transport of electricity generated by
one entity over transmission and distribution lines belonging to
another entity. For many years prior to enactment of the Energy
Policy Act, the FERC imposed wholesale wheeling obligations as a
condition of approving mergers and granting operating privileges,
a practice that continues.
Competition arises not only from co-generation or independent
power production, but from municipalities seeking to extend their
service boundaries to include customers being served by IP. This
is not a new risk in the industry, as the right of municipalities
to have power wheeled to them by utilities was established in
1973. The Illinois Commerce Commission (ICC) has been supportive
of IP's attempts to maintain its customer base through approval of
special contracts and flexible pricing that help IP to compete
with existing municipal providers.
Further competition may be introduced by state action or by
further federal regulatory action. While the Energy Policy Act
precludes the FERC from mandating retail wheeling, state
regulators and legislators could open utility franchise
territories to full competition at the retail level. Retail
wheeling involves the transport of electricity to end-use
residential, commercial or industrial customers. Such a change
would be a significant departure from existing regulation in
which public utilities have a universal obligation to serve the
public in return for relatively protected service territories and
regulated pricing designed to allow a reasonable return on
prudent investment and recovery of operating costs. State
attempts to lay the groundwork for retail wheeling have been
hampered by opposition from various interest groups, as well as
the complexity of related issues, including recovery of costs
associated with preexisting generation investment.
While Illinova and IP are confident of IP's present ability
to compete with all current alternate sources of energy supply,
the issue of competition is one that raises both risks and
opportunities. At this time, the ultimate effect of competition
on consolidated financial position and results of operations is
uncertain. See "Note 1 - Summary of Significant Accounting
Policies" of the "Notes to Consolidated Financial Statements" for
additional discussion of the effects of regulation.
OPEN ACCESS AND WHEELING
Under the Energy Policy Act, an investor-owned utility must
respond to any bona fide transmission service request within 60
days. Although the Energy Policy Act created, for the first
time, a FERC-administered mechanism for imposing wholesale
wheeling obligations on utilities, IP has had the obligation to
wheel power for interconnected electricity suppliers since 1976.
That condition was included in IP's Clinton Power Station
(Clinton) construction permit and operating license issued by
the Nuclear Regulatory Commission. IP currently wheels power at
rates originally approved by the FERC in 1984. It is too soon to
predict the long-term financial impact of increasing transmission
access and other issues arising from such access.
EARLY RETIREMENT
In December 1994, IP announced plans for a voluntary early
retirement program. Approximately 200 salaried employees would
qualify for early retirement under this program. The offer will
be made to employees during the fourth quarter of 1995. A
similar program for union employees is the subject of contract
negotiations currently underway between IP and the International
Brotherhood of Electrical Workers. Approximately 450 union
employees would qualify for the program if current negotiations
result in the same package as offered to salaried employees. At
December 31, 1994, IP employed 4,350 people, as compared to
4,540 at December 31, 1993.
The early retirement program for salaried employees is
expected to generate a pre-tax charge of approximately $22 million
against fourth quarter 1995 earnings and to generate savings of
approximately $15 million annually beginning in 1996. A combined
early retirement program for both salaried and union employees,
based on the same package as announced for salaried employees,
would generate a pre-tax charge of approximately $42 million
against fourth quarter 1995 earnings and would generate savings
of approximately $35 million annually beginning in 1996.
CONSOLIDATED RESULTS OF OPERATIONS
Overview
Earnings (loss) applicable to common stock were $158 million
for 1994, $(82) million for 1993 and $93 million for 1992.
Earnings (loss) per common share were $2.09 for 1994, $(1.08) for
1993 and $1.23 for 1992. The 1994 results include $.08 per share
for the excess of carrying amount over consideration paid for IP
preferred stock redeemed in December 1994. The 1994 earnings
also reflect an increase in gas rates as a result of IP's 1994
gas rate order, increased electric sales, lower operating and
maintenance expenses due to on-going cost management efforts, no
Clinton refueling and maintenance outage and lower financing
costs. In 1993, earnings were $118 million, or $1.57 per common
share, excluding the September 1993 write-off of disallowed
Clinton post-construction costs of $200 million or $2.65 per
share, net of income taxes. The 1993 earnings before the write-
off reflect increased electric and gas sales due to closer-to-
normal temperatures, increased interchange sales, lower
operating and maintenance expenses and lower interest expense as
a result of a continued refinancing program. The 1992 earnings
were primarily due to the February 1992 increase in electric
rates of 9.2%, which was modified in August 1992, resulting in a
net increase of 7.2%. Additionally, in 1992 IP reduced its
interest expense by retiring and refinancing certain long-term
debt and lowered its electric depreciation expense as a result
of new depreciation rates approved in the 1992 electric rate
case order.
IP operating revenues are based on rates authorized by the
ICC and the FERC. These rates are designed to recover the cost of
service and to allow shareholders a fair rate of return as
determined by the ICC and the FERC. Future electric and natural
gas sales, including interchange sales, will continue to be
affected by an increasingly competitive marketplace, changes in
the regulatory environment, increased transmission access,
weather conditions, competing fuel sources, interchange market
conditions, plant availability, fuel cost recoveries, customer and
IP conservation efforts and the overall economy.
<TABLE>
[GRAPH APPEARS HERE]
OPERATING REVENUES
(in millions of dollars)
<CAPTION>
Year Revenue Amount
---- --------------
<S> <C>
1994 1589.5
1993 1581.2
1992 1479.5
1991 1474.9
1990 1469.5
</TABLE>
ELECTRIC OPERATIONS - For the years 1992 through 1994, electric
revenues including interchange increased 8.1% and the gross
electric margin increased 5.5% as follows:
------------------------------------------------------------------
(Millions of dollars) 1994 1993 1992
------------------------------------------------------------------
Electric revenues $1,177.5 $1,135.6 $1,117.9
Interchange revenues 110.0 130.8 73.0
Fuel cost & power purchased (319.2) (313.6) (272.8)
------------------------------------------------------------------
Electric margin $ 968.3 $ 952.8 $ 918.1
==================================================================
The components of annual changes in electric revenues are
summarized as follows:
------------------------------------------------------------------
(Millions of dollars) 1994 1993 1992
------------------------------------------------------------------
Price $(23.2) $(30.0) $ 71.2
Volume and other 44.1 72.1 (45.8)
Fuel cost recoveries 21.0 (24.4) (8.7)
------------------------------------------------------------------
Revenue increase $ 41.9 $ 17.7 $ 16.7
==================================================================
From 1995 through 1999 electric sales excluding interchange
are expected to increase approximately 2% per year.
1994 - The 3.7% increase in electric revenues was primarily due
to a 6.3% increase in kilowatt-hour sales to ultimate consumers
(excluding interchange sales and wheeling). Volume increases
resulted from higher commercial sales (8.3%) and higher
industrial sales (7.0%) due to an improving economy. Residential
sales remained essentially unchanged from 1993 primarily due to
milder temperatures in 1994 as compared to 1993. Interchange
sales decreased 19.6% primarily due to unusually large sales
opportunities during 1993.
1993 - The 1.6% increase in electric revenues was primarily due to
a 3.2% increase in kilowatt-hour sales to ultimate consumers
(excluding interchange sales and wheeling) reflecting closer-to
normal temperatures during the summer season. Volume increases
resulted from higher residential sales (9.9%), commercial sales
(6.3%), and industrial sales (.5%). The increase in electric
revenues was partially offset by the reduction in rates resulting
from the August 1992 ICC Rehearing Order. Interchange revenues
increased $57.8 million (79.2%) primarily as a result of increased
sales opportunities.
1992 - The 1.5% increase in electric revenues was primarily due to
the 9.2% rate increase in February 1992, which was modified in
August 1992, resulting in a net increase of 7.2%, partially
offset by decreased usage due to unusually mild weather. Total
kilowatthour sales to ultimate consumers (excluding interchange
sales and wheeling) decreased 2.1%. The decreases in residential
sales (10.4%) and commercial sales (1.8%) were due to unusually
cool summer and mild winter temperatures as compared to a warmer
summer and colder winter during 1991. Industrial sales increased
5.8% due to higher usage by several of IP's larger customers.
The 14.7% decrease in interchange revenues in 1992 as compared
to 1991 was attributable to milder weather.
<TABLE>
[GRAPH APPEARS HERE]
MAJOR SOURCES OF ELECTRIC ENERGY
(in millions of MWH)
<CAPTION>
Year Fossil Nuclear Purchases
------------------------------------------------------------------
<S> <C> <C> <C>
1994 13.2 6.4 3.1
1993 13.1 5.1 5.1
1992 13.5 4.3 1.6
------------------------------------------------------------------
</TABLE>
The cost of meeting IP's system requirements was reflected in
fuel costs for electric plants and power purchased. Changes in
these costs are summarized as follows:
------------------------------------------------------------------
(Millions of dollars) 1994 1993 1992
------------------------------------------------------------------
Fuel for electric plants
Volume and other $ 13.8 $ 3.5 $(17.4)
Price (14.3) 7.4 (7.9)
Fuel cost recoveries 32.0 (24.6) 7.5
------------------------------------------------------------------
31.5 (13.7) (17.8)
Power purchased (25.9) 54.5( (.7)
------------------------------------------------------------------
Total increase (decrease) $ 5.6 $40.8 $(18.5)
==================================================================
Weighted average system
generating fuel cost ($/MWH) $12.72 $13.88 $13.77
==================================================================
Changes in these costs were caused by system load
requirements, generating unit availability, fuel prices, purchased
power prices, resale of energy to other utilities and fuel cost
recovery through the Uniform Fuel Adjustment Clause.
<TABLE>
[GRAPH APPEARS HERE]
Equivalent Availability -- Clinton and Fossil
<CAPTION>
Year Clinton Fossil
------------------------------------------------------------------
<S> <C> <C>
1994 92% 78%
1993 73% 85%
1992 62% 82%
1991 76% 81%
1990 47% 76%
------------------------------------------------------------------
</TABLE>
Changes in factors affecting the cost of fuel for electric
generation are summarized as follows:
------------------------------------------------------------------
1994 1993 1992
------------------------------------------------------------------
Increase (decrease)
in generation 8.2% 2.5% (7.0%)
Generation mix
Coal and other 67% 72% 75%
Nuclear 33% 28% 25%
==================================================================
1994 - The cost of fuel increased 13.4% and electric generation
increased 8.2%. The increase in fuel cost was attributable to
the effects of the Uniform Fuel Adjustment Clause, partially
offset by a decrease in fossil generation and an increase in
lower-cost nuclear generation. Clinton's equivalent availability
and generation were higher in 1994 as compared to 1993 due to no
refueling and maintenance outage. Clinton's next refueling and
maintenance outage is scheduled to begin in March 1995. Power
purchased for the period decreased $25.9 million. Unusually
large interchange sales opportunities during 1993, not recurring
in 1994, were the primary cause of the decrease in purchased
power.
<TABLE>
[GRAPH APPEARS HERE]
FUEL COST PER MILLION BTU
(percent of generation)
<CAPTION>
Fuel
Type Cost Percent
----------------------------------------------------------------
<S> <C> <C>
Coal $1.42 66.2%
Nuclear .85 33.3
Gas 3.06 .2
Oil 3.89 .3
----------------------------------------------------------------
</TABLE>
1993 - The cost of fuel decreased 5.5%, while electric
generation increased 2.5%. The decrease in fuel cost was
attributable to the effects of the Uniform Fuel Adjustment
Clause and lower generation at IP's largest fossil plant. This
decrease was partially offset by an increase in transportation
costs due to flooding in the Midwest and the United Mine Workers'
Strike. Power purchased for the period increased $54.5 million.
Coal delivery concerns and coal conservation measures stemming
from the United Mine Workers' Strike, combined with favorable
interchange prices and increased sales opportunities,
contributed to IP's increase in purchased power. Clinton
returned to service December 10, 1993, after completing its
fourth refueling and maintenance outage which began September
26, 1993.
1992 - The cost of fuel decreased 6.7% and electric generation
decreased at fossil plants as a result of mild weather and a
credit refund from one coal supplier, partially offset by the
effects of the Uniform Fuel Adjustment Clause. The credit refund
resulted from a price reduction arrived at through arbitration
under the applicable coal supply contract. Clinton returned to
service June 1, 1992, after completing a refueling and
maintenance outage that began February 27, 1992.
GAS OPERATIONS - For the years 1992 through 1994, gas revenues,
including transportation, increased 4.6% and the gross margin on
gas revenues increased 11.1% as follows:
------------------------------------------------------------------
(Millions of dollars) 1994 1993 1992
------------------------------------------------------------------
Gas revenues $ 293.2 $ 306.8 $ 281.8
Gas cost (172.4) (187.3) (171.9)
Transportation revenues 8.8 8.0 6.8
------------------------------------------------------------------
Gas margin $ 129.6 $ 127.5 $ 116.7
==================================================================
(Millions of therms)
Therms sold 584 597 613
Therms transported 262 229 204
------------------------------------------------------------------
Total consumption 846 826 817
==================================================================
Changes in the cost of gas purchased for resale are
summarized as follows:
------------------------------------------------------------------
(Millions of dollars) 1994 1993 1992
------------------------------------------------------------------
Gas purchased for resale
Cost (excluding take-or-pay) $ (6.4) $13.3 $ 1.0
Take-or-pay costs 2.8 5.3 (16.0)
Volume (13.6) (3.4) 16.5
Gas cost recoveries 2.3 .2 2.6
------------------------------------------------------------------
Total increase (decrease) $(14.9) $15.4 $ 4.1
==================================================================
Average cost per therm delivered $ .261 $.275 $ .260
==================================================================
The 1994 decrease in the cost of gas purchased was primarily
due to lower natural gas prices, the expanded use of additional
gas storage and a decrease in therms purchased. Also contributing
to the higher gas margin in 1994 was the 6.1% increase in gas base
rates approved by the ICC in April 1994. The 1993 increase in the
cost of gas purchased was primarily due to an increase in the
price of purchased gas and take-or-pay costs. From 1995 through
1999, gas sales including therms transported are expected to
remain close to 1994 levels.
OTHER EXPENSES AND TAXES - A comparison of significant increases
(decreases) in other expenses and deferred Clinton costs for the
last three years is presented in the following table:
------------------------------------------------------------------
(Millions of dollars) 1994 1993 1992
------------------------------------------------------------------
Other operating expenses $(9.2) $(2.1) $17.9
Maintenance (11.2) (1.3) 14.9
Depreciation and amortization 12.2 7.9 (15.5)
Deferred Clinton costs (5.8) (1.9) -
==================================================================
The decrease in operating and maintenance expenses for 1994
is due to ongoing re-engineering efforts, improved operating
efficiencies at IP's fossil plants and at Clinton and no
refueling and maintenance outage at Clinton. The decrease in
operating and maintenance expenses for 1993 is primarily due to
decreased costs at Clinton, partially offset by increased fossil
plant maintenance. The Clinton refueling and maintenance outage
and higher administration and general expenses contributed to the
increase in other operating and maintenance expenses in 1992. The
1994 increase in depreciation expense is due primarily to a
higher utility plant balance in 1994 as compared to 1993. The
1993 increase in depreciation expense is due principally to the
effects of the adoption of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." See "Note 1 -
Summary of Significant Accounting Policies" of the "Notes to
Consolidated Financial Statements" for additional information.
The 1992 decrease in depreciation expense reflects the reduction
of the nonClinton electric plant composite rate approved in the
1992 rate order. Deferred Clinton costs decreased in 1994 and 1993
as a result of the September 1993 write-off of disallowed Clinton
post-construction costs.
<TABLE>
[GRAPH APPEARS HERE]
OPERATING AND MAINTENANCE EXPENSES
(in millions of dollars)
<CAPTION>
Year Dollars
------------------------------------------------------------------
<S> <C>
1994 349.6
1993 370.0
1992 373.4
1991 340.6
1990 365.6
------------------------------------------------------------------
</TABLE>
OTHER INCOME AND DEDUCTIONS - Total allowance for funds used
during construction (AFUDC), a non-cash item of income,
increased in 1994 compared to 1993 and 1992. The 1994 increase
was due to higher construction work-in-progress balances
eligible for AFUDC, partially offset by a lower AFUDC rate. The
AFUDC effective rate was 7.0%, 7.5% and 7.5% in 1994, 1993 and
1992, respectively. The 1994 increase in Miscellaneous-net
deductions was primarily due to a decrease in allocated income
taxes.
INTEREST CHARGES - Total interest charges decreased $21.0 million
in 1994, $3.7 million in 1993 and $12.3 million in 1992. These
decreases were primarily due to the refinancing with lower cost
debt or the retirement of debt from 1992 through 1994. From 1992
to 1994, IP retired or refinanced approximately $1.5 billion of
long-term debt, excluding revolving loan agreements, with a
weighted average interest rate of 9.27%. During this time,
approximately $1.4 billion of new debt was issued at a weighted
average interest rate of 6.97%.
INFLATION - Inflation, as measured by the Consumer Price Index,
was 2.5%, 3.1% and 3.0% in 1994, 1993 and 1992, respectively.
The primary effect of inflation on IP is that historical rather
than current plant costs are recovered in IP's rates.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
REGULATORY MATTERS
1994 GAS RATE ORDER - On April 6, 1994, the ICC approved an
increase of $18.9 million, or 6.1%, in IP's natural gas base
rates. The increase will be partially offset by savings from
lower gas costs resulting from the expansion of the Hillsboro
gas storage field. The approved authorized rate of return on
rate base is 9.29%, with a rate of return on common equity of
11.24%. Concurrent with the gas rate increase, IP's gas utility
plant composite depreciation rate decreased to 3.4%.
FERC ORDER 636 - Pursuant to Orders 636 and 636-A, issued in April
and August 1992, respectively, the FERC approved amendments to
its rules that are intended to increase competition among
natural gas suppliers by -unbundling' the interstate pipelines'
merchant sales service into separate sales and transportation
services and by mandating that the pipelines' firm
transportation service be comparable to the transportation
service included in their traditional bundled sales service. As
a result of Orders 636 and 636-A, the pipelines are charging
their customers "transition" costs, which arise from unbundling
services. IP estimates that approximately $10.5 million in
transition costs will be incurred. In 1993, IP began to pay
transition costs billed by gas pipelines and to recover these
payments through a tariff rider. On September 23, 1994, the ICC
issued a final order approving recovery of Order 636 transition
costs.
DIVIDENDS
On October 12, 1994, the Board of Directors of Illinova
increased the common stock dividend 25 percent, declaring the
common stock dividend for the first quarter of 1995 at 25 cents
per share, payable February 1, 1995, to shareholders of record
as of January 10, 1995. On December 14, 1994, IP declared
preferred stock dividends for the first quarter of 1995, payable
February 1, 1995, to shareholders of record as of January 10,
1995.
CAPITAL RESOURCES AND REQUIREMENTS
Illinova and IP need cash for operating expenses, interest
and dividend payments, debt and IP preferred stock retirements and
construction programs. To meet these needs, Illinova and IP have
used internally generated funds and external financings
including the issuance of IP preferred stock, debt and revolving
lines of credit. The timing and amount of external financings
depend primarily upon economic and financial market conditions,
cash needs and capitalization ratio objectives. To a significant
degree, the availability and cost of external financing depend
upon the financial health of the company seeking those funds.
Short-term debt is used to meet temporary cash needs for
operations or to meet capital requirements until the timing is
considered appropriate to issue long-term securities.
Cash flow from operations during 1994 provided sufficient
working capital to meet ongoing operating requirements, to
service existing common and IP preferred stock dividends and
debt requirements and a substantial portion of construction
requirements. Additionally, Illinova expects current revenues
will enable it to meet future operating requirements and
continue to service its existing debt, IP preferred and Illinova
common stock dividends, IP sinking fund requirements and all of
its anticipated construction requirements. The current ratings
of securities by two principal securities rating agencies are as
follows:
------------------------------------------------------------------
Standard
Moody's & Poor's
------------------------------------------------------------------
IP first/new mortgage bonds Baa2 BBB
IP preferred stock baa3 BBB-
IP commercial paper P-2 A-2
==================================================================
These ratings are an indication of Illinova's and IP's
financial position and may affect the cost of securities, as well
as the willingness of investors to invest in securities. Under
current market conditions, these ratings are unlikely to impair
Illinova's or IP's ability to issue, or significantly increase
the cost of issuing additional securities through external
financing. Illinova and IP have adequate short-term and
intermediate-term bank borrowing capacity.
In 1993, Standard and Poor's (S&P) published revised
standards for review of utility business and financial risks,
based in part on a subjective evaluation of such factors as
anticipated growth in service territory, industrial sales as a
proportion of total revenues, regulatory environment and nuclear
plant ownership. S&P's preliminary assessment placed IP, along
with approximately one-third of the industry, in the -below
average' category. On April 13, 1994, S&P lowered IP's mortgage
bond rating to BBB from BBB'. This action came after S&P reviewed
IP's specific business position in light of the revised standards.
In February 1994, IP redeemed $12 million of mandatorily
redeemable serial preferred stock and issued $35.6 million of
First Mortgage Bonds, 5.7% Series due 2024 (Pollution Control
Series K). In May, the proceeds of the debt issuance were used to
retire $35.6 million of First Mortgage Bonds, 11 5/8% Series due
2014 (Pollution Control Series D). In August 1994, $100 million of
8 1/2% debt securities were retired.
Illinois Power Capital, L.P., (IP Capital), is a limited
partnership in which IP serves as a general partner. IP Capital
issued $97 million of tax-advantaged monthly income preferred
securities (MIPS) at 9.45% (5.67% after-tax rate) in October
1994. The proceeds were loaned to IP and were used to redeem
$79.1 million (principal value) of higher-cost outstanding
preferred stock of IP. The excess of carrying amount of redeemed
preferred stock over consideration paid amounted to $6.4 million
which was recorded in equity and included in net income
applicable to common stock. See "Note 10 - Preferred Stock of
Subsidiary" of the "Notes to Consolidated Financial Statements"
for additional information.
In December 1994, IP issued $84.1 million of First Mortgage
Bonds, 7.4% Series due 2024 (Pollution Control Series L). In March
1995, the proceeds of the debt issuance will be used to retire
$84.1 million First Mortgage Bonds, 10 3/4% Series due 2015
(Pollution Control Series E). See "Note 9 - Long-Term Debt of
Subsidiary" of the "Notes to Consolidated Financial Statements"
for additional information.
For the years 1994, 1993 and 1992, changes in long-term debt
and IP preferred stock outstanding, including normal maturities
and elective redemptions, were as follows:
------------------------------------------------------------------
(Millions of dollars) 1994 1993 1992
------------------------------------------------------------------
Bonds $ (10) $ 35 $(21)
Other long-term debt (100) - (66)
Preferred stock 6 (51) (10)
------------------------------------------------------------------
Total decrease $(104) $(16) $(97)
==================================================================
In February 1995, 1994, 1993 and 1992, IP redeemed $12
million of mandatorily redeemable 8% serial preferred stock.
The amounts shown in the preceding table for debt retirements
do not include all mortgage sinking fund requirements. IP has
generally met these requirements by pledging property additions
as permitted under the 1943 mortgage. For additional information,
see "Note 9 - Long-Term Debt of Subsidiary" and "Note 10 -
Preferred Stock of Subsidiary" of the "Notes to Consolidated
Financial Statements." See "Note 4 - Commitments and
Contingencies" of the Notes to Consolidated Financial
Statements" for information related to coal and gas purchases,
nuclear fuel commitments and emission allowance purchases.
In 1992, the IP Board authorized a new general obligation
mortgage (New Mortgage), which is intended to replace IP's 1943
Mortgage and Deed of Trust (First Mortgage). Bonds issued under
the New Mortgage are secured by a corresponding issue of First
Mortgage bonds under the First Mortgage. At December 31, 1994,
based upon the most restrictive earnings test contained in the
First Mortgage, IP could issue approximately $691 million of
additional first mortgage bonds for other than refunding purposes.
The amount of available unsecured borrowing capacity totaled $160
million at December 31, 1994. Also at December 31, 1994, the
unused portion of Illinova and IP total bank lines of credit was
$293 million. As of December 31, 1994, IP has $120 million of
unissued debt securities and $56.5 million of unissued preferred
stock authorized by the Securities and Exchange Commission in
September 1993 and August 1993, respectively.
Construction expenditures for the years 1992 through 1994
were approximately $715.8 million, including $21.7 million of
AFUDC. Illinova estimates that $1.13 billion will be required for
construction and capital requirements during the 1995-99 period as
follows:
------------------------------------------------------------------
Five-Year Period
------------------------------------------------------------------
(Millions of dollars) 1995 1995-1999
------------------------------------------------------------------
Construction requirements
Electric generating facilities $82 $246
Electric transmission and
distribution facilities 70 296
General plant 28 112
Gas facilities 24 121
------------------------------------------------------------------
Total construction requirements 204 775
Nuclear fuel 11 107
Debt retirements - 214
Preferred stock retirements 12 36
------------------------------------------------------------------
Total $227 $1,132
==================================================================
Construction and capital requirements are expected to be met
primarily through internal cash generation. The expenditures in
the preceding table do not include any capital expenditures for
compliance with the Clean Air Act. See "Note 4 - Commitments and
Contingencies" of the "Notes to Consolidated Financial
Statements" for additional information.
ENVIRONMENTAL MATTERS
See "Note 4 - Commitments and Contingencies" of the "Notes to
Consolidated Financial Statements" for a discussion of the Clean
Air Act and manufactured-gas plant sites.
TAX AND ACCOUNTING MATTERS
Illinova is subject to the Alternative Minimum Tax (AMT)
provisions of the Internal Revenue Code. As a result, in 1994,
1993 and 1992, federal income tax liabilities were approximately
$50 million, $27 million and $23 million, respectively, greater
than they would have been had Illinova not been subject to AMT.
As of December 31, 1994, Illinova had approximately $186 million
of AMT credit carryforwards that can be carried forward
indefinitely. This credit is available to offset regular tax
liabilities in excess of the tentative minimum tax. In 1994,
Illinova continued to utilize a portion of its tax net operating
loss carryforward. As of December 31, 1994, the balance of the
tax net operating loss carryforward was approximately $29
million.
In October 1994, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 119,
"Disclosures About Derivative Financial Instruments and Fair
Value of Financial Instruments" (FAS 119). FAS 119 requires
expanded disclosure in the consolidated financial statements
beginning with the year ended December 31, 1994.
responsibility for information
------------------------------
The consolidated financial statements and all information in
this annual report are the responsibility of management. The
consolidated financial statements have been prepared in
conformity with generally accepted accounting principles applied
on a consistent basis and include amounts that are based on
management's best estimates and judgments. Management also
prepared the other information in the annual report and is
responsible for its accuracy and consistency with the
consolidated financial statements. In the opinion of management,
the consolidated financial statements fairly reflect Illinova's
financial position, results of operations and cash flows.
Illinova believes that the accounting and internal accounting
control systems are maintained so that these systems provide
reasonable assurance that assets are safeguarded against loss
from unauthorized use or disposition and that the financial
records are reliable for preparing the consolidated financial
statements.
The consolidated financial statements have been audited by
Illinova's independent accountants, Price Waterhouse LLP, in
accordance with generally accepted auditing standards. Such
standards include the evaluation of internal accounting
controls to establish a basis for developing the scope of the
examination of the consolidated financial statements. In
addition to the use of independent accountants, Illinova
maintains a professional staff of internal auditors who conduct
financial, procedural and special audits. To assure their
independence, both Price Waterhouse LLP and the internal
auditors have direct access to the Audit Committee of the Board
of Directors.
The Audit Committee is composed of members of the Board of
Directors who are not active or retired employees of Illinova.
The Audit Committee meets with Price Waterhouse LLP and the
internal auditors and makes recommendations to the Board of
Directors concerning the appointment of the independent
accountants and services to be performed. Additionally, the
Audit Committee meets with Price Waterhouse LLP to discuss the
results of their annual audit, Illinova's internal accounting
controls and financial reporting matters. The Audit Committee
meets with the internal auditors to assess the internal audit
work performed, including tests of internal accounting controls.
Larry D. Haab Larry F. Altenbaumer
Chairman, President Chief Financial Officer,
and Chief Executive Officer Treasurer and Controller
report of independent accountants
---------------------------------
PRICE WATERHOUSE LLP
To the Board of Directors
of Illinova Corporation
In our opinion, the consolidated financial statements of
Illinova Corporation and its subsidiaries appearing on pages A-11
through A31 of this report present fairly, in all material
respects, the financial position of Illinova Corporation and its
subsidiaries at December 31, 1994 and 1993, and the results of
their operations and their cash flows for each of the three years
in the period ended December 31, 1994, in conformity with
generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the
opinion expressed above.
Price Waterhouse LLP
St. Louis, Missouri
February 1, 1995
consolidated statements of income
---------------------------------
(Millions of dollars
except per share amounts)
-----------------------------------------------------------------
For the Years Ended December 31, 1994 1993 1992
OPERATING REVENUES
Electric $1,177.5 $1,135.6 $1,117.9
Electric interchange 110.0 130.8 73.0
Gas 302.0 314.8 288.6
-----------------------------------------------------------------
Total 1,589.5 1,581.2 1,479.5
-----------------------------------------------------------------
OPERATING EXPENSES AND TAXES
Fuel for electric plants 266.6 235.1 248.8
Power purchased 52.6 78.5 24.0
Gas purchased for resale 172.4 187.3 171.9
Other operating expenses 260.0 269.2 271.3
Maintenance 89.6 100.8 102.1
Depreciation and amortization 175.8 163.6 155.7
General taxes 130.3 125.6 122.2
Deferred Clinton costs 3.5 9.3 11.2
Income taxes 118.3 106.5 86.2
-----------------------------------------------------------------
Total 1,269.1 1,275.9 1,193.4
-----------------------------------------------------------------
Operating income 320.4 305.3 286.1
-----------------------------------------------------------------
OTHER INCOME AND DEDUCTIONS
Allowance for equity funds
used during construction 3.8 2.7 1.5
Disallowed Clinton costs - (271.0) -
Income tax effects of disallowed costs - 70.6 -
Miscellaneous-net (9.1) (3.0) (0.6)
-----------------------------------------------------------------
Total (5.3) (200.7) 0.9
-----------------------------------------------------------------
Income before interest charges 315.1 104.6 287.0
-----------------------------------------------------------------
INTEREST CHARGES
Interest on long-term debt 135.1 154.1 160.8
Other interest charges 8.8 10.8 7.8
Allowance for borrowed funds
used during construction (5.5) (4.5) (3.7)
Preferred dividend requirements
of subsidiary 24.9 26.1 28.9
-----------------------------------------------------------------
Total 163.3 186.5 193.8
-----------------------------------------------------------------
Net income (loss) 151.8 (81.9) 93.2
Excess of carrying amount over
consideration paid for redeemed
preferred stock of subsidiary 6.4 - -
-----------------------------------------------------------------
Net income (loss) applicable
to common stock $158.2 ($81.9) $93.2
=================================================================
Weighted average number of common shares
outstanding during the period 75,643,937 75,643,937 75,643,937
Earnings (loss) per common share $2.09 ($1.08) $1.23
Cash dividends declared
per common share $0.65 $0.40 $1.40
Cash dividends paid per common share $0.80 $0.80 $0.80
See notes to consolidated financial statements which are an
integral part of these financial statements.
consolidated balance sheets
---------------------------
(Millions of dollars)
------------------------------------------------------------------
December 31, 1994 1993
ASSETS
Utility Plant, at original cost
Electric (includes construction work in progress
of $202.8 million and $218.7
million, respectively) $6,023.1 $5,889.4
Gas (includes construction work in progress of
$16.8 million and $18.8 million, respectively) 606.1 589.9
------------------------------------------------------------------
6,629.2 6,479.3
Less -- accumulated depreciation 2,102.7 1,974.6
------------------------------------------------------------------
4,526.5 4,504.7
Nuclear fuel in process 6.2 6.6
Nuclear fuel under capital lease 111.5 128.5
------------------------------------------------------------------
4,644.2 4,639.8
------------------------------------------------------------------
INVESTMENTS AND OTHER ASSETS 37.4 20.1
------------------------------------------------------------------
CURRENT ASSETS
Cash and cash equivalents 50.7 9.9
Accounts receivable (less allowance for doubtful
accounts of $3 million and $4
million, respectively)
Service 110.4 85.2
Other 30.5 37.5
Accrued unbilled revenue 78.9 49.0
Materials and supplies, at average cost
Fossil fuel 18.7 17.0
Gas in underground storage 23.1 23.2
Operating materials 92.1 91.4
Prepaid and refundable income taxes 11.5 14.7
Prepayments and other 23.5 17.1
------------------------------------------------------------------
439.4 345.0
------------------------------------------------------------------
DEFERRED CHARGES
Deferred Clinton costs 110.8 114.3
Recoverable income taxes 147.3 108.0
Other 197.6 196.3
------------------------------------------------------------------
455.7 418.6
------------------------------------------------------------------
$5,576.7 $5,423.5
==================================================================
CAPITAL AND LIABILITIES
CAPITALIZATION
Common stock -- No par value, 200,000,000
shares authorized; 75,643,937
shares outstanding, stated at $1,424.6 $1,424.6
Less -- Deferred compensation -- ESO P 23.5 28.2
Retained earnings (deficit) 58.8 (64.6)
Less -- Capital stock expense 9.7 10.8
------------------------------------------------------------------
Total common stock equity 1,450.2 1,321.0
------------------------------------------------------------------
Preferred stock of subsidiary 321.7 303.7
Mandatorily redeemable preferred
stock of subsidiary 36.0 48.0
Long-term debt of subsidiary 1,946.1 1,926.3
------------------------------------------------------------------
Total capitalization 3,754.0 3,599.0
------------------------------------------------------------------
CURRENT LIABILITIES
Accounts payable 108.2 128.8
Notes payable 238.8 92.3
Long-term debt and lease obligations
of subsidiary maturing within one year 33.5 187.7
Dividends declared 23.4 49.9
Taxes accrued 32.3 32.0
Interest accrued 38.4 64.6
Other 55.8 51.4
------------------------------------------------------------------
530.4 606.7
------------------------------------------------------------------
DEFERRED CREDITS
Accumulated deferred income taxes 978.6 906.4
Accumulated deferred investment tax credits 230.9 230.5
Other 82.8 80.9
------------------------------------------------------------------
Commitments and Contingencies (Note 4) 1,292.3 1,217.8
------------------------------------------------------------------
$5,576.7 $5,423.5
==================================================================
See notes to consolidated financial statements which are an
integral part of these statements.
consolidated statements of cash flows
-------------------------------------
(Millions of dollars)
------------------------------------------------------------------
For the Years Ended December 31, 1994 1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $151.8 ($81.9) $93.2
Items not requiring (providing) cash --
Disallowed Clinton costs,
net of income tax - 200.4 -
Depreciation and amortization 178.8 167.3 157.7
Allowance for funds used during
construction (9.3) (7.2) (5.2)
Deferred income taxes 36.4 67.9 56.6
Deferred Clinton costs 3.5 9.3 11.2
Changes in assets and liabilities --
Accounts and notes receivable (18.2) (21.3) 25.1
Accrued unbilled revenue (29.9) 42.9 (4.7)
Materials and supplies (2.3) 6.2 (2.2)
Accounts payable (20.6) 13.8 6.7
Interest accrued and other, net (21.6) (27.7) 6.4
------------------------------------------------------------------
Net cash provided by operating
activities 268.6 369.7 344.8
------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Construction expenditures (193.7) (277.7) (244.4)
Allowance for funds used during
construction 9.3 7.2 5.2
Other investing activities (19.7) (8.2) 9.7
------------------------------------------------------------------
Net cash used in investing
activities (204.1) (278.7) (229.5)
------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends on common stock (60.5) (60.5) (60.5)
Redemptions --
Short-term debt (259.3) (254.5) (221.6)
Long-term debt of subsidiary (230.0) (832.0) (480.6)
Preferred stock of subsidiary (91.0) (94.4) (10.0)
Issuances --
Short-term debt 405.8 279.7 412.7
Long-term debt of subsidiary 119.8 866.8 269.0
Preferred stock of subsidiary 97.0 43.5 -
Premium paid on redemption of long-term
debt of subsidiary (2.8) (25.8) (14.6)
Other financing activities (2.7) (12.6) (12.0)
------------------------------------------------------------------
Net cash used in financing
activities (23.7) (89.8) (117.6)
------------------------------------------------------------------
Net change in cash and cash
equivalents 40.8 1.2 (2.3)
Cash and cash equivalents at
beginning of year 9.9 8.7 11.0
------------------------------------------------------------------
Cash and cash equivalents at
end of year $50.7 $9.9 $8.7
==================================================================
consolidated statements of retained earnings (deficit)
------------------------------------------------------
(Millions of dollars)
------------------------------------------------------------------
For the Years Ended December 31, 1994 1993 1992
Balance (deficit) at
Beginning of Year ($64.6) $41.0 $75.8
Net Income (loss) before dividends 176.7 (55.8) 122.1
------------------------------------------------------------------
112.1 (14.8) 197.9
------------------------------------------------------------------
Less-
Dividends-
Preferred stock of subsidiary 11.1 20.1 51.6
Common Stock 48.6 29.7 105.3
Plus-
Excess of carrying amount
over consideration paid
for redeemed preferred stock of
subsidiary 6.4 - -
------------------------------------------------------------------
(53.3) (49.8) (156.9)
------------------------------------------------------------------
Balance (deficit) at End of Year $58.8 ($64.6) $41.0
==================================================================
See notes to consolidated financial statements which are an
integral part of these statements.
notes to consolidated financial statements
------------------------------------------
NOTE 1 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
-----------------------------
PRINCIPLES OF CONSOLIDATION - The consolidated financial
statements include the accounts of Illinova Corporation, a holding
company, Illinois Power Company (IP), a combination electric and
gas utility, and Illinova Generating Company (IGC), a wholly owned
subsidiary that invests in energy-related projects and competes
in the independent power market. See "Note 2 - Illinova
Subsidiaries" for additional information.
IP's consolidated financial position and results of
operations are currently the principal factors affecting
Illinova's consolidated financial position and results of
operations. All significant intercompany balances and transactions
have been eliminated from the consolidated financial statements.
All non-utility operating transactions are included in the section
titled Other Income and Deductions, "Miscellaneous-net" in the
Consolidated Statements of Income. Prior year amounts have been
restated on a basis consistent with the December 31, 1994,
presentation.
REGULATION - IP is subject to regulation by the Illinois Commerce
Commission (ICC) and the Federal Energy Regulatory Commission
(FERC) and, accordingly, prepares its consolidated financial
statements based on the concepts of Statement of Financial
Accounting Standards No. 71, "Accounting for the Effects of
Certain Types of Regulation" (FAS 71), which require that the
effects of the ratemaking process be recorded. Such effects
primarily concern the time at which various items enter the
determination of net income in order to follow the principle of
matching costs and revenues. Accordingly, IP records various
regulatory assets and liabilities to reflect the actions of
regulators. Management believes that IP currently meets the
criteria for continued application of FAS 71, but will continue
to evaluate significant changes in the regulatory and
competitive environment to assess IP's overall compliance with
such criteria. These criteria include: 1) whether rates set by
regulators are designed to recover the specific costs of
providing regulated services and products to customers and; 2)
whether regulators continue to establish rates based on cost. In
the event that management determines that IP no longer meets the
criteria for application of FAS 71, an extraordinary noncash
charge to income would be recorded in order to remove the
effects of the actions of regulators from the consolidated
financial statements. The discontinuation of application of FAS
71 would likely have a material adverse effect on Illinova's and
IP's consolidated financial position and results of operations.
Illinova's principal accounting policies are:
UTILITY PLANT - The cost of additions to utility plant and
replacements for retired property units is capitalized. Cost
includes labor, materials and an allocation of general and
administrative costs, plus an allowance for funds used during
construction (AFUDC) as described below. Maintenance and repairs,
including replacement of minor items of property, are charged to
maintenance expense as incurred. When depreciable property units
are retired, the original cost and dismantling charges, less
salvage value, are charged to accumulated depreciation.
REGULATORY ASSETS - Regulatory assets include deferred Clinton
Power Station (Clinton) post-construction costs, unamortized
debt discount, premium and expense, recoverable income taxes,
deferred electric fuel and purchased gas costs and manufactured-
gas plant site cleanup costs.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION - The FERC Uniform
System of Accounts defines AFUDC as the net costs for the period
of construction of borrowed funds used for construction purposes
and a reasonable rate on other funds when so used. AFUDC is
capitalized at a rate that is related to the approximate
weighted average cost of capital. In 1994, 1993 and 1992, the
pre-tax rate used for all construction projects was 7.0%, 7.5%
and 7.5%, respectively. Although cash is not currently realized
from the allowance, it is realized under the ratemaking process
over the service life of the related property through increased
revenues resulting from a higher rate base and higher
depreciation expense.
DEPRECIATION - For financial statement purposes, IP depreciates
the various classes of depreciable property over their estimated
useful lives by applying composite rates on a straight-line basis.
In 1994, 1993 and 1992, provisions for depreciation were 2.8% of
the average depreciable cost for Clinton. Provisions for
depreciation for all other electric plant were 2.5% in 1994, 1993
and 1992. Provisions for depreciation of gas utility plant, as a
percentage of the average depreciable cost, were equivalent to 4%
in 1993 and 1992. Effective with the April 6, 1994, ICC order in
IP's gas rate case, the gas depreciation rate was lowered to 3.4%.
AMORTIZATION OF NUCLEAR FUEL - IP leases nuclear fuel from
Illinois Power Fuel Company under a capital lease. Amortization of
nuclear fuel (including related financing costs) is determined on
a unit of production basis. See "Note 4 - Commitments and
Contingencies" for discussion of decommissioning and nuclear fuel
disposal costs. A provision for spent fuel disposal costs is
charged to fuel expense based on kilowatt-hours generated.
DEFERRED CLINTON COSTS - In accordance with an ICC order in April
1987, IP began deferring certain Clinton post-construction
operating and financing costs until rates to reflect such costs
became effective (April 1989). After issuance of the March 1989
ICC rate order, deferral of Clinton post-construction costs
ceased and amortization of the previously deferred post-
construction costs over a 37.5-year period commenced. Although
cash is not currently realized from these deferrals, it is
realized under the ratemaking process over the service life of
Clinton through increased revenues resulting from a higher rate
base and higher amortization expense. See "Note 3 - Clinton
Power Station" for additional information.
UNAMORTIZED DEBT DISCOUNT, PREMIUM AND EXPENSE - Discount,
premium and expense associated with long-term debt are amortized
over the lives of the related issues. Costs related to refunded
debt are amortized over the lives of the related new debt issues
or the remaining life of the old debt if no new debt is issued.
REVENUE AND ENERGY COST - IP records revenue for services provided
but not yet billed to more closely match revenues with expenses.
Unbilled revenues represent the estimated amount customers will
be billed for service delivered from the time meters were last
read to the end of the accounting period. Operating revenues
include related taxes that have been billed to customers in the
years 1994, 1993 and 1992 in the amount of $66 million, $65
million and $61 million, respectively. The cost of fuel for the
generation of electricity, purchased power and gas purchased for
resale is recovered from customers pursuant to the electric fuel
and purchased gas adjustment clauses. Accordingly, allowable
energy costs that are to be passed on to customers in a
subsequent accounting period are deferred. The recovery of costs
deferred under these clauses is subject to review and approval by
the ICC.
On April 6, 1994, the ICC approved an increase of $18.9
million, or 6.1%, in IP's natural gas base rates. The increase
will be partially offset by savings from lower gas costs
resulting from the expansion of the Hillsboro gas storage field.
The approved authorized rate of return on rate base is 9.29%,
with a rate of return on common equity of 11.24%
INCOME TAXES - Under Statement of Financial Accounting Standards
No. 109, -Accounting for Income Taxes' (FAS 109), deferred tax
assets and liabilities are recognized for the tax consequences
of transactions that have been treated differently for financial
reporting and tax return purposes, measured on the basis of the
statutory tax rates. In accordance with FAS 71, a regulatory
asset (Recoverable income taxes) has been recorded representing
the probable recovery from customers of additional deferred
income taxes established under FAS 109.
Investment tax credits used to reduce federal income taxes
have been deferred and are being amortized to income over the -
service life' of the property that gave rise to the credits.
Illinova and its subsidiaries file a consolidated federal income
tax return. Income taxes are allocated to the individual companies
based on their respective taxable income or loss. See -Note 7 -
Income Taxes' for additional discussion.
PREFERRED DIVIDEND REQUIREMENTS OF SUBSIDIARY - Preferred dividend
requirements of IP reflected in the consolidated income
statements are recorded on the accrual basis and relate to the
period for which the dividends are applicable.
CONSOLIDATED STATEMENTS OF CASH FLOWS - Cash and cash equivalents
include cash on hand and temporary investments purchased with an
initial maturity of three months or less. Capital lease
obligations not affecting cash flow increased by $28 million, $27
million and $14 million during 1994, 1993 and 1992, respectively.
Income taxes and interest paid are as follows:
Years ended December 31,
------------------------------------------------------------------
(Millions of dollars) 1994 1993 1992
------------------------------------------------------------------
Income taxes $ 71.1 $ 26.0 $ 27.5
Interest $165.9 $166.4 $177.3
==================================================================
The increase in income taxes paid from 1993 to 1994 was due
to an increase in taxable income and the settlement of an IRS
audit. The results of the settlement did not have a material
effect on Illinova's or IP's consolidated financial position or
results of operations. See "Note 7 - Income Taxes" for
additional information.
SALE OF ACCOUNTS RECEIVABLE AND ACCRUED UNBILLED REVENUE - In June
1993, IP entered an agreement for the sale of an undivided
interest in a designated pool of IP's accounts receivable and
accrued unbilled revenue up to a maximum of $50 million. At
December 31, 1993, $15 million of accounts receivable and $35
million of accrued unbilled revenue had been sold. In December
1994, IP bought back all of the accounts receivable and accrued
unbilled revenue that were sold under the agreement. All costs
associated with the agreement have been reflected in Other
Income and Deductions, "Miscellaneous-net," on Illinova's
Consolidated Statements of Income.
FORWARD CONTRACTS - Realized and unrealized gains and losses on
forward contracts held as hedges of interest rate exposure are
deferred and recognized as interest expense over the lives of
the hedged liabilities.
INTEREST RATE CAP - Premiums paid for the purchased interest rate
cap agreement are being amortized to interest expense over the
terms of the cap. Unamortized premiums are included in Deferred
Charges, "Other" in the Consolidated Balance Sheets. Amounts
received under the cap agreement are recognized as a reduction
in interest expense.
NOTE 2 ILLINOVA SUBSIDIARIES
----------------------------
On May 27, 1994, Illinova Corporation (Illinova), a holding
company, was officially formed with the filing of documents with
the Illinois Secretary of State. Illinova became the parent of
IP pursuant to a share-for-share conversion of IP common stock
into Illinova common stock. On June 8, 1994, IGC (formerly IP
Group, Inc.), originally a subsidiary of IP, was transferred as
a dividend in the amount of $9.2 million from IP to Illinova,
effectively establishing IGC as a wholly owned subsidiary of
Illinova. IP, the primary business and subsidiary of Illinova, is
engaged in the generation, transmission, distribution and sale of
electric energy and the distribution, transportation and sale of
natural gas in the State of Illinois.
IGC is Illinova's wholly owned independent power subsidiary
which invests in energy supply projects throughout the world and
competes in the independent power market. In 1993, IGC invested
in a co-generation project in Teesside, England. During 1994,
IGC became an equity partner with Tenaska, Inc., in four natural
gasfired generation plants, two of which are in operation and
two of which are under construction. Tenaska, Inc. is an Omaha,
Nebraska-based developer of independent power projects throughout
the U.S. In August 1994, IGC purchased 50 percent of the North
American Energy Services Company (NAES). NAES supplies a broad
range of operations, maintenance and support services to the
worldwide independent power generation industry and will operate
the Tenaska generation plants in which IGC purchased an equity
interest. In November 1994, IGC became an equity partner in an
operating diesel engine-powered generating plant in Puerto
Cortez, Honduras.
At December 31, 1994, Illinova's net investment in IGC is
$28.8 million.
IP provided approximately $20 million in funds to Illinova
for operations and investments during 1994. Illinova is paying IP
interest on these funds at a rate equal to that which Illinova
would have paid had it used a currently outstanding line of
credit.
NOTE 3 CLINTON POWER STATION
----------------------------
IP and Soyland Power Cooperative, Inc. (Soyland) share
ownership of Clinton, with IP owning 86.8% and Soyland owning
13.2%. IP's ownership percentage is reflected in utility plant
(at original cost) and in accumulated depreciation in the
Consolidated Balance Sheets. Clinton was placed in service in
1987 and represents approximately 18% of IP's installed
generation capacity. The investment in Clinton and its related
deferred costs represented approximately 52% of Illinova's total
assets at December 31, 1994. IP's 86.8% share of Clinton-related
costs represented 32% of Illinova's total 1994 other operating,
maintenance and depreciation expenses. Clinton's equivalent
availability was 92%, 73% and 62% for 1994, 1993 and 1992,
respectively. Clinton's equivalent availability was higher in
1994 due to no refueling outage.
Ownership of an operating nuclear generating unit exposes IP
to significant risks, including increased and changing regulatory,
safety and environmental requirements and the uncertain future
cost of closing and dismantling the unit. IP expects to be
allowed to continue to operate Clinton; however, if any
unforeseen or unexpected developments would prevent IP from
doing so, Illinova and IP could be materially adversely
affected. See "Note 4 Commitments and Contingencies" for
additional information.
RATE AND REGULATORY MATTERS
1992 RATE ORDER - A September 1993 decision by the Illinois
Appellate Court, Third District (Appellate Court Decision),
upheld key components of the August 1992 Rehearing Order
(Rehearing Order) issued by the ICC. The Rehearing Order denied
IP recovery of certain deferred Clinton post-construction costs,
which were composed of all deferred depreciation and real estate
taxes and 72.8% of the deferred common equity return.
IP originally recorded these deferred Clinton post-
construction costs as a regulatory asset when such costs were
believed probable of recovery through future rates, based on prior
ICC orders. The deferred costs were recorded from the time Clinton
began operations (April 1987) to the time the ICC allowed IP to
begin recovering these deferred costs in rates (March 1989),
otherwise known as the regulatory lag period.
Based upon IP's assessment of the Appellate Court Decision
and in accordance with FAS 71, IP recorded a loss of $271 million
($200 million or $2.65 per share, net of income taxes) in
September 1993. This write-off included revenues and related
interest of approximately $8.9 million to be refunded for
deferred costs included in electric rates between April 1992 and
August 1992, which were disallowed by the Rehearing Order.
The Appellate Court Decision remanded the case to the ICC for
further proceedings to determine the amount of actual financial
harm incurred by IP during the regulatory lag period. The
decision also remanded the case for verification of the
calculation of the amortization of deferred Clinton post-
construction costs from March 1989 to June 1992.
On February 25, 1994, IP and the remaining parties to this
case presented a joint motion to the Appellate Court requesting
entry of an order remanding the case to the Commission for further
proceedings in accordance with a stipulated agreement of the
parties. The Appellate Court granted the joint motion on March
2, 1994. On March 16, 1994, the ICC issued an order on remand
that did not result in any change in IP's rates from those
adopted in the Rehearing Order. The order on remand required IP
to refund $8.9 million of revenue that had been collected
between April and August 1992 subject to refund. The refunds
began in March 1994 and were completed in October 1994.
1987 UNIFORM FUEL ADJUSTMENT CLAUSE RECONCILIATION - In January
1994, the ICC issued an order on remand consistent with an
Illinois Appellate Court, Third District, decision which held
that evidence did not support the findings in a February 1992
ICC order that IP incurred $29.3 million in imprudent nuclear
fuel procurement and management costs. As a result of the
Appellate Court decision and subsequent related ICC orders, IP
is in the process of recovering approximately $12.7 million of
nuclear fuel costs, which will not have an impact on
consolidated results of operations.
NOTE 4 COMMITMENTS AND CONTINGENCIES
------------------------------------
COMMITMENTS - Estimated construction requirements in 1995 are $204
million, which includes $152 million for electric facilities,
$24 million for gas facilities and $28 million for general
plant. The five-year construction program for 1995 through 1999
is estimated to be $775 million. These expenditures do not
include capital expenditures for compliance with the Clean Air
Act, as discussed below.
In addition, IP has substantial commitments for the purchase
of coal under long-term contracts. Coal contract commitments for
1995 through 1999 are estimated to be $779 million (excluding
price escalation provisions). Total coal purchases for 1994, 1993
and 1992 were $191 million, $184 million and $186 million,
respectively. IP has existing contracts with various natural gas
suppliers and interstate pipelines to provide natural gas supply,
transportation and leased storage. Committed natural gas,
transportation and leased storage costs (including pipeline
transition costs) for 1995 through 1999 are estimated to total $75
million. Total natural gas purchased for 1994, 1993 and 1992 was
$168 million, $188 million and $184 million, respectively. IP's
share of nuclear fuel commitments for Clinton is approximately $22
million for uranium concentrates through 1998, $8.4 million for
conversion through 2002, $51 million for enrichment through 1999
and $164 million for fabrication through 2017. IP has commitments
for emission allowances through 1999 estimated at $101 million. It
is anticipated that all of these costs will be recoverable under
IP's electric fuel and purchased gas adjustment clauses, if
found by the ICC to be prudently incurred.
INSURANCE - IP maintains insurance on behalf of IP and Soyland
for certain losses involving the operation of Clinton. One
insurance program provides coverage for physical damage to the
plant. Based upon a review of this insurance, IP has reduced its
limits from $2.7 billion to $1.6 billion effective December 15,
1994. IP's insurance program has two layers: 1) a primary layer of
$500 million provided by nuclear insurance pools; and 2) an excess
coverage layer of $1.1 billion provided by an industry-owned
mutual insurance company. In the event of an accident with an
estimated cost of reactor stabilization and site decontamination
exceeding $100 million, Nuclear Regulatory Commission (NRC)
regulations require that insurance proceeds be dedicated and
used first to return the reactor to, and maintain it in, a safe
and stable condition. After providing for stabilization and
decontamination, the insurers would then cover property damage
up to a total payout of $1.38 billion. Second, the NRC requires
decontamination of the reactor and reactor station site in
accordance with a plan approved by the NRC. The insurers would
provide up to $220 million to cover decommissioning costs in
excess of funds already collected for decommissioning, as
discussed later. In the event insurance limits are not
exhausted, the excess coverage may also be applied to a portion
of the value of the undamaged property. In addition, while IP
has no reason to anticipate a serious nuclear accident at
Clinton, if such an incident should occur, the claims for
property damage and other costs could materially exceed the
limits of current or available insurance coverage. IP also
carries approximately $.9 million per week of business
interruption insurance coverage for its ownership share of
Clinton through the industry-owned mutual insurance company in
the event of an extended shutdown of Clinton due to accidental
property damage. This insurance does not provide coverage until
Clinton has been out of service for 21 weeks. Thereafter, the
insurance provides up to 156 weeks of coverage.
Multiple major losses covered under the current property
damage and business interruption insurance coverages involving
Clinton or other stations insured by the industry-owned mutual
insurance company could result in retrospective premium
assessments of up to approximately $13 million. About $12 million
of this assessment is subject to the ownership interest in Clinton
between IP and Soyland.
All United States nuclear power station operators are subject
to the Price-Anderson Act. Under that Act, public liability for a
nuclear incident is currently limited to $8.9 billion. Coverage
of the first $200 million is provided by private insurance.
Excess coverage is provided by retrospective premium assessments
against each licensed nuclear reactor in the United States.
Currently, the liability to these reactor operators/owners for
such an assessment would be up to $79.3 million per incident,
not including premium taxes which may be applicable, payable in
annual installments of not more than $10 million.
A Master Worker Policy covers worker tort claims alleging
bodily injury, sickness or disease as a result of initial
radiation exposure occurring on or after January 1, 1988. The
policy has an aggregate limit of $200 million applying to the
commercial nuclear industry as a whole. As claims are paid under
the policy, there is a provision for automatic reinstatement of
policy limits up to an additional $200 million. There is also a
provision for retrospective assessment of additional premiums if
claims exceed funds available in the insurance company's reserve
accounts. The maximum retrospective premium assessment for this
contingency is approximately $3 million and may be subject to
state premium taxes. Any retrospective premium assessments
pertaining to the Master Worker Policy or the Price-Anderson Act
are subject to the ownership interest in Clinton between IP and
Soyland.
IP may be subject to other risks which may not be insurable,
or the amount of insurance carried to offset the various risks may
not be sufficient to meet potential liabilities and losses. There
is also no assurance that IP will be able to maintain insurance
coverages at their present levels. Under those circumstances, such
losses or liabilities would have a substantial adverse effect on
Illinova's and IP's consolidated financial position.
DECOMMISSIONING AND NUCLEAR FUEL DISPOSAL - Costs IP is
responsible for its ownership share of the costs of
decommissioning Clinton and for spent nuclear fuel disposal
costs. IP is collecting future decommissioning costs through its
rates based on an ICC-approved formula that allows IP to adjust
rates annually for changes in decommissioning cost estimates.
Based on NRC regulations that establish a minimum funding
level, IP's 86.8% share of Clinton decommissioning costs is
estimated to be approximately $357 million (1994 dollars). The NRC
minimum is based only on the cost of removing radioactive plant
structures. A site-specific study to estimate the costs of
dismantlement, removal and disposal of Clinton has not been made;
however, IP plans to undertake this study in 1995. This study may
result in projected decommissioning costs higher than the NRC-
specified funding level. At December 31, 1994 and 1993, IP had
recorded a liability of $22.4 million and $17.2 million,
respectively, for the future decommissioning of Clinton.
External decommissioning trusts, as prescribed under Illinois
law and authorized by the ICC, have been established to accumulate
funds based on the expected service life of the plant for the
future decommissioning of Clinton. For the years 1994, 1993 and
1992, IP has contributed $5.5 million, $3.9 million and $3.7
million, respectively, to its external nuclear decommissioning
trust funds. The balances in these nuclear decommissioning funds
at December 31, 1994 and 1993, were $22.4 million and $17.2
million, respectively. IP recognizes earnings and expenses from
the trust funds as changes in its assets and liabilities relating
to these funds. In November 1994, the ICC granted IP permission to
invest up to 60% of the nuclear decommissioning trust assets in
selected equity securities. As a result, funding in this manner
commenced with an initial investment in December 1994. Future
contributions will be directed to this asset class until the
approved equity allocation is reached.
The Securities and Exchange Commission (SEC) staff has
questioned certain current accounting practices of the electric
utility industry, including those practices used by IP,
regarding the recognition, measurement and classification of
decommissioning costs for nuclear generating stations in
financial statements. In response to these questions, the FASB
has agreed to review the accounting for removal costs of nuclear
generating stations, including decommissioning. If current
electric utility industry accounting practices for such
decommissioning are changed: 1) annual provisions for
decommissioning could increase; 2) the estimated total cost for
decommissioning could be recorded as a liability; and 3) trust
fund income from the external decommissioning trusts could be
reported as investment income rather than as a reduction to
decommissioning expense. Although it is too early to determine
whether any changes to current electric utility industry
accounting practices for decommissioning will be adopted, IP
believes that based on current information, any required changes
would not have an adverse effect on results of operations due to
existing and anticipated future ability to recover
decommissioning costs through rates.
In 1992, the ICC entered an order in which it expressed
concern that IP take all reasonable action to ensure that Soyland
contributes its ownership share of the current or any revised
estimate of decommissioning costs. The order also states that if
IP becomes liable for decommissioning expenses attributable to
Soyland, the ICC will then decide whether that expense should be
the responsibility of IP stockholders or its customers.
Under the Energy Policy Act of 1992, IP is responsible for a
portion of the cost to decontaminate and decommission the U.S.
Department of Energy's (DOE) uranium enrichment facilities.
Based on quantities purchased from the DOE facilities prior to
passage of the Act, each utility is being assessed an annual fee
for a period of 15 years. At December 31, 1994, IP has a
remaining liability of $5.7 million representing future
assessments. IP is recovering these costs, as amortized, through
its fuel adjustment clause.
Under the Nuclear Waste Policy Act of 1982, the DOE is
responsible for the permanent storage and disposal of spent
nuclear fuel. The DOE currently charges one mill ($0.001) per
net kilowatt-hour (one dollar per MWH) generated and sold for
future disposal of spent fuel. IP is recovering these charges
through rates.
ENVIRONMENTAL MATTERS
CLEAN AIR ACT - In August 1992, IP announced that it had suspended
construction of two scrubbers at the Baldwin Power Station, on
which IP had expended approximately $34.6 million. IP has
recovered approximately $3.1 million as a result of the sale of
excess materials that were not used on the project. After
suspending scrubber construction, IP reconsidered its
alternatives for complying with Phase I of the 1990 Clean Air
Act Amendments. In March 1993, IP announced its compliance plan
for Phase I (19951999) of the Clean Air Act, which is to
continue using high-sulfur Illinois coal and acquire emission
allowances to comply with the Clean Air Act requirements. An
emission allowance is the authorization by the United States
Environmental Protection Agency (U.S.EPA) to emit one ton of
sulfur dioxide. The ICC approved IP's Phase I Clean Air Act
compliance plan in September 1993, and IP is continuing to
implement that plan. Sufficient emission allowances have been
acquired to meet anticipated needs for 1995. IP will be active in
the emissions allowance market in order to meet requirements for
allowances in 1996 and beyond. In 1993, the Illinois General
Assembly passed and the governor signed legislation authorizing
but not requiring the ICC to permit expenditures and revenues from
emission allowance purchases and sales to be reflected in rates
charged to customers as a cost of fuel. In December 1994, the ICC
approved the recovery of emission allowance costs through the
Uniform Fuel Adjustment Clause. IP's compliance plan will defer,
until at least 2000, any need for scrubbers or other capital
projects associated with sulfur dioxide emission reductions.
Additional actions and capital expenditures will be required by IP
to achieve compliance with the Phase II (2000 and beyond) sulfur
dioxide emission requirements of the Clean Air Act.
IP planned to comply with the Phase I nitrogenoxide emission
reduction requirements of the acid rain provisions of the Clean
Air Act by installing low-nitrogen-oxide (NOx) burners at Baldwin
Unit 3. On November 29, 1994, the U.S. Appellate Court remanded
the Phase I NOx rules back to the U.S.EPA. IP is positioned to
comply with the previously established rules and does not expect
the new rules to be any more stringent. Therefore, the Court's
decision is not expected to have a material impact on IP's
compliance activity.
Additional capital expenditures are anticipated prior to 2000
to comply with the Phase II nitrogen-oxide requirements, as well
as potential requirements to further reduce nitrogen-oxide
emissions from IP plants to help achieve compliance with air
quality standards in the St. Louis and/or Chicago metropolitan
areas. IP has installed continuous emission monitoring systems
at its major generating stations, as required by the acid rain
provisions of the Clean Air Act.
In July 1993, the Alliance for Clean Coal (Alliance), a
coalition of Western coal producers and railroads, filed suit
against the ICC in the U.S. District Court in Chicago. The
Alliance sought a declaration that an Illinois statute regarding
the filing with and approval by the ICC of utility Clean Air Act
compliance plans, including provisions on the construction of
scrubbers or other devices to facilitate continued use of high-
sulfur Illinois coal as a fuel, is unconstitutional. In December
1993, the U.S. District Court issued an opinion and an order in
ALLIANCE FOR CLEAN COAL VS. ELLEN CRAIG, ET AL. declaring the
statute unconstitutional. The order prohibits the ICC from
enforcing the statute, and declares void compliance plans
prepared and approved in reliance on the statute. Subsequent to
that decision, IP filed its plan with the ICC, not for approval
as it believes no approval of the plan is required, but as a
supplement to informational filings made in a pending least-cost
plan proceeding. The ICC concluded in its final order that IP's
compliance plan represented the least-cost option for
compliance. On January 9, 1995, the Seventh Circuit Court of
Appeals affirmed the U.S. District Court decision.
MANUFACTURED-GAS PLANT (MGP) SITES - IP, through its predecessor
companies, was identified on a State of Illinois list as the
responsible party for potential environmental impairment at 24
former manufactured-gas plant sites. IP is investigating each of
the sites to determine: 1) the type and amount of residues
present; 2) whether the residues constitute environmental or
health hazards and, if present, their extent; and 3) whether IP
has any responsibility for remedial action. Because of the unknown
and unique characteristics of each site (such as amount and type
of residues present, physical characteristics of the site and the
environmental risk) and uncertain regulatory requirements, IP is
not able to determine its ultimate liability for the
investigation and remediation of the 24 sites. However, at
December 31, 1994, IP had estimated and recorded a minimum
liability of $35 million. In 1994, IP spent approximately $1.3
million for investigation and remediation activities. IP is
unable to determine at this time what portion of these costs, if
any, will be eligible for recovery from insurance carriers or
other potentially responsible parties. In addition, IP is unable
to determine the time frame over which these costs may be paid
out. IP has recorded a regulatory asset in the amount of $35
million, reflecting management's expectation that investigation
and remediation costs for the manufactured-gas plant sites will
be recovered from customers or insurers.
In September 1992, the ICC issued a generic order concluding
that utilities will be allowed to collect from customers MGP
remediation costs paid to third parties, subject to prudency
evaluation. The order allowed recovery of such prudently incurred
costs over a five-year period but with no recovery from customers
of carrying costs on the unrecovered balance.
IP is currently recovering MGP site cleanup costs from its
customers through a tariff rider approved by the ICC in April
1993. In February 1994, an intervening consumer group appealed
the September 1992 ICC order and an affirming December 1993
Appellate Court decision to the Illinois Supreme Court, arguing
that utilities should not be permitted to recover MGP cleanup
costs from customers or should not be permitted to recover such
costs through riders. IP and other utilities have also appealed
to the Illinois Supreme Court seeking to include carrying costs
on the unrecovered balance of cleanup costs through the tariff
rider. The Illinois Supreme Court agreed to hear both appeals,
and briefing and oral arguments were held in September 1994.
Management believes that the final disposition of these appeals
will not have a material adverse effect on Illinova's or IP's
consolidated financial position or results of operations.
ELECTRIC AND MAGNETIC FIELDS - The possibility that exposure to
electric and magnetic fields (EMF) emanating from power lines,
household appliances and other electric sources may result in
adverse health effects continues to be the subject of litigation
and governmental, medical and media attention. Litigants have also
claimed that EMF concerns justify recovery from utilities for the
loss in value of real property exposed to power lines, substations
and other such sources of EMF. Scientific research worldwide has
produced conflicting results, and no conclusive evidence that
electric and/or magnetic field exposure causes adverse health
effects. Research is continuing to resolve scientific
uncertainties. It is too soon to tell what, if any, impact
these actions may have on Illinova's or IP's consolidated
financial position.
LEGAL PROCEEDINGS
Illinova and IP are involved in legal or administrative
proceedings before various courts and agencies with respect to
matters occurring in the ordinary course of business, some of
which involve substantial amounts of money. Management believes
that the final disposition of these proceedings will not have a
material adverse effect on consolidated financial position or
results of operations.
OTHER
IP sells electric energy and natural gas to residential,
commercial and industrial customers throughout Illinois. At
December 31, 1994, 60%, 21% and 19% of accounts receivable were
from residential, commercial and industrial customers,
respectively. IP maintains reserves for potential credit losses
and such losses have been within management's expectations.
NOTE 5 LINES OF CREDIT
AND SHORT-TERM LOANS
----------------------
IP has total lines of credit represented by bank commitments
amounting to $250 million, all of which were unused at December
31, 1994. The weighted average borrowings for 1994 were $1.1
million at a weighted average interest rate of 3.7%. These lines
of credit are renewable in July 1995 and September 1996. These
bank commitments support the amount of commercial paper
outstanding at any time, limited only by the amount of unused
bank commitments, and are available to support other IP
activities.
IP pays facility fees up to 0.25% per annum, on $250
million of the total line of credit, regardless of usage. The
interest rate on borrowings under these agreements is, at IP's
option, based upon the lending banks' reference rate, their
Certificate of Deposit rate, the borrowing rate of key banks in
the London interbank market or competitive bid.
IP has letters of credit totaling $204.8 million and pays
fees up to 0.55% per annum on the unused amount of credit.
In addition, IP has short-term financing options to obtain
funds not to exceed $80 million. IP pays no fees for these
uncommitted facilities and funding is subject to availability
upon request.
For the years 1994, 1993 and 1992, IP had short-term
borrowings consisting of bank loans, commercial paper,
extendible floating rate notes and other short-term debt
outstanding at various times as follows:
------------------------------------------------------------------
(Millions of dollars, except rates) 1994 1993 1992
------------------------------------------------------------------
Balance at December 31
Short-term borrowings $238.8 $ 92.3 $ 67.1
Weighted average interest
rate at December 31 6.2% 3.5% 3.8%
Maximum amount outstanding
at any month end $238.8 $123.7 $181.9
Average daily borrowings
outstanding during the year $165.4 $ 85.0 $115.1
Weighted average interest
rate during the year 4.6% 3.5% 4.0%
------------------------------------------------------------------
Illinova has total lines of credit represented by bank
commitments amounting to $43 million, all of which were unused at
December 31, 1994.
Illinova and IP have only limited involvement with derivative
financial instruments and do not use them for trading purposes.
They are used to manage well-defined interest rate risks arising
out of core activities without the use of leverage and without
risk to principal.
Interest rate cap agreements are used to reduce the potential
impact of increases in interest rates on floating-rate
commercial paper. In 1994, IP entered a five-year variable rate
interest rate cap agreement covering up to $140 million of
commercial paper. The agreement entitles IP to receive from a
counterparty on a monthly basis the amount, if any, by which
IP's interest payments on a nominal amount of commercial paper
exceed the interest rate set by the cap. At December 31, 1994,
the cap rate was set at 5.0% while the current market rate
available to IP was 6.125%.
NOTE 6 FACILITIES AGREEMENTS
----------------------------
IP and Soyland share ownership of Clinton, with IP owning
86.8% and Soyland owning 13.2%. Agreements between IP and Soyland
provide that IP has control over construction and operation of
the generating station, that the parties share electricity
generated in proportion to their ownership interests and that IP
will have certain obligations to provide replacement power to
Soyland if IP ceases to operate or reduces output from Clinton.
Under the provisions of a Power Coordination Agreement (PCA)
between Soyland and IP dated October 5, 1984, as amended, IP was
required to provide Soyland with 8.0% (288 megawatts) of
electrical capacity from its fossil-fueled generating plants
through 1994. This requirement will increase to 12% in 1995 and
each year thereafter until the agreement expires or is
terminated. This is in addition to the capacity Soyland receives
as an owner of Clinton. IP is compensated with capacity charges
and for energy costs and variable operating expenses. IP
transmits energy for Soyland through IP's transmission and
subtransmission systems. Under provisions of the PCA, Soyland
has the option of participating financially in major capital
expenditures at the fossil-fueled plants, such as those needed
for Phase II Clean Air Act compliance, to the extent of its
capacity entitlement with each party bearing its own direct
capital costs, or by having the costs treated as plant additions
and billed to Soyland in accordance with other billing
provisions of the PCA. See "Note 4 Commitments and
Contingencies" for discussion of the Clean Air Act. At any time
after December 31, 2004, either IP or Soyland can terminate the
PCA by giving not less than seven years' prior written notice to
the other party. The party to whom termination notice has been
given may designate an earlier effective date of termination
which shall be not less than twelve months after receiving
notice.
NOTE 7 INCOME TAXES
-------------------
Deferred tax assets and liabilities were composed of the
following:
Balance as of December 31,
------------------------------------------------------------------
(Millions of dollars) 1994 1993
------------------------------------------------------------------
Deferred Tax Assets:
------------------------------------------------------------------
Current:
Misc. book/tax recognition differences $ 19.7 $ 25.6
------------------------------------------------------------------
Noncurrent:
Depreciation and other property related 52.6 56.3
Alternative minimum tax 186.0 131.0
Tax credit and net operating loss
carryforward 27.6 111.9
Unamortized investment tax credit 122.0 129.1
Misc. book/tax recognition differences 57.0 17.5
------------------------------------------------------------------
445.2 445.8
------------------------------------------------------------------
Total deferred tax assets $464.9 $471.4
==================================================================
Deferred Tax Liabilities:
------------------------------------------------------------------
Current:
Misc. book/tax recognition differences $ 8.2 $ 10.9
------------------------------------------------------------------
Noncurrent:
Depreciation and other property related 1,252.0 1,187.3
Deferred Clinton costs 62.1 64.0
Misc. book/tax recognition differences 109.7 100.9
------------------------------------------------------------------
1,423.8 1,352.2
------------------------------------------------------------------
Total deferred tax liabilities $1,432.0 $1,363.1
==================================================================
Income taxes included in the Consolidated Statements of
Income consist of the following components:
Years Ended December 31,
------------------------------------------------------------------
(Millions of dollars) 1994 1993 1992
------------------------------------------------------------------
Current taxes -
Included in operating
expenses and taxes $ 58.3 $ 25.3 $ 22.9
------------------------------------------------------------------
Total current taxes 58.3 25.3 22.9
------------------------------------------------------------------
Deferred taxes -
Included in operating
expenses and taxes
Property related differences 60.0 72.3 73.2
Alternative minimum tax (50.4) (31.8) (31.4)
Gain/loss on reacquired debt - 16.5 4.8
Take-or-pay charges - .3 2.3
Net operating loss carryforward 62.0 22.8 18.3
Internal Revenue Service
interest on tax issues 7.5 (1.9) .7
Misc. book/tax recognition
differences (7.8) 3.8 (4.1)
Included in other income
and deductions
Property related differences 10.0 6.0 9.2
Net operating loss carryforward (17.4) (15.4) (15.5)
Misc. book/tax recognition
differences (.7) (2.5) .4
Disallowed Clinton costs - (62.2) -
------------------------------------------------------------------
Total deferred taxes 63.2 7.9 57.9
------------------------------------------------------------------
Deferred investment tax credit - net
Included in operating
expenses and taxes (11.3) (.8) (.5)
Included in other income
and deductions (.3) (.7) (.8)
Disallowed investment tax credit - (8.4) -
------------------------------------------------------------------
Total investment tax credit (11.6) (9.9) (1.3)
------------------------------------------------------------------
Total income taxes $109.9 $23.3 $79.5
==================================================================
The reconciliations of income tax expense to amounts computed
by applying the statutory tax rate to reported pretax
results for the period are set forth below:
Years Ended December 31,
------------------------------------------------------------------
(Millions of dollars) 1994 1993 1992
------------------------------------------------------------------
Income tax expense at the
federal statutory tax rate $91.6 $(20.5) $58.7
Increases/(decreases) in taxes
resulting from -
State taxes, net of federal effect 13.8 5.8 11.3
Investment tax credit -
amortization (7.8) (8.8) (8.4)
Depreciation not normalized 4.3 7.1 9.4
Preferred dividend requirement
of subsidiary 8.7 9.1 9.8
Disallowed Clinton costs
(including ITC) - 27.4 -
Other-net (.7) 3.2 (1.3)
------------------------------------------------------------------
Total income taxes $109.9 $ 23.3 $ 79.5
==================================================================
ombined federal and state effective income tax rates
were 42%, (39.8%) and 46% for the years 1994, 1993 and 1992,
respectively. The negative effective tax rate for 1993 is a
result of the loss recorded by IP due to the Rehearing Order
which denied IP recovery of certain deferred Clinton costs. The
1993 effective tax rate excluding the effect of this loss was
44.2%. At December 31, 1994, Illinova had approximately $29
million of federal income tax net operating loss carryforwards
to offset future taxable income. Approximately $15 million of
these carryforwards expire in 2006, $12 million expire in 2007
and $2 million expire in 2008.
Illinova is subject to the rovisions of the Alternative
Minimum Tax System (AMT). As a result, Illinova has an alternative
minimum tax credit carryforward at December 31, 1994, of
approximately $186 million. This credit can be carried forward
indefinitely to offset future regular income tax liabilities in
excess of the tentative minimum tax.
The Internal Revenue Service (IRS) has completed its audit of
IP's federal income tax returns for the years 1986 through
1988. IP and the IRS have reached
an agreement on all audit issues. The results of the agreement
did not have a material effect on Illinova's or IP's
consolidated financial position or results of operations.
NOTE 8 CAPITAL LEASES
---------------------
Illinois Power Fuel Company (Fuel Company), which is 50%
owned by IP, was formed in 1981 for the purpose of leasing nuclear
fuel to IP for Clinton. Lease payments are equal to the Fuel
Company's cost of fuel as consumed (including related financing
and administrative costs). Billings under the lease agreement
during 1994, 1993 and 1992 were $52 million, $45 million and $43
million, respectively, including financing costs of $7 million, $6
million and $8 million, respectively. IP is obligated to make
subordinated loans to the Fuel Company at any time the obligations
of the Fuel Company that are due and payable exceed the funds
available to the Fuel Company. IP has an obligation for nuclear
fuel disposal costs of leased nuclear fuel. See "Note 4 -
Commitments and Contingencies" for discussion of decommissioning
and nuclear fuel disposal costs. Nuclear fuel lease payments are
included with fuel for electric plants on Illinova's Consolidated
Statements of Income.
At December 31, 1994 and 1993, current obligations under
capital lease for nuclear fuel are $33.3 million and $41.6
million, respectively. Over the next five years estimated payments
under capital leases are as follows:
------------------------------------------------------------------
(Millions of dollars)
------------------------------------------------------------------
1995 $39.2
1996 34.6
1997 26.7
1998 13.0
1999 8.5
Thereafter 2.9
------------------------------------------------------------------
124.9
Less: Interest 13.4
------------------------------------------------------------------
Total $111.5
==================================================================
NOTE 9 LONG-TERM DEBT OF SUBSIDIARY
-----------------------------------
(Millions of dollars)
--------------------------------------------------------------------------------
December 31, 1994 1993
First mortgage bonds--
5.85% series due 1996 $ 40.0 $40.0
6 1/2% series due 1999 72.0 72.0
6.60% series due 2004 (Pollution Control 7.0 7.2
Series A)
9 7/8% series due 2004 - 10.0
7.95% series due 2004 72.0 72.0
6% series due 2007 (Pollution Control Series B] 18.7 18.7
11 5/8% series due 2014 (Pollution Control - 35.6
Series D)
10 3/4% series due 2015 (Pollution Control - 84.1
Series E)
7 5/8% series due 2016 (Pollution Control 150.0 150.0
Series F, G and H)
8.30% series due 2017 (Pollution Control 33.8 33.8
Series I)
7 3/8% series due 2021 (Pollution Control 84.7 84.7
Series J)
8 3/4% series due 2021 125.0 125.0
5.7% series due 2024 (Pollution Control Series K] 35.6 -
7.4% series due 2024 (Pollution Control Series L] 84.1 -
--------------------------------------------------------------------------------
Total first mortgage bonds 722.9 733.1
--------------------------------------------------------------------------------
New mortgage bonds--
6 1/8% series due 2000 40.0 40.0
5 5/8% series due 2000 110.0 110.0
6 1/2% series due 2003 100.0 100.0
6 3/4% series due 2005 70.0 70.0
8.0% series due 2023 235.0 235.0
7 1/2% series due 2025 200.0 200.0
Adjustable rate series due 2028
(Pollution Control Series M, N and O) 111.8 111.8
--------------------------------------------------------------------------------
Total new mortgage bonds 866.8 866.8
--------------------------------------------------------------------------------
Total mortgage bonds 1,589.7 1,599.9
--------------------------------------------------------------------------------
Short-term debt to be refinanced as long-term debt 125.0 125.0
8 1/2% debt securities due 1994 - 100.0
Medium-term notes, series A 100.0 100.0
Variable rate long-term debt due 2017 75.0 75.0
-------------------------------------------------------------------------------
Total other long-term debt 300.0 400.0
--------------------------------------------------------------------------------
1,889.7 1,999.9
Unamortized discount on debt (21.6) (15.4)
--------------------------------------------------------------------------------
Total long-term debt excluding capital lease
obligations 1,868.1 1,984.5
Obligation under capital leases 111.5 129.5
--------------------------------------------------------------------------------
1,979.6 2,114.0
Long-term debt and lease obligations maturing
within one year (33.5) (187.7)
--------------------------------------------------------------------------------
Total long-term debt $ 1,946.1 $1,926.3
================================================================================
In May 1994, $35.6 million of 11 5/8% Pollution Control Bonds
Series D due 2014 were retired with the same principal amount of
5.7% Pollution Control Bonds Series K due 2024. In December 1994,
$84.1 million of 7.4% Pollution Control Bonds Series B due 2024
were issued. The proceeds and additional funds were placed in an
irrevocable trust and invested in U. S. Treasury securities, and
will be used to extinguish the outstanding $84.1 million 10 3/4%
Pollution Control Bonds Series E due 2015 on March 1, 1995. This
resulted in an in-substance defeasance in accordance with Statement
of Financial Accounting Standards No. 76, "Extinguishment of Debt."
The $84.1 million of 10 3/4% Pollution Control Bonds Series E due
2015 have been removed from the consolidated financial statements.
Short-term debt to be refinanced as long-term debt consists of
commercial paper that will be renewed regularly on a long-term
basis. Ongoing credit support is provided by Illinova's and IP's
revolving credit agreements of $43 million and $250 million,
respectively. In 1989 and 1991, IP issued a series of fixed rate
medium-term notes. At December 31, 1994, the maturity dates on
these notes ranged from 1996 to 1998 with interest rates ranging
from 9% to 9.31%. Interest rates on variable rate long-term debt
due 2017 are adjusted weekly and ranged from 5.25% to 5.6% at
December 31, 1994.
For the years 1995, 1996, 1997, 1998 and 1999, IP has long-term
debt maturities and cash sinking fund requirements in the aggregate
of (in millions) $.2, $61.7, $10.8, $68.8 and $72.8, respectively.
These amounts exclude capital lease requirements. See "Note 8 -
Capital Leases." Certain supplemental indentures to the First
Mortgage require that IP make annual deposits, as a sinking and
property fund, in amounts not to exceed $.4 million in 1995, $1.8
million in 1997, $1.8 million in 1998 and $1.8 million in 1999.
These amounts are subject to reduction and historically have been
met by pledging property additions, as permitted by the First
Mortgage.
At December 31, 1994, the aggregate total of unamortized debt
expense and unamortized loss on reacquired debt was approximately
$107.4 million.
IP's first mortgage bonds are secured by a first mortgage
lien on substantially all of the fixed property, franchises and
rights of IP with certain minor exceptions expressly provided
in the First Mortgage. In 1992, the Board authorized a new
general obligation mortgage, which is intended to replace the
First Mortgage. Bonds issued under the new mortgage were
secured by a corresponding issue of first mortgage bonds under
the First Mortgage. The remaining balance of net bondable
additions at December 31, 1994, was approximately $1.0 billion.
NOTE 10 PREFERRED STOCK OF SUBSIDIARY
-------------------------------------
(millions of dollars)
-----------------------------------------------------------------
December 31, 1994 1993
SERIAL PREFERRED STOCK OF SUBSIDIARY,
cumulative, $50 par value --
Authorized 5,000,000 shares; 3,325,815 and 4,150,000 shares
outstanding, respectively
Series Share Redemption prices
4.08% 300,000 $51.50 $15.0 $15.0
4.26% 150,000 51.50 7.5 7.5
4.70% 200,000 51.50 10.0 10.0
4.42% 150,000 51.50 7.5 7.5
4.20% 180,000 52.00 9.0 9.0
8.24% 600,000 51.90 30.0 30.0
7.56% 675,040 51.685 33.8 35.0
8.00% 693,975 52.29 34.7 50.0
7.75% 376,800 50.00 after July 1, 2003 18.8 43.5
Net premium on preferred stock 0.8 0.7
-----------------------------------------------------------------
Total Preferred Stock of Subsidiary,
$50 par value 167.1 208.2
-----------------------------------------------------------------
SERIAL PREFERRED STOCK OF SUBSIDIARY,
cumulative, without par value--
Authorized 5,000,000 shares; 1,512,550 and 2,390,300 shares
outstanding, respectively (including 360,000 and 480,000 shares,
respectively, of redeemable preferred stock)
Series Share Redemption prices
A 742,300 $ 50.00 37.1 50.0
B 410,250 ($51.50 prior to May 1, 1995, 20.5 45.5
$50 thereafter)
-----------------------------------------------------------------
Total Preferred Stock of Subsidiary,
without par value 57.6 95.5
-----------------------------------------------------------------
PREFERENCE STOCK OF SUBSIDIARY,
cumulative, without par value --
Authorized 5,000,000 shares; none outstanding --- ---
PREFERRED SECURITIES OF SUBSIDIARY
(Illinois Power Capital, L.P.)
Monthly Income Preferred Securities 97.0 ---
-----------------------------------------------------------------
Total Serial Preferred Stock, Preference
Stock and Preferred Securities
of Subsidiary $321.7 $303.7
-----------------------------------------------------------------
MANDATORILY REDEEMABLE SERIAL PREFERRED
STOCK OF SUBSIDIARY, cumulative --
Series Share Par Value
8.00% 360,000 none $36.0 $48.0
=================================================================
Serial Preferred Stock ($50 par value) is redeemable at the
option of IP in whole or in part at any time not less than 30
days and not more than 60 days notice by publication.
Quarterly dividend rates for Serial Preferred Stock, Series A,
are determined based on market interest rates of certain U. S.
Treasury securities. Dividends paid in 1994 and 1993 were $.75
per quarter. The dividend rate for any dividend period will not
be less than 6% per annum or greater than 12% per annum applied
to the liquidation preference value of $50 per share.
Quarterly dividend rates for Serial Preferred Stock, Series B,
are determined based on market interest rates of certain U. S.
Treasury securities. Dividends paid in 1994 and 1993 were $.875
per quarter. The dividend rate for any dividend period will not
be less than 7% per annum or greater than 14% per annum applied
to the liquidation preference value of $50 per share.
Illinois Power Capital, L.P., is a limited partnership in which
IP serves as a general partner. Illinois Power Capital issued
$97 million of tax-advantaged monthly income preferred
securities (MIPS) at 9.45% (5.67% after-tax rate) in October
1994. The proceeds were loaned to IP and were used to redeem
$79.1 million (principal value) of higher-cost outstanding
preferred stock of IP. The excess of carrying amount of redeemed
preferred stock over consideration paid amounted to $6.4
million, which was recorded in equity and included in net income
applicable to common stock. IP consolidates the accounts of
Illinois Power Capital.
In February 1993, IP redeemed $10 million of 8.52% and $12
million of 8.00% mandatorily redeemable preferred stock. In July
1993, IP redeemed the remaining $30 million of 8.52% mandatorily
redeemable serial preferred stock. In February 1994 and 1993, IP
redeemed $12 million of 8.00% mandatorily redeemable serial
preferred stock. For each year, 1995 through 1997, IP is required
to redeem $12 million of mandatorily redeemable preferred stock
outstanding at stated value.
NOTE 11 COMMON STOCK
AND RETAINED EARNINGS
---------------------
IP has an Incentive Savings Plan (Plan) for salaried
employees. IP's matching contribution is used to purchase
Illinova common stock. Under this Plan, 27,545 shares of common
stock were
designated for issuance at December 31, 1994.
IP has an Incentive Savings Plan for Employees Covered Under
a Collective Bargaining Agreement. IP's matching contribution is
used to purchase Illinova common stock. Under this plan, 69,167
shares of stock were designated for issuance at December 31,
1994.
Illinova has an Employees Stock Ownership Plan (ESOP) that
includes an incentive compensation feature which is tied to
achievement of specified corporate performance goals. This
arrangement began in 1991 when IP loaned $35 million to the
Trustee of the Plans, who used the loan proceeds to purchase
2,031,445 shares of IP's common stock on the open market. The
loan and common shares were converted to Illinova instruments
pursuant to formation of the Holding Company in May 1994. These
shares are held in a suspense account under the Plans and are
being distributed to the accounts of participating employees as
the loan is repaid by the Trustee with funds contributed by IP,
together with dividends on the shares acquired with the loan
proceeds. IP financed the loan with funds borrowed under its
bank credit agreements.
For the year ended December 31, 1994, 42,008 shares were
allocated to salaried employees and 47,530 shares to employees
covered under the Collective Bargaining Agreement through the
matching contribution feature of the ESOP arrangement. Under the
incentive compensation feature, 184,079 shares were allocated to
employees for the year ended December 31, 1994. During 1994, IP
contributed $5.5 million to the ESOP and using the shares
allocated method, recognized $5.6 million of expense. Interest
paid on the ESOP debt was approximately $2.5 million in 1994 and
dividends used for debt services were approximately $1.6
million.
Illinova has an Automatic Reinvestment and Stock Purchase
Plan and an Employees Stock Ownership Plan for which at December
31, 1994, 3,270,236 and 29,115 shares, respectively, of common
stock were designated for issuance. Illinova has the
responsibility for administering both of these plans. The plans
allow purchases of shares on the open market, as well as
purchases of new issue shares directly from Illinova.
In 1992, the Board of Directors adopted and the shareholders
approved a Long-Term Incentive Compensation Plan (the Plan) for
officers or employee members of the Board, but excluding
directors who are not officers or employees. The types of awards
that may be granted under the Plan are restricted stock,
incentive stock options, non-qualified stock options, stock
appreciation rights, dividend equivalents and other stock-based
awards. The Plan provides that any one or more types of awards
may be granted for up to 1,500,000 shares of Illinova's common
stock. The following table outlines the activity thus far under
this plan:
-----------------------------------------------------------------
Year Options Grant Year
Granted Granted Price Exercisable
-----------------------------------------------------------------
1992 62,000 $23 3/8 1996
1993 73,500 $24 1/4 1997
1994 82,650 $20 7/8 1997
-----------------------------------------------------------------
The provisions of Supplemental Indentures to IP's General
Mortgage Indenture and Deed of Trust contain certain restrictions
with respect to the declaration and payment of dividends. IP was
not limited by any of these restrictions at December 31, 1994.
Under the Restated Articles of Incorporation, common stock
dividends are subject to the preferential rights of the holders
of preferred and preference stock.
NOTE 12 PENSION AND OTHER BENEFIT COSTS
---------------------------------------
IP has defined-benefit pension plans covering all officers
and employees. Benefits are based on years of service and
compensation. IP's funding policy is to contribute annually at
least the minimum amount required by government funding
standards, but not more than can be deducted for federal income
tax purposes. Pension costs, a portion of which have been
capitalized, for 1994, 1993 and 1992 include the following
components:
Years Ended December 31,
-----------------------------------------------------------------
(Millions of dollars) 1994 1993 1992
-----------------------------------------------------------------
Service cost on benefits earned
during the year $11.9 $11.3 $ 9.4
Interest cost on projected
benefit obligation 21.8 20.8 18.3
Return on plan assets (7.9) (28.1) (20.9)
Net amortization and deferral (19.2) 1.9 (5.0)
-----------------------------------------------------------------
Total pension cost $ 6.6 $ 5.9 $ 1.8
=================================================================
The estimated funded status of the plans at December 31,
1994 and 1993, using discount rates of 8.75% and 7.75%,
respectively, and future compensation increases of 4.5% was as
follows:
Balances as of December 31,
-----------------------------------------------------------------
(Millions of dollars) 1994 1993
-----------------------------------------------------------------
Actuarial present value of:
Vested benefit obligation $(209.6) $(231.9)
-----------------------------------------------------------------
Accumulated benefit obligation $(220.8) $(233.6)
-----------------------------------------------------------------
Projected benefit obligation $(267.3) $(285.8)
Plan assets at fair value 284.0 281.4
-----------------------------------------------------------------
Excess (deficit) of assets over projected
benefit obligation 16.7 (4.4)
Unamortized net (gain) loss (38.8) 9.1
Unrecognized net asset at transition (15.0) (43.1)
Prior service costs 24.5 23.9
-----------------------------------------------------------------
Accrued pension cost included in
accounts payable $ (12.6) $ (14.5)
=================================================================
The plan assets consist primarily of common stocks, fixed
income securities, cash equivalents and real estate. The
actuarial present value of accumulated plan benefits at January
1, 1994 and 1993, were $230 million and $205 million,
respectively, including vested benefits of $213 million and $203
million, respectively. The pension cost for 1994, 1993 and 1992
was calculated using: a discount rate of 7.75%, 8.25% and 8.5%,
respectively; future compensation increases of 4.5% for 1994 and
5.5% for 1993 and 1992; and a return on assets of 9% for 1994,
1993 and 1992. The unrecognized net asset at transition and prior
service costs are amortized on a straight-line basis over the
average remaining service period of employees who are expected to
receive benefits under the plan. IP did not make any cash
contributions during 1993 for the pension plan due to its
overfunded status. IP made a cash contribution of $10 million in
1994 and $3 million in 1992.
IP provides health care and life insurance benefits to
certain retired employees, including their eligible dependents,
who attain specified ages and years of service under the terms of
the definedbenefit plans. Postretirement benefits, a portion of
which have been capitalized, for 1994 and 1993 included the
following components:
Years Ended December 31,
-----------------------------------------------------------------
(Millions of dollars) 1994 1993
-----------------------------------------------------------------
Service cost on benefits earned
during the year $ 3.3 $ 2.9
Interest cost on projected benefit
obligation 6.2 5.9
Return on plan assets .2 (.5)
Amortization of unrecognized
transition obligation 2.1 3.3
-----------------------------------------------------------------
Total postretirement cost $11.8 $11.6
-----------------------------------------------------------------
The net periodic postretirement benefit cost in the table
above includes amortization of the previously unrecognized
accumulated postretirement benefit obligation, which was $55.2
million and $63.9 million as of January 1, 1994 and 1993,
respectively, over 20 years on a straight-line basis.
IP has established two separate trusts for those retirees
who were subject to a collectively bargained agreement and all
other retirees to fund retiree health care and life insurance
benefits. IP's funding policy is to contribute annually an amount
at least equal to the revenues collected for the amount of
postretirement benefit costs allowed in rates. The plan assets
consist of common stocks and fixed income securities at December
31, 1994 and 1993. The estimated funded status of the plans at
December 31, 1994 and 1993, using weighted average discount rates
of 8.75% and 7.75%, respectively, and a return on assets of 9%
was as follows:
Balances as of December 31,
-----------------------------------------------------------------
(Millions of dollars) 1994 1993
-----------------------------------------------------------------
Accumulated postretirement
benefit obligation
Retirees $(26.7) $(29.2)
Other fully eligible participants (11.6) (14.0)
Other active plan participants (27.3) (38.0)
-----------------------------------------------------------------
Total benefit obligation (65.6) (81.2)
Plan assets at fair value 15.2 10.1
-----------------------------------------------------------------
Funded status (50.4) (71.1)
Unrecognized transition obligation 52.3 60.6
Unrecognized net (gain) loss (7.8) 7.4
-----------------------------------------------------------------
Accrued postretirement benefit cost
included in accounts payable $ (5.9) $ (3.1)
-----------------------------------------------------------------
The assumed 1995 weighted average health-care-cost trend
rate used to measure the expected cost of benefits covered by the
plans is 11%. This trend rate decreases through 2005 to an
ultimate weighted average rate of 5% for 2005 and subsequent
years. The effect of a 1% increase in each future year's assumed
health-carecost trend rates increases the service and interest
cost from $9.4 million to $11.4 million and the accumulated
postretirement benefit obligation from $65.6 million to $75.4
million.
EARLY RETIREMENT
In December 1994, IP announced plans for a voluntary early
retirement program. Approximately 200 salaried employees would
qualify for early retirement under this program. The offer will
be made to employees during the fourth quarter of 1995. A
similar program for union employees is the subject of contract
negotiations currently underway between IP and the International
Brotherhood of Electrical Workers. Approximately 450 union
employees would qualify for the program if current negotiations
result in the same package as offered to salaried employees. At
December 31, 1994, IP employed 4,350 people, as compared to
4,540 at December 31, 1993.
The early retirement program for salaried employees is
expected to generate a pre-tax charge of approximately $22
million
against fourth quarter 1995 earnings and to generate savings of
approximately $15 million annually beginning in 1996. A combined
early retirement program for both salaried and union employees,
based on the same package as announced for salaried employees,
would generate a pre-tax charge of approximately $42 million
against fourth quarter 1995 earnings and would generate savings
of approximately $35 million annually beginning in 1996.
NOTE 13 SEGMENTS OF BUSINESS
----------------------------
Illinova's primary subsidiary, Illinois Power Company, is a
public utility engaged in the generation, transmission,
distribution, and sale of electric energy, and the distribution,
transportation and sale of natural gas. The following is a
summary of operations:
<TABLE>
<CAPTION>
(millions of dollars)
------------------------------------------------------------------------------------------------------------
1994 1993 1992
Total Total Total
Electric Gas Company Electric Gas Company Electric Gas Company
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operation information -
Operating revenues $1287.5 $302.0 $1,589.5 $1,266.4 $314.8 $1,581.2 $1,190.9 $288.6 $1,479.5
Operating expenses, excluding
provision for income taxes
and deferred Clinton 872.6 274.7 1,147.3 873.9 286.2 1,160.1 831.3 264.7 1,096.0
Deferred Clinton costs 3.5 - 3.5 9.3 - 9.3 11.2 - 11.2
------------------------------------------------------------------------------------------------------------
Pre-tax operating income 411.4 27.3 438.7 383.2 28.6 411.8 348.4 23.9 372.3
Allowance for funds used
during constru 8.9 0.4 9.3 6.2 1.0 7.2 4.5 0.7 5.2
Disallowed Clinton costs - - - (200.4) - (200.4) - - -
------------------------------------------------------------------------------------------------------------
Pre-tax operating income,
including AFUDC and disallowed
Clinton costs $420.3 $ 27.7 $ 448.0 $ 189.0 $ 29.6 $218.6 $ 352.9 $ 24.6 $ 377.5
------------------------------------------------- -------------- --------------
Other deductions, net 17.5 15.6 7.2
Interest charges 143.9 164.9 168.6
Provision for income taxes 109.9 93.9 79.6
Preferred dividend requirements
of subsidiary 24.9 26.1 28.9
------------------------------------------------------------------------------------------------------------
Net income (loss) 151.8 (81.9) 93.2
Excess of carrying value over consideration paid
paid redeemed preferred stock of subsidiary 6.4 - -
------------------------------------------------------------------------------------------------------------
Net income (loss) applicable to common stock $ 158.2 $(81.9) $ 93.2
============================================================================================================
Other information -
Depreciation $ 156.1 $ 21.1 $ 177.2 $ 148.2 $ 21.0 $169.2 $ 141.3 $ 20.0 $ 161.3
------------------------------------------------------------------------------------------------------------
Capital expenditures $ 173.7 $ 20.8 $ 194.5 $ 221.3 $ 56.4 $277.7 $ 203.1 $ 41.3 $ 244.4
------------------------------------------------------------------------------------------------------------
Investment information -
Identifiable assets* $4,589.0 $442.6 $5,031.6 $4,526.8 $406.4 $4,933.2 $4,602.9 $355.4 $4,958.3
------------------------------------------------- --------------- ----------------
Nonutility plant and other investments 37.2 19.9 9.3
Assets utilized for overall Company operations 507.9 470.4 364.1
------------------------------------------------------------------------------------------------------------
Total assets $5,576.7 $5,423.5 $5,331.7
============================================================================================================
</TABLE>
*Utility plant, nuclear fuel, materials and supplies, deferred Clinton costs and
prepaid and deferred energy costs.
NOTE 14 FAIR VALUE OF FINANCIAL INSTRUMENTS
-------------------------------------------
1994 1993
------------------------------------------------------------------
(Millions of dollars) Carrying Fair Carrying Fair
Value Value Value Value
------------------------------------------------------------------
Nuclear decommissioning
trust funds $ 22.4 $22.9 $17.2 $18.3
Cash and cash equivalents 50.7 50.7 9.9 9.9
Mandatorily redeemable
preferred stock of
subsidiary 36.0 36.0 48.0 48.5
Long-term debt of
subsidiary 1,868.1 1,750.7 1,984.5 2,048.6
Notes payable 238.8 238.8 92.3 92.3
------------------------------------------------------------------
The following methods and assumptions were used to estimate
the fair value of each class of financial instruments listed in
the table above:
NUCLEAR DECOMMISSIONING TRUST FUNDS - The fair values of
available
for-sale marketable debt securities and equity investments held
by the Nuclear Decommissioning Trust are based on quoted market
prices at the reporting date for those or similar investments.
CASH AND CASH EQUIVALENTS - The carrying amount of cash and cash
equivalents approximates fair value due to the short maturity of
these instruments.
MANDATORILY REDEEMABLE SERIAL PREFERRED STOCK OF SUBSIDIARY AND
LONG-TERM DEBT OF SUBSIDIARY - The fair value of IP mandatorily
redeemable preferred stock and IP long-term debt is estimated
based on the quoted market prices for similar issues or by
discounting expected cash flows at the rates currently offered to
IP for debt of the same remaining maturities, as advised by IP's
bankers.
NOTES PAYABLE - The carrying amount of notes payable approximates
fair value due to the short maturity of these instruments.
NOTE 15 QUARTERLY CONSOLIDATED FINANCIAL INFORMATION AND
COMMON STOCK DATA (UNAUDITED)
--------------------------------------------------------
(Millions of dollars except per common share
amounts)
-----------------------------------------------------------------
-
First Second Third Fourth
Quarter Quarter Quarter Quarter
1994 1994 1994 1994
-----------------------------------------------------------------
-
Operating revenues $442.9 $349.6 $428.9 $368.1
Operating income 71.3 72.2 112.2 64.7
Net income 27.3 29.5 71.8 23.2
Net income applicable
to common stock 27.3 29.5 71.8 29.6
Earnings per common share $ .36 $ .39 $ .95 $ .39
Common stock prices and dividends
High $22 1/2 $22 5/8 $21 1/2 $21 7/8
Low $19 7/8 $18 1/4 $18 1/8 $18 7/8
Dividends declared $ - $ .20 $ .20 $ .25
First Second Third Fourth
Quarter Quarter Quarter Quarter
1993 1993 1993 1993
-----------------------------------------------------------------
-
Operating revenues $395.1 $350.5 $452.4 $383.2
Operating income 68.3 67.9 114.3 54.8
Net income (loss) 21.0 22.5 (130.2) 4.8
Net income (loss) applicable
to common stock 21.0 22.5 (130.2) 4.8
Earnings (loss) per common share$ .28 $ .30 $(1.72) $ .06
Common stock prices and dividends
High $ 24 $25 3/4 $25 7/8 $24 7/8
Low $21 3/4 $22 1/2 $24 1/2 $20 1/8
Dividends declared $ .20 $ .20 $ - $ -
The 1994 fourth quarter earnings per share include $.08 per
sharefor the excess of carrying amount over consideration paid
for
redeemed preferred stock of IP.
The 1993 third quarter loss reflects the write-off of disallowed
Clinton costs of $200 million, or $2.65 per share, net of income
taxes. See "Note 3 - Clinton Power Station."
The common stock is listed on the New York Stock Exchange and
the Chicago Stock Exchange. The stock prices above are the
prices reported on the Composite Tape. There were 38,750
registered holders of common stock at January 10,1995. On May
31, 1994, common shares of Illinois Power began trading as
common shares of Illinova.
selected consolidated financial data*
-------------------------------------
1994 1993 1992 1991 1990 1984
-----------------------------------------------------------------
Operating revenues
Electric $1,177.5 $1,135.6 $1,117.9 $1,101.2 $1084.6 $810.3
Electric
interchange 110.0 130.8 73.0 85.5 73.8 21.1
Gas 302.0 314.8 288.6 288.2 311.1 470.2
-----------------------------------------------------------------
Total
operating
revenues $1,599.5 $1,581.2 $1,479.5 $1,479.9 $1,469.5 $1,301.6
-----------------------------------------------------------------
Net income (loss) $151.8 $(81.9) $93.2 $78.4 $(115.3) $210.2
Effective income
tax rate 42.0% (39.8)% 46.0% 48.6% (23.0)% 37.0%
-----------------------------------------------------------------
Net income (loss)
applicable to
common stock $158.2 $(81.9) $93.2 $78.4 $(115.3) $210.2
Earnings (loss)
per common
share $2.09 $(1.08) $1.23 $1.04 $(1.53) $4.02
Cash dividends declared
per common share $.65 $.40 $1.40 $.40 --- $2.64
Dividend payout
ratio
(declared) 30.7% N/A 112.9% 38.4% --- 66.6%
Book value per
common share $19.17 $17.46 $18.81 $19.25 $18.70 $23.71
Price range of
common shares
High $22 5/8 $25 7/8 $25 1/8 $24 1/8 $19 3/8 $23 7/8
Low $18 1/8 $20 1/8 $19 1/4 $15 3/8 $12 3/4 $17 5/8
Weighted average
number of common
shares outstanding
during the period
(thousands) 75,644 75,644 75,644 75,644 75,613 52,315
-----------------------------------------------------------------
Total
assets**$5,576.7 $5,423.5 $5,331.7 $5,271.8 $5,345.5 $4,086.5
-----------------------------------------------------------------
Capitalization
Common stock
equity $1,450.2 $1,321.0 $1,422.7 $1,456.1 $1,414.9 $1,337.1
Preferred
stock of
subsidiary 321.7 303.7 303.1 303.1 308.9 265.2
Mandatorily
redeemable
preferred stock
of subsidiary 36.0 48.0 100.0 110.0 140.0 86.0
Long-term debt
of subsidiary 1,946.1 1,926.3 2,017.4 2,153.1 2,198.9 1,621.0
-----------------------------------------------------------------
Total
capitalization**
$3,754.0 $3,599.0 $3,843.2 $4,022.3 $4,062.7 $3,309.3
-----------------------------------------------------------------
Embedded cost
of long-term
debt 7.6% 7.5% 8.3% 8.7% 9.3% 10.1%
-----------------------------------------------------------------
Retained earnings
(deficit) $58.8 $(64.6) $41.0 $75.8 $1.2 $350.6
-----------------------------------------------------------------
Capital
expenditures $193.7 $277.7 $244.4 $141.2 $130.6 $553.4
Cash flows
from
operations $268.6 $369.7 $344.8 $281.3 $215.4 $235.5
AFUDC as a
percent of
earnings applicable
to common stock 5.9% N/A 5.6% 3.7% N/A 56.6%
Return on average
common equity 11.0% (6.0)% 6.5% 5.5% (7.8)% 17.0%
Ratio of earnings
to fixed charges 2.56 0.66 1.87 1.70 0.54 3.15
=================================================================
* Millions of dollars except earnings (loss) per common share,
cash dividends declared per common share, book value per common
share and price range of common shares
** Restated for the effect of capitalized nuclear fuel lease.
selected illinois power company statistics
------------------------------------------
1994 1993 1992 1991 1990 1984
-----------------------------------------------------------------
ELECTRIC SALES IN KWH (MILLIONS)
Residential 4,537 4,546 4,138 4,620 4,223 3,977
Commercial 3,517 3,246 3,055 3,111 2,981 2,698
Industrial 8,685 8,120 8,083 7,642 7,751 6,968
Other 536 337 466 699 987 1,822
-----------------------------------------------------------------
Sales to
ultimate
consumers 17,275 6,249 15,742 16,072 15,942 15,465
Interchange 4,837 6,015 2,807 3,360 2,715 762
Wheeling 622 569 402 292 19 -
-----------------------------------------------------------------
Total
electric
sales 22,734 22,833 18,951 19,724 18,676 16,227
-----------------------------------------------------------------
ELECTRIC REVENUES (MILLIONS)
Residential $471 $463 $435 $447 $411 $279
Commercial 295 269 263 251 246 179
Industrial 378 360 381 355 373 277
Other 30 40 38 47 55 76
-----------------------------------------------------------------
Revenues from
ultimate
consumers 1,174 1,132 1,117 1,100 1,085 811
Interchange 110 131 73 86 74 21
Wheeling 3 3 1 1 - -
-----------------------------------------------------------------
Total
electric
revenues $1,287 $1,266 $1,191 $1,187 $1,159 $832
-----------------------------------------------------------------
GAS SALES IN THERMS (MILLIONS)
Residential 359 371 339 339 322 399
Commercial 144 148 138 133 134 183
Industrial 81 78 136 98 99 230
-----------------------------------------------------------------
Salesto
ultimate
consumers 584 597 613 570 555 812
Transportation
of customer-
owned gas 262 229 204 253 269 -
-----------------------------------------------------------------
Total gas
sold and
transported 846 826 817 823 824 812
Interdepart-
mental sales 5 7 12 8 18 1
-----------------------------------------------------------------
Total gas
delivered 851 833 829 831 842 813
-----------------------------------------------------------------
GAS REVENUES (MILLIONS)
Residential $192 $200 $181 $184 $180 $248
Commercial 66 68 61 61 62 99
Industrial 31 34 37 31 42 110
-----------------------------------------------------------------
Revenues from
ultimate
consumers 289 302 279 276 284 457
Transportation
of customer-
owned gas 9 8 7 9 10 -
Miscellaneous 4 5 3 3 17 13
-----------------------------------------------------------------
Total gas
revenues $302 $315 $289 $288 $311 $470
-----------------------------------------------------------------
System peak demand (native load) in kw (thousands)
3,395 3,415 3,109 3,272 3,394 3,371
Firm peak demand (native load) in kw (thousands)
3,232 3,254 2,925 3,108 3,180 3,217
Net generating capability in kw (thousands)
4,121 4,045 4,052 3,909 3,891 3,774
-----------------------------------------------------------------
Electric customers (end of year)
553,869 554,270 549,391 565,421 560,045 533,364
Gas customers (end of year)
388,170 394,379 386,261 401,763 398,891 381,710
Employees (end of year)
4,350 4,540 4,624 4,514 4,402 4,236
=================================================================
ILLINOIS POWER COMPANY INFORMATION STATEMENT
AND 1994 ANNUAL REPORT TO SHAREHOLDERS
notice of annual meeting of shareholders
----------------------------------------
Table of Contents
Notice of Annual Meeting . . . . . . . . . . . . . . 2
Information Statement . . . . . . . . . . . . . . . 3
Appendix:
1994 Annual Report to Shareholders . . . . . . . . . A-1
TO THE SHAREHOLDERS OF ILLINOIS POWER COMPANY:
Notice is Hereby Given that the Annual Meeting of
Shareholders of Illinois Power Company (the "Company") will be
held on April 12, 1995, 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 transact any other business which may properly come
before the meeting or any adjournment.
Shareholders of record at the close of business on February
13, 1995, will be entitled to notice of and to vote at the
Annual Meeting.
By Order of the Board of Directors,
Leah Manning Stetzner,
Vice President, General Counsel and Corporate Secretary
Decatur, Illinois
March 15, 1995
IMPORTANT
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.
information statement (pursuant to Section 14(c) of the
Securities Exchange Act of 1934)
--------------------------------------------------------
March 15, 1995
(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. The Annual
Meeting will be held on April 12, 1995, 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.
On February 13, 1995 ("Record Date"), Illinova Corporation
("Illinova") beneficially owned all of the 75,643,937 shares of
the Company's Common Stock then outstanding and there were
4,718,365 shares of the Company's Preferred Stock then
outstanding, none of which was held by Illinova.
VOTING RIGHTS
Shareholders of record at the close of business on the
Record Date will be entitled to receive notice of and to vote at
the Annual Meeting. Shareholders who are present at the Annual
Meeting will be entitled to one vote for each share of the
Company's Stock which they held of record at the close of
business on the Record Date.
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 Stock held of record at
the close of business on the Record Date.
ANNUAL REPORT AND INFORMATION STATEMENT
Accompanying this Information Statement, which includes
Consolidated Financial Statements, is a Notice of Annual Meeting
of Shareholders and the Summary Annual Report to Shareholders
covering operations of Illinova for the year 1994. This
Information Statement and accompanying documents are first being
mailed to shareholders on or about March 15, 1995.
BOARD OF DIRECTORS
Information Regarding
the Board of Directors
The Board of Directors held six Board meetings in 1994.
Other than Mr. Vannoy, all directors attended at least 75% of the
aggregate meetings of the Board and Committees of which they were
members during 1994. The Board has two standing committees: the
Audit Committee and the Nuclear Operations Committee.
The duties and members 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 in 1994.
This Committee consists of the following non-employee
directors ("Outside Directors"): Vernon K. Zimmerman, Chairman,
Richard R. Berry, Donald E. Lasater, Robert M. Powers, Walter M.
Vannoy, and Marilou von Ferstel.
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
1994.
This Committee consists of the following members of the
Board: Walter M. Vannoy, Chairman, Richard R. Berry, Larry D.
Haab, Donald E. Lasater, Charles W. Wells, and Vernon K.
Zimmerman.
Board Compensation
The Outside Directors of the Company, who also serve on the
Board of Illinova, 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 Illinova 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.
Illinova 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 a Deferred Compensation Plan for Certain
Directors, Outside Directors of the Company may elect to defer
all or any portion of their fees until termination of their
services as a director. Such deferred dollar amounts are
converted into stock units representing shares of Illinova Common
Stock with the value of each stock unit based upon the closing
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 the
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 the deferred fees is made in shares of Illinova 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 Illinova may determine beginning
in the year following the year of termination.
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
the Company. If any nominee should become unable to serve as a
director, another nominee may be selected by the current Board of
Directors.
Year in Which
First Elected
Name of Director Nominee, Age, a Director of
Business Experience and Other Information the Company
------------------------------------------------------------
Richard R. Berry, 63 1988
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.
Larry D. Haab, 57 1986
Chairman, President and Chief Executive Officer of Illinois Power
since June 1991, and an employee of Illinois Power since 1965.
He is a director of First Decatur Bancshares, Inc.,
The First National Bank of Decatur and Firstech, Incorporated.
Donald E. Lasater, 69 1981
Prior to retirement in April 1989, Mr. Lasater was Chairman of
the Board and Chief Executive Officer of Mercantile
Bancorporation, Inc., St. Louis, Missouri, a bank holding
company, since 1970. He is a director of Interco Incorporated,
General American Life Insurance Company and A.P. Green
Industries, Inc.
Donald S. Perkins, 67 1988
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 Chairman of the
Board and a director of Kmart Corporation and a director of
AT&T, Aon Corporation, Cummins Engine Company, Inc., Inland
Steel Industries, Inc., LaSalle Street Fund, Inc., The Putnam
Funds, and Time Warner, Inc.
Robert M. Powers, 63 1984
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 and a director of A. E.
Staley Manufacturing Company, and a director of Tate & Lyle,
PLC.
Walter D. Scott, 63 1990
Professor of Management and Senior Austin Fellow, J. L. Kellogg
Graduate School of Management, Northwestern 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 Services, from 1980
to 1984. Mr. Scott is a director of Chicago Title and Trust
Company, Chicago Title Insurance Company, Intermatic
Incorporated, and Orval Kent Food Company, Inc.
Ronald L. Thompson, 45 1991
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 interests in
manufacturing and service activities, from 1980 to 1993. He is
Chairman of the Board of The GR Group and a director of
McDonnell Douglas Corporation.
Walter M. Vannoy, 67 1990
Chairman of the Board and a director of Figgie International,
Inc., a diversified operating
company serving consumer, industrial, technical, and service
markets world-wide, Willoughby, Ohio, since 1994. He is a
director of Chempower, Inc.
Marilou von Ferstel, 57 1990
Executive Vice President and General Manager of Ogilvy Adams &
Rinehart, Inc., a public relations firm in Chicago, Illinois,
since June 1990. She had previously been Managing Director and
Senior Vice President of Hill and Knowlton, Chicago, Illinois, a
public relations consulting firm, from May 1981 to June 1990.
Ms. von Ferstel is a director of Walgreen Company.
Charles W. Wells, 60 1976
Executive Vice President of Illinois Power Company since 1976.
Mr. Wells has been an employee of Illinois Power since 1956. He
was elected a Vice President in 1972. He is a director of First
of America Decatur N.A.
John D. Zeglis, 47 1993
Senior Vice President, General Counsel and Government Affairs of
AT&T, Basking Ridge, New Jersey, a diversified communications
company, since 1989. He had been Senior Vice President and
General Counsel from 1986 to 1989. He is a director of the
Helmerich & Payne Corporation.
Vernon K. Zimmerman, 66 1973
Director of the Center for International Education 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 and Southwestern Life
Corporation.
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table shows shares of Illinova Common Stock
and Illinois Power Preferred Stock beneficially owned as
of January 25, 1995, by each director nominee and the executive
officers named in the Summary Executive Compensation Table.
All owners of more than five percent of Illinois Power Preferred
Stock are also listed.
<TABLE>
<CAPTION>
Number
of Shares
Name of Class Beneficially Percent
Beneficial Owner of Stock Owned (1) of Class
----------------------------------------------------------------
<S> <C> <C> <C>
Richard R. Berry Common 2,802 (2)
Larry D. Haab Common 9,647 (2)
Donald E. Lasater Common 3,313 (2)
Donald S. Perkins Common 7,353 (2)
Robert M. Powers Common 6,600 (2)
Preferred 1,200
Walter D. Scott Common 3,200 (2)
Ronald L. Thompson Common 2,391 (2)
Walter M. Vannoy Common 2,700 (2)
Marilou von Ferstel Common 3,353 (2)
Charles W. Wells Common 8,157 (2)
John D. Zeglis Common 1,659 (2)
Vernon K. Zimmerman Common 7,432 (2)
Paul L. Lang Common 2,587 (2)
Larry F. Altenbaumer Common 3,642 (2)
Larry S. Brodsky Common 1,534 (2)
American Express Company (3)Preferred 233,245 16.7%
</TABLE>
(1) The nature of beneficial ownership for shares shown is sole
voting and/or investment power, except for Mr. Powers and Mr.
Wells, who disclaim beneficial ownership of 1,200 shares of
Illinois Power Preferred Stock and 1,000 shares of Illinova
Common Stock, respectively, held in the names of their wives.
(2) Except as indicated above, no director or any executive
officer owns any other equity securities of the Company. No
director or executive officer owns as much as 1% of Illinova
Common Stock. All directors and executive officers of both
Illinova and Illinois Power as a group own 75,791 shares of
Illinova Common Stock (less than 1%).
(3) According to its Form 4 filing, American Express Company,
American Express Tower, World Financial Center, New York, NY
10285, and its subsidiaries owned 233,245 shares of Preferred
Stock, without par value, as of October 25, 1994, as to which
beneficial ownership is disclaimed, with sole power to vote
and dispose of all shares.
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. The compensation shown includes all compensation paid
for service to the Company, its parent and subsidiaries.
<TABLE>
Summary Compensation Table
<CAPTION>
Long Term Compensation
-----------------------------------------
Annual Compensation Awards Payouts
----------------------------- ---------------------- --------
Restricted
Other Stock Securities LTIP All Other
Bonus Annual Awards Underlying Payouts Compensation
Name and Principal Position Year Salary (1) Compensation (2) Options (3) (4)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Larry D. Haab 1994 $451,375 $42,881 $15,783 $42,881 20,900 shs. $22,869 $3,578
Chairman, President and 1993 437,500 22,531 13,199 20,000 shs. 3,555
Chief Executive Officer of1992 403,958 28,883 7,099 16,000 shs. 3,373
Illinova and Illinois Power
Charles W. Wells 1994 $276,625 $25,242 $12,404 $25,242 8,500 shs. $15,152 $5,533
Executive Vice President 1993 265,875 12,629 9,697 6,500 shs 5,341
of Illinois Power 1992 252,500 16,160 7,034 6,000 shs. 5,129
Paul L. Lang 1994 $213,562 $20,289 $ 8,672 $20,289 6,800 shs. $11,036 $ 543
Senior Vice President 1993 205,625 9,767 7,508 6,000shs. 527
of Illinois Power 1992 188,667 13,490 4,472 5,000 shs. 536
Larry F. Altenbaumer 1994 $196,562 $18,674 $8,975 $18,674 6,800 shs. $ 9,519 $2,007
Chief Financial Officer, 1993 187,750 8,918 7,093 6,000 shs. 2,009
Treasurer and Controller 1992 166,500 10,656 3,588 5,000 shs. 1,867
of Illinova and Senior
Vice President and Chief
Financial Officer of
Illinois Power
Larry S. Brodsky 1994 $174,186 $16,548 $4,973 $16,548 4,400 shs. $ 8,766 $1,587
Senior Vice President 1993 157,875 8,131 4,220 4,500 shs. 1,527
of Illinois Power 1992 146,791 9,395 3,676 3,000 shs. 1,508
</TABLE>
(1) The amounts shown in this column are the cash award portion
of grants made to these individuals under the Executive Incentive
Compensation Plan ("Compensation Plan"), including amounts
deferred under the Executive Deferred Compensation Plan. See the
Compensation Plan description in footnote (2) below.
(2) This table sets forth stock unit awards under the Company's
Compensation Plan. One-half of each year's award under this plan
is converted into stock units representing shares of Illinova
Common Stock based on its closing price 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
under Bonus in the Summary Compensation Table. 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 Illinova 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, without good cause or by any participant
with good reason, all awards of the participant become fully
vested and payable. As of December 31, 1994, named executive
officers were credited with the following total aggregate number
of unvested stock units under the Compensation Plan, valued on
the basis of the closing price of Illinova Common Stock on
December 31, 1994: Mr. Haab, 4,427 units valued at $96,713; Mr.
Wells, 2,535 units valued at $55,384; Mr. Lang, 2,044 units
valued at $44,653; Mr. Altenbaumer, 1,792 units valued at
$39,157; Mr. Brodsky, 1,596 units valued at $34,880. Although
stock units have been rounded, valuation is based on total
stock units, including partial shares.
(3) The amounts shown in this column reflect the cash value of
the stock units granted in 1992 for the year 1991, including
amounts deferred, under the Compensation Plan. See the
compensation Plan description in footnote (2) above.
(4) The amounts shown in this column are the Company's
contributions under the Incentive Savings Plan (including the
market value of shares of Illinova Common Stock at the time of
allocation).
The following tables summarize grants during 1994 of stock
options under Illinova's 1992 Long-Term Incentive Compensation
Plan ("LTIC Plan") and awards outstanding at year end for the
individuals named in the Summary Compensation Table. No options
were exercisable or exercised during 1994.
<TABLE>
OPTION GRANTS IN 1994
Individual Grants
-------------------------------------
<CAPTION>
Number % of
of Securities Total Options Exercise Grant
Underlying Granted to or Base Date
Options Employees Price Expiration Present
Granted(1) in 1994 Per Share(1) Date Value(2)
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Larry D. Haab 20,900 25% $20.875 6/8/2003 $158,500
Charles W. Wells 8,500 10 20.875 6/8/2003 64,100
Paul L. Lang 6,800 8 20.875 6/8/2003 51,500
Larry F. Altenbaumer 6,800 8 20.875 6/8/2003 51,500
Larry S. Brodsky 4,400 5 20.875 6/8/2003 33,300
</TABLE>
(1) Each option becomes exercisable on June 30, 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 a
recipient's employment terminates. In the event of certain change-
in-control circumstances, the Compensation and Nominating
Committee may declare the option immediately exercisable. The
exercise price of each option is equal to the fair market value
of Illinova Common Stock on the date of the grant.
(2) 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 by SEC rules; however, the Company and Illinova do not
necessarily view the Black-Scholes pricing methodology, or any
other present methodology, as a valid or accurate means of
valuing stock option grants. Illinova 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 8, 1994, was $20.875; the exercise price of the options is
$20.875; and the term of the option is 10 years. The annual
dividend yield on Illinova Common Stock was 3.623%. The risk-free
interest rate used was 7.50%, based on the yield of a
zero-coupon government bond maturing at the end of the option
term. The volatility of the stock used was 0.1975.
<TABLE>
AGGREGATED OPTION AND FISCAL
YEAR-END OPTION VALUE TABLE
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Fiscal Year-End at Fiscal Year-End
Name Exercisable/Unexercisable Exercisable/Unexercisable
-----------------------------------------------------------------
<S> <C> <C>
Larry D. Haab 0 shs./56,900 shs. 0/20,168
Charles W. Wells 0 shs./21,000 shs. 0/8,202
Paul L. Lang 0 shs./17,800 shs. 0/6,562
Larry F. Altenbaumer 0 shs./17,800 shs. 0/6,562
Larry S. Brodsky 0 shs./11,900 shs. 0/4,246
</TABLE>
PENSION BENEFITS
The Company maintains a Retirement Income Plan for Salaried
Employees (the "Retirement Plan") providing pension benefits for
all eligible salaried employees. In addition to the Retirement
Plan, the Company also maintains a nonqualified Supplemental
Retirement Income Plan for Salaried Employees of the
Company (the "Supplemental Plan") that covers all elected
officers eligible to participate in the Retirement Plan and
provides for payments from the general funds of Illinois Power of
any monthly retirement income not payable under the Retirement
Plan because of benefit limits imposed by law or because of
certain Retirement 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 Retirement
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>
ESTIMATED ANNUAL BENEFITS (ROUNDED)
<CAPTION>
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
650,000 195,000 260,000 325,000 390,000 455,000
</TABLE>
The earnings used in determining pension benefits under the
Retirement Plan are the participants' regular base compensation,
as set forth under Salary in the Summary Compensation Table.
At December 31, 1994, for purposes of both the Retirement
Plan and the Supplemental Plan, Messrs. Haab, Wells, Lang,
Altenbaumer, and Brodsky had completed 29, 31, 8, 22, and 20
years of credited service, respectively.
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
Illinova Corporation (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 the employees of the
Company who elect early retirement.
COMPENSATION AND NOMINATING COMMITTEE
REPORT ON OFFICER COMPENSATION
The six-member Compensation and Nominating Committee of the
Illinova Board of Directors (the "Committee") is composed
entirely of Outside 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 Compensation Plan, approves payments made
pursuant to the Compensation Plan and recommends grants under the
Long-Term Incentive Compensation 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. 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 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.
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 this Compensation Plan
for the Company's officers in 1989. 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 this Compensation 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
Illinova Common Stock units, the number of which is determined by
dividing half of the earned bonus amount by the closing price of
Illinova 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 1994, awards under the Compensation Plan are based on
achievement in 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 an assessment of the
individual officer's performance during the year.
Awards shown under Bonus in the Summary Compensation Table
for performance during 1994 were based on the following results.
Earnings per share and operating effectiveness (as measured by
power plant availability) were better than the threshold level
for the award. Customer satisfaction was at the threshold target
level. Employee teamwork did not result in an award. Cost
management was better than the maximum level for the award.
Long-Term Incentive Compensation Plan
In 1992, the Board of Directors adopted and the Company's
shareholders approved 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 based on the review of 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 Illinova'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 1994 represent a long-term incentive award based on
Illinova, the Company and individual performance as evaluated by
the Chairman and reviewed by the Committee.
CEO Compensation
Larry Haab became Chairman, President and Chief Executive
Officer ("CEO") of the Company on June 12, 1991, and Chairman,
President and Chief Executive Officer of Illinova in December
1993. Mr. Haab's 1994 compensation was based on the policies and
plans described above.
The Committee invokes the active participation of all
Outside Directors in reviewing Mr. Haab's performance before
it makes recommendations regarding his compensation. The
Committee is responsible for administering the processes for
completing this review. The process starts early in the year when
the Board of Directors works with Mr. Haab to establish his
personal goals and short- and long-term strategic goals for
Illinova and the Company. At the conclusion of the year Mr. Haab
reviews his performance with the Outside Directors. The Committee
oversees this review and recommends to the Board appropriate
adjustments to compensation. For 1994 the Committee, with the
participation of all Outside Directors, determined that
almost all goals were achieved and that the results for Illinova
and the Company for the year were excellent. They concluded that
his performance continued to lead Illinova and the Company to the
accomplishment of their strategic objectives.
The 1994 Compensation Plan award for the CEO 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 1,963 stock units
which vest over a three-year period as described above.
The 20,900 option shares granted to the CEO reflect the
Committee's recognition of his work in directing Illinova and the
Company toward their 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
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 10 percent
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 1994.
INDEPENDENT AUDITORS
The Board of Directors of the Company has selected Price
Waterhouse LLP as independent auditors for the Company for 1995.
A representative of that firm will be present at the Annual
Meeting and available to make a statement and to respond to
appropriate questions.
OTHER MATTERS
Illinova's 1994 Summary Annual Report to Shareholders was
mailed to the Company's shareholders commencing on March 15,
1995. Copies of the Company's Annual Report on Form 10-K will be
provided to shareholders, after the filing thereof with the SEC
on or before March 31, 1995. Requests should be addressed
to Investor Relations, G-21, Illinois Power Company, 500 South
27th Street, Decatur, Illinois 62525-1805.
Any proposal by a shareholder to be presented at the next
Annual Meeting must be received at the Company's executive
offices not later than October 31, 1995.
OTHER BUSINESS
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.
By Order of the Board of Directors,
Leah Manning Stetzner
Vice President, General Counsel and Corporate Secretary
Decatur, Illinois
March 15, 1995
Illinois Power Company
appendix: 1994 annual report to shareholders
--------------------------------------------
TABLE OF CONTENTS
Management's Discussion and Analysis . . . . . . . . . . . A-2
Responsibility for Information . . . . . . . . . . . . . A-10
Report of Independent Accountants . . . . . . . . . . . . A-10
Consolidated Statements of Income . . . . . . . . . . . . A-11
Consolidated Balance Sheets . . . . . . . . . . . . . . . A-12
Consolidated Statements of Cash Flows . . . . . . . . . . A-13
Consolidated Statements of Retained Earnings (Deficit) . . A-13
Notes to Consolidated Financial Statements . . . . . . . . A-14
Selected Consolidated Financial Data . . . . . . . . . . . A-32
Selected Statistics . . . . . . . . . . . . . . . . . . . A-33
management's discussion and analysis
------------------------------------
In this report, we make reference to the Consolidated
Financial Statements, related Notes to Consolidated Financial
Statements, Selected Consolidated Financial Data and Selected
Statistics for information concerning consolidated financial
position and results of operations. The factors having
significant impact upon consolidated financial position and
consolidated results of operations since January 1, 1992, are
discussed below.
Illinois Power Company (IP) is a subsidiary of Illinova
Corporation (Illinova), a holding company. Illinova was
officially formed on May 27, 1994, with the filing of documents
with the Illinois Secretary of State. Illinova became the
parent of IP through a merger pursuant to a share-for-share
conversion of IP common stock into Illinova common stock. On June
8, 1994, Illinova Generating Company (formerly IP Group, Inc.),
originally a subsidiary of IP, was transferred to Illinova,
establishing Illinova Generating Company as a wholly
owned subsidiary of Illinova. IP is the primary business and
subsidiary of Illinova, and is engaged in the generation,
transmission, distribution and sale of electric energy and the
distribution, transportation and sale of natural gas
in the State of Illinois.
COMPETITION
Competition has become a dominant issue for the electric
utility industry. Competition has been promoted by federal
legislation, starting with the Public Utility Regulatory Policy
Act of 1978, which facilitated the development of co-generators
and independent power producers, and continuing with enactment of
the Energy Policy Act of 1992 which authorized the Federal Energy
Regulatory Commission (FERC) to mandate wholesale wheeling of
electricity by utilities at the request of certain authorized
generating entities and electric service providers. Wheeling is
the transport of electricity generated by one entity over
transmission and distribution lines belonging to another entity.
For many years prior to enactment of the Energy Policy Act, the
FERC imposed wholesale wheeling obligations as a condition of
approving mergers and granting operating privileges, a practice
that continues.
Competition arises not only from co-generation or
independent power production, but from municipalities seeking to
extend their service boundaries to include customers being served
by IP. This is not a new risk in the industry, as the
right of municipalities to have power wheeled to them by
utilities was established in 1973. The Illinois Commerce
Commission (ICC) has been supportive of IP's attempts to maintain
its customer base through approval of special contracts and
flexible pricing that help IP to compete with existing municipal
providers.
Further competition may be introduced by state action or by
further federal regulatory action. While the Energy Policy Act
precludes the FERC from mandating retail wheeling, state
regulators and legislators could open utility franchise
territories to full competition at the retail level. Retail
wheeling involves the transport of electricity to end-use
residential, commercial or industrial customers. Such a change
would be a significant departure from existing regulation in
which public utilities have a universal obligation to serve the
public in return for relatively protected service territories and
regulated pricing designed to allow a reasonable return on
prudent investment and recovery of operating costs. State
attempts to lay the groundwork for retail wheeling have been
hampered by opposition from various interest groups, as well as
the complexity of related issues, including recovery of costs
associated with pre-existing generation investment.
While IP is confident of its present ability to compete with
all current alternate sources of energy supply, the issue of
competition is one that raises both risks and opportunities. At
this time, the ultimate effect of competition on consolidated
financial position and results of operations is uncertain. See
"Note 1 - Summary of Significant Accounting Policies" of the
"Notes to Consolidated Financial Statements" for additional
discussion of the effects of regulation.
OPEN ACCESS AND WHEELING
Under the Energy Policy Act, an investor-owned utility must
respond to any bona fide transmission service request within 60
days. Although the Energy Policy Act created, for the first time,
a FERC-administered mechanism for imposing wholesale wheeling
obligations on utilities, IP has had the obligation to wheel
power for interconnected electricity suppliers since 1976. That
condition was included in IP's Clinton Power Station (Clinton)
construction permit and operating license issued by the Nuclear
Regulatory Commission. IP currently wheels power at rates
originally approved by the FERC in 1984.
Illinova Power Marketing, Inc. (IPM) is a wholly owned
subsidiary of Illinova formed in July 1994. IPM plans to become
active in the business of brokering and marketing electric power
to various customers. In accordance with FERC standards, IPM's
affiliated utility must file an open access transmission tariff
offering transmission services and prices comparable to those
which the utility provides to its customers. IP plans to submit
the comparable open access transmission tariff, designed to
satisfy the FERC's "comparability" requirements, to the FERC
during the first quarter of 1995. It is too soon to predict the
long-term financial impact of increasing transmission access and
other issues arising from such access.
EARLY RETIREMENT
In December 1994, IP announced plans for a voluntary early
retirement program. Approximately 200 salaried employees would
qualify for early retirement under this program. The offer will
be made to employees during the fourth quarter of 1995. A similar
program for union employees is the subject of contract
negotiations currently underway between IP and the International
Brotherhood of Electrical Workers. Approximately 450 union
employees would qualify for the program if current negotiations
result in the same package as offered to salaried employees. At
December 31, 1994, IP employed 4,350 people, as compared
to 4,540 at December 31, 1993.
The early retirement program for salaried employees is
expected to generate a pre-tax charge of approximately $22
million against fourth quarter 1995 earnings and to generate
savings of approximately $15 million annually beginning in 1996.
A combined early retirement program for both salaried and union
employees, based on the same package as announced for salaried
employees, would generate a pre-tax charge of approximately $42
million against fourth quarter 1995 earnings and would generate
savings of approximately $35 million annually beginning in
1996.
CONSOLIDATED RESULTS OF OPERATIONS
Overview
Net income (loss) applicable to common stock was $162
million for 1994, $(82) million for 1993 and $93 million for
1992. The 1994 results include $6.4 million for the excess of
carrying amount over consideration paid for preferred stock
redeemed in December 1994. The 1994 results also reflect an
increase in gas rates as a result of IP's 1994 gas rate order,
increased electric sales, lower operating and maintenance
expenses due to on-going cost management efforts, no Clinton
refueling and maintenance outage and lower financing costs. In
1993, net income applicable to common stock was $118 million,
excluding the September 1993 write-off of disallowed Clinton post-
construction costs of $200 million, net of income taxes. The 1993
net income before the write-off reflects increased
electric and gas sales due to closer-to-normal temperatures,
increased interchange sales, lower operating and maintenance
expenses and lower interest expense as a result of a continued
refinancing program. The 1992 net income was primarily due to the
February 1992 increase in electric rates of 9.2%, which was
modified in August 1992, resulting in a net increase of 7.2%.
Additionally, in 1992 IP reduced its interest expense by retiring
and refinancing certain long-term debt and lowered its electric
depreciation expense as a result of new depreciation rates
approved in the 1992 electric rate case order.
IP operating revenues are based on rates authorized by the
ICC and the FERC. These rates are designed to recover the cost of
service and to allow shareholders a fair rate of return as
determined by the ICC and the FERC. Future electric and natural
gas sales, including interchange sales, will continue to be
affected by an increasingly competitive marketplace, changes in
the regulatory environment, increased transmission access,
weather conditions, competing fuel sources, interchange market
conditions, plant availability, fuel cost recoveries, customer
and IP conservation efforts and the overall economy.
<TABLE>
[GRAPH APPEARS HERE]
OPERATING REVENUES
(in millions of dollars)
<CAPTION>
Year Revenue Amount
---- --------------
<S> <C>
1994 1589.5
1993 1581.2
1992 1479.5
1991 1474.9
1990 1469.5
</TABLE>
ELECTRIC OPERATIONS - For the years 1992 through 1994, electric
revenues including interchange increased 8.1% and the gross
electric margin increased 5.5% as follows:
-----------------------------------------------------------------
(Millions of dollars) 1994 1993 1992
-----------------------------------------------------------------
Electric revenues $1,177.5 $1,135.6 $1,117.9
Interchange revenues 110.0 130.8 73.0
Fuel cost & power purchased (319.2) (313.6) (272.8)
-----------------------------------------------------------------
Electric margin $ 968.3 $ 952.8 $ 918.1
=================================================================
The components of annual changes in electric revenues are
summarized as follows:
-----------------------------------------------------------------
(Millions of dollars) 1994 1993 1992
-----------------------------------------------------------------
Price $(23.2) $(30.0) $ 71.2
Volume and other 44.1 72.1 (45.8)
Fuel cost recoveries 21.0 (24.4) (8.7)
-----------------------------------------------------------------
Revenue increase $ 41.9 $ 17.7 $ 16.7
=================================================================
From 1995 through 1999 electric sales excluding interchange
are expected to increase approximately 2% per year.
1994 - The 3.7% increase in electric revenues was primarily due
to a 6.3% increase in kilowatt-hour sales to ultimate consumers
(excluding interchange sales and wheeling). Volume increases
resulted from higher commercial sales (8.3%) and higher
industrial sales (7.0%) due to an improving economy. Residential
sales remained essentially unchanged from 1993 primarily due to
milder temperatures in 1994 as compared to 1993. Interchange
sales decreased 19.6% primarily due to unusually large sales
opportunities during 1993.
1993 - The 1.6% increase in electric revenues was primarily due
to a 3.2% increase in kilowatt-hour sales to ultimate consumers
(excluding interchange sales and wheeling) reflecting closer-to-
normal temperatures during the summer season. Volume increases
resulted from higher residential sales (9.9%), commercial sales
(6.3%), and industrial sales (.5%). The increase in electric
revenues was partially offset by the reduction in rates resulting
from the August 1992 ICC Rehearing Order. Interchange revenues
increased $57.8 million (79.2%) primarily as a result of
increased sales opportunities.
1992 - The 1.5% increase in electric revenues was primarily due
to the 9.2% rate increase in February 1992, which was modified in
August 1992, resulting in a net increase of 7.2%, partially
offset by decreased usage due to unusually mild weather. Total
kilowatt-hour sales to ultimate consumers (excluding interchange
sales and wheeling) decreased 2.1%. The decreases in residential
sales (10.4%) and commercial sales (1.8%) were due to unusually
cool summer and mild winter temperatures as compared to a warmer
summer and colder winter during 1991. Industrial sales increased
5.8% due to higher usage by several of IP's larger customers. The
14.7% decrease in interchange revenues in 1992 as compared to
1991 was attributable to milder weather.
<TABLE>
[GRAPH APPEARS HERE]
MAJOR SOURCES OF ELECTRIC ENERGY
(in millions of MWH)
<CAPTION>
Year Fossil Nuclear Purchases
-----------------------------------------------------------------
<S> <C> <C> <C>
1994 13.2 6.4 3.1
1993 13.1 5.1 5.1
1992 13.5 4.3 1.6
-----------------------------------------------------------------
</TABLE>
The cost of meeting IP's system requirements was reflected
in fuel costs for electric plants and power purchased. Changes in
these costs are summarized as follows:
-----------------------------------------------------------------
(Millions of dollars) 1994 1993 1992
-----------------------------------------------------------------
Fuel for electric plants
Volume and other $ 13.8 $ 3.5 $(17.4)
Price (14.3) 7.4 (7.9)
Fuel cost recoveries 32.0 (24.6) 7.5
-----------------------------------------------------------------
31.5 (13.7) (17.8)
Power purchased (25.9) 54.5 (.7)
-----------------------------------------------------------------
Total increase (decrease) $ 5.6 $40.8 $(18.5)
=================================================================
Weighted average system
generating fuel cost ($/MWH) $12.72 $13.88 $13.77
=================================================================
Changes in these costs were caused by system load
requirements, generating unit availability, fuel prices,
purchased power prices, resale of energy to other utilities and
fuel cost recovery through the Uniform Fuel Adjustment Clause.
<TABLE>
[GRAPH APPEARS HERE]
Equivalent Availability -- Clinton and Fossil
<CAPTION>
Year Clinton Fossil
-----------------------------------------------------------------
<S> <C> <C>
1994 92% 78%
1993 73% 85%
1992 62% 82%
1991 76% 81%
1990 47% 76%
-----------------------------------------------------------------
</TABLE>
Changes in factors affecting the cost of fuel for electric
generation are summarized as follows:
-----------------------------------------------------------------
1994 1993 1992
-----------------------------------------------------------------
Increase (decrease)
in generation 8.2% 2.5% (7.0%)
Generation mix
Coal and other 67% 72% 75%
Nuclear 33% 28% 25%
=================================================================
1994 - The cost of fuel increased 13.4% and electric generation
increased 8.2%. The increase in fuel cost was attributable to the
effects of the Uniform Fuel Adjustment Clause, partially offset
by a decrease in fossil generation and an increase in lower-cost
nuclear generation. Clinton's equivalent availability and
generation were higher in 1994 as compared to 1993 due to no
refueling and maintenance outage. Clinton's next refueling and
maintenance outage is scheduled to begin in March 1995. Power
purchased for the period decreased $25.9 million. Unusually large
interchange sales opportunities during 1993, not recurring in
1994, were the primary cause of the decrease in purchased power.
<TABLE>
[GRAPH APPEARS HERE]
FUEL COST PER MILLION BTU
(percent of generation)
<CAPTION>
Fuel
Type Cost Percent
----------------------------------------------------------------
<S> <C> <C>
Coal $1.42 66.2%
Nuclear .85 33.3
Gas 3.06 .2
Oil 3.89 .3
----------------------------------------------------------------
</TABLE>
1993 - The cost of fuel decreased 5.5%, while electric generation
increased 2.5%. The decrease in fuel cost was attributable to the
effects of the Uniform Fuel Adjustment Clause and lower
generation at IP's largest fossil plant. This decrease was
partially offset by an increase in transportation costs due to
flooding in the Midwest and the United Mine Workers' Strike.
Power purchased for the period increased $54.5 million. Coal
delivery concerns and coal conservation measures stemming from
the United Mine Workers' Strike, combined with favorable
interchange prices and increased sales opportunities, contributed
to IP's increase in purchased power. Clinton returned to service
December 10, 1993, after completing its fourth refueling and
maintenance outage which began September 26, 1993.
1992 - The cost of fuel decreased 6.7% and electric generation
decreased at fossil plants as a result of mild weather and a
credit refund from one coal supplier, partially offset by the
effects of the Uniform Fuel Adjustment Clause. The credit refund
resulted from a price reduction arrived at through arbitration
under the applicable coal supply contract. Clinton returned to
service June 1, 1992, after completing a refueling and
maintenance outage that began February 27, 1992.
GAS OPERATIONS - For the years 1992 through 1994, gas revenues,
including transportation, increased 4.6% and the gross margin on
gas revenues increased 11.1% as follows:
-----------------------------------------------------------------
(Millions of dollars) 1994 1993 1992
-----------------------------------------------------------------
Gas revenues $ 293.2 $ 306.8 $ 281.8
Gas cost (172.4) (187.3) (171.9)
Transportation revenues 8.8 8.0 6.8
-----------------------------------------------------------------
Gas margin $ 129.6 $ 127.5 $ 116.7
=================================================================
(Millions of therms)
Therms sold 584 597 613
Therms transported 262 229 204
-----------------------------------------------------------------
Total consumption 846 826 817
=================================================================
Changes in the cost of gas purchased for resale are
summarized as follows:
-----------------------------------------------------------------
(Millions of dollars) 1994 1993 1992
-----------------------------------------------------------------
Gas purchased for resale
Cost (excluding take-or-pay) $ (6.4) $13.3 $ 1.0
Take-or-pay costs 2.8 5.3 (16.0)
Volume (13.6) (3.4) 16.5
Gas cost recoveries 2.3 .2 2.6
-----------------------------------------------------------------
Total increase (decrease) $(14.9) $15.4 $ 4.1
=================================================================
Average cost per therm delivered .261 .275 .260
=================================================================
The 1994 decrease in the cost of gas purchased was primarily
due to lower natural gas prices, the expanded use of additional
gas storage and a decrease in therms purchased. Also contributing
to the higher gas margin in 1994 was the 6.1% increase in gas
base rates approved by the ICC in April 1994. The 1993 increase
in the cost of gas purchased was primarily due to an increase in
the price of purchased gas and take-or-pay costs. From 1995
through 1999, gas sales including therms transported are expected
to remain close to 1994 levels. Other Expenses and Taxes. A
comparison of significant increases (decreases) in other expenses
and deferred Clinton costs for the last three years is presented
in the following table:
-----------------------------------------------------------------
(Millions of dollars) 1994 1993 1992
-----------------------------------------------------------------
Other operating expenses $(9.2) $(2.1) $17.9
Maintenance (11.2) (1.3) 14.9
Depreciation and amortization 12.2 7.9 (15.5)
Deferred Clinton costs (5.8) (1.9) -
=================================================================
The decrease in operating and maintenance expenses for 1994
is due to ongoing re-engineering efforts, improved operating
efficiencies at IP's fossil plants and at Clinton and no
refueling and maintenance outage at Clinton. The decrease
in operating and maintenance expenses for 1993 is primarily due
to decreased costs at Clinton, partially offset by increased
fossil plant maintenance. The Clinton refueling and maintenance
outage and higher administration and general expenses contributed
to the increase in other operating and maintenance expenses
in 1992. The 1994 increase in depreciation expense is due
primarily to a higher utility plant balance in 1994 as compared
to 1993. The 1993 increase in depreciation expense is due
principally to the effects of the adoption of Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes." See "Note 1 - Summary of Significant Accounting Policies"
of the "Notes to Consolidated Financial Statements" for
additional information. The 1992 decrease in depreciation expense
reflects the reduction of the non-Clinton electric plant
composite rate approved in the 1992 rate order. Deferred Clinton
costs decreased in 1994 and 1993 as a result of the September
1993 write-off of disallowed Clinton post-construction costs.
<TABLE>
[GRAPH APPEARS HERE]
OPERATING AND MAINTENANCE EXPENSES
(in millions of dollars)
<CAPTION>
Year Dollars
-----------------------------------------------------------------
<S> <C>
1994 349.6
1993 370.0
1992 373.4
1991 340.6
1990 365.6
-----------------------------------------------------------------
</TABLE>
OTHER INCOME AND DEDUCTIONS - Total allowance for funds used
during construction (AFUDC), a non-cash item of income, increased
in 1994 compared to 1993 and 1992. The 1994 increase was due to
higher construction work-in-progress balances eligible for AFUDC,
partially offset by a lower AFUDC rate. The AFUDC effective
rate was 7.0%, 7.5% and 7.5% in 1994, 1993 and 1992,
respectively. The 1994 increase in Miscellaneous-net deductions
was primarily due to a decrease in allocated income taxes.
INTEREST CHARGES - Total interest charges decreased $21.0 million
in 1994, $3.7 million in 1993 and $12.3 million in 1992. These
decreases were primarily due to the refinancing with lower cost
debt or the retirement of debt from 1992 through 1994. From 1992
to 1994, IP retired or refinanced approximately $1.5 billion of
long-term debt, excluding revolving loan agreements, with a
weighted average interest rate of 9.27%. During this time,
approximately $1.4 billion of new debt was issued at a weighted-
average interest rate of 6.97%.
INFLATION - Inflation, as measured by the Consumer Price Index,
was 2.5%, 3.1% and 3.0% in 1994, 1993 and 1992, respectively. The
primary effect of inflation on IP is that historical rather than
current plant costs are recovered in IP's rates.
LIQUIDITY AND CAPITAL RESOURCES
Regulatory Matters
1994 GAS RATE ORDER - On April 6, 1994, the ICC approved an
increase of $18.9 million, or 6.1%, in IP's natural gas base
rates. The increase will be partially offset by savings from
lower gas costs resulting from the expansion of the Hillsboro gas
storage field. The approved authorized rate of return on rate
base is 9.29%, with a rate of return on common equity of 11.24%.
Concurrent with the gas rate increase, IP's gas utility plant
composite depreciation rate decreased to 3.4%.
FERC ORDER 636 - Pursuant to Orders 636 and 636-A, issued in
April and August 1992, respectively, the FERC approved amendments
to its rules that are intended to increase competition among
natural gas suppliers by "unbundling" the interstate pipelines'
merchant sales service into separate sales and transportation
services and by mandating that the pipelines' firm transportation
service be comparable to the transportation service included in
their traditional bundled sales service. As a result of Orders
636 and 636-A, the pipelines are charging their customers
"transition" costs, which arise from unbundling services. IP
estimates that approximately $10.5 million in transition
costs will be incurred. In 1993, IP began to pay transition costs
billed by gas pipelines and to recover these payments through a
tariff rider. On September 23, 1994, the ICC issued a final order
approving recovery of Order 636 transition costs.
Dividends
On October 12, 1994, the Board of Directors of Illinois
Power increased the common stock dividend 25 percent, declaring
the common stock dividend for the first quarter of 1995 at 25
cents per share, payable February 1, 1995, to shareholders of
record as of January 10, 1995. On December 14, 1994, IP declared
preferred stock dividends for the first quarter of 1995, payable
February 1, 1995, to shareholders of record as of January 10,
1995.
Capital Resources and Requirements
IP needs cash for operating expenses, interest and dividend
payments, debt and IP preferred stock retirements and
construction programs. To meet these needs, IP has used
internally generated funds and external financings including the
issuance of preferred stock, debt and revolving lines of credit.
The timing and amount of external financings depend primarily
upon economic and financial market conditions, cash needs and
capitalization ratio objectives. To a significant degree, the
availability and cost of external financing depend upon
the financial health of the company seeking those funds.
Short-term debt is used to meet temporary cash needs for
operations or to meet capital requirements until the timing is
considered appropriate to issue long-term securities.
Cash flow from operations during 1994 provided sufficient
working capital to meet ongoing operating requirements, to
service existing common and preferred stock dividends and debt
requirements and a substantial portion of construction
requirements. Additionally, IP expects current revenues will
enable it to meet future operating requirements and continue to
service its existing debt, preferred and common stock dividends,
sinking fund requirements and all of its anticipated construction
requirements. The current ratings of securities by two principal
securities rating agencies are as follows:
-----------------------------------------------------------------
Standard
Moody's & Poor's
-----------------------------------------------------------------
IP first/new mortgage bonds Baa2 BBB
IP preferred stock baa3 BBB-
IP commercial paper P-2 A-2
=================================================================
These ratings are an indication of IP's financial position
and may affect the cost of securities, as well as the willingness
of investors to invest in securities. Under current market
conditions, these ratings are unlikely to impair IP's ability to
issue or significantly increase the cost of issuing additional
securities through external financing. IP has adequate short-term
and intermediate-term bank borrowing capacity.
In 1993, Standard and Poor's (S&P) published revised
standards for review of utility business and financial risks,
based in part on a subjective evaluation of such factors as
anticipated growth in service territory, industrial sales as
a proportion of total revenues, regulatory environment and
nuclear plant ownership. S&P's preliminary assessment placed IP,
along with approximately one-third of the industry, in the "below
average" category. On April 13, 1994, S&P lowered IP's mortgage
bond rating to BBB from BBB+. This action came after S&P reviewed
IP's specific business position in light of the revised
standards.
In February 1994, IP redeemed $12 million of mandatorily
redeemable serial preferred stock and issued $35.6 million of
First Mortgage Bonds, 5.7% Series due 2024 (Pollution Control
Series K). In May, the proceeds of the debt issuance were used to
retire $35.6 million of First Mortgage Bonds, 11 5/8% Series due
2014 (Pollution Control Series D). In August 1994, $100 million
of 8 1/2% debt securities were retired.
Illinois Power Capital, L.P., (IP Capital), is a limited
partnership in which IP serves as a general partner. IP Capital
issued $97 million of tax-advantaged monthly income preferred
securities (MIPS) at 9.45% (5.67% after-tax rate) in
October 1994. The proceeds were loaned to IP and were used to
redeem $79.1 million (principal value) of higher-cost outstanding
preferred stock of IP. The excess of carrying amount of redeemed
preferred stock over consideration paid amounted to $6.4 million
which was recorded in equity and included in net income
applicable to common stock. See "Note 9 - Preferred Stock" of the
"Notes to Consolidated Financial Statements" for additional
information.
In December 1994, IP issued $84.1 million of First Mortgage
Bonds, 7.4% Series due 2024 (Pollution Control Series L). In
March 1995, the proceeds of the debt issuance will be used to
retire $84.1 million First Mortgage Bonds, 10 3/4% Series due
2015 (Pollution Control Series E). See "Note 8 - Long-Term Debt"
of the "Notes to Consolidated Financial Statements" for
additional information.
For the years 1994, 1993 and 1992, changes in long-term debt
and preferred stock outstanding, including normal maturities and
elective redemptions, were as follows:
-----------------------------------------------------------------
(Millions of dollars) 1994 1993 1992
-----------------------------------------------------------------
Bonds $ (10) $ 35 $(21)
Other long-term debt (100) - (66)
Preferred stock 6 (51) (10)
-----------------------------------------------------------------
Total decrease $(104) $(16) $(97)
=================================================================
In February 1995, 1994, 1993 and 1992, IP redeemed $12
million of mandatorily redeemable 8% serial preferred stock.
The amounts shown in the preceding table for debt retirements do
not include all mortgage sinking fund requirements.
IP has generally met these requirements by pledging property
additions as permitted under the 1943 mortgage. For additional
information, see "Note 8 - Long-Term Debt" and "Note 9 -
Preferred Stock" of the "Notes to Consolidated Financial
Statements." See "Note 3 - Commitments and Contingencies" of the
"Notes to Consolidated Financial Statements" for information
related to coal and gas purchases, nuclear fuel commitments and
emission allowance purchases.
In 1992, the IP Board authorized a new general obligation
mortgage (New Mortgage), which is intended to replace IP's 1943
Mortgage and Deed of Trust (First Mortgage). Bonds issued under
the New Mortgage are secured by a corresponding issue of First
Mortgage bonds under the First Mortgage. At December 31, 1994,
based upon the most restrictive earnings test contained in
the First Mortgage, IP could issue approximately $691 million of
additional first mortgage bonds for other than refunding
purposes. The amount of available unsecured borrowing capacity
totaled $160 million at December 31, 1994. Also at December 31,
1994, the unused portion of IP bank lines of credit was $250
million. As of December 31, 1994, IP has $120 million of unissued
debt securities and $56.5 million of unissued preferred stock
authorized by the Securities and Exchange Commission in September
1993 and August 1993, respectively.
IP has filed a petition with the ICC seeking approval of a
program whereby IP will reacquire shares of its common stock from
Illinova, from time to time, at prices determined to be
equivalent to current market value. The reacquired stock
will be retained as treasury stock or cancelled. IP expects to
receive ICC approval, and to implement the program, in the first
quarter of 1995.
Construction expenditures for the years 1992 through 1994
were approximately $715.8 million, including $21.7 million of
AFUDC. IP estimates that $1.13 billion will be required for
construction and capital requirements during the 1995-99 period
as follows:
-----------------------------------------------------------------
Five-Year Period
-----------------------------------------------------------------
(Millions of dollars) 1995 1995-1999
-----------------------------------------------------------------
Construction requirements
Electric generating facilities $82 $246
Electric transmission and
distribution facilities 70 296
General plant 28 112
Gas facilities 24 121
-----------------------------------------------------------------
Total construction requirements 204 775
Nuclear fuel 11 107
Debt retirements - 214
Preferred stock retirements 12 36
-----------------------------------------------------------------
Total $227 $1,132
=================================================================
Construction and capital requirements are expected to be met
primarily through internal cash generation. The expenditures in
the preceding table do not include any capital expenditures for
compliance with the Clean Air Act. See "Note 3 - Commitments and
Contingencies" of the "Notes to Consolidated Financial
Statements" for additional information.
Environmental Matters
See "Note 3 - Commitments and Contingencies" of the "Notes
to Consolidated Financial Statements" for a discussion of the
Clean Air Act and manufactured-gas plant sites.
Tax and Accounting Matters
IP is subject to the Alternative Minimum Tax (AMT)
provisions of the Internal Revenue Code. As a result, in 1994,
1993 and 1992, federal income tax liabilities were approximately
$51 million, $27 million and $23 million, respectively, greater
than they would have been had IP not been subject to AMT. As of
December 31, 1994, IP had approximately $187 million of AMT
credit carryforwards that can be carried forward indefinitely.
This credit is available to offset regular tax liabilities in
excess of the tentative minimum tax. In 1994, IP continued to
utilize a portion of its tax net operating loss carryforward. As
of December 31, 1994, the balance of the tax net operating loss
carryforward was approximately $25 million.
In October 1994, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 119,
"Disclosures About Derivative Financial Instruments and Fair
Value of Financial Instruments" (FAS 119). FAS 119 requires
expanded disclosure in the consolidated financial statements
beginning with the year ended December 31, 1994.
responsibility for
information
-------------------
The consolidated financial statements and all information in
this annual report are the responsibility of management. The
consolidated financial statements have been prepared in
conformity with generally accepted accounting principles
applied on a consistent basis and include amounts that are based
on management's best estimates and judgments. Management also
prepared the other information in the annual report and is
responsible for its accuracy and consistency with the
consolidated financial statements. In the opinion of management,
the consolidated financial statements fairly reflect IPOs
financial position, results of operations and cash flows.
IP believes that the accounting and internal accounting
control systems are maintained so that these systems provide
reasonable assurance that assets are safeguarded against loss
from unauthorized use or disposition and that the financial
records are reliable for preparing the consolidated financial
statements.
The consolidated financial statements have been audited by
IP's independent accountants, Price Waterhouse LLP, in accordance
with generally accepted auditing standards. Such standards
include the evaluation of internal accounting controls to
establish a basis for developing the scope of the examination of
the consolidated financial statements. In addition to the use of
independent accountants, IP maintains a professional staff of
internal auditors who conduct financial, procedural and special
audits. To assure their independence, both Price Waterhouse LLP
and the internal auditors have direct access to the Audit
Committee of the Board of Directors.
The Audit Committee is composed of members of the Board of
Directors who are not active or retired employees of IP. The
Audit Committee meets with Price Waterhouse LLP and the internal
auditors and makes recommendations to the Board of Directors
concerning the appointment of the independent accountants and
services to be performed. Additionally, the Audit Committee meets
with Price Waterhouse LLP to discuss the results of their annual
audit, IPOs internal accounting controls and financial reporting
matters. The Audit Committee meets with the internal auditors to
assess the internal audit work performed, including tests of
internal accounting controls.
/S/Larry D. Haab /s/Larry F. Altenbaumer
------------------- ------------------------
Larry D. Haab Larry F. Altenbaumer
Chairman, President Senior Vice President
and Chief Executive Officer and Chief Financial Officer
report of independent accountants
---------------------------------
PRICE WATERHOUSE LLP
To the Board of Directors
of Illinois Power Company
In our opinion, the consolidated financial statements of
Illinois Power Company and its subsidiaries appearing on pages A-
11 through A-31 of this report present fairly, in all material
respects, the financial position of Illinois Power Company and
its subsidiaries at December 31, 1994 and 1993, and the results
of their operations and their cash flows for each of the three
years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles. These financial
statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the
opinion expressed above.
/s/Price Waterhouse LLP
-----------------------------
Price Waterhouse LLP
St. Louis, Missouri
February 1, 1995
<TABLE>
consolidated statements of income
---------------------------------
<CAPTION>
(Millions of dollars
-----------------------------------------------------------------
For the Years Ended December 31, 1994 1993 1992
<S> <C> <C> <C>
OPERATING REVENUES
Electric $1,177.5 $1,135.6 $1,117.9
Electric interchange 110.0 130.8 73.0
Gas 302.0 314.8 288.6
-----------------------------------------------------------------
Total 1,589.5 1,581.2 1,479.5
-----------------------------------------------------------------
OPERATING EXPENSES AND TAXES
Fuel for electric plants 266.6 235.1 248.8
Power purchased 52.6 78.5 24.0
Gas purchased for resale 172.4 187.3 171.9
Other operating expenses 260.0 269.2 271.3
Maintenance 89.6 100.8 102.1
Depreciation and amortization 175.8 163.6 155.7
General taxes 130.3 125.6 122.2
Deferred Clinton costs 3.5 9.3 11.2
Income taxes 118.3 106.5 86.2
-----------------------------------------------------------------
Total 1,269.1 1,275.9 1,193.4
-----------------------------------------------------------------
Operating income 320.4 305.3 286.1
-----------------------------------------------------------------
OTHER INCOME AND DEDUCTIONS
Allowance for equity funds
used during construction 3.8 2.7 1.5
Disallowed Clinton costs - (271.0) -
Income tax effects of disallowed costs - 70.6 -
Miscellaneous-net (5.5) (3.3) (.6)
-----------------------------------------------------------------
Total (1.7) (201.0) .9
-----------------------------------------------------------------
Income before interest charges 318.7 104.3 287.0
-----------------------------------------------------------------
INTEREST CHARGES
Interest on long-term debt 135.1 154.1 160.8
Other interest charges 8.8 10.8 7.8
Allowance for borrowed funds
used during construction (5.5) (4.5) (3.7)
-----------------------------------------------------------------
Total 138.4 160.4 164.9
-----------------------------------------------------------------
Net income (loss) 180.3 (56.1) 122.1
Less-Preferred dividend requirements 24.9 26.1 28.9
Plus-Excess of carrying amount over
consideration paid for redeemed
preferred stock 6.4 - -
-----------------------------------------------------------------
Net income (loss) applicable
to common stock $161.8 ($82.2) $93.2
=================================================================
</TABLE>
See notes to consolidated financial statements which are an
integral part of these statements.
<TABLE>
consolidated balance sheets
---------------------------
<CAPTION>
(Millions of dollars)
-----------------------------------------------------------------
December 31, 1994 1993
ASSETS
<S> <C> <C>
Utility Plant, at original cost
Electric (includes construction work in progress
of $202.8 million and $218.7
million, respectively) $6,023.1 $5,889.4
Gas (includes construction work in progress of
$16.8 million and $18.8 million,
respectively) 606.1 589.9
-----------------------------------------------------------------
6,629.2 6,479.3
Less -- accumulated depreciation 2,102.7 1,974.6
-----------------------------------------------------------------
4,526.5 4,504.7
Nuclear fuel in process 6.2 6.6
Nuclear fuel under capital lease 111.5 128.5
-----------------------------------------------------------------
4,644.2 4,639.8
-----------------------------------------------------------------
INVESTMENTS AND OTHER ASSETS 15.4 15.4
-----------------------------------------------------------------
CURRENT ASSETS
Cash and cash equivalents 47.9 9.3
Accounts receivable (less allowance for doubtful
accounts of $3 million and $4 million,
respectively)
Service 110.4 85.2
Other 52.6 37.5
Accrued unbilled revenue 78.9 49.0
Materials and supplies, at average cost
Fossil fuel 18.7 17.0
Gas in underground storage 23.1 23.2
Operating materials 92.1 91.4
Prepaid and refundable income taxes 11.5 14.7
Prepayments and other 23.4 17.0
-----------------------------------------------------------------
458.6 344.3
-----------------------------------------------------------------
DEFERRED CHARGES
Deferred Clinton costs 110.8 114.3
Recoverable income taxes 147.3 108.0
Other 219.5 223.3
-----------------------------------------------------------------
477.6 445.6
-----------------------------------------------------------------
$5,595.8 $5,445.1
=================================================================
CAPITAL AND LIABILITIES
CAPITALIZATION
Common stock -- No par value, 100,000,000
shares authorized; 75,643,937
shares outstanding, stated at $1,424.6 $1,424.6
Retained earnings (deficit) 51.1 (71.0)
Less -- Capital stock expense 9.7 10.8
-----------------------------------------------------------------
Total common stock equity 1,466.0 1,342.8
-----------------------------------------------------------------
Preferred stock 321.7 303.7
Mandatorily redeemable preferred
stock 36.0 48.0
Long-term debt 1,946.1 1,926.3
-----------------------------------------------------------------
Total capitalization 3,769.8 3,620.8
-----------------------------------------------------------------
CURRENT LIABILITIES
Accounts payable 108.2 128.4
Notes payable 238.8 92.3
Long-term debt and lease obligations
maturing within one year 33.5 187.7
Dividends declared 23.4 49.9
Taxes accrued 32.3 32.0
Interest accrued 38.4 64.6
Other 55.8 51.4
-----------------------------------------------------------------
530.9 606.3
-----------------------------------------------------------------
DEFERRED CREDITS
Accumulated deferred income taxes 981.4 906.6
Accumulated deferred investment tax credits 230.9 230.5
Other 82.8 80.9
-----------------------------------------------------------------
(Commitments and Contingencies Note 3) 1,295.1 1,218.0
-----------------------------------------------------------------
$5,595.8 $5,445.1
=================================================================
</TABLE>
See notes to consolidated financial statements which are an
integral part of these statements.
<TABLE>
consolidated statements of cash flows
-------------------------------------
<CAPTION>
(Millions of dollars)
-----------------------------------------------------------------
For the Years Ended December 31, 1994 1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income (loss) $180.3 ($56.1) $122.1
Items not requiring (providing) cash --
Disallowed Clinton costs,
net of income tax - 200.4 -
Depreciation and amortization 178.8 167.3 157.7
Allowance for funds used during
construction (9.3) (7.2) (5.2)
Deferred income taxes 38.9 67.9 56.6
Deferred Clinton costs 3.5 9.3 11.2
Changes in assets and liabilities --
Accounts and notes receivable (40.2) (21.3) 25.1
Accrued unbilled revenue (29.9) 42.9 (4.7)
Materials and supplies (2.3) 6.2 (2.2)
Accounts payable (19.7) 13.8 6.7
Interest accrued and other, net (19.9) (26.6) 7.2
-----------------------------------------------------------------
Net cash provided by operating
activities 280.2 396.6 374.5
-----------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Construction expenditures (193.7) (277.7) (244.4)
Allowance for funds used during
construction 9.3 7.2 5.2
Other investing activities (2.4) (2.1) 9.7
-----------------------------------------------------------------
Net cash used in investing
activities (186.8) (272.6) (229.5)
-----------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends on common stock (86.6) (88.0) (90.2)
and preferred stock
Redemptions --
Short-term debt (258.2) (254.5) (221.6)
Long-term debt (230.0) (832.0) (480.6)
Preferred stock (91.0) (94.4) (10.0)
Issuances --
Short-term debt 404.7 279.7 412.7
Long-term debt 119.8 866.8 269.0
Preferred stock 97.0 43.5 -
Premium paid on redemption of
long-term debt (2.8) (25.8) (14.6)
Other financing activities (7.7) (18.7) (12.0)
-----------------------------------------------------------------
Net cash used in financing
activities (54.8) (123.4) (147.3)
-----------------------------------------------------------------
Net change in cash and cash
equivalents 38.6 .6 (2.3)
Cash and cash equivalents at
beginning of year 9.3 8.7 11.0
-----------------------------------------------------------------
Cash and cash equivalents at
end of year $47.9 $9.3 $8.7
=================================================================
</TABLE>
<TABLE>
consolidated statements of retained earnings (deficit)
------------------------------------------------------
<CAPTION>
(Millions of dollars)
-----------------------------------------------------------------
For the Years Ended December 31, 1994 1993 1992
<S> <C> <C> <C>
Balance (deficit) at
Beginning of Year ($71.0) $41.0 $75.8
Net Income (loss) before dividends 180.3 (56.1) 122.1
-----------------------------------------------------------------
109.3 (15.1) 197.9
-----------------------------------------------------------------
Less-
Dividends-
Preferred stock 11.1 20.1 51.6
Common Stock 53.5 35.8 105.3
Plus-
Excess of carrying amount
over consideration paid
for redeemed preferred stock 6.4 - -
-----------------------------------------------------------------
(58.2) (55.9) (156.9)
-----------------------------------------------------------------
Balance (deficit) at End of Year $51.1 ($71.0) $41.0
=================================================================
</TABLE>
See notes to consolidated financial statements which are an
integral part of these statements.
notes to consolidated financial statements
------------------------------------------
Note 1 Summary of Significant Accounting Policies
-------------------------------------------------
Principles of Consolidation Illinois Power Company (IP) is a
subsidiary of Illinova Corporation (Illinova), a holding company.
Illinova was officially formed on May 27, 1994, with the filing
of documents with the Illinois Secretary of State. Illinova
became the parent of IP through a merger pursuant to a share-for-
share conversion of IP common stock into Illinova common stock.
On June 8, 1994, Illinova Generating Company (formerly IP Group,
Inc.), originally a subsidiary of IP, was transferred to
Illinova, establishing Illinova Generating Company as a wholly
owned subsidiary of Illinova. The transfer of Illinova Generating
Company and other equity to Illinova is reflected in the 1993 and
1994 Consolidated Statements of Retained Earnings (Deficit) as a
component of common stock dividends. IP is the primary business
and subsidiary of Illinova, and is engaged in the generation,
transmission, distribution and sale of electric energy and the
distribution, transportation and sale of natural gas in the State
of Illinois. The consolidated financial statements include the
accounts of IP, a combination electric and gas utility, and
Illinois Power Capital, L.P. See "Note 9 - Preferred Stock" for
additional information.
All significant intercompany balances and transactions have
been eliminated from the consolidated financial statements. Prior
year amounts have been restated on a basis consistent with the
December 31, 1994, presentation.
REGULATION - IP is subject to regulation by the Illinois Commerce
Commission (ICC) and the Federal Energy Regulatory Commission
(FERC) and, accordingly, prepares its consolidated financial
statements based on the concepts of Statement of Financial
Accounting Standards No. 71, "Accounting for the Effects of
Certain Types of Regulation" (FAS 71), which require that the
effects of the ratemaking process be recorded. Such effects
primarily concern the time at which various items enter the
determination of net income in order to follow the principle of
matching costs and revenues. Accordingly, IP records various
regulatory assets and liabilities to reflect the actions of
regulators. Management believes that IP currently meets the
criteria for continued application of FAS 71, but will
continue to evaluate significant changes in the regulatory and
competitive environment to assess IP's overall compliance with
such criteria. These criteria include:
(1) whether rates set by regulators are designed to recover the
specific costs of providing regulated services and products to
customers; and (2) whether regulators continue to establish rates
based on cost. In the event that management determines that IP no
longer meets the criteria for application of FAS 71, an
extraordinary noncash charge to income would be recorded in order
to remove the effects of the actions of regulators from the
consolidated financial statements. The discontinuation of
application of FAS 71 would likely have a material adverse effect
on IP's consolidated financial position and results of
operations. IP's principal accounting policies are:
UTILITY PLANT - The cost of additions to utility plant and
replacements for retired property units is capitalized. Cost
includes labor, materials and an allocation of general and
administrative costs, plus an allowance for funds used
during construction (AFUDC) as described below. Maintenance and
repairs, including replacement of minor items of property, are
charged to maintenance expense as incurred. When depreciable
property units are retired, the original cost and dismantling
charges, less salvage value, are charged to accumulated
depreciation.
REGULATORY ASSETS - Regulatory assets include deferred Clinton
Power Station (Clinton) post-construction costs, unamortized debt
discount, premium and expense, recoverable income taxes, deferred
electric fuel and purchased gas costs and manufactured-gas plant
site cleanup costs.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION - The FERC Uniform
System of Accounts defines AFUDC as the net costs for the period
of construction of borrowed funds used for construction purposes
and a reasonable rate on other funds when so used. AFUDC is
capitalized at a rate that is related to the approximate weighted
average cost of capital. In 1994, 1993 and 1992, the pre-tax rate
used for all construction projects was 7.0%, 7.5% and 7.5%,
respectively. Although cash is not currently realized from the
allowance, it is realized under the ratemaking process over the
service life of the related property through increased revenues
resulting from a higher rate base and higher depreciation
expense.
DEPRECIATION - For financial statement purposes, IP depreciates
the various classes of depreciable property over their estimated
useful lives by applying composite rates on a straight-line
basis. In 1994, 1993 and 1992, provisions for depreciation were
2.8% of the average depreciable cost for Clinton. Provisions
for depreciation for all other electric plant were 2.5% in 1994,
1993 and 1992. Provisions for depreciation of gas utility plant,
as a percentage of the average depreciable cost, were equivalent
to 4% in 1993 and 1992. Effective with the April 6, 1994, ICC
order in IP's gas rate case, the gas depreciation rate was
lowered to 3.4%.
AMORTIZATION OF NUCLEAR FUEL - IP leases nuclear fuel from
Illinois Power Fuel Company under a capital lease. Amortization
of nuclear fuel (including related financing costs) is determined
on a unit of production basis. See "Note 3 - Commitments and
Contingencies" for discussion of decommissioning and nuclear
fuel disposal costs. A provision for spent fuel disposal costs is
charged to fuel expense based on kilowatt-hours generated.
Deferred Clinton Costs In accordance with an ICC order in April
1987, IP began deferring certain Clinton post-construction
operating and financing costs until rates to reflect such costs
became effective (April 1989). After issuance of the
March 1989 ICC rate order, deferral of Clinton post-construction
costs ceased and amortization of the previously deferred post-
construction costs over a 37.5-year period commenced. Although
cash is not currently realized from these deferrals, it is
realized under the ratemaking process over the service life of
Clinton through increased revenues resulting from a higher rate
base and higher amortization expense. See "Note 2 - Clinton Power
Station" for additional information.
UNAMORTIZED DEBT DISCOUNT, PREMIUM AND EXPENSE - Discount,
premium and expense associated with long-term debt are amortized
over the lives of the related issues. Costs related to refunded
debt are amortized over the lives of the related new debt issues
or the remaining life of the old debt if no new debt is
issued.
REVENUE AND ENERGY COST - IP records revenue for services
provided but not yet billed to more closely match revenues with
expenses. Unbilled revenues represent the estimated amount
customers will be billed for service delivered from the
time meters were last read to the end of the accounting period.
Operating revenues include related taxes that have been billed to
customers in the years 1994, 1993 and 1992 in the amount of $66
million, $65 million and $61 million, respectively. The cost of
fuel for the generation of electricity, purchased power and gas
purchased for resale is recovered from customers pursuant to the
electric fuel and purchased gas adjustment clauses. Accordingly,
allowable energy costs that are to be passed on to customers in a
subsequent accounting period are deferred. The recovery of costs
deferred under these clauses is subject to review and approval by
the ICC. On April 6, 1994, the ICC approved an increase of $18.9
million, or 6.1%, in IP's natural gas base rates. The increase
will be partially offset by savings from lower gas costs
resulting from the expansion of the Hillsboro gas storage
field. The approved authorized rate of return on rate base is
9.29%, with a rate of return on common equity of 11.24%.
INCOME TAXES - Under Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" (FAS 109), deferred tax
assets and liabilities are recognized for the tax consequences of
transactions that have been treated differently for financial
reporting and tax return purposes, measured on the basis of the
statutory tax rates. In accordance with FAS 71, a regulatory
asset (Recoverable income taxes) has been recorded representing
the probable recovery from customers of additional deferred
income taxes established under FAS 109.
Investment tax credits used to reduce federal income taxes
have been deferred and are being amortized to income over the
"service life" of the property that gave rise to the credits. IP
is included in Illinova's consolidated federal income tax return.
Income taxes are allocated to the individual companies based
on their respective taxable income or loss. See "Note 6 - Income
Taxes" for additional discussion.
PREFERRED DIVIDEND REQUIREMENTS - Preferred dividend requirements
reflected in the consolidated income statements are recorded on
the accrual basis and relate to the period for which the
dividends are applicable.
CONSOLIDATED STATEMENTS OF CASH FLOWS - Cash and cash equivalents
include cash on hand and temporary investments purchased with an
initial maturity of three months or less. Capital lease
obligations not affecting cash flow increased by $28 million, $27
million and $14 million during 1994, 1993 and 1992,
respectively. Income taxes and interest paid are as follows:
Years ended December 31,
-----------------------------------------------------------------
(Millions of dollars) 1994 1993 1992
-----------------------------------------------------------------
Income taxes $ 72.1 $ 26.0 $ 27.5
Interest $165.9 $166.4 $177.3
=================================================================
The increase in income taxes paid from 1993 to 1994 was due
to an increase in taxable income and the settlement of an IRS
audit. The results of the settlement did not have a material
effect on IP's consolidated financial position or results of
operations. See "Note 6 - Income Taxes" for additional
information.
SALE OF ACCOUNTS RECEIVABLE AND ACCRUED UNBILLED REVENUE - In
June 1993, IP entered an agreement for the sale of an undivided
interest in a designated pool of IP's accounts receivable and
accrued unbilled revenue up to a maximum of $50 million. At
December 31, 1993, $15 million of accounts receivable and $35
million of accrued unbilled revenue had been sold. In December
1994, IP bought back all of the accounts receivable and accrued
unbilled revenue that were sold under the agreement. All costs
associated with the agreement have been reflected in Other Income
and Deductions, "Miscellaneous-net," on IP's Consolidated
Statements of Income.
FORWARD CONTRACTS - Realized and unrealized gains and losses on
forward contracts held as hedges of interest rate exposure are
deferred and recognized as interest expense over the lives of the
hedged liabilities.
INTEREST RATE CAP - Premiums paid for the purchased interest rate
cap agreement are being amortized to interest expense over the
terms of the cap. Unamortized premiums are included in Deferred
Charges, "Other" in the Consolidated Balance Sheets. Amounts
received under the cap agreement are recognized as a reduction
in interest expense.
TRANSACTIONS WITH ILLINOVA - In addition to transfers of capital
reflected in the Consolidated Statements of Retained Earnings
(Deficit), IP provided approximately $20 million in funds to
Illinova for operations and investments during 1994. Illinova is
paying IP interest on these funds at a rate equal to that which
Illinova would have paid had it used a currently outstanding line
of credit. In addition, Illinova and IP have recorded an
intercompany payable and receivable, respectively, for
approximately $23.5 million in order to recognize the effect on
the Employees Stock Ownership Plan of the conversion of IP common
stock to Illinova common stock concurrent with the formation of
Illinova. This was a noncash transaction. See "Note 10 - Common
Stock and Retained Earnings" for additional information.
Note 2 Clinton Power Station
----------------------------
IP and Soyland Power Cooperative, Inc. (Soyland) share
ownership of Clinton, with IP owning 86.8% and Soyland owning
13.2%. IP's ownership percentage is reflected in utility plant
(at original cost) and in accumulated depreciation in the
Consolidated Balance Sheets. Clinton was placed in service in
1987 and represents approximately 18% of IP's installed
generation capacity. The investment in Clinton and its related
deferred costs represented approximately 52% of IP's total assets
at December 31, 1994. IP's 86.8% share of Clinton-related costs
represented 32% of IP's total 1994 other operating, maintenance
and depreciation expenses. Clinton's equivalent availability was
92%, 73% and 62% for 1994, 1993 and 1992, respectively. Clinton's
equivalent availability was higher in 1994 due to no
refueling outage.
Ownership of an operating nuclear generating unit exposes IP
to significant risks, including increased and changing
regulatory, safety and environmental requirements and the
uncertain future cost of closing and dismantling the unit. IP
expects to be allowed to continue to operate Clinton; however, if
any unforeseen or unexpected developments would prevent IP from
doing so, IP could be materially adversely affected. See "Note 3
- Commitments and Contingencies" for additional information.
RATE AND REGULATORY MATTERS
1992 RATE ORDER - A September 1993 decision by the Illinois
Appellate Court, Third District (Appellate Court Decision),
upheld key components of the August 1992 Rehearing Order
(Rehearing Order) issued by the ICC. The Rehearing Order denied
IP recovery of certain deferred Clinton post-construction costs,
which were composed of all deferred depreciation and real estate
taxes and 72.8% of the deferred common equity return.
IP originally recorded these deferred Clinton post-
construction costs as a regulatory asset when such costs were
believed probable of recovery through future rates, based on
prior ICC orders. The deferred costs were recorded from
the time Clinton began operations (April 1987) to the time the
ICC allowed IP to begin recovering these deferred costs in rates
(March 1989), otherwise known as the regulatory lag period.
Based upon IP's assessment of the Appellate Court Decision
and in accordance with FAS 71, IP recorded a loss of $271 million
($200 million, net of income taxes) in September 1993. This write-
off included revenues and related interest of approximately $8.9
million to be refunded for deferred costs included in electric
rates between April 1992 and August 1992, which were disallowed
by the Rehearing Order.
The Appellate Court Decision remanded the case to the ICC
for further proceedings to determine the amount of actual
financial harm incurred by IP during the regulatory lag period.
The decision also remanded the case for verification of the
calculation of the amortization of deferred Clinton post-
construction costs from March 1989 to June 1992.
On February 25, 1994, IP and the remaining parties to this
case presented a joint motion to the Appellate Court requesting
entry of an order remanding the case to the Commission for
further pro-ceedings in accordance with a stipulated agreement of
the parties. The Appellate Court granted the joint motion on
March 2, 1994. On March 16, 1994, the ICC issued an order on
remand that did not result in any change in IP's rates from those
adopted in the Rehearing Order. The order on remand required IP
to refund $8.9 million of revenue that had been collected between
April and August 1992 subject to refund. The refunds began in
March 1994 and were completed in October 1994.
1987 UNIFORM FUEL ADJUSTMENT CLAUSE RECONCILIATION - In January
1994, the ICC issued an order on remand consistent with an
Illinois Appellate Court, Third District, decision which held
that evidence did not support the findings in a February 1992 ICC
order that IP incurred $29.3 million in imprudent nuclear fuel
procurement and management costs. As a result of the Appellate
Court decision and subsequent related ICC orders, IP is in the
process of recovering approximately $12.7 million of nuclear fuel
costs, which will not have an impact on consolidated results of
operations.
Note 3 Commitments and Contingencies
------------------------------------
COMMITMENTS - Estimated construction requirements in 1995 are
$204 million, which includes $152 million for electric
facilities, $24 million for gas facilities and $28 million for
general plant. The five-year construction program for 1995
through 1999 is estimated to be $775 million. These expenditures
do not include capital expenditures for compliance with the Clean
Air Act, as discussed below.
In addition, IP has substantial commitments for the purchase
of coal under long-term contracts. Coal contract commitments for
1995 through 1999 are estimated to be $779 million (excluding
price escalation provisions). Total coal purchases for 1994, 1993
and 1992 were $191 million, $184 million and $186 million,
respectively. IP has existing contracts with various natural gas
suppliers and interstate pipelines to provide natural gas supply,
transportation and leased storage. Committed natural gas,
transportation and leased storage costs (including pipeline
transition costs) for 1995 through 1999 are estimated to total
$75 million. Total natural gas purchased for 1994, 1993 and 1992
was $168 million, $188 million and $184 million, respectively.
IP's share of nuclear fuel commitments for Clinton is
approximately $22 million for uranium concentrates through 1998,
$8.4 million for conversion through 2002, $51 million
for enrichment through 1999 and $164 million for fabrication
through 2017. IP has commitments for emission allowances through
1999 estimated at $101 million. It is anticipated that all of
these costs will be recoverable under IP's electric fuel and
purchased gas adjustment clauses, if found by the ICC to be
prudently incurred.
INSURANCE - IP maintains insurance on behalf of IP and Soyland
for certain losses involving the operation of Clinton. One
insurance program provides coverage for physical damage to the
plant. Based upon a review of this insurance, IP has reduced its
limits from $2.7 billion to $1.6 billion effective December 15,
1994. IP's insurance program has two layers: 1) a primary layer
of $500 million provided by nuclear insurance pools; and 2) an
excess coverage layer of $1.1 billion provided by an industry-
owned mutual insurance company. In the event of an accident with
an estimated cost of reactor stabilization and site
decontamination exceeding $100 million, Nuclear Regulatory
Commission (NRC) regulations require that insurance proceeds be
dedicated and used first to return the reactor to, and maintain
it in, a safe and stable condition. After providing for
stabilization and decontamination, the insurers would then cover
property damage up to a total payout of $1.38 billion. Second,
the NRC requires decontamination of the reactor and reactor
station site in accordance with a plan approved by the NRC. The
insurers would provide up to $220 million to cover
decommissioning costs in excess of funds already collected for
decommissioning, as discussed later. In the event insurance
limits are not exhausted, the excess coverage may also be applied
to a portion of the value of the undamaged property. In addition,
while IP has no reason to anticipate a serious nuclear accident
at Clinton, if such an incident should occur, the claims for
property damage and other costs could materially exceed the
limits of current or available insurance coverage. IP also
carries approximately $.9 million per week of business
interruption insurance coverage for its ownership share of
Clinton through the industry-owned mutual insurance company in
the event of an extended shutdown of Clinton due to accidental
property damage. This insurance does not provide coverage until
Clinton has been out of service for 21 weeks. Thereafter,
the insurance provides up to 156 weeks of coverage.
Multiple major losses covered under the current property
damage and business interruption insurance coverages involving
Clinton or other stations insured by the industry-owned mutual
insurance company could result in retrospective premium
assessments of up to approximately $13 million. About $12 million
of this assessment would be allocated between IP and Soyland
based on their respective ownership interests in Clinton.
All United States nuclear power station operators are
subject to the Price-Anderson Act. Under that Act, public
liability for a nuclear incident is currently limited to $8.9
billion. Coverage of the first $200 million is provided by
private insurance. Excess coverage is provided by retrospective
premium assessments against each licensed nuclear reactor in the
United States. Currently, the liability to these reactor
operators/owners for such an assessment would be up to $79.3
million per incident, not including premium taxes which may be
applicable, payable in annual installments of not more than
$10 million.
A Master Worker Policy covers worker tort claims alleging
bodily injury, sickness or disease as a result of initial
radiation exposure occurring on or after January 1, 1988. The
policy has an aggregate limit of $200 million applying to the
commercial nuclear industry as a whole. As claims are paid under
the policy, there is a provision for automatic reinstatement of
policy limits up to an additional $200 million. There is also a
provision for retrospective assessment of additional premiums if
claims exceed funds available in the insurance company's reserve
accounts. The maximum retrospective premium assessment for this
contingency is approximately $3 million and may be subject
to state premium taxes. Any retrospective premium assessments
pertaining to the Master Worker Policy or the Price-Anderson Act
would be allocated between IP and Soyland based on their
respective ownership interests in Clinton.
IP may be subject to other risks which may not be insurable,
or the amount of insurance carried to offset the various risks
may not be sufficient to meet potential liabilities and losses.
There is also no assurance that IP will be able to maintain
insurance coverages at their present levels. Under those
circumstances, such losses or liabilities would have a
substantial adverse effect on IP's consolidated financial
position.
DECOMMISSIONING AND NUCLEAR FUEL DISPOSAL COSTS - IP is
responsible for its ownership share of the costs of
decommissioning Clinton and for spent nuclear fuel disposal
costs. IP is collecting future decommissioning costs through its
rates based on an ICC-approved formula that allows IP to adjust
rates annually for changes in decommissioning cost estimates.
Based on NRC regulations that establish a minimum funding
level, IP's 86.8% share of Clinton decommissioning costs is
estimated to be approximately $357 million (1994 dollars). The
NRC minimum is based only on the cost of removing radioactive
plant structures. A site-specific study to estimate the costs of
dismantlement, removal and disposal of Clinton has not been made;
however, IP plans to undertake this study in 1995. This study may
result in projected decommissioning costs higher than the NRC-
specified funding level. At December 31, 1994 and 1993, IP had
recorded a liability of $22.4 million and $17.2 million,
respectively, for the future decommissioning of Clinton.
External decommissioning trusts, as prescribed under
Illinois law and authorized by the ICC, have been established to
accumulate funds based on the expected service life of the plant
for the future decommissioning of Clinton. For the years 1994,
1993 and 1992, IP has contributed $5.5 million, $3.9 million and
$3.7 million, respectively, to its external nuclear
decommissioning trust funds. The balances in these nuclear
decommissioning funds at December 31, 1994 and 1993, were $22.4
million and $17.2 million, respectively. IP recognizes earnings
and expenses from the trust funds as changes in its assets and
liabilities relating to these funds. In November 1994, the ICC
granted IP permission to invest up to 60% of the nuclear
decommissioning trust assets in selected equity securities. As a
result, funding in this manner commenced with an initial
investment in December 1994. Future contributions will be
directed to this asset class until the approved equity allocation
is reached.
The Securities and Exchange Commission staff has questioned
certain current accounting practices of the electric utility
industry, including those practices used by IP, regarding the
recognition, measurement and classification of decommissioning
costs for nuclear generating stations in financial statements.
In response to these questions, the Financial Accounting
Standards Board has agreed to review the accounting for removal
costs of nuclear generating stations, including decommissioning.
If current electric utility industry accounting practices for
such decommissioning are changed: 1) annual provisions
for decommissioning could increase; 2) the estimated total cost
for decommissioning could be recorded as a liability; and 3)
trust fund income from the external decommissioning trusts could
be reported as investment income rather than as a reduction to
decommissioning expense. Although it is too early to determine
whether any changes to current electric utility industry
accounting practices for decommissioning will be adopted, IP
believes that based on current information, any required changes
would not have an adverse effect on consolidated results of
operations due to existing and anticipated future ability to
recover decommissioning costs through rates.
In 1992, the ICC entered an order in which it expressed
concern that IP take all reasonable action to ensure that Soyland
contributes its ownership share of the current or any revised
estimate of decommissioning costs. The order also states
that if IP becomes liable for decommissioning expenses
attributable to Soyland, the ICC will then decide whether that
expense should be the responsibility of IP stockholders or its
customers.
Under the Energy Policy Act of 1992, IP is responsible for a
portion of the cost to decontaminate and decommission the U.S.
Department of Energy's (DOE) uranium enrichment facilities. Based
on quantities purchased from the DOE facilities prior to passage
of the Act, each utility is being assessed an annual fee for a
period of 15 years. At December 31, 1994, IP has a remaining
liability of $5.7 million representing future assessments. IP is
recovering these costs, as amortized, through its fuel adjustment
clause.
Under the Nuclear Waste Policy Act of 1982, the DOE is
responsible for the permanent storage and disposal of spent
nuclear fuel. The DOE currently charges one mill ($0.001) per net
kilowatt-hour (one dollar per MWH) generated and sold for future
disposal of spent fuel. IP is recovering these charges through
rates.
ENVIRONMENTAL MATTERS
CLEAN AIR ACT - In August 1992, IP announced that it had
suspended construction of two scrubbers at the Baldwin Power
Station, on which IP had expended approximately $34.6 million. IP
has recovered approximately $3.1 million as a result of the sale
of excess materials that were not used on the project. After
suspending scrubber construction, IP reconsidered its
alternatives for complying with Phase I of the 1990 Clean Air Act
Amendments. In March 1993, IP announced its compliance plan for
Phase I (1995-1999) of the Clean Air Act, which is to
continue using high-sulfur Illinois coal and acquire emission
allowances to comply with the Clean Air Act requirements. An
emission allowance is the authorization by the United States
Environmental Protection Agency (U.S.EPA) to emit one ton of
sulfur dioxide. The ICC approved IP's Phase I Clean Air Act
compliance plan in September 1993, and IP is continuing to
implement that plan. Sufficient emission allowances have been
acquired to meet anticipated needs for 1995. IP will be active in
the emissions allowance market in order to meet requirements for
allowances in 1996 and beyond. In 1993, the Illinois General
Assembly passed and the governor signed legislation authorizing
but not requiring the ICC to permit expenditures and revenues
from emission allowance purchases and sales to be reflected in
rates charged to customers as a cost of fuel. In December 1994,
the ICC approved the recovery of emission allowance costs through
the Uniform Fuel Adjustment Clause. IP's compliance plan will
defer, until at least 2000, any need for scrubbers or other
capital projects associated with sulfur dioxide emission
reductions. Additional actions and capital expenditures will be
required by IP to achieve compliance with the Phase II (2000 and
beyond) sulfur dioxide emission requirements of the Clean Air
Act.
IP planned to comply with the Phase I nitrogen-oxide
emission reduction requirements of the acid rain provisions of
the Clean Air Act by installing low-nitrogen-oxide (NOx) burners
at Baldwin Unit 3. On November 29, 1994, the U.S. Appellate Court
remanded the Phase I NOx rules back to the U.S.EPA. IP is
positioned to comply with the previously established rules and
does not expect the new rules to be any more stringent.
Therefore, the Court's decision is not expected to have a
material impact on IP's compliance activity.
Additional capital expenditures are anticipated prior to
2000 to comply with the Phase II nitrogen-oxide requirements, as
well as potential requirements to further reduce nitrogen-oxide
emissions from IP plants to help achieve compliance with air
quality standards in the St. Louis and/or Chicago metropolitan
areas. IP has installed continuous emission monitoring systems at
its major generating stations, as required by the acid rain
provisions of the Clean Air Act.
In July 1993, the Alliance for Clean Coal (Alliance), a
coalition of Western coal producers and railroads, filed suit
against the ICC in the U.S. District Court in Chicago. The
Alliance sought a declaration that an Illinois statute
regarding the filing with and approval by the ICC of utility
Clean Air Act compliance plans, including provisions on the
construction of scrubbers or other devices to facilitate
continued use of high-sulfur Illinois coal as a fuel, is
unconstitutional. In December 1993, the U.S. District Court
issued an opinion and an order in Alliance for Clean Coal vs.
Ellen Craig, et al. declaring the statute unconstitutional. The
order prohibits the ICC from enforcing the statute, and declares
void compliance plans prepared and approved in reliance on
the statute. Subsequent to that decision, IP filed its plan with
the ICC, not for approval as it believes no approval of the plan
is required, but as a supplement to informational filings made in
a pending least-cost plan proceeding. The ICC concluded in its
final order that IP's compliance plan represented the least-cost
option for compliance. On January 9, 1995, the Seventh Circuit
Court of Appeals affirmed the U.S. District Court decision.
MANUFACTURED-GAS PLANT (MGP) SITES - IP, through its predecessor
companies, was identified on a State of Illinois list as the
responsible party for potential environmental impairment at 24
former manufactured-gas plant sites. IP is investigating each of
the sites to determine: 1) the type and amount of residues
present; 2) whether the residues constitute environmental or
health hazards and, if present, their extent; and 3) whether IP
has any responsibility for remedial action. Because of the
unknown and unique characteristics of each site (such as
amount and type of residues present, physical characteristics of
the site and the environmental risk) and uncertain regulatory
requirements, IP is not able to determine its ultimate liability
for the investigation and remediation of the 24 sites. However,
at December 31, 1994, IP had estimated and recorded a minimum
liability of $35 million. In 1994, IP spent approximately $1.3
million for investigation and remediation activities. IP is
unable to determine at this time what portion of these costs, if
any, will be eligible for recovery from insurance carriers or
other potentially responsible parties. In addition, IP is
unable to determine the time frame over which these costs may be
paid out. IP has recorded a regulatory asset in the amount of $35
million, reflecting management's expectation that investigation
and remediation costs for the manufactured-gas plant sites will
be recovered from customers or insurers.
In September 1992, the ICC issued a generic order concluding
that utilities will be allowed to collect from customers MGP
remediation costs paid to third parties, subject to prudency
evaluation. The order allowed recovery of such prudently incurred
costs over a five-year period but with no recovery from
customers of carrying costs on the unrecovered balance.
IP is currently recovering MGP site cleanup costs from its
customers through a tariff rider approved by the ICC in April
1993. In February 1994, an intervening consumer group appealed
the September 1992 ICC order and an affirming December
1993 Appellate Court decision to the Illinois Supreme Court,
arguing that utilities should not be permitted to recover MGP
cleanup costs from customers or should not be permitted to
recover such costs through riders. IP and other utilities have
also appealed to the Illinois Supreme Court seeking to include
carrying costs on the unrecovered balance of cleanup costs
through the tariff rider. The Illinois Supreme Court agreed to
hear both appeals, and briefing and oral arguments were held in
September 1994. Management believes that the final disposition of
these appeals will not have a material adverse effect on IPOs
consolidated financial position or results of operations.
ELECTRIC AND MAGNETIC FIELDS - The possibility that exposure to
electric and magnetic fields (EMF) emanating from power lines,
household appliances and other electric sources may result in
adverse health effects continues to be the subject of litigation
and governmental, medical and media attention. Litigants have
also claimed that EMF concerns justify recovery from utilities
for the loss in value of real property exposed to power lines,
substations and other such sources of EMF. Scientific research
worldwide has produced conflicting results and no conclusive
evidence that electric and/or magnetic field exposure causes
adverse health effects. Research is continuing to resolve
scientific uncertainties. It is too soon to tell what, if any,
impact these actions may have on IP's consolidated financial
position.
LEGAL PROCEEDINGS
IP is involved in legal or administrative proceedings before
various courts and agencies with respect to matters occurring in
the ordinary course of business, some of which involve
substantial amounts of money. Management believes that the
final disposition of these proceedings will not have a material
adverse effect on consolidated financial position or results of
operations.
OTHER
IP sells electric energy and natural gas to residential,
commercial and industrial customers throughout Illinois. At
December 31, 1994, 60%, 21% and 19% of accounts receivable were
from residential, commercial and industrial customers,
respectively. IP maintains reserves for potential credit losses
and such losses have been within management's expectations.
Note 4 Lines of Credit
and Short-Term Loans
----------------------
IP has total lines of credit represented by bank commitments
amounting to $250 million, all of which were unused at December
31, 1994. The weighted average borrowings for 1994 were $1.1
million at a weighted average interest rate of 3.7%. These lines
of credit are renewable in July 1995 and September 1996. These
bank commitments support the amount of commercial paper
outstanding at any time, limited only by the amount of unused
bank commitments, and are available to support other IP
activities.
IP pays facility fees up to 0.25% per annum, on $250 million
of the total line of credit, regardless of usage. The interest
rate on borrowings under these agreements is, at IP's option,
based upon the lending banks' reference rate, their Certificate
of Deposit rate, the borrowing rate of key banks in the London
interbank market or competitive bid.
IP has letters of credit totaling $204.8 million and pays
fees up to 0.55% per annum on the unused amount of credit.
In addition, IP has short-term financing options to obtain funds
not to exceed $80 million. IP pays no fees for these uncommitted
facilities and funding is subject to availability upon request.
For the years 1994, 1993 and 1992, IP had short-term borrowings
consisting of bank loans, commercial paper, extendible floating
rate notes and other short-term debt outstanding at various times
as follows:
-----------------------------------------------------------------
(Millions of dollars, except rates) 1994 1993 1992
-----------------------------------------------------------------
Balance at December 31
Short-term borrowings $238.8 $ 92.3 $ 67.1
Weighted average interest
rate at December 31 6.2% 3.5% 3.8%
Maximum amount outstanding
at any month end $238.8 $123.7 $181.9
Average daily borrowings
outstanding during the year $165.4 $ 85.0 $115.1
Weighted average interest
rate during the year 4.6% 3.5% 4.0%
-----------------------------------------------------------------
IP has only limited involvement with derivative financial
instruments and does not use them for trading purposes. They are
used to manage well-defined interest rate risks arising out of
core activities without the use of leverage and without risk to
principal.
Interest rate cap agreements are used to reduce the
potential impact of increases in interest rates on floating-rate
commercial paper. In 1994, IP entered a five-year variable rate
interest rate cap agreement covering up to $140 million of
commercial paper. The agreement entitles IP to receive from a
counterparty on a monthly basis the amount, if any, by which IP's
interest payments on a nominal amount of commercial paper exceed
the interest rate set by the cap. At December 31, 1994, the cap
rate was set at 5.0% while the current market rate available to
IP was 6.125%.
Note 5 Facilities Agreements
----------------------------
IP and Soyland share ownership of Clinton, with IP owning
86.8% and Soyland owning 13.2%. Agreements between IP and Soyland
provide that IP has control over construction and operation of
the generating station, that the parties share electricity
generated in proportion to their ownership interests and that IP
will have certain obligations to provide replacement power to
Soyland if IP ceases to operate or reduces output from Clinton.
Under the provisions of a Power Coordination Agreement (PCA)
between Soyland and IP dated October 5, 1984, as amended, IP was
required to provide Soyland with 8.0% (288 megawatts) of
electrical capacity from its fossil-fueled generating
plants through 1994. This requirement will increase to 12% in
1995 and each year thereafter until the agreement expires or is
terminated. This is in addition to the capacity Soyland receives
as an owner of Clinton. IP is compensated with capacity charges
and for energy costs and variable operating expenses. IP
transmits energy for Soyland through IP's transmission and
subtransmission systems. Under provisions of the PCA, Soyland has
the option of participating financially in major capital
expenditures at the fossil-fueled plants, such as those needed
for Phase II Clean Air Act compliance, to the extent of its
capacity entitlement with each party bearing its own direct
capital costs, or by having the costs treated as plant additions
and billed to Soyland in accordance with other billing provisions
of the PCA. See "Note 3 - Commitments and Contingencies" for
discussion of the Clean Air Act. At any time after December
31, 2004, either IP or Soyland can terminate the PCA by giving
not less than seven years' prior written notice to the other
party. The party to whom termination notice has been given may
designate an earlier effective date of termination which shall be
not less than twelve months after receiving notice.
Note 6 Income Taxes
--------------------
Deferred tax assets and liabilities were composed of the
following:
Balance as of December 31,
-----------------------------------------------------------------
(Millions of dollars) 1994 1993
-----------------------------------------------------------------
Deferred Tax Assets:
-----------------------------------------------------------------
Current:
Misc. book/tax recognition differences $ 19.7 $ 25.6
-----------------------------------------------------------------
Noncurrent:
Depreciation and other property related 52.6 56.3
Alternative minimum tax 187.0 131.0
Tax credit and net operating loss
carryforward 27.6 111.9
Unamortized investment tax credit 122.0 129.1
Misc. book/tax recognition differences 53.2 17.3
-----------------------------------------------------------------
442.4 445.6
-----------------------------------------------------------------
Total deferred tax assets $462.1 $471.2
=================================================================
Deferred Tax Liabilities:
-----------------------------------------------------------------
Current:
Misc. book/tax recognition differences $ 8.2 $ 10.9
-----------------------------------------------------------------
Noncurrent:
Depreciation and other property related 1,252.0 1,187.3
Deferred Clinton costs 62.1 64.0
Misc. book/tax recognition differences 109.7 100.9
-----------------------------------------------------------------
1,423.8 1,352.2
-----------------------------------------------------------------
Total deferred tax liabilities $1,432.0 $1,363.1
=================================================================
Income taxes included in the Consolidated Statements of
Income consist of the following components:
Years Ended December 31,
-----------------------------------------------------------------
(Millions of dollars) 1994 1993 1992
-----------------------------------------------------------------
Current taxes -
Included in operating
expenses and taxes $ 58.3 $ 25.3 $ 22.9
-----------------------------------------------------------------
Total current taxes 58.3 25.3 22.9
-----------------------------------------------------------------
Deferred taxes -
Included in operating
expenses and taxes
Property related differences 60.0 72.3 73.2
Alternative minimum tax (50.4) (31.8) (31.4)
Gain/loss on reacquired debt - 16.5 4.8
Take-or-pay charges - .3 2.3
Net operating loss carryforward 62.0 22.8 18.3
Internal Revenue Service
interest on tax issues 7.5 (1.9) .7
Misc. book/tax recognition
differences (7.8) 3.8 (4.1)
Included in other income
and deductions
Property related differences 10.0 6.0 9.2
Net operating loss carryforward (17.4) (15.4) (15.5)
Misc. book/tax recognition
differences 1.9 (2.3) .4
Disallowed Clinton costs - (62.2) -
-----------------------------------------------------------------
Total deferred taxes 65.8 8.1 57.9
-----------------------------------------------------------------
Deferred investment tax credit - net
Included in operating
expenses and taxes (11.3) (.8) (.5)
Included in other income
and deductions (.3) (.7) (.8)
Disallowed investment tax credit - (8.4) -
-----------------------------------------------------------------
Total investment tax credit (11.6) (9.9) (1.3)
-----------------------------------------------------------------
Total income taxes $112.5 $23.5 $79.5
=================================================================
The reconciliations of income tax expense to amounts
computed by applying the statutory tax rate to reported pretax
results for the period are set forth below:
Years Ended December 31,
-----------------------------------------------------------------
(Millions of dollars) 1994 1993 1992
-----------------------------------------------------------------
Income tax expense at the
federal statutory tax rate $102.5 $(11.4) $68.5
Increases/(decreases) in taxes
resulting from -
State taxes, net of federal effect 13.8 5.8 11.3
Investment tax credit -
amortization (7.8) (8.8) (8.4)
Depreciation not normalized 4.3 7.1 9.4
Disallowed Clinton costs
(including ITC) - 27.4 -
Other-net (.3) 3.4 (1.3)
-----------------------------------------------------------------
Total income taxes $112.5 $ 23.5 $ 79.5
=================================================================
Combined federal and state effective income tax rates were
38.4%, (72.4%) and 39.4% for the years 1994, 1993 and 1992,
respectively. The negative effective tax rate for 1993 is a
result of the loss recorded by IP due to the Rehearing
Order which denied IP recovery of certain deferred Clinton costs.
The 1993 effective tax rate excluding the effect of this loss was
39.5%. At December 31, 1994, IP had approximately $25 million of
federal income tax net operating loss carryforwards to offset
future taxable income. Approximately $15 million of these
carryforwards expire in 2006 and $10 million expire in 2007.
IP is subject to the provisions of the Alternative Minimum
Tax System (AMT). As a result, IP has an alternative minimum tax
credit carryforward at December 31, 1994, of approximately $187
million. This credit can be carried forward indefinitely to
offset future regular income tax liabilities in excess of the
tentative minimum tax.
The Internal Revenue Service (IRS) has completed its audit
of IP's federal income tax returns for the years 1986 through
1988. IP and the IRS have reached an agreement on all audit
issues. The results of the agreement did not have a
material effect on IP's consolidated financial position or
results of operations.
Note 7 Capital Leases
---------------------
Illinois Power Fuel Company (Fuel Company), which is 50%
owned by IP, was formed in 1981 for the purpose of leasing
nuclear fuel to IP for Clinton. Lease payments are equal to the
Fuel Company's cost of fuel as consumed (including
related financing and administrative costs). Billings under the
lease agreement during 1994, 1993 and 1992 were $52 million, $45
million and $43 million, respectively, including financing costs
of $7 million, $6 million and $8 million, respectively. IP is
obligated to make subordinated loans to the Fuel Company at any
time the obligations of the Fuel Company that are due and payable
exceed the funds available to the Fuel Company. IP has an
obligation for nuclear fuel disposal costs of leased nuclear
fuel. See "Note 3 - Commitments and Contingencies" for discussion
of decommissioning and nuclear fuel disposal costs. Nuclear fuel
lease payments are included with fuel for electric plants on
IP's Consolidated Statements of Income.
At December 31, 1994 and 1993, current obligations under
capital lease for nuclear fuel are $33.3 million and $41.6
million, respectively. Over the next five years estimated
payments under capital leases are as follows:
-----------------------------------------------------------------
(Millions of dollars)
-----------------------------------------------------------------
1995 $39.2
1996 34.6
1997 26.7
1998 13.0
1999 8.5
Thereafter 2.9
-----------------------------------------------------------------
124.9
Less: Interest 13.4
-----------------------------------------------------------------
Total $111.5
=================================================================
<TABLE>
Note 8 Long-Term Debt
---------------------
<CAPTION>
(Millions of dollars)
--------------------------------------------------------------------------------
December 31, 1994 1993
<S> <C> <C>
First mortgage bonds--
5.85% series due 1996 $ 40.0 $ 40.0
6 1/2% series due 1999 72.0 72.0
6.60% series due 2004 (Pollution Control 7.0 7.2
Series A)
9 7/8% series due 2004 - 10.0
7.95% series due 2004 72.0 72.0
6% series due 2007 (Pollution Control Series B) 18.7 18.7
11 5/8% series due 2014 (Pollution Control - 35.6
Series D)
10 3/4% series due 2015 (Pollution Control - 84.1
Series E)
7 5/8% series due 2016 (Pollution Control 150.0 150.0
Series F, G and H)
8.30% series due 2017 (Pollution Control 33.8 33.8
Series I)
7 3/8% series due 2021 (Pollution Control 84.7 84.7
Series J)
8 3/4% series due 2021 125.0 125.0
5.7% series due 2024 (Pollution Control Series K) 35.6 -
7.4% series due 2024 (Pollution Control Series L] 84.1 -
--------------------------------------------------------------------------------
Total first mortgage bonds 722.9 733.1
--------------------------------------------------------------------------------
New mortgage bonds--
6 1/8% series due 2000 40.0 40.0
5 5/8% series due 2000 110.0 110.0
6 1/2% series due 2003 100.0 100.0
6 3/4% series due 2005 70.0 70.0
8.0% series due 2023 235.0 235.0
7 1/2% series due 2025 200.0 200.0
Adjustable rate series due 2028
(Pollution Control Series M, N and O) 111.8 111.8
--------------------------------------------------------------------------------
Total new mortgage bonds 866.8 866.8
--------------------------------------------------------------------------------
Total mortgage bonds 1,589.7 1,599.9
--------------------------------------------------------------------------------
Short-term debt to be refinanced as long-term debt 125.0 125.0
8 1/2% debt securities due 1994 - 100.0
Medium-term notes, series A 100.0 100.0
Variable rate long-term debt due 2017 75.0 75.0
--------------------------------------------------------------------------------
Total other long-term debt 300.0 400.0
--------------------------------------------------------------------------------
1,889.7 1,999.9
Unamortized discount on debt (21.6) (15.4)
--------------------------------------------------------------------------------
Total long-term debt excluding
capital lease obligations 1,868.1 1,984.5
Obligation under capital leases 111.5 129.5
--------------------------------------------------------------------------------
1,979.6 2,114.0
Long-term debt and lease obligations
maturing within one year (33.5) (187.7)
--------------------------------------------------------------------------------
Total long-term debt $ 1,946.1 $1,926.3
=================================================================================
</TABLE>
In May 1994, $35.6 million of 11 5/8% Pollution Control Bonds
Series D due 2014 were retired with the same principal amount of
5.7% Pollution Control Bonds Series K due 2024. In December 1994,
$84.1 million of 7.4% Pollution Control Bonds Series L due 2024
were issued. The proceeds and additional funds were placed in an
irrevocable trust and invested in U. S. Treasury securities, and
will be used to extinguish the outstanding $84.1 million 10 3/4%
Pollution Control Bonds Series E due 2015 on March 1, 1995. This
resulted in an in-substance defeasance in accordance with
Statement of Financial Accounting Standards No. 76, "
Extinguishment of Debt." The $84.1 million of 10 3/4% Pollution
Control Bonds Series E due 2015 have been removed from the
consolidated financial statements.
Short-term debt to be refinanced as long-term debt consists of
commercial paper that will be renewed regularly on a long-term
basis. Ongoing credit support is provided by IP's revolving
credit agreements of $250 million. In 1989 and 1991, IP issued a
series of fixed rate medium-term notes. At December 31, 1994, the
maturity dates on these notes ranged from 1996 to 1998 with
interest rates ranging from 9% to 9.31%. Interest rates on
variable rate long-term debt due 2017 are adjusted weekly and
ranged from 5.25% to 5.6% at December 31, 1994.
For the years 1995, 1996, 1997, 1998 and 1999, IP has long-term
debt maturities and cash sinking fund requirements in the
aggregate of (in millions) $.2, $61.7, $10.8, $68.8 and $72.8,
respectively. These amounts exclude capital lease requirements.
See "Note 7 - Capital Leases." Certain supplemental indentures to
the First Mortgage require that IP make annual deposits, as a
sinking and property fund, in amounts not to exceed $.4 million
in 1995, $1.8 million in 1997, $1.8 million in 1998 and $1.8
million in 1999. These amounts are subject to reduction and
historically have been met by pledging property additions, as
permitted by the First Mortgage.
At December 31, 1994, the aggregate total of unamortized debt
expense and unamortized loss on reacquired debt was approximately
$107.4 million.
IP's first mortgage bonds are secured by a first mortgage lien on
substantially all of the fixed property, franchises and rights of
IP with certain minor exceptions expressly provided in the First
Mortgage. In 1992, the Board authorized a new general obligation
mortgage, which is intended to replace the First Mortgage. Bonds
issued under the New Mortgage were secured by a corresponding
issue of first mortgage bonds under the First Mortgage. The
remaining balance of net bondable additions at December 31, 1994,
was approximately $1.0 billion.
Note 9 Preferred Stock
----------------------
(millions of dollars)
-----------------------------------------------------------------
December 31, 1994 1993
SERIAL PREFERRED STOCK OF SUBSIDIARY,
cumulative, $50 par value --
Authorized 5,000,000 shares; 3,325,815 and 4,150,000 shares
outstanding, respectively
Series Share Redemption prices
4.08% 300,000 $51.50 $15.0 $15.0
4.26% 150,000 51.50 7.5 7.5
4.70% 200,000 51.50 10.0 10.0
4.42% 150,000 51.50 7.5 7.5
4.20% 180,000 52.00 9.0 9.0
8.24% 600,000 51.90 30.0 30.0
7.56% 675,040 51.685 33.8 35.0
8.00% 693,975 52.29 34.7 50.0
7.75% 376,800 50.00 after July 1, 2003 18.8 43.5
Net premium on preferred stock 0.8 0.7
-----------------------------------------------------------------
Total Preferred Stock,
$50 par value 167.1 208.2
-----------------------------------------------------------------
SERIAL PREFERRED STOCK,
cumulative, without par value--
Authorized 5,000,000 shares; 1,512,550 and 2,390,300 shares
outstanding, respectively (including 360,000 and 480,000 shares,
respectively, of redeemable preferred stock)
Series Share Redemption prices
A 742,300 $ 50.00 37.1 50.0
B 410,250 ($51.50 prior to May 1, 1995, 20.5 45.5
$50 thereafter)
-----------------------------------------------------------------
Total Preferred Stock of Subsidiary,
without par value 57.6 95.5
-----------------------------------------------------------------
PREFERENCE STOCK,
cumulative, without par value --
Authorized 5,000,000 shares; none outstanding --- ---
PREFERRED SECURITIES OF SUBSIDIARY
(Illinois Power Capital, L.P.)
Monthly Income Preferred Securities 97.0 ---
-----------------------------------------------------------------
Total Serial Preferred Stock, Preference
Stock and Preferred Securities
of Subsidiary $321.7 $303.7
-----------------------------------------------------------------
MANDATORILY REDEEMABLE SERIAL PREFERRED
STOCK, cumulative --
Series Share Par Value
8.00% 360,000 none $36.0 $48.0
=================================================================
Serial Preferred Stock ($50 par value) is redeemable at the
option of IP in whole or in part at any time not less than 30
days and not more than 60 days notice by publication.
Quarterly dividend rates for Serial Preferred Stock, Series A,
are determined based on market interest rates of certain U. S.
Treasury securities. Dividends paid in 1994 and 1993 were $.75
per quarter. The dividend rate for any dividend period will not
be less than 6% per annum or greater than 12% per annum applied
to the liquidation preference value of $50 per share.
Quarterly dividend rates for Serial Preferred Stock, Series B,
are determined based on market interest rates of certain U. S.
Treasury securities. Dividends paid in 1994 and 1993 were $.875
per quarter. The dividend rate for any dividend period will not
be less than 7% per annum or greater than 14% per annum applied
to the liquidation preference value of $50 per share.
Illinois Power Capital, L.P., is a limited partnership in which
IP serves as a general partner. Illinois Power Capital issued $97
million of tax-advantaged monthly income preferred securities
(MIPS) at 9.45% (5.67% after-tax rate) in October 1994. The
proceeds were loaned to IP and were used to redeem $79.1
million (principal value) of higher-cost outstanding preferred
stock of IP. The excess of carrying amount of redeemed preferred
stock over consideration paid amounted to $6.4 million, which
was recorded in equity and included in net income applicable to
common stock. IP consolidates the accounts of Illinois
Power Capital.
In February 1993, IP redeemed $10 million of 8.52% and $12
million of 8.00% mandatorily redeemable preferred stock. In July
1993, IP redeemed the remaining $30 million of 8.52% mandatorily
redeemable serial preferred stock. In February 1994 and 1993, IP
redeemed $12 million of 8.00% mandatorily redeemable serial
preferred stock. For each year, 1995 through 1997, IP is required
to redeem $12 million of mandatorily redeemable preferred stock
outstanding at stated value.
Note 10 Common Stock
and Retained Earnings
----------------------
On May 31, 1994, common shares of IP began trading as common
shares of Illinova. Illinova is the sole shareholder of IP common
stock.
IP has an Incentive Savings Plan (Plan) for salaried
employees. IP's matching contribution is used to purchase
Illinova common stock. Under this Plan, 27,545 shares of common
stock were designated for issuance at December 31, 1994.
IP has an Incentive Savings Plan for Employees Covered Under
a Collective Bargaining Agreement. IP's matching contribution is
used to purchase Illinova common stock. Under this plan, 69,167
shares of stock were designated for issuance at December 31,
1994.
IP employees participate in an Employees Stock Ownership
Plan (ESOP) that includes an incentive compensation feature which
is tied to achievement of specified corporate performance goals.
This arrangement began in 1991 when IP loaned $35 million to the
Trustee of the Plans, who used the loan proceeds to purchase
2,031,445 shares of IP's common stock on the open market. The
loan and common shares were converted to Illinova instruments
pursuant to formation of the Holding Company in May 1994. These
shares are held in a suspense account under the Plans and are
being distributed to the accounts of participating employees as
the loan is repaid by the Trustee with funds contributed by IP,
together with dividends on the shares acquired with the loan
proceeds. IP financed the loan with funds borrowed under its bank
credit agreements.
For the year ended December 31, 1994, 42,008 shares were
allocated to salaried employees and 47,530 shares to employees
covered under the Collective Bargaining Agreement through the
matching contribution feature of the ESOP arrangement. Under the
incentive compensation feature, 184,079 shares were allocated to
employees for the year ended December 31, 1994. During 1994, IP
contributed $5.5 million to the ESOP and using the shares
allocated method, recognized $5.6 million of expense. Interest
paid on the ESOP debt was approximately $2.5 million in 1994 and
dividends used for debt services were approximately $1.6
million.
In 1992, the Board of Directors adopted and the shareholders
approved a Long-Term Incentive Compensation Plan (the Plan) for
officers or employee members of the Board, but excluding
directors who are not officers or employees. The types of awards
that may be granted under the Plan are restricted stock,
incentive stock options, non-qualified stock options, stock
appreciation rights, dividend equivalents and other stock-based
awards. The Plan provides that any one or more types of awards
may be granted for up to 1,500,000 shares of Illinova's common
stock. The following table outlines the activity thus far
under this plan:
-----------------------------------------------------------------
Year Options Grant Year
Granted Granted Price Exercisable
-----------------------------------------------------------------
1992 62,000 $23 3/8 1996
1993 73,500 $24 1/4 1997
1994 82,650 $20 7/8 1997
-----------------------------------------------------------------
The provisions of Supplemental Indentures to IP's General
Mortgage Indenture and Deed of Trust contain certain restrictions
with respect to the declaration and payment of dividends. IP was
not limited by any of these restrictions at December 31, 1994.
Under the Restated Articles of Incorporation, common stock
dividends are subject to the preferential rights of the holders
of preferred and preference stock.
Note 11 Pension and Other Benefit Costs
---------------------------------------
IP has defined-benefit pension plans covering all officers
and employees. Benefits are based on years of service and
compensation. IP's funding policy is to contribute annually at
least the minimum amount required by government funding
standards, but not more than can be deducted for federal income
tax purposes.
Pension costs, a portion of which have been capitalized, for
1994, 1993 and 1992 include the following components:
Years Ended December 31,
-----------------------------------------------------------------
(Millions of dollars) 1994 1993 1992
-----------------------------------------------------------------
Service cost on benefits earned
during the year $11.9 $11.3 $ 9.4
Interest cost on projected
benefit obligation 21.8 20.8 18.3
Return on plan assets (7.9) (28.1) (20.9)
Net amortization and deferral (19.2) 1.9 (5.0)
-----------------------------------------------------------------
Total pension cost $ 6.6 $ 5.9 $ 1.8
=================================================================
The estimated funded status of the plans at December 31,
1994 and 1993, using discount rates of 8.75% and 7.75%,
respectively, and future compensation increases of 4.5% was as
follows:
Balances as of December 31,
-----------------------------------------------------------------
(Millions of dollars) 1994 1993
-----------------------------------------------------------------
Actuarial present value of:
Vested benefit obligation $(209.6) $(231.9)
-----------------------------------------------------------------
Accumulated benefit obligation $(220.8) $(233.6)
-----------------------------------------------------------------
Projected benefit obligation $(267.3) $(285.8)
Plan assets at fair value 284.0 281.4
-----------------------------------------------------------------
Excess (deficit) of assets over projected
benefit obligation 16.7 (4.4)
Unamortized net (gain) loss (38.8) 9.1
Unrecognized net asset at transition (15.0) (43.1)
Prior service costs 24.5 23.9
-----------------------------------------------------------------
Accrued pension cost included in
accounts payable $ (12.6) $ (14.5)
=================================================================
The plan assets consist primarily of common stocks, fixed
income securities, cash equivalents and real estate. The
actuarial present value of accumulated plan benefits at January
1, 1994 and 1993, were $230 million and $205 million,
respectively, including vested benefits of $213 million and $203
million, respectively. The pension cost for 1994, 1993 and 1992
was calculated using: a discount rate of 7.75%, 8.25% and 8.5%,
respectively; future compensation increases of 4.5% for 1994 and
5.5% for 1993 and 1992; and a return on assets of 9% for 1994,
1993 and 1992. The unrecognized net asset at transition and prior
service costs are amortized on a straight-line basis over the
average remaining service period of employees who are expected to
receive benefits under the plan. IP did not make any cash
contributions during 1993 for the pension plan due to its
overfunded status. IP made cash contributions of $10 million in
1994 and $3 million in 1992.
IP provides health care and life insurance benefits to
certain retired employees, including their eligible dependents,
who attain specified ages and years of service under the terms of
the defined-benefit plans. Postretirement benefits, a portion of
which have been capitalized, for 1994 and 1993 included
the following components:
Years Ended December 31,
-----------------------------------------------------------------
(Millions of dollars) 1994 1993
-----------------------------------------------------------------
Service cost on benefits earned
during the year $ 3.3 $ 2.9
Interest cost on projected benefit
obligation 6.2 5.9
Return on plan assets .2 (.5)
Amortization of unrecognized
transition obligation 2.1 3.3
-----------------------------------------------------------------
Total postretirement cost $11.8 $11.6
-----------------------------------------------------------------
The net periodic postretirement benefit cost in the table
above includes amortization of the previously unrecognized
accumulated postretirement benefit obligation, which was $55.2
million and $63.9 million as of January 1, 1994 and 1993,
respectively, over 20 years on a straight-line basis.
IP has established two separate trusts for those retirees
who were subject to a collectively bargained agreement and all
other retirees to fund retiree health care and life insurance
benefits. IP's funding policy is to contribute annually an amount
at least equal to the revenues collected for the amount of
postretirement benefit costs allowed in rates. IP made cash
contributions of $8.4 million in 1994 and $9.5 million in 1993.
The plan assets consist of common stocks and fixed income
securities at December 31, 1994 and 1993. The estimated funded
status of the plans at December 31, 1994 and 1993, using weighted
average discount rates of 8.75% and 7.75%, respectively, and a
return on assets of 9% was as follows:
Balances as of December 31,
-----------------------------------------------------------------
(Millions of dollars) 1994 1993
-----------------------------------------------------------------
Accumulated postretirement
benefit obligation
Retirees $(26.7) $(29.2)
Other fully eligible participants (11.6) (14.0)
Other active plan participants (27.3) (38.0)
-----------------------------------------------------------------
Total benefit obligation (65.6) (81.2)
Plan assets at fair value 15.2 10.1
-----------------------------------------------------------------
Funded status (50.4) (71.1)
Unrecognized transition obligation 52.3 60.6
Unrecognized net (gain) loss (7.8) 7.4
-----------------------------------------------------------------
Accrued postretirement benefit cost
included in accounts payable $ (5.9) $ (3.1)
-----------------------------------------------------------------
The assumed 1995 weighted average health-care-cost trend
rate used to measure the expected cost of benefits covered by the
plans is 11%. This trend rate decreases through 2005 to an
ultimate weighted average rate of 5% for 2005 and subsequent
years. The effect of a 1% increase in each future year's assumed
health-care-cost trend rates increases the service and interest
cost from $9.4 million to $11.4 million and the accumulated
postretirement benefit obligation from $65.6 million to $75.4
million.
EARLY RETIREMENT
In December 1994, IP announced plans for a voluntary early
retirement program. Approximately 200 salaried employees would
qualify for early retirement under this program. The offer will
be made to employees during the fourth quarter of 1995. A similar
program for union employees is the subject of contract
negotiations currently underway between IP and the International
Brotherhood of Electrical Workers. Approximately 450 union
employees would qualify for the program if current negotiations
result in the same package as offered to salaried employees. At
December 31, 1994, IP employed 4,350 people, as compared to 4,540
at December 31, 1993.
The early retirement program for salaried employees is
expected to generate a pre-tax charge of approximately $22
million against fourth quarter 1995 earnings and to generate
savings of approximately $15 million annually beginning in 1996.
A combined early retirement program for both salaried and union
employees, based on the same package as announced for salaried
employees, would generate a pre-tax charge of approximately $42
million against fourth quarter 1995 earnings and would generate
savings of approximately $35 million annually beginning in
1996.
Note 12 Segments of Business
----------------------------
Illinois Power Company is a public utility engaged in the
generation, transmission, distribution, and sale of electric
energy, and the distribution, transportation and sale of natural
gas. The following is a summary of operations:
<TABLE>
<CAPTION> (millions of dollars)
------------------------------------------------------------------------------------------------------------
1994 1993 1992
Total TotalTotal
Electric Gas Company Electric GasCompany Electric Gas Company
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operation information -
Operating revenues $1287.5 $302.0 $1,589.5 $1,266.4 $314.8 $1,581.2 $1,190.9 $288.6 $1,479.5
Operating expenses, excluding
provision for income taxes
and deferred Clinton 872.6 274.7 1,147.3 873.9 286.2 1,160.1 831.3 264.7 1,096.0
Deferred Clinton costs 3.5 - 3.5 9.3 - 9.3 11.2 - 11.2
------------------------------------------------------------------------------------------------------------
Pre-tax operating income 411.4 27.3 438.7 383.2 28.6 411.8 348.4 23.9 372.3
Allowance for funds used
during construction 8.9 0.4 9.3 6.2 1.0 7.2 4.5 0.7 5.2
Disallowed Clinton costs - - - (200.4) - (200.4) - - -
------------------------------------------------------------------------------------------------------------
Pre-tax operating income,
including AFUDC and disallowed
Clinton costs $420.3 $ 27.7 $ 448.0 $ 189.0 $ 29.6 $218.6 $ 352.9 $ 24.6 $ 377.5
------------------------------------------------- --------------- ----------------
Other deductions, net 11.3 15.6 7.2
Interest charges 143.9 164.9 168.6
Provision for income taxes 112.5 94.2 79.6
------------------------------------------------------------------------------------------------------------
Net income (loss) 180.3 (56.1) (122.1)
Preferred dividend requirements (24.9) (26.1) (28.9)
Excess of carrying amount over consideration paid
for redeemed preferred stock 6.4 - -
------------------------------------------------------------------------------------------------------------
Net income (loss) applicable to common stock $ 161.8 $(82.2) $ 93.2
============================================================================================================
Other information -
Depreciation $ 156.1 $ 21.1 $ 177.2 $ 148.2 $ 21.0 $169.2 $ 141.3 $ 20.0 $ 161.3
------------------------------------------------------------------------------------------------------------
Capital expenditures $ 173.1 $ 20.6 $ 193.7 $ 221.3 $ 56.4 $277.7 $ 203.1 $ 41.3 $ 244.4
------------------------------------------------------------------------------------------------------------
Investment information -
Identifiable assets* $4,589.0 $442.6 $5,031.6 $4,526.8 $406.4 $4,933.2 $4,602.9 $355.4 $4,958.3
------------------------------------------------- --------------- ----------------
Nonutility plant and other investments 15.2 15.2 9.3
Assets utilized for overall Company operations 549.0 496.7 364.1
------------------------------------------------------------------------------------------------------------
Total assets $5,595.8 $5,445.1 $5,331.7
============================================================================================================
</TABLE>
*Utility plant, nuclear fuel, materials and supplies, deferred Clinton costs and
prepaid and deferred energy costs.
NOTE 13 FAIR VALUE OF FINANCIAL INSTRUMENTS
-------------------------------------------
1994 1993
-----------------------------------------------------------------
(Millions of dollars) Carrying Fair Carrying Fair
Value Value Value Value
-----------------------------------------------------------------
Nuclear decommissioning
trust funds $ 22.4 $22.9 $17.2 $18.3
Cash and cash equivalents 47.9 47.9 9.3 9.3
Mandatorily redeemable
preferred stock 36.0 36.0 48.0 48.5
Long-term debt 1,868.1 1,750.7 1,984.5 2,048.6
Notes payable 238.8 238.8 92.3 92.3
-----------------------------------------------------------------
The following methods and assumptions were used to estimate
the fair value of each class of financial instruments listed in
the table above:
NUCLEAR DECOMMISSIONING TRUST FUNDS - The fair values of
available-for-sale marketable debt securities and equity
investments held by the Nuclear Decommissioning Trust are based
on quoted market prices at the reporting date for those or
similar investments.
CASH AND CASH EQUIVALENTS - The carrying amount of cash and cash
equivalents approximates fair value due to the short maturity of
these instruments.
MANDATORILY REDEEMABLE SERIAL PREFERRED STOCK AND LONG-TERM DEBT
- The fair value of mandatorily redeemable preferred stock and
long-term debt is estimated based on the quoted market prices for
similar issues or by discounting expected cash flows at the rates
currently offered for debt of the same remaining maturities.
NOTES PAYABLE - The carrying amount of notes payable approximates
fair value due to the short maturity of these instruments.
Note 14 Quarterly Consolidated Financial Information and
Common Stock Data (Unaudited)
---------------------------------------------------------
(Millions of dollars)
-----------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
1994 1994 1994 1994
-----------------------------------------------------------------
Operating revenues $442.9 $349.6 $428.9 $368.1
Operating income 71.3 72.2 112.2 64.7
Net income 34.4 36.5 78.4 31.0
Net income applicable
to common stock 28.5 30.5 72.5 30.3
Cash dividends declared on
common stock - 15.1 15.1 18.9
Cash dividends paid on
common stock 15.1 30.2 - 15.2
First Second Third Fourth
Quarter Quarter Quarter Quarter
1993 1993 1993 1993
-----------------------------------------------------------------
Operating revenues $395.1 $350.5 $452.4 $383.2
Operating income 68.3 67.9 114.3 54.8
Net income (loss) 27.9 29.3 (123.9) 10.6
Net income (loss) applicable
to common stock 21.0 22.5 (130.2) 4.5
Cash dividends declared on
common stock 15.1 15.1 - -
Cash dividends paid on
common stock 15.1 15.1 15.1 15.2
The 1994 fourth quarter net income applicable to common stock
includes $6.4 million for the excess of carrying amount over
consideration paid for redeemed preferred stock.
The 1993 third quarter loss reflects the write-off of disallowed
Clinton costs of $200 million, net of income taxes. See "Note 2 -
Clinton Power Station."
On May 31, 1994, common shares of Illinois Power began trading as
common shares of Illinova. Illinova is the sole shareholder of
Illinois Power Company common stock.
selected consolidated financial data
------------------------------------
1994 1993 1992 1991 1990 1984
-----------------------------------------------------------------
Operating revenues
Electric $1,177.5 $1,135.6 $1,117.9 $1,101.2 $1084.6 $810.3
Electric
interchange 110.0 130.8 73.0 85.5 73.8 21.1
Gas 302.0 314.8 288.6 288.2 311.1 470.2
-----------------------------------------------------------------
Total
operating
revenues $1,589.5 $1,581.2 $1,479.5 $1,474.9 $1,469.5 $1,301.6
-----------------------------------------------------------------
Net income (loss) $180.3 $(56.1) $122.1 $109.3 $(78.5) $235.5
Effective income
tax rate 38.4% (72.4)% 39.4% 40.4% (37.9)% 34.4%
-----------------------------------------------------------------
Net income (loss)
applicable to
common stock $161.8 $(82.2) $93.2 $78.4 $(115.3) $210.2
Cash dividends
declared on
common stock $ 49.1 $30.2 $105.9 $30.2 $ - $140.0
Cash dividends
paid on common
stock $ 60.5 $60.5 $60.5 $15.1 $ - $137.0
-----------------------------------------------------------------
Total
assets* $5,595.8 $5,445.1 $5,331.7 $5,271.8 $5,345.5 $4,083.5
-----------------------------------------------------------------
Capitalization
Common stock
equity $1,466.0 $1,342.8 $1,454.0 $1,488.8 $1,414.9 $1,337.1
Preferred
stock 321.7 303.7 303.1 303.1 308.9 265.2
Mandatorily
redeemable
preferred stock36.0 48.0 100.0 110.0 140.0 86.0
Long-term debt* 1,946.1 1,926.3 2,017.4 2,153.1 2,198.9 1,621.0
-----------------------------------------------------------------
Total
capitalization*
$3,769.8 $3,620.8 $3,874.5 $4,055.0 $4,062.7 $3,309.3
-----------------------------------------------------------------
Embedded cost
of long-term
debt 7.6% 7.5% 8.3% 8.7% 9.3% 10.1%
-----------------------------------------------------------------
Retained earnings
(deficit) $51.1 $(71.0) $41.0 $75.8 $1.2 $350.6
-----------------------------------------------------------------
Capital
expenditures $193.7 $277.7 $244.4 $141.2 $130.6 $553.4
Cash flows
from
operations $280.2 $396.6 $374.5 $313.1 $252.6 $235.5
AFUDC as a
percent of
earnings applicable
to common stock 5.7% N/A 5.6% 3.7% N/A 56.6%
Ratio of earnings
to fixed charges 2.73 .80 2.02 1.85 .70 3.15
=================================================================
* Restated for the effect of capitalized nuclear fuel lease.
illinois power company
selected statistics
------------------------------------------
1994 1993 1992 1991 1990 1984
-----------------------------------------------------------------
ELECTRIC SALES IN KWH (MILLIONS)
Residential 4,537 4,546 4,138 4,620 4,223 3,977
Commercial 3,517 3,246 3,055 3,111 2,981 2,698
Industrial 8,685 8,120 8,083 7,642 7,751 6,968
Other 536 337 466 699 987 1,822
-----------------------------------------------------------------
Sales to
ultimate
consumers 17,275 16,249 15,742 16,072 15,942 15,465
Interchange 4,837 6,015 2,807 3,360 2,715 762
Wheeling 622 569 402 292 19 -
-----------------------------------------------------------------
Total
electric
sales 22,734 22,833 18,951 19,724 18,676 16,227
-----------------------------------------------------------------
ELECTRIC REVENUES (MILLIONS)
Residential $471 $463 $435 $447 $411 $279
Commercial 295 269 263 251 246 179
Industrial 378 360 381 355 373 277
Other 30 40 38 47 55 76
-----------------------------------------------------------------
Revenues from
ultimate
consumers 1,174 1,132 1,117 1,100 1,085 811
Interchange 110 131 73 86 74 21
Wheeling 3 3 1 1 - -
-----------------------------------------------------------------
Total
electric
revenues $1,287 $1,266 $1,191 $1,187 $1,159 $832
-----------------------------------------------------------------
GAS SALES IN THERMS (MILLIONS)
Residential 359 371 339 339 322 399
Commercial 144 148 138 133 134 183
Industrial 81 78 136 98 99 230
-----------------------------------------------------------------
Sales to
ultimate
consumers 584 597 613 570 555 812
Transportation
of customer-
owned gas 262 229 204 253 269 -
-----------------------------------------------------------------
Total gas
sold and
transported 846 826 817 823 824 812
Interdepart-
mental sales 5 7 12 8 18 1
-----------------------------------------------------------------
Total gas
delivered 851 833 829 831 842 813
-----------------------------------------------------------------
GAS REVENUES (MILLIONS)
Residential $192 $200 $181 $184 $180 $248
Commercial 66 68 61 61 62 99
Industrial 31 34 37 31 42 110
-----------------------------------------------------------------
Revenues from
ultimate
consumers 289 302 279 276 284 457
Transportation
of customer-
owned gas 9 8 7 9 10 -
Miscellaneous 4 5 3 3 17 13
-----------------------------------------------------------------
Total gas
revenues $302 $315 $289 $288 $311 $470
-----------------------------------------------------------------
System peak demand (native load) in kw (thousands)
3,395 3,415 3,109 3,272 3,394 3,371
Firm peak demand (native load) in kw (thousands)
3,232 3,254 2,925 3,108 3,180 3,217
Net generating capability in kw (thousands)
4,121 4,045 4,052 3,909 3,891 3,774
-----------------------------------------------------------------
Electric customers (end of year)
553,869 554,270 549,391 565,421 560,045 533,364
Gas customers (end of year)
388,170 394,379 386,261 401,763 398,891 381,710
Employees (end of year)
4,350 4,540 4,624 4,514 4,402 4,236
=================================================================
Exhibit 21
-434-
Subsidiaries of Illinova Corporation and Illinois Power
Company
State or Jurisdiction
Name of Incorporation
---- ---------------------
Illinova Corporation Illinois
Illinois Power Company Illinois
IP Gas Supply Company Illinois
Illinois Power Fuel Company (1) Illinois
Electric Energy, Inc. (2) Illinois
Illinois Power Capital, L.P. (3) Delaware
Illinova Generating Company Illinois
IPG Canfield Co. Illinois
IPG Dominguez Co. Illinois
IPG Eastern, Inc. Illinois
IPG Ferndale, Inc. Illinois
IPG Frederickson, Inc. Illinois
IPG LAP Cogen, Inc. Illinois
IPG Panorama Co. Illinois
IPG Paris, Inc. Illinois
IPG Western, Inc. Illinois
IGC Acquisitions, Inc. Cayman Islands
IGC Brazos, Inc. Illinois
IGC Development Company Illinois
IGC International, Inc. Illinois
IGC Sub Co., Inc. Illinois
White Oak Energy Investors, Inc. Illinois
ECI Energy, Ltd. (4) Delaware
North American Energy Services Co. (5) Washington
IGC ELCO Partnership, LLC (6) Cayman Islands
Illinova Power Marketing, Inc. Delaware
(1) Illinois Power Company owns 50% of the common stock of
Illinois Power Fuel Company.
(2) Illinois Power Company owns 20% of the common
stock of EEI.
(3) Illinois Power Company is the general partner in
Illinois Power Capital, L.P., with a 3% equity
ownership share. Illinois Power Capital is
consolidated in the accounts of Illinois Power Company.
(4) Illinova Generating Company owns 50% of the voting
common stock of ECI Energy, Ltd.
(5) Illinova Generating Company owns 50% of the common
stock of North American Energy Services Company.
(6) Illinova Generating Company owns 1% and IGC
International, Inc. (a wholly owned subsidiary of
Illinova Generating Company) owns 99% of ELCO
Partnership LLC.
Exhibit 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to he incorporation by reference in the
Registration Statement on Form S-8 (No. 33-22068), the
Registration Statement on Form S-8 (No. 33-60278), and the
Registration Statement on Form S-8 (No. 33-66124), and in the
Prospectus constituting part of the Registration Statement on
Form S-3 (No. 33-25699) of our report dated February 1, 1995,
appearing on page A-10 of the Annual Report to Shareholders in
the appendix to the Illinova Corporation Proxy Statement which is
incorporated in this Annual Report on Form 10-K.
/s/Price Waterhouse LLP
---------------------------
Price Waterhouse LLP
March 24, 1995
Exhibit 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to he incorporation by reference in the
Prospectus constituting part of the Registration Statement on
Form S-8 (No. 33-50173), and the Registration Statement on Form S-
3 (No. 33-52048), and in the Registration Statement on Form S-3
(No. 33-62506) of our report dated February 1, 1995, appearing on
page A-10 of the Annual Report to Shareholders in the appendix to
the Illinois Power Company Information Statement which is
incorporated in this Annual Report on Form 10-K.
/s/Price Waterhouse LLP
---------------------------
Price Waterhouse LLP
March 24, 1995
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet, income statements and cash flow statement of Illinova Corporation and is
qualified in its entirety by reference to the balance sheet, income statement
and cash flow statement of Illinova Corporation.
</LEGEND>
<CIK> 0000914755
<NAME> ILLINOVA CORP.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 4644
<OTHER-PROPERTY-AND-INVEST> 37
<TOTAL-CURRENT-ASSETS> 440
<TOTAL-DEFERRED-CHARGES> 456
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 5577
<COMMON> 1415
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 59
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1450
36<F1>
322<F1>
<LONG-TERM-DEBT-NET> 1868
<SHORT-TERM-NOTES> 85
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 154
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 78
<LEASES-CURRENT> 33
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1551
<TOT-CAPITALIZATION-AND-LIAB> 5577
<GROSS-OPERATING-REVENUE> 1589
<INCOME-TAX-EXPENSE> 118
<OTHER-OPERATING-EXPENSES> 1151
<TOTAL-OPERATING-EXPENSES> 1269
<OPERATING-INCOME-LOSS> 320
<OTHER-INCOME-NET> (5)
<INCOME-BEFORE-INTEREST-EXPEN> 315
<TOTAL-INTEREST-EXPENSE> 163<F2>
<NET-INCOME> 152
0<F3>
<EARNINGS-AVAILABLE-FOR-COMM> 158<F4>
<COMMON-STOCK-DIVIDENDS> 61<F5>
<TOTAL-INTEREST-ON-BONDS> 135
<CASH-FLOW-OPERATIONS> 269
<EPS-PRIMARY> 2.09
<EPS-DILUTED> 0
<FN>
<F1>Preferred stock of subsidiary - Illinois Power Company.
<F2>Includes preferred stock dividend requirement of subsidiary - Illinois Power
Company - of $25 million.
<F3>Preferred stock dividend of subsidiary - Illinois Power Company - is
included in Total Interest Expense.
<F4>Includes approximately $7.0 million of excess of carrying amount over
consideration paid for redeemed preferred stock of subsidiary - Illinois Power
Company.
<F5>Cash dividends paid.
</FN>
</TABLE>
