UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________to __________
Commission Registrants; State of Incorporation; IRS Employer
File Number Address; and Telephone Number Identification No.
1-11327 Illinova Corporation 37-1319890
(an Illinois Corporation)
500 S. 27th Street
Decatur, IL 62521
(217) 424-6600
1-3004 Illinois Power Company 37-0344645
(an Illinois Corporation)
500 S. 27th Street
Decatur, IL 62521
(217) 424-6600
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
registrant was required to file such report), and (2) have been subject to such
filing requirements for the past 90 days.
Illinova Yes X No
Corporation ---- ----
Illinois Power Yes X No
Company ---- ----
Indicate the number of shares outstanding of each of the issuers'
classes of common stock, as of the latest practicable date:
Illinova Corporation Common stock, no par value, 69,919,287
shares outstanding at June 30, 1999
Illinois Power Company Common stock, no par value,
62,892,213 shares outstanding held by Illinova
Corporation at June 30, 1999
<PAGE>
ILLINOVA CORPORATION
ILLINOIS POWER COMPANY
This combined Form 10-Q is separately filed by Illinova Corporation and Illinois
Power Company. 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.
FORM 10-Q FOR THE QUARTER ENDED June 30, 1999
INDEX
PAGE NO.
Part I. FINANCIAL INFORMATION
Item 1: Financial Statements
Illinova Corporation
Consolidated Balance Sheets 3 - 4
Consolidated Statements of Income 5
Consolidated Statements of Comprehensive Income 6
Consolidated Statements of Cash Flows 7
Illinois Power Company
Consolidated Balance Sheets 8 - 9
Consolidated Statements of Income 10
Consolidated Statements of Comprehensive Income 11
Consolidated Statements of Cash Flows 12
Notes to Consolidated Financial Statements of
Illinova Corporation and
Illinois Power Company 13 - 31
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of
Operations for Illinova Corporation
and Illinois Power Company 32 - 52
Item 3: Quantitative and Qualitative Disclosures
About Market Risk 53 - 55
Part II. OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K 56
Signatures 57 - 58
Exhibit Index 59
2
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
ILLINOVA CORPORATION
CONSOLIDATED BALANCE SHEETS
(See accompanying Notes to Consolidated Financial Statements)
JUNE 30, DECEMBER 31,
1999 1998
ASSETS (Unaudited) (Audited)
(Millions of Dollars)
<S> <C> <C> <C>
Utility Plant
Electric (includes construction work
in progress of $154.6 million and
$177.7 million, respectively) $5,584.1 $5,481.8
Gas (includes construction work
in progress of $13.2 million and
$15.3 million, respectively) 693.7 686.9
-------- --------
6,277.8 6,168.7
Less - Accumulated depreciation 1,756.4 1,713.7
-------- --------
4,521.4 4,455.0
Nuclear fuel 15.5 20.3
-------- --------
Total utility plant 4,536.9 4,475.3
-------- --------
Investments and Other Assets 265.9 246.9
-------- --------
Current Assets
Cash and cash equivalents 35.4 518.1
Accounts receivable (less allowance
for doubtful accounts of $5.5 million)
Service 123.4 105.9
Other 129.8 116.1
Accrued unbilled revenue 70.7 82.6
Materials and supplies, at average cost 80.8 90.8
Assets from commodity price risk
management activities 58.3 51.5
Prepayments and other 58.2 51.5
-------- --------
Total current assets 556.6 1,016.5
-------- --------
Deferred Charges
Transition period cost recovery 778.1 783.0
Other 317.9 279.6
-------- --------
Total deferred charges 1,096.0 1,062.6
-------- --------
$6,455.4 $6,801.3
======== ========
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
ILLINOVA CORPORATION
CONSOLIDATED BALANCE SHEETS
(See accompanying Notes to Consolidated Financial Statements)
JUNE 30, DECEMBER 31,
1999 1998
CAPITAL AND LIABILITIES (Unaudited) (Audited)
(Millions of Dollars)
Capitalization
Common stock -
No par value, 200,000,000 shares authorized;
<S> <C> <C> <C>
75,681,937 shares issued, stated at $1,319.8 $1,319.7
Less - Deferred compensation - ESOP 3.8 6.8
Retained deficit - accumulated since 1/1/99 (17.1) -
Accumulated other comprehensive income 1.8 -
Less - Capital stock expense 7.3 7.3
Less - 5,762,650 shares of common stock
in treasury, at cost 138.7 138.7
-------- --------
Total common stock equity 1,154.7 1,166.9
Preferred stock of subsidiary 50.4 57.1
Company obligated mandatorily redeemable
preferred stock of subsidiary 194.0 199.0
Long-term debt 175.4 176.1
Long-term debt of subsidiary 2,137.2 2,158.5
-------- --------
Total capitalization 3,711.7 3,757.6
-------- --------
Current Liabilities
Accounts payable 232.6 256.5
Notes payable 122.0 147.6
Long-term debt and lease obligations
of subsidiary maturing within one year 287.1 506.6
Liabilities from commodity price
risk management activities 100.0 99.8
Other 219.1 203.8
-------- --------
Total current liabilities 960.8 1,214.3
-------- --------
Deferred Credits
Accumulated deferred income taxes 961.4 964.0
Accumulated deferred investment tax credits 38.8 39.6
Decommissioning liability 528.5 567.4
Other 254.2 258.4
-------- --------
Total deferred credits 1,782.9 1,829.4
-------- --------
$6,455.4 $6,801.3
======== ========
</TABLE>
4
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<TABLE>
<CAPTION>
ILLINOVA CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(See accompanying Notes to Consolidated Financial Statements)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998 1999 1998
(Unaudited)
(Millions except per share)
Operating Revenues:
<S> <C> <C> <C> <C>
Electric $276.7 $304.5 $ 531.9 $ 581.1
Electric interchange 56.2 112.7 150.2 209.0
Gas 45.2 49.8 168.3 166.4
Diversified enterprises 101.2 80.3 177.3 166.2
------ ------ -------- --------
Total 479.3 547.3 1,027.7 1,122.7
------ ------ -------- --------
Operating Expenses:
Fuel for electric plants 60.0 53.9 111.4 109.6
Power purchased 46.7 229.4 98.4 326.5
Gas purchased for resale 17.0 22.4 89.5 88.4
Diversified enterprises 114.5 85.0 196.0 179.7
Other operating expenses 81.0 87.9 191.4 167.7
Maintenance 26.1 35.0 67.4 64.0
Depreciation and amortization 44.9 50.5 89.4 101.2
Amortization of regulatory asset 6.2 - 7.7 -
General taxes 22.9 34.3 52.8 73.0
------ ------ -------- --------
Total 419.3 598.4 904.0 1,110.1
------ ------ -------- --------
Operating Income (Loss) 60.0 (51.1) 123.7 12.6
------ ------ -------- --------
Other Income and Deductions:
Miscellaneous-net 6.3 2.8 17.2 1.3
Equity earnings in affiliates 2.9 3.4 3.4 8.9
------ ------ -------- --------
Total 9.2 6.2 20.6 10.2
------ ------ -------- --------
Income (Loss) Before Interest
Charges and Income Taxes 69.2 (44.9) 144.3 22.8
------ ------ -------- --------
Interest Charges:
Interest expense 46.8 35.9 89.9 72.5
Allowance for borrowed funds
used during construction (2.0) (1.2) (3.2) (2.3)
Preferred dividend
requirements of subsidiary 4.7 5.0 9.7 9.9
------ ------ -------- --------
Total 49.5 39.7 96.4 80.1
------ ------ -------- --------
Income (Loss) Before Income Taxes 19.7 (84.6) 47.9 (57.3)
------ ------ -------- --------
Income Taxes 10.7 (37.6) 22.0 (33.3)
------ ------ -------- --------
Net Income (Loss) 9.0 (47.0) 25.9 (24.0)
Carrying amount (under) over
consideration paid for redeemed
preferred stock of subsidiary (0.3) - 0.5 -
------ ------ -------- --------
Net Income (Loss) Applicable to
Common Stock $ 8.7 $(47.0) $ 26.4 $ (24.0)
====== ====== ======== ========
Earnings (Loss) per common share (basic
and diluted) $0.12 ($0.66) $0.38 ($0.34)
Cash dividends declared per
common share $0.31 $0.31 $0.62 $0.62
Cash dividends paid per
common share $0.31 $0.31 $0.62 $0.62
Weighted average number of
common shares outstanding
during period 69,919,287 71,712,791 69,919,287 71,707,054
</TABLE>
5
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<TABLE>
<CAPTION>
ILLINOVA CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(See accompanying Notes to Consolidated Financial Statements)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998 1999 1998
(Unaudited)
(Millions of Dollars)
<S> <C> <C> <C> <C>
Net Income (Loss) Applicable to Common Stock $8.7 ($47.0) $26.4 ($24.0)
----- ------ ------ -------
Other Comprehensive Income, before tax
Foreign currency translation adjustments (0.1) - (0.2) -
Unrealized gains on securities 2.8 - 3.3 -
----- ------ ------ -------
Other comprehensive income, before tax 2.7 - 3.1 -
Income taxes on other comprehensive income (1.1) - (1.3) -
----- ------ ------ -------
Other comprehensive income, net of tax 1.6 - 1.8 -
------ ------ ------ -------
Comprehensive Income (Loss) $10.3 ($47.0) $28.2 ($24.0)
====== ====== ====== =======
</TABLE>
6
<PAGE>
ILLINOVA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(See accompanying Notes to Consolidated Financial Statements)
SIX MONTHS ENDED
JUNE 30,
1999 1998
(Unaudited)
(Millions of dollars)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 25.9 $ (24.0)
Items not requiring cash, net 139.6 29.4
Changes in assets and liabilities (124.0) 229.3
------- -------
Net cash provided by operating activities 41.5 234.7
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Construction expenditures (150.5) (115.0)
Other investing activities (31.0) (28.3)
------- -------
Net cash used in investing activities (181.5) (143.3)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends on common stock (43.3) (44.4)
Reissuance of common stock - 0.7
Capital lease repayment (61.1) -
Redemptions -
Short-term debt (451.4) (154.8)
Long-term debt of subsidiary (428.8) (109.2)
Preferred stock of subsidiary (11.7) -
Issuances -
Short-term debt 425.8 107.8
Long-term debt 250.0 92.4
Other financing activities (22.2) 0.5
------- -------
Net cash used in financing activities (342.7) (107.0)
------- -------
NET CHANGE IN CASH AND CASH EQUIVALENTS (482.7) (15.6)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 518.1 33.0
------- -------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 35.4 $ 17.4
======= =======
7
<PAGE>
ILLINOIS POWER COMPANY
CONSOLIDATED BALANCE SHEETS
(See accompanying Notes to Consolidated Financial Statements)
JUNE 30, DECEMBER 31,
1999 1998
ASSETS (Unaudited) (Audited)
(Millions of Dollars)
Utility Plant
Electric (includes construction work
in progress of $154.6 million and
$177.7 million, respectively) $5,584.1 $5,481.8
Gas (includes construction work
in progress of $13.2 million and
$15.3 million, respectively) 693.7 686.9
-------- --------
6,277.8 6,168.7
Less - Accumulated depreciation 1,756.4 1,713.7
-------- --------
4,521.4 4,455.0
Nuclear fuel 15.5 20.3
-------- --------
Total utility plant 4,536.9 4,475.3
-------- --------
Investments and Other Assets 2.8 2.6
-------- --------
Current Assets
Cash and cash equivalents 17.0 504.5
Accounts receivable (less allowance
for doubtful accounts of $5.5 million)
Service 123.4 105.9
Other 43.1 32.5
Accrued unbilled revenue 70.7 82.6
Materials and supplies, at average cost 80.3 90.4
Assets from commodity price risk
management activities 27.6 26.0
Prepayments and other 40.0 42.8
-------- --------
Total current assets 402.1 884.7
-------- --------
Deferred Charges
Transition period cost recovery 778.1 783.0
Other 318.5 284.2
-------- --------
Total deferred charges 1,096.6 1,067.2
-------- --------
$6,038.4 $6,429.8
======== ========
8
<PAGE>
<TABLE>
<CAPTION>
ILLINOIS POWER COMPANY
CONSOLIDATED BALANCE SHEETS
(See accompanying Notes to Consolidated Financial Statements)
JUNE 30, DECEMBER 31,
1999 1998
CAPITAL AND LIABILITIES (Unaudited) (Audited)
(Millions of Dollars)
<S> <C> <C>
Capitalization
Common stock -
No par value, 100,000,000 shares
authorized; 75,643,937 shares issued,
stated at $1,382.5 $1,382.4
Retained earnings - accumulated since 1/1/99 14.3 -
Accumulated other comprehensive income 1.9 -
Less - Capital stock expense 7.3 7.3
Less - 12,751,724 shares of
common stock in treasury, at cost 286.4 286.4
-------- --------
Total common stock equity 1,105.0 1,088.7
Preferred stock 50.4 57.1
Company obligated mandatorily
redeemable preferred stock 194.0 199.0
Long-term debt 2,137.2 2,158.5
-------- --------
Total capitalization 3,486.6 3,503.3
-------- --------
Current Liabilities
Accounts payable 201.1 216.2
Notes payable 80.0 147.6
Long-term debt and lease obligations
maturing within one year 287.1 506.6
Liabilities from commodity price
risk management activities 61.0 61.6
Other 132.4 150.5
-------- --------
Total current liabilities 761.6 1,082.5
-------- --------
Deferred Credits
Accumulated deferred income taxes 968.8 978.7
Accumulated deferred investment tax credits 38.8 39.6
Decommissioning liability 528.5 567.4
Other 254.1 258.3
-------- --------
Total deferred credits 1,790.2 1,844.0
-------- --------
$6,038.4 $6,429.8
======== ========
9
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
ILLINOIS POWER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(See accompanying Notes to Consolidated Financial Statements)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998 1999 1998
(Unaudited)
(Millions of dollars)
Operating Revenues:
<S> <C> <C> <C> <C>
Electric $276.7 $304.5 $531.9 $581.1
Electric interchange 56.2 112.7 150.2 209.0
Gas 45.2 49.8 168.3 166.4
------ ------ ------ ------
Total 378.1 467.0 850.4 956.5
------ ------ ------ ------
Operating Expenses and Taxes:
Fuel for electric plants 60.0 53.9 111.4 109.6
Power purchased 46.7 229.4 98.4 326.5
Gas purchased for resale 17.0 22.4 89.5 88.4
Other operating expenses 81.0 87.9 191.4 167.7
Maintenance 26.1 35.0 67.4 64.0
Depreciation and amortization 44.9 50.5 89.4 101.2
Amortization of regulatory asset 6.2 - 7.7 -
General taxes 22.9 34.3 52.8 73.0
Income taxes 23.0 (36.6) 36.7 (25.9)
------ ------ ------ ------
Total 327.8 476.8 744.7 904.5
------ ------ ------ ------
Operating Income (Loss) 50.3 (9.8) 105.7 52.0
------ ------ ------ ------
Other Income and Deductions, Net 11.6 1.3 17.8 2.9
------ ------ ------ ------
Income (Loss) Before Interest Charges 61.9 (8.5) 123.5 54.9
------ ------ ------ ------
Interest Charges and Other:
Interest expense 43.9 33.3 83.7 67.4
Allowance for borrowed funds
used during construction (2.0) (1.2) (3.2) (2.3)
------ ------ ------ ------
Total 41.9 32.1 80.5 65.1
------ ------ ------ ------
Net Income (Loss) 20.0 (40.6) 43.0 (10.2)
Less-Preferred dividend
requirements 4.7 5.0 9.7 9.9
Plus - Carrying amount (under) over
consideration paid for
redeemed preferred stock (0.3) - 0.5 -
------ ------ ------ ------
Net Income (Loss) Applicable to
Common Stock $15.0 ($45.6) $33.8 ($20.1)
====== ======= ====== ======
10
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
ILLINOIS POWER COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(See accompanying Notes to Consolidated Financial Statements)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998 1999 1998
(Unaudited)
(Millions of Dollars)
<S> <C> <C> <C> <C>
Net Income (Loss) Applicable to Common Stock $15.0 ($45.6) $33.8 ($20.1)
----- ------ ----- ------
Other Comprehensive Income, before tax
Unrealized gains on securities 2.7 - 3.1 -
Income taxes on other comprehensive income (1.0) - (1.2) -
----- ------ ----- ------
Other comprehensive income, net of tax 1.7 - 1.9 -
----- ------ ----- ------
Comprehensive Income (Loss) $16.7 ($45.6) $35.7 ($20.1)
===== ====== ===== ======
11
<PAGE>
</TABLE>
ILLINOIS POWER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(See accompanying Notes to Consolidated Financial Statements)
SIX MONTHS ENDED
JUNE 30,
1999 1998
(Unaudited)
(Millions of dollars)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 43.0 $(10.2)
Items not requiring cash, net 133.0 34.0
Changes in assets and liabilities (137.8) 222.9
------- ------
Net cash provided by operating activities 38.2 246.7
------- ------
CASH FLOWS FROM INVESTING ACTIVITIES
Construction expenditures (150.4) (115.0)
Other investing activities (5.3) 3.9
------- ------
Net cash used in investing activities (155.7) (111.1)
------- ------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends on preferred and common stock (28.6) (52.7)
Repurchase of common stock - (29.4)
Capital lease repayment (61.1) -
Redemptions -
Short-term debt (385.4) (107.4)
Long-term debt (428.8) (109.2)
Preferred stock (11.7) -
Issuances -
Short-term debt 317.8 98.9
Long-term debt 250.0 52.4
Other financing activities (22.2) 0.3
------- ------
Net cash used in financing activities (370.0) (147.1)
------- ------
NET CHANGE IN CASH AND CASH EQUIVALENTS (487.5) (11.5)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 504.5 17.8
------- ------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 17.0 $ 6.3
======= ======
12
<PAGE>
ILLINOVA CORPORATION AND ILLINOIS POWER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
GENERAL
Financial statement note disclosures, normally included in financial
statements prepared in conformity with generally accepted accounting principles,
have been omitted from this Form 10-Q pursuant to the Rules and Regulations of
the Securities and Exchange Commission (SEC). However, in the opinion of
Illinova Corporation (Illinova) and Illinois Power Company (IP), the disclosures
and information contained in this Form 10-Q are adequate and not misleading. See
the consolidated financial statements and the accompanying notes in Illinova's
1998 Annual Report to Shareholders, (included in the Proxy Statement), the
consolidated financial statements and the accompanying notes in IP's 1998 Annual
Report to Shareholders (included in the Information Statement), Illinova's and
IP's 1998 Form 10-K filings to the SEC, and Illinova's and IP's 1998 Form 8-K
filings to the SEC for information relevant to the consolidated financial
statements contained herein, including information as to certain regulatory and
environmental matters and as to the significant accounting policies followed.
In the opinion of Illinova, the accompanying unaudited June 30, 1999,
and audited December 31, 1998, consolidated financial statements for Illinova
reflect all adjustments necessary to present fairly the Consolidated Balance
Sheets as of June 30, 1999, and December 31, 1998, the Consolidated Statements
of Income for the three and six months ended June 30, 1999 and 1998, the
Consolidated Statements of Comprehensive Income for the three and six months
ended June 30, 1999 and 1998, and the Consolidated Statements of Cash Flows for
the three and six months ended June 30, 1999 and 1998. In addition, it is
Illinova's and IP's opinion that the accompanying unaudited June 30, 1999, and
audited December 31, 1998, consolidated financial statements for IP reflect all
adjustments necessary to present fairly the Consolidated Balance Sheets as of
June 30, 1999, and December 31, 1998, the Consolidated Statements of Income for
the three and six months ended June 30, 1999 and 1998, the Consolidated
Statements of Comprehensive Income for the three and six months ended June 30,
1999 and 1998, and the Consolidated Statements of Cash Flows for the three and
six months ended June 30, 1999 and 1998. Due to seasonal and other factors which
are characteristic of electric and gas utility operations, interim period
results are not necessarily indicative of results to be expected for the year.
The consolidated financial statements of Illinova include the accounts
of Illinova, IP, Illinova Generating Company (IGC), Illinova Insurance Company
(IIC), Illinova Energy Partners, Inc. (IEP), and Illinova Business Enterprises,
Inc. (IBE). All significant intercompany balances and transactions have been
eliminated from the consolidated financial statements. All transactions for
Illinova's unregulated subsidiaries are included in the sections titled
"Diversified Enterprises," "Interest Charges," "Income Taxes" and "Other Income
and Deductions" in Illinova's Consolidated Statements of Income.
The consolidated financial statements of IP include the accounts of
Illinois Power Capital, L.P., Illinois Power Financing I (IPFI), Illinois Power
Securitization Limited Liability Company, and Illinois Power Special Purpose
Trust (IPSPT). 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,
Net" in IP's Consolidated Statements of Income.
13
<PAGE>
REGULATORY AND LEGAL MATTERS
OPEN ACCESS AND COMPETITION
The Illinois Customer Choice and Rate Relief Act of 1997, P.A. 90-561,
Illinois electric utility restructuring legislation, was enacted in December
1997. P.A. 90-561 gives IP's residential customers a 15 percent decrease in base
electric rates beginning August 1, 1998, and an additional 5 percent decrease
effective May 1, 2002. The rate decreases result in revenue reductions of
approximately $35 million in 1998, and expected revenue reductions of
approximately $70 million in each of the years 1999 through 2001, approximately
$90 million in 2002, and approximately $100 million in 2003, based on 1997
levels of consumption and compared to rates in effect in 1997.
Under P.A. 90-561, customers with demand greater than 4 MW at a single
site and customers with at least 10 sites which aggregate at least 9.5 MW in
total demand will be free to choose their electric generation suppliers ("direct
access") starting October 1999. Direct access for the remaining non-residential
customers will occur in two phases: customers representing one-third of the
remaining load in the non-residential class in October 1999 and customers
representing the entire remaining non-residential load on December 31, 2000.
Direct access will be available to all residential customers in May 2002. IP
remains obligated to serve all customers who continue to take service from IP at
tariff rates and remains obligated to provide delivery service to all at
regulated rates. Rates for delivery services for non-residential customers will
be established in 1999, in proceedings mandated by P.A. 90-561.
Although the specified residential rate reductions and the introduction
of direct access will lead to lower electric service revenues, P.A. 90-561 is
designed to protect the financial integrity of electric utilities in three
principal ways:
1) Departing customers are obligated to pay transition charges, based on the
utility's lost revenue from that customer. The transition charges are
applicable through 2006 and can be extended two additional years by the
Illinois Commerce Commission (ICC). The transition charges are calculated
by subtracting from a customer's fully bundled rate an amount equal to: a)
delivery charges the utility will continue to receive from the customer, b)
the market value of the freed-up energy, and c) a mitigation factor, which
is the higher of a fixed rate per kwh or a percentage of the customer's
bundled base rate. The mitigation factor increases during the transition
period. By Specifically preventing IP from being held completely harmless
with regard to revenue loss, the mitigation factor is designed to provide
incentive for management to continue cost reduction efforts and generate
new sources of revenue;
2) Utilities are provided the opportunity to lower their financing and capital
costs through the issuance of "securitized" bonds, also called transitional
funding instruments; and
3) Utilities are permitted to seek rate relief in the event that the change in
law leads to their return on equity falling below a specified minimum based
on a prescribed test. Utilities are also subject to an "over-earnings" test
which requires them, in effect, to share with customers earnings in excess
of specified levels.
The extent to which revenues are affected by P.A. 90-561 will depend on
a number of factors including future market prices for wholesale and retail
energy, load growth and demand levels in the current IP service territory, and
success in marketing to customers outside IP's service territory. The impact on
net income will depend on, among other things, actual revenues and the cost of
doing business.
14
<PAGE>
ACCOUNTING MATTERS
Prior to the enactment of P.A. 90-561, IP prepared its consolidated
financial statements in accordance with FAS 71, "Accounting for the Effects of
Certain Types of Regulation." Because P.A. 90-561 provides for market-based
pricing of electric generation services, IP discontinued application of FAS 71
for its generating segment in December 1997, when P.A. 90-561 was enacted.
In December 1998, Illinova's and IP's Boards of Directors decided to
exit the nuclear portion of the business by either sale or shutdown of Clinton
Power Station (Clinton). FAS 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," requires that all
long-lived assets for which management has committed to a plan of disposal be
reported at the lower of carrying amount or fair value less costs to sell.
Consequently, IP wrote off the value of Clinton and accrued Clinton-related exit
costs, which resulted in a $1,372.2 million loss, net of income taxes, and an
accumulated deficit in Illinova's consolidated retained earnings balance of
$1,419.5 million.
Illinova's and IP's Boards of Directors also chose in December 1998 to
effect a quasi-reorganization. The quasi-reorganization is an accounting
procedure that eliminated the accumulated deficit in retained earnings and
permitted the Company to proceed on much the same basis as if it had been
legally reorganized by restating the Company's assets and liabilities to their
fair values, with the net amount of these adjustments added to or deducted from
the deficit. The remaining deficit in retained earnings was then eliminated by a
transfer from paid-in capital, giving the Company a "fresh start" with a zero
balance in retained earnings. The quasi-reorganization eliminated Illinova's
consolidated accumulated deficit in retained earnings of $1,419.5 million.
IP recognized the impairment of Clinton-related assets and accrued
exit-related costs in December 1998, based on expected plant closure as of
August 31, 1999. IP now expects to consummate the sale of the Clinton-related
assets by the end of 1999. On receipt of various regulatory approvals necessary
to consummate the sale, IP will adjust its accruals for exit-related costs in
accordance with the terms of the sale. The estimated effect of adjusting the
accruals for exit-related costs is a $292 million decrease. Reduction of
exit-related accruals will not immediately impact earnings. The decrease in the
accruals will result in a decrease in the book value of IP's fossil generation
assets, which were written up to fair value in conjunction with the December
1998 quasi-reorganization, which occurred coincident with the establishment of
such exit-related accruals. The $292 million decrease in the book value of IP's
fossil generation assets will result in an estimated annual decrease in
depreciation of the fair value adjustment of $9.5 million.
Implementation of a quasi-reorganization required the adoption of any
accounting standards that had not yet been adopted because their required
implementation date had not occurred. All applicable accounting standards were
adopted as of December 1998. The standards adopted included FAS 133, "Accounting
for Derivative Instruments and Hedging Activities," EITF Issue 98-10,
"Accounting for Contracts Involved in Energy Trading and Risk Management
Activities," SOP 98-1, "Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use," and SOP 98-5, "Reporting on the Costs of Start-Up
Activities."
Illinova and IP recognized other comprehensive income for the six months
ended June 30, 1999, as required by FAS 130, "Reporting Comprehensive Income."
FAS 130 established standards for reporting and display of comprehensive income
and its components in a full set of general-purpose financial statements.
15
<PAGE>
Illinova and IP have adopted the two-statement approach, as provided for by FAS
130 and present a separate statement of comprehensive income in addition to the
income statement. Items included in Illinova's other comprehensive income for
the three and six months ended June 30, 1999, include unrealized gains on
securities, foreign currency translations, and related income taxes. IP's other
comprehensive income for the three and six months ended June 30, 1999, comprised
unrealized gains on securities held in IP's nuclear decommissioning trust and
related income taxes. There were no items reported as other comprehensive income
in 1998.
MANUFACTURED GAS PLANT SITES
IP has recorded an estimated liability for Manufactured Gas Plant (MGP)
site remediation of $59 million. This amount represents IP's current estimate of
the costs it will incur to remediate the 24 MGP sites for which it is
responsible. Because of the unknown and unique characteristics at each site, IP
cannot currently determine its ultimate liability for remediation of the sites.
In October 1995, to offset the burden imposed on its customers, IP
initiated litigation against a number of insurance carriers. Settlements or
settlements in principle have been reached with all thirty of the carriers.
Settlement proceeds recovered from the carriers will offset a significant
portion of the MGP remediation costs and will be credited to customers through
the tariff rider mechanism which the ICC has previously approved. Cleanup costs
in excess of insurance proceeds will be fully recovered from IP's transmission
and distribution customers.
TREASURY STOCK
Through June 30, 1999, IP has purchased a total of 12,751,724 shares of
its common stock from Illinova, all of which are held as treasury stock and
deducted from common equity at the cost of the shares purchased. No shares of IP
common stock were purchased during the first six months of 1999. In October
1998, the Illinova Board approved the repurchase of up to 12 million shares of
Illinova common stock over the next six to twelve months in conjunction with
IP's issuance of securitized debt. No additional repurchases are planned at
present. For more information, see "Liquidity and Capital Resources" of
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on page 34 of this report.
As part of the contemplated merger with Dynegy, on June 13, 1999,
Illinova entered into a forward purchase agreement allowing purchases on the
open market of up to 6.64 million shares of Illinova common stock over the next
two years. At present no shares have been purchased under this agreement.
FINANCIAL AND OTHER DERIVATIVE INSTRUMENTS
Trading Activities- Illinova, through its subsidiaries, IP and IEP,
engages in the brokering and marketing of electricity and natural gas. IP and
IEP use a variety of instruments, including fixed-price swap agreements,
variable-price swap agreements, exchange-traded energy futures and options
contracts, and over-the-counter forwards, swaps, and options.
As of December 31, 1998, Illinova and its subsidiaries adopted EITF
98-10. For more information regarding Illinova's adoption of new accounting
pronouncements, see Accounting Matters of this section on page 15 of this
report. At June 30, 1999, IP's and IEP's derivative assets and liabilities were
16
<PAGE>
recorded in the Consolidated Balance Sheets at fair value with unrealized gains
and losses shown net in the Consolidated Statements of Income. IP and IEP record
realized gains and losses as components of operating revenues and operating
expenses in the Consolidated Statements of Income.
The notional quantities and average terms of commodity instruments held
for trading purposes at June 30, 1999, are presented below:
Volume-Fixed Volume-Fixed Average
Price Payor Price Receiver Term
Electricity
IP 1,650 MW 1,550 MW 1 year
IEP 11,475 MW 11,339 MW 1 year
Gas
IEP (in thousands) 5,980 MMBtu 5,980 MMBtu 1 year
All notional amounts reflect the volume of transactions but do not
represent the dollar amounts or actual megawatts exchanged by the parties to the
contracts. Accordingly, notional amounts do not accurately measure Illinova's
exposure to market or credit risk.
The estimated fair value of commodity instruments held for trading
purposes at June 30, 1999, are presented below:
Fair Value Fair Value
(Millions of dollars) Assets Liabilities
Electricity
IP $23.5 $49.0
IEP 28.8 37.5
---- ----
52.3 86.5
Gas
IEP 1.8 1.1
--- ---
$53.8 $87.6
The fair value was estimated using quoted prices and indices where
available and the liquidity of the market for the instrument was considered. The
fair values are subject to volatility based on changing market conditions.
The weighted average term of the trading portfolio, based on volume, is
less than one year. The maximum and average terms disclosed herein are not
indicative of likely future cash flows as these positions may be modified by new
transactions in the trading portfolio at any time in response to changing market
conditions, market liquidity, and Illinova's risk management portfolio needs and
strategies. Terms regarding cash settlements of these contracts vary with
respect to the actual timing of cash receipts and payments.
Non-Trading Activities- To reduce the risk from market fluctuations in the price
of electricity and related transmission, Illinova, through its subsidiary IP,
enters into forward transactions, swaps, and options (energy derivatives). These
instruments are used to hedge expected purchases, sales, and transmission of
electricity (a portion of which are firm commitments at the inception of the
hedge). The weighted average maturity of these instruments is less than one
year.
Periodically, IP has used interest rate derivatives (principally
interest rate swaps and caps) to adjust the portion of its overall borrowings
subject to interest rate risk. As of June 30, 1999, there were no interest rate
derivatives outstanding.
In order to hedge expected purchases of emission allowances, IP has
entered into swap agreements and written put options with other utilities to
mitigate the risk from market fluctuations in the price of the allowances. At
17
<PAGE>
June 30, 1999, the notional amount of two emission allowance swaps was 126,925
units, with a recorded liability of $19.9 million, based on fair value at
delivery date. The maximum maturity of the swap agreements is 10 years. These
swap agreements do not fall under the scope of FAS 133. Due to the remote
probability of exercise, the three put options written by IP are considered
immaterial.
As of December 31, 1998, Illinova and its subsidiaries adopted FAS 133.
IP's derivative assets and liabilities are currently recorded on the
Consolidated Balance Sheets at fair value with unrealized gains and losses shown
net in the Consolidated Statements of Income. Hedge accounting was not applied.
In the future, if hedge accounting is applied, unrealized gains and losses will
be shown as a component of Comprehensive Income in the equity section of the
Consolidated Balance Sheets. IP records realized gains and losses as components
of operating revenues and operating expenses in the Consolidated Statements of
Income. As of June 30, 1999, all non-trading derivative instruments were
accounted for using mark-to-market accounting.
The notional quantities and the average term of energy derivative
commodity instruments held for other than trading purposes at June 30, 1999,
follows:
Volume-Fixed Volume-Fixed Average
Price Payor Price Receiver Term
Electricity
IP 650 MW 150 MW 1 year
In addition to the fixed-price notional volumes above, IP recorded a $25
million liability in 1998 for two "commodity for commodity" energy swap
agreements totaling 350 MW which are not considered derivatives as defined by
FAS 133. As of June 30, 1999, the swap liability decreased to $21.6 million. The
decrease in the liability is due to IP's commencing repayment of one power swap
in January 1999.
The notional amount is intended to be indicative of the level of
activity in such derivatives, although the amounts at risk are significantly
smaller because changes in the market value of these derivatives generally are
offset by changes in the value associated with the underlying physical
transactions or in other derivatives. When energy derivatives are closed out in
advance of the underlying commitment or anticipated transaction, the market
value changes may not be offset because price movement correlation ceases to
exist when the positions are closed.
The estimated fair values of energy derivative commodity instruments,
held for non-trading purposes at June 30, 1999, are presented below:
Fair Value Fair Value
(Millions of dollars) Assets Liabilities
Electricity
IP $4.1 $12.0
The fair value was estimated using quoted prices and indices where
available, and considering the liquidity of the market for the instrument. The
fair values are subject to significant volatility based on changing market
conditions.
The average maturity and fair values discussed above are not necessarily
indicative of likely future cash flows. These positions may be modified by new
offsetting transactions at any time in response to changing generation forecast,
market conditions, market liquidity, and Illinova's risk management portfolio
needs and strategies. Terms regarding cash settlements of these contracts vary
with respect to the actual timing of cash receipts and payments.
18
<PAGE>
ILLINOVA - SEGMENTS OF BUSINESS
In 1997, the FASB issued FAS 131, "Disclosures about Segments of an Enterprise
and Related Information." This statement superseded FAS 14, "Financial Reporting
for Segments of a Business Enterprise," and established new standards for
defining a company's segments and disclosing information about them. The new
statement requires that segments be based on the internal structure and
reporting of a company's operations.
The Illinova enterprise comprises six separate corporations and eight functional
business groups. The business groups and their principal activities are as
follows:
o IP Customer Service Business Group - transmission, distribution, and sale
of electric energy; distribution, transportation, and sale of natural gas
in Illinois.
o IP Wholesale Energy Business Group - fossil-fueled electric generation in
Illinois, wholesale electricity transactions throughout the United States,
and dispatching activities.
o IP Nuclear Generation Business Group - nuclear-fueled electric generation
in Illinois.
o Illinova Energy Partners - energy-related products and services throughout
the United States and Canada.
o Illinova Generating Company - independent power projects throughout the
world.
o IP Financial Business Group - financial support functions such as
accounting, finance, corporate performance, audit and compliance, investor
relations, legal, corporate development, regulatory, risk management, and
tax services.
o IP Support Services Business Group - specialized support functions,
including information technology, human resources, environmental resources,
purchasing and materials management, and public affairs.
o Corporate - Illinova Corporation, Illinova Insurance Company and Illinova
Business Enterprises - holding company; insurance and risk products; and
miscellaneous business lines.
Of the above-listed segments, the IP Financial Business Group, the IP Support
Services Business Group, and Corporate did not individually meet the minimum
threshold requirements for separate disclosure and are combined in the Other
category.
In 1998, three measures were used to judge segment performance: contribution
margin, cash flow, and return on net invested capital. In 1999, two measures are
used to judge segment performance: contribution margin and cash flow. Omission
of return on net invested capital provides for increased focus on near-term
financial needs.
19
<PAGE>
<TABLE>
<CAPTION>
Illinova Corporation
Three Months Ended June 30, 1999 (Millions of Dollars)
Illinova
Customer Wholesale Energy Illinova Other Consoli-
Service Energy Nuclear Partners Generating dated
1999
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues from external customers $320.8 $51.8 $5.5 $ - $ - $ - $378.1
Diversified enterprise revenue - - - 77.4 24.1 (0.3) 101.2
Intersegment revenue (1) - 118.9 37.2 - - - 156.1
--------------------------------------------------------------------------------------------
Total Revenue 320.8 170.7 42.7 77.4 24.1 (0.3) 635.4
Depreciation and amortization
expense 23.7 25.7 1.6 - - 0.1 51.1
Other operating expenses (1) 209.8 135.3 59.6 80.7 23.3 12.6 524.3
--------------------------------------------------------------------------------------------
Operating income (loss) 87.3 9.7 (18.5) (3.3) (2.2) (13.0) 60.0
Interest expense 19.3 21.1 3.3 - - 3.1 46.8
AFUDC (0.4) (1.6) - - - (0.0) (2.0)
--------------------------------------------------------------------------------------------
Income (loss) before taxes 68.4 (9.8) (21.8) (3.3) (2.2) (16.1) 15.2
Income tax expense (benefit) 26.2 (4.3) (7.5) (1.1) (0.5) (2.1) 10.7
Miscellaneous - net 0.2 (1.9) (1.6) - (0.5) (1.0) (4.8)
Equity earnings in affiliates - - - (0.6) (2.2) (0.1) (2.9)
Interest revenue - - (0.8) - - (0.7) (1.5)
--------------------------------------------------------------------------------------------
Net income (loss) after taxes 42.0 (3.6) (11.9) (1.6) 1.0 (12.2) 13.7
Preferred dividend requirement and
carrying amount over (under)
consideration paid for redeemed
preferred stock 2.6 2.8 (0.7) - - (0.3) 5.0
--------------------------------------------------------------------------------------------
Net income (loss) applicable
to common stock $39.4 $(6.4) $(11.2) $(1.6) $1.0 $(12.5) $8.7
- -----------------------------------------------------------------------------------------------------------------------------------
Other information -
Total assets (2) $2,640.7 $3,162.4 $199.0 $97.6 $241.0 $114.7 $6,455.4
Subsidiary's investment in
equity method investees - - - 9.8 192.4 - 202.2
Total expenditures for additions
to long-lived assets 27.2 86.0 - - - 2.1 115.3
- -----------------------------------------------------------------------------------------------------------------------------------
Corporate Measures -
Contribution margin (3) $52.5 $7.1 $(10.0) $(1.6) $1.0 $(10.4) $38.6
Cash flow (4) 18.1 (51.2) (26.4) (2.9) 9.0 35.7 (17.7)
Return on net invested capital (5) N/A N/A N/A N/A N/A N/A N/A
</TABLE>
(1) Intersegment revenue priced at 2.9 cents per kwh delivered. Intersegment
expense is reflected in other operating expenses for Customer Service. Both
intersegment revenue and expenses were eliminated for purposes of the
Consolidated Statements of Income.
(2) Asset balances recorded by the business groups are significantly different
in 1999 due to the impact of the impairment and write-off of nuclear
generation, fair market valuation of fossil generation and recording of the
regulatory asset to the Customer Service Business Group.
(3) Contribution margin represented by net income before financing costs
(net-of-tax) and preferred dividend requirement.
(4) Cash flow before financing activities.
(5) Return on net invested capital is no longer a corporate measure in 1999.
20
<PAGE>
<TABLE>
<CAPTION>
Illinova Corporation
Three Months Ended June 30, 1998 (Millions of Dollars)
Illinova
Customer Wholesale Energy Illinova Other Consoli-
Service Energy Nuclear Partners Generating dated
1998
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues from external customers $352.9 $112.7 $1.4 $ - $ - $ - $467.0
Diversified enterprise revenue - - - 76.4 2.7 1.2 80.3
Intersegment revenue (1) - 120.2 (0.6) - - - 119.6
--------------------------------------------------------------------------------------------
Total Revenue 352.9 232.9 0.8 76.4 2.7 1.2 666.9
Depreciation and amortization
expense 16.9 7.5 24.7 - - 1.4 50.5
Other operating expenses (1) 209.6 284.9 84.4 78.3 4.9 5.4 667.5
--------------------------------------------------------------------------------------------
Operating income (loss) 126.4 (59.5) (108.3) (1.9) (2.2) (5.6) (51.1)
Interest expense 9.4 2.9 10.8 - - 12.8 35.9
AFUDC (0.3) (0.3) (0.5) - - (0.1) (1.2)
--------------------------------------------------------------------------------------------
Income (loss) before taxes 117.3 (62.1) (118.6) (1.9) (2.2) (18.3) (85.8)
Income tax expense (benefit) 48.0 (26.7) (50.9) (0.6) (0.6) (6.8) (37.6)
Miscellaneous - net 0.3 (1.2) - - (0.2) (0.3) (1.4)
Equity earnings in affiliates - - - (0.4) (3.0) - (3.4)
Interest revenue - - - - - (1.4) (1.4)
--------------------------------------------------------------------------------------------
Net income (loss) after taxes 69.0 (34.2) (67.7) (0.9) 1.6 (9.8) (42.0)
Preferred dividend requirement 1.7 0.6 2.5 - - 0.2 5.0
--------------------------------------------------------------------------------------------
Net income (loss) applicable
to common stock $67.3 $(34.8) $(70.2) $(0.9) $1.6 $(10.0) $(47.0)
- -----------------------------------------------------------------------------------------------------------------------------------
Other information -
Total assets $1,795.3 $715.6 $2,771.7 $53.1 $199.3 $102.9 $5,637.9
Subsidiary's investment in
equity method investees - - - 9.6 173.8 - 183.4
Total expenditures for additions
to long-lived assets 30.7 17.2 19.0 - - 1.5 68.4
- -----------------------------------------------------------------------------------------------------------------------------------
Corporate Measures -
Contribution margin (2) $73.4 $(33.6) $(61.4) $(0.9) $1.6 $(2.8) $(23.7)
Cash flow (3) 53.7 78.0 (70.4) 1.4 (0.9) (23.0) 38.8
Return on net invested capital (4) 5.6% -7.4% N/A 2.2% 0.8% N/A -0.7%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Intersegment revenue priced at 2.5 cents per kwh delivered. Intersegment
expense is reflected in other operating expenses for Customer Service.
Nuclear reflects a replacement power expense for the increment of market
price over the intersegment price. Both intersegment revenue and expenses
were eliminated for purposes of the Consolidated Statements of Income.
(2) Contribution margin represented by net income before financing costs
(net-of-tax), preferred dividend requirement.
(3) Cash flow before financing activities.
(4) Return on net invested capital calculated as contribution margin divided by
net invested capital.
21
<PAGE>
ILLINOVA GEOGRAPHIC INFORMATION
(Millions of dollars)
- --------------------------------------------------------------------------------
Second Quarter 1999 1998
- --------------------------------------------------------------------------------
Revenues: (1)
United States $474.9 $545.2
Foreign countries (Seven) 4.4 2.1
------ ------
$479.3 $547.3
====== ======
(Millions of dollars)
- --------------------------------------------------------------------------------
June 30, 1999 1998
- --------------------------------------------------------------------------------
Long-lived assets: (2)
United States $4,507.5 $4,601.7
Foreign countries (Nine) 161.8 132.2
-------- --------
$4,669.3 $4,733.9
======== ========
(1) Revenues are attributed to geographic regions based on location of
customer.
(2) Long-lived assets include plant, equipment, and investments in
subsidiaries.
22
<PAGE>
<TABLE>
<CAPTION>
Illinova Corporation
Six Months Ended June 30, 1999 (Millions of Dollars)
Illinova
Customer Wholesale Energy Illinova Other Consoli-
Service Energy Nuclear Partners Generating dated
1999
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues from external customers $697.5 $145.9 $7.0 $ - $ - $ - $850.4
Diversified enterprise revenue - - - 123.8 52.4 1.1 177.3
Intersegment revenue (1) - 254.8 36.5 - - - 291.3
--------------------------------------------------------------------------------------------
Total Revenue 697.5 400.7 43.5 123.8 52.4 1.1 1,319.0
Depreciation and amortization
expense 42.2 51.3 3.6 - - (0.0) 97.1
Other operating expenses (1) 485.1 261.9 149.0 130.0 56.4 15.8 1,098.2
--------------------------------------------------------------------------------------------
Operating income (loss) 170.2 87.5 (109.1) (6.2) (4.0) (14.7) 123.7
Interest expense 38.6 41.0 4.0 - - 6.3 89.9
AFUDC (0.8) (2.4) - - - 0.0 (3.2)
--------------------------------------------------------------------------------------------
Income (loss) before taxes 132.4 48.9 (113.1) (6.2) (4.0) (21.0) 37.0
Income tax expense (benefit) 50.6 18.0 (43.2) (1.8) 1.2 (2.8) 22.0
Miscellaneous - net 0.2 (1.8) (2.1) - (6.7) (2.2) (12.6)
Equity earnings in affiliates - - - (1.6) (1.8) - (3.4)
Interest revenue - - (1.9) - - (2.7) (4.6)
--------------------------------------------------------------------------------------------
Net income (loss) after taxes 81.6 32.7 (65.9) (2.8) 3.3 (13.3) 35.6
Preferred dividend requirement and
carrying amount over (under)
consideratin paid for redeemed
preferred stock 5.5 5.8 (1.6) - - (0.5) 9.2
--------------------------------------------------------------------------------------------
Net income (loss) applicable
to common stock $76.1 $26.9 $(64.3) $(2.8) $3.3 $(12.8) $26.4
- -----------------------------------------------------------------------------------------------------------------------------------
Other information -
Total assets (2) $2,640.7 $3,162.4 $199.0 $97.6 $241.0 $114.7 $6,455.4
Subsidiary's investment in
equity method investees - - - 9.8 192.4 - 202.2
Total expenditures for additions
to long-lived assets 50.1 100.5 - - - 3.0 153.6
- -----------------------------------------------------------------------------------------------------------------------------------
Corporate Measures -
Contribution margin (3) $102.5 $53.8 $(63.4) $(2.8) $3.3 $(9.5) $83.9
Cash flow (4) 60.2 (138.8) (132.7) (4.6) 21.5 87.3 (107.1)
Return on net invested capital (5) N/A N/A N/A N/A N/A N/A N/A
</TABLE>
(1) Intersegment revenue priced at 2.9 cents per kwh delivered. Intersegment
expense is reflected in other operating expenses for Customer Service. Both
intersegment revenue and expenses were eliminated for purposes of the
Consolidated Statements of Income.
(2) Asset balances recorded by the business groups are significantly different
in 1999 due to the impact of the impairment and write-off of nuclear
generation, fair market valuation of fossil generation and recording of the
regulatory asset to the Customer Service Business Group.
(3) Contribution margin represented by net income before financing costs
(net-of-tax) and preferred dividend requirement.
(4) Cash flow before financing activities.
(5) Return on net invested capital is no longer a corporate measure in 1999.
23
<PAGE>
<TABLE>
<CAPTION>
Illinova Corporation
Six Months Ended June 30, 1998 (Millions of Dollars)
Illinova
Customer Wholesale Energy Illinova Other Consoli-
Service Energy Nuclear Partners Generating dated
1998
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues from external customers $744.5 $209.0 $3.0 $ - $ - $ - $956.5
Diversified enterprise revenue - - - 161.3 3.4 1.5 166.2
Intersegment revenue (1) - 232.0 (1.2) - - - 230.8
--------------------------------------------------------------------------------------------
Total Revenue 744.5 441.0 1.8 161.3 3.4 1.5 1,353.5
Depreciation and amortization
expense 33.8 14.9 49.5 - - 3.0 101.2
Other operating expenses (1) 454.3 435.6 168.4 168.1 8.9 4.4 1,239.7
--------------------------------------------------------------------------------------------
Operating income (loss) 256.4 (9.5) (216.1) (6.8) (5.5) (5.9) 12.6
Interest expense 26.5 8.6 32.3 - - 5.1 72.5
AFUDC (0.6) (0.7) (0.9) - - (0.1) (2.3)
--------------------------------------------------------------------------------------------
Income (loss) before taxes 230.5 (17.4) (247.5) (6.8) (5.5) (10.9) (57.6)
Income tax expense (benefit) 94.4 (10.0) (106.2) (1.7) (1.3) (8.5) (33.3)
Miscellaneous - net 0.3 0.6 - (0.1) (0.2) (0.5) 0.1
Equity earnings in affiliates - - - (2.4) (6.5) - (8.9)
Interest revenue - - - - - (1.4) (1.4)
--------------------------------------------------------------------------------------------
Net income (loss) after taxes 135.8 (8.0) (141.3) (2.6) 2.5 (0.5) (14.1)
Preferred dividend requirement 3.5 1.3 5.0 - - 0.1 9.9
--------------------------------------------------------------------------------------------
Net income (loss) applicable
to common stock $132.3 $(9.3) $(146.3) $(2.6) $2.5 $(0.6) $(24.0)
- -----------------------------------------------------------------------------------------------------------------------------------
Other information -
Total assets $1,796.3 $715.6 $2,771.7 $53.1 $199.3 $102.9 $5,637.9
Subsidiary's investment in
equity method investees - - - 9.6 173.8 - 183.4
Total expenditures for additions
to long-lived assets 60.9 27.4 26.2 - - 2.8 117.3
- -----------------------------------------------------------------------------------------------------------------------------------
Corporate Measures -
Contribution margin (2) $149.0 $(5.5) $(122.6) $(2.6) $2.5 $2.2 $23.0
Cash flow (3) 126.9 121.2 (152.0) 3.5 3.0 19.1 121.7
Return on net invested capital (4) 11.5% -1.4% N/A 7.4% 1.3% N/A 0.6%
</TABLE>
(1) Intersegment revenue priced at 2.5 cents per kwh delivered. Intersegment
expense is reflected in other operating expenses for Customer Service.
Nuclear reflects a replacement power expense for the increment of market
price over the intersegment price. Both intersetment revenue and expenses
were eliminated for purposes of the Consolidated Statements of Income.
(2) Contribution margin represented by net income before financing costs
(net-of-tax), preferred dividend requirement.
(3) Cash flow before financing activities.
(4) Return on net invested capital calculated as contribution margin divided by
net invested capital.
24
<PAGE>
ILLINOVA GEOGRAPHIC INFORMATION
(Millions of dollars)
- --------------------------------------------------------------------------------
Year-To-Date June 30, 1999 1998
- --------------------------------------------------------------------------------
Revenues: (1)
United States $1,019.1 $1,120.6
Foreign countries (Seven) 8.6 2.1
-------- --------
$1,027.7 $1,122.7
======== ========
(Millions of dollars)
- --------------------------------------------------------------------------------
June 30, 1999 1998
- --------------------------------------------------------------------------------
Long-lived assets: (2)
United States $4,507.5 $4,601.7
Foreign countries (Nine) 161.8 132.2
-------- --------
$4,669.3 $4,733.9
======== ========
(1) Revenues are attributed to geographic regions based on location of
customer.
(2) Long-lived assets include plant, equipment, and investments in
subsidiaries.
IP - SEGMENTS OF BUSINESS
IP comprises five business groups. The business groups and their principal
services are as follows:
o IP Customer Service Business Group - transmission, distribution, and sale
of electric energy; distribution, transportation, and sale of natural gas
in Illinois.
o IP Wholesale Energy Business Group - fossil-fueled electric generation in
Illinois, wholesale electricity transactions throughout the United States,
and dispatching activities.
o IP Nuclear Generation Business Group - nuclear-fueled electric generation
in Illinois.
o IP Financial Business Group - financial support functions such as
accounting, finance, corporate performance, audit and compliance, investor
relations, legal, corporate development, regulatory, risk management, and
tax services.
o IP Support Services Business Group - specialized support functions,
including information technology, human resources, environmental resources,
purchasing and materials management, and public affairs.
Of the above-listed segments, the IP Financial Business Group and the IP Support
Services Business Group did not individually meet the minimum threshold
requirements for separate disclosure and are combined in the Other category.
In 1998, three measures were used to judge segment performance: contribution
margin, cash flow, and return on net invested capital. In 1999, two measures are
used to judge segment performance; contribution margin and cash flow. Omission
of return on net invested capital provides for increased focus on near-term
financial needs.
25
<PAGE>
<TABLE>
<CAPTION>
Illinois Power
Three Months Ended June 30, 1999 (Millions of Dollars)
Customer Wholesale Total
1999 Service Energy Nuclear Other Company
<S> <C> <C> <C> <C> <C>
Revenues from external customers $320.8 $51.8 $5.5 $ - $378.1
Intersegment revenue (1) - 118.9 37.2 - 156.1
------------------------------------------------------------------
Total Revenue 320.8 170.7 42.7 - 534.2
Depreciation and amortization expense 23.7 25.7 1.6 0.1 51.1
Other operating expenses (1) 209.8 135.3 59.6 5.1 409.8
------------------------------------------------------------------
Operating income (loss) 87.3 9.7 (18.5) (5.2) 73.3
Interest expense 19.3 21.1 3.3 0.2 43.9
AFUDC (0.4) (1.6) - (0.0) (2.0)
------------------------------------------------------------------
Income (loss) before taxes 68.4 (9.8) (21.8) (5.4) 31.4
Income tax expense (benefit) 26.2 (4.3) (7.5) 1.8 16.2
Miscellaneous-net 0.2 (1.9) (1.6) 0.1 (3.2)
Interest revenue - - (0.8) (0.8) (1.6)
------------------------------------------------------------------
Net income (loss) after taxes 42.0 (3.6) (11.9) (6.5) 20.0
Preferred dividend requirement and
carrying amount over consideration
paid for redeemed preferred stock 2.6 2.8 (0.7) 0.3 5.0
------------------------------------------------------------------
Net income (loss) applicable to common stock $ 39.4 $ (6.4) $ (11.2) $ (6.8) $ 15.0
- -------------------------------------------------------------------------------------------------------------------------------
Other information -
Total assets (2) $2,640.7 $3,162.4 $199.0 $ 36.3 $6,038.4
Total expenditures for additions
to long-lived assets 27.2 86.0 - 2.1 115.3
Corporate Measures -
Contribution margin (3) $ 52.5 $ 7.1 $ (10.0) $ (6.4) $ 43.2
Cash flow (4) 18.1 (51.2) (26.4) 5.2 (54.3)
Return on net invested capital (5) N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Intersegment revenue priced at 2.9 cents per kwh delivered for 1999.
Intersegment expense is reflected in other operating expenses for Customer
Service. Both intersegment revenue and eexpenses were eliminated for
purposes of the Consolidated Statements of Income.
(2) Asset balances recorded by the business groups are significantly different
in 1999 due to the impact of the impairment and write-off of nuclear
generation, fair market valuation of fossil generation and recording of the
regulatory asset to the Customer Service Business Group.
(3) Contribution margin represented by net income before financing costs
(net-of-tax) and preferred dividend requirement.
(4) Cash flow before financing activities.
(5) Return on net invested capital is no longer a corporate measure in 1999.
26
<PAGE>
<TABLE>
<CAPTION>
Illinois Power
Three Months Ended June 30, 1998 (Millions of Dollars)
Customer Wholesale Total
1998 Service Energy Nuclear Other Company
<S> <C> <C> <C> <C> <C>
Revenues from external customers $352.9 $ 112.7 $ 1.4 $ - $467.0
Intersegment revenue (1) - 120.2 (0.6) 0.0 119.6
------------------------------------------------------------------
Total Revenue 352.9 232.9 0.8 0.0 586.6
Depreciation and amortization expense 16.9 7.5 24.7 1.4 50.5
Other operating expenses (1) 209.6 284.9 84.4 3.6 582.5
------------------------------------------------------------------
Operating income (loss) 126.4 (59.5) (108.3) (5.0) (46.4)
Interest expense 9.4 2.9 10.8 10.2 33.3
AFUDC (0.3) (0.3) (0.5) (0.1) (1.2)
------------------------------------------------------------------
Income (loss) before taxes 117.3 (62.1) (118.6) (15.1) (78.5)
Income tax expense (benefit) 48.0 (26.7) (50.9) (5.4) (35.0)
Miscellaneous-net 0.3 (1.2) - (0.2) (1.1)
Interest revenue - - - (1.8) (1.8)
------------------------------------------------------------------
Net income (loss) after taxes 69.0 (34.2) (67.7) (7.7) (40.6)
Preferred dividend requirement 1.7 0.6 2.5 0.2 5.0
------------------------------------------------------------------
Net income (loss) applicable to common stock $ 67.3 $ (34.8) $ (70.2) $ (7.9) $(45.6)
- -------------------------------------------------------------------------------------------------------------------------------
Other information -
Total assets $1,795.3 $ 715.6 $2,771.7 $ 66.4 $5,349.0
Total expenditures for additions
to long-lived assets 30.7 17.2 19.0 1.5 68.4
- -------------------------------------------------------------------------------------------------------------------------------
Corporate Measures -
Contribution margin (2) $ 73.4 $ (33.6) $ (61.4) $(2.1) $(23.7)
Cash flow (3) 53.7 78.0 (70.4) (21.3) 40.0
Return on net invested capital (4) 5.6% -7.4% N/A N/A -0.6%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Intersegment revenue priced at 2.5 cents per kwh delivered for 1998.
Intersegment expense is reflected in other operating expenses for Customer
Service. Nuclear reflects a replacement power expense for the increment of
market price over the intersegment price for 1998. Both intersegment
revenue and expenses were eliminated for purposes of the Consolidated
Statements of Income.
(2) Contribution margin represented by net income before financing costs
(net-of-tax) and preferred dividend requirement.
(3) Cash flow before financing activities.
(4) For 1998, return on net invested capital calculated as contribution margin
divided by net invested capital.
27
<PAGE>
GEOGRAPHIC INFORMATION
(Millions of dollars)
- --------------------------------------------------------------------------------
Second Quarter 1999 1998
- --------------------------------------------------------------------------------
Revenues: (1)
United States $378.1 $467.0
====== ======
(Millions of dollars)
- --------------------------------------------------------------------------------
June 30, 1999 1998
- --------------------------------------------------------------------------------
Long-lived assets: (2)
United States $4,442.2 $4,552.4
======== ========
(1) Revenues are attributed to geographic regions based on location of
customer.
(2) Long-lived assets include plant, equipment, and investments in
subsidiaries.
28
<PAGE>
<TABLE>
<CAPTION>
Illinois Power
Six Months Ended June 30, 1999 (Millions of Dollars)
Customer Wholesale Total
1999 Service Energy Nuclear Other Company
<S> <C> <C> <C> <C> <C>
Revenues from external customers $697.5 $ 145.9 $7.0 $ - $850.4
Intersegment revenue (1) - 254.8 36.5 - 291.3
------------------------------------------------------------------
Total Revenue 697.5 400.7 43.5 - 1,141.7
Depreciation and amortization expense
42.2 51.3 3.6 - 97.1
Other operating expenses (1) 485.1 261.9 149.0 6.2 902.2
------------------------------------------------------------------
Operating income (loss) 170.2 87.5 (109.1) (6.2) 142.4
Interest expense 38.6 41.0 4.0 0.1 83.7
AFUDC (0.8) (2.4) - - (3.2)
------------------------------------------------------------------
Income (loss) before taxes 132.4 48.9 (113.1) (6.3) 61.9
Income tax expense (benefit) 50.6 18.0 (43.2) 2.4 27.8
Miscellaneous-net 0.2 (1.8) (2.1) (0.3) (4.0)
Interest revenue - - (1.9) (3.0) (4.9)
------------------------------------------------------------------
Net income (loss) after taxes 81.6 32.7 (65.9) (5.4) 43.0
Preferred dividend requirement and
carrying amount over (under)
consideration paid for
redeemed preferred stock 5.5 5.8 (1.6) (0.5) 9.2
------------------------------------------------------------------
Net income (loss) applicable to
common stock $ 76.1 $ 26.9 $ (64.3) $ (4.9) $ 33.8
- -------------------------------------------------------------------------------------------------------------------------------
Other information -
Total assets (2) $2,640.7 $3,162.4 $199.0 $ 36.3 $6,038.4
Total expenditures for additions
to long-lived assets 50.1 100.5 - 3.0 153.6
- -------------------------------------------------------------------------------------------------------------------------------
Corporate Measures -
Contribution margin (3) $102.5 $ 53.8 $ (63.4) $ (5.3) $ 87.6
Cash flow (4) 60.2 (138.8) (132.7) 86.6 (124.7)
Return on net invested capital (5) N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Intersegment revenue priced at 2.9 cents per kwh delivered for 1999.
Intersegment expense is reflected in other operating expenses for Customer
Service. Both intersegment revenue and expenses were eliminated for
purposes of the Consolidated Statements of Income.
(2) Asset balances recorded by the business groups are significantly different
in 1999 due to the impact of the impairment and write-off of nuclear
generation, fair market valuation of fossil generation and recording of the
regulatory asset to the Customer Service Business Group.
(3) Contribution margin represented by net income before financing costs
(net-of-tax) and preferred dividend requirement.
(4) Cash flow before financing activities.
(5) Return on net invested capital is no longer a corporate measure in 1999.
29
<PAGE>
<TABLE>
<CAPTION>
Illinois Power
Six Months Ended June 30, 1998 (Millions of Dollars)
Customer Wholesale Total
1998 Service Energy Nuclear Other Company
<S> <C> <C> <C> <C> <C>
Revenues from external customers $744.5 $ 209.0 $ 3.0 $ - $956.5
Intersegment revenue (1) - 232.0 (1.2) 0.0 230.8
------------------------------------------------------------------
Total Revenue 744.5 441.0 1.8 0.0 1,187.3
Depreciation and amortization expense
33.8 14.9 49.5 3.0 101.2
Other operating expenses (1) 454.3 435.6 168.4 1.7 1,060.0
-----------------------------------------------------------------
Operating income (loss) 256.4 (9.5) (216.1) (4.7) 26.1
Interest expense 26.5 8.6 32.3 - 67.4
AFUDC (0.6) (0.7) (0.9) (0.1) (2.3)
------------------------------------------------------------------
Income (loss) before taxes 230.5 (17.4) (247.5) (4.6) (39.0)
Income tax expense (benefit) 94.4 (10.0) (106.2) (6.0) (27.8)
Miscellaneous-net 0.3 0.6 - 0.1 1.0
Interest revenue - - - (2.0) (2.0)
------------------------------------------------------------------
Net income (loss) after taxes 135.8 (8.0) (141.3) 3.3 (10.2)
Preferred dividend requirement 3.5 1.3 5.0 0.1 9.9
------------------------------------------------------------------
Net income (loss) applicable to
common stock $132.3 $(9.3) $(146.3) $ 3.2 $(20.1)
- -------------------------------------------------------------------------------------------------------------------------------
Other information -
Total assets $1,795.3 $ 715.6 $2,771.7 $ 66.4 $5,349.0
Total expenditures for additions
to long-lived assets 60.9 27.4 26.2 2.8 117.3
Corporate Measures -
Contribution margin (2) $149.0 $(5.5) $(122.6) $ 3.0 $ 23.9
Cash flow (3) 126.9 121.2 (152.0) 10.0 106.1
Return on net invested capital (4) 11.5% -1.4% N/A N/A 0.7%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Intersegment revenue priced at 2.5 cents per kwh delivered for 1998.
Intersegment expense is reflected in other operating expenses for Customer
Service. Nuclear reflects a replacement power expense for the increment of
market price over the intersegment price for 1998. Both intersegment
revenue and expenses were eliminated for purposes of the Consolidated
Statements of Income.
(2) Contribution margin represented by net income before financing costs
(net-of-tax) and preferred dividend requirement.
(3) Cash flow before financing activities.
(4) For 1998, return on net invested capital calculated as contribution margin
divided by net invested capital.
30
<PAGE>
GEOGRAPHIC INFORMATION
(Millions of dollars)
- --------------------------------------------------------------------------------
Year-To-Date June 30, 1999 1998
- --------------------------------------------------------------------------------
Revenues: (1)
United States $850.4 $956.5
====== ======
(Millions of dollars)
- --------------------------------------------------------------------------------
June 30, 1999 1998
- --------------------------------------------------------------------------------
Long-lived assets: (2)
United States $4,442.2 $4,552.4
======== ========
(1) Revenues are attributed to geographic regions based on location of
customer.
(2) Long-lived assets include plant, equipment, and investments in
subsidiaries.
31
<PAGE>
ILLINOVA CORPORATION AND ILLINOIS POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain information contained in this report is forward-looking
information based on current expectations and plans that involve risks and
uncertainties. Forward-looking information includes, among other things,
statements concerning the impact of regulatory changes, plans for the Clinton
facility, and success in addressing Year 2000 issues; as well as those that
include the words "expect," "intend," "predict," "estimate," "believe" or
similar language. Although Illinova and IP believe these forward-looking
statements are accurate, their businesses are dependent on various regulatory
issues, general economic conditions and future trends, and these factors can
cause actual results to differ materially from the forward-looking statements
that have been made.
The following factors, in addition to those discussed elsewhere in this
report and in the Annual Report on Form 10-K for the fiscal year ended December
31, 1998, and subsequent securities filings could cause results to differ
materially from management expectations as suggested by such forward-looking
statements: the outcome of state and Federal regulatory proceedings affecting
the restructuring of the electric and utility industry; the impact on IP of
current regulations providing for rate reductions and the phasing in of the
opportunity for some customers to choose alternative energy suppliers; the
effects of increased competition in the future due to, among other things,
deregulation of certain aspects of IP's business at both the state and Federal
levels, and the increasing popularity of alternative sources of electricity,
such as co-generation facilities; the effects of the implementation of
Illinova's various strategies to best respond to its changing business and
regulatory environment, including potential acquisitions, focused growth of
unregulated businesses and other options; the fluctuating electricity supply
demands of IP customers, which, if increased beyond IP's generation capacity,
might result in unplanned outages forcing IP to acquire additional supplies in
the electricity marketplace at uncertain and often volatile prices and
availability; changes in prices and costs of fuel; various financial risks
attendant to selling or shutting down Clinton; ongoing nuclear operational
exposures until Clinton is sold or shut down; the effect of events that can
occur in Illinova's or IP's business operations or in general economic
conditions, that could negatively impact its financial flexibility and costs of
financing; the impact of the sale or shutdown of Clinton on IP's ability to
issue indebtedness under its existing mortgages; the impact of current
environmental regulations on utilities and the expectation that more stringent
requirements will be introduced over time, which are likely to have a negative
financial effect; various factors affecting non-utility investments, such as
IGC's investments in foreign countries, which are subject to currency
fluctuations, cyclical and sustained economic downturns and political risks; the
inherent risks of active purchases and sales by Illinova, through IEP and IP, of
electricity and natural gas futures and similar contracts; and the ability of
Illinova and IP, their vendors and others to manage Year 2000 issues.
All forward-looking statements in this report are based on information
that currently is available. Illinova and IP disclaim any obligation to update
any forward-looking statement.
32
<PAGE>
ILLINOVA SUBSIDIARIES
IP, a subsidiary of Illinova, engages in the generation, transmission,
distribution and sale of electric energy and the distribution, transportation
and sale of natural gas in the State of Illinois. IP has publicly traded
preferred shares outstanding but its common stock is wholly-owned by Illinova.
IGC is Illinova's wholly-owned independent power subsidiary. IGC invests
in energy supply projects throughout the world and competes in the independent
power market. IGC's strategy is to invest in and develop "greenfield" power
plants, acquire existing generation facilities and provide power plant
operations and maintenance.
IEP is a wholly-owned subsidiary of Illinova. IEP develops and markets
energy-related products and services to the unregulated energy market throughout
the United States and Canada and engages in the brokering and marketing of
electric power and gas.
IIC is a wholly-owned subsidiary of Illinova and was licensed by the
State of Vermont as a captive insurance company. The primary business of IIC is
to insure certain risks of Illinova and its subsidiaries.
IBE is a wholly-owned subsidiary of Illinova and was created to account
for miscellaneous business activities not regulated by the ICC or the Federal
Energy Regulatory Commission (FERC) and not falling within the business scope of
other Illinova subsidiaries.
Illinova Power Marketing, Inc. (IPMI) is a wholly-owned subsidiary of
Illinova created in April 1999, to become the wholesale generation and power
marketing company to which IP's fossil generating assets will be transferred.
The ICC approved the transfer of generation assets to IPMI on July 8, 1999.
Other required regulatory approvals for the transfer of these assets and for
IPMI's marketing activities are being sought.
MERGER AGREEMENT
On June 14, 1999, Illinova and Dynegy Inc. (Dynegy) announced the
execution of a definitive agreement for the merger of Illinova and Dynegy,
creating a full service provider of energy products and services. The
combination brings together Illinova's strategically positioned Midwest
generating facilities and developing national energy services and products with
Dynegy, a leading marketer of energy products and services in the country. Both
Illinova and Dynegy are leading independent power developers and producers. The
combined company is expected to own more than 15,000 megawatts of domestic
generating capacity, representing the world's most geographically diverse
generating asset portfolio.
Under terms of the merger agreement, which were approved unanimously by
each company's board of directors and agreed to by Dynegy's industrial
shareholders (who collectively own approximately 76% of Dynegy's outstanding
common stock), a newly established parent company will acquire all of the shares
of Dynegy and Illinova for a combination of stock and cash, subject to the
satisfaction of certain pre-closing conditions. The merger is conditioned, among
other things, upon the completion of the pending sale of the Clinton by
Illinova, the approvals of the FERC, the SEC, the ICC, Illinova's common
stockholders and the expiration or termination of the Hart-Scott-Rodino waiting
period. The merger is expected to close by the end of the first quarter of 2000.
Upon closing, Chuck Watson, Chairman and Chief Executive Officer of
Dynegy, will retain that title in the combined company. Charles Bayless,
Chairman, President and Chief Executive Officer of Illinova, will continue as a
33
<PAGE>
non-executive director of the combined company. The Board of Directors of the
combined company, which will be incorporated in Illinois and headquartered in
Houston, Texas, will consist of seven members of the current Illinova Board and
seven members of the current Dynegy Board, including three designees of Chevron
U.S.A., which currently owns an approximate 25% interest in Dynegy. Illinova's
regulated utility, IP, will be a subsidiary and remain headquartered in Decatur,
IL.
Various details regarding the merger are discussed more fully in the
Form S-4 filed by Energy Convergence Holding Company on August 11, 1999, SEC
File No. 333-84965, which is incorporated herein by reference.
DIVERSIFIED BUSINESS ACTIVITIES
In February 1999, IEP, a wholly-owned subsidiary of Illinova, purchased
the Indiana-based natural gas management operations of Equitable Resources
Marketing Company. Equitable Resources Marketing (ERM) was a subsidiary of
Equitable Resources, Inc., (ERI) of Pittsburgh, PA. ERI is an integrated energy
company that produces, markets, and distributes natural gas and oil.
In April 1999, IEP also purchased Quality Energy Services (QES), a
Tempe, Arizona based natural gas marketing company.
In May 1999, IEP purchased the Chicago, IL based holdings of Energy
Dynamics, Inc., (EDI) an independent natural gas marketing firm based in Rolling
Meadows, IL.
The 1998 combined revenues of ERM, QES, and EDI were approximately $67
million.
LIQUIDITY AND CAPITAL RESOURCES
CAPITAL RESOURCES AND REQUIREMENTS
Cash flows from operations during the first six months of 1999,
supplemented by external financing and cash on hand, were sufficient to meet
ongoing operating requirements and to service existing common and preferred
stock dividends, debt requirements, IP's construction requirements and
Illinova's investments in its subsidiaries. However, Illinova and IP liquidity
has decreased as compared to June 30, 1998, as a result of higher fossil
maintenance costs, increased marketing expenses, and higher Clinton costs
combined with lower revenues attributable to the rate reduction mandated by P.A.
90-561.
Illinova expects to use future operating cash flows, supplemented by
external financing, to meet operating requirements and to continue to service
existing debt, IP's preferred and Illinova common stock dividends, and
Illinova's and IP's anticipated subsidiary investments and construction
requirements for the remainder of 1999.
Illinova currently has authority to issue an additional $130 million in
debt securities under an existing $300 million shelf registration. Illinova also
has in place a $130 million Revolving Credit Agreement. However, covenants in
the Illinova Revolving Credit Facility limit total Illinova debt to $350
million. At June 30, 1999 $40.5 million of new debt capacity was available.
Prior to 1999, IP paid Illinova dividends on the IP common stock held by
Illinova to provide Illinova cash for operations. IP is limited in its payment
of dividends by the Illinois Public Utilities Act, which requires retained
earnings equal to or greater than the amount of any proposed dividend
declaration or payment, and by the Federal Power Act, which precludes
declaration or payment of dividends by electric utilities "out of money properly
stated in a capital account." In the first quarter of 1999, IP did not declare
or pay dividends on its common stock. In June 1999, IP declared and paid a
34
<PAGE>
common stock dividend of $19.5 million. Based on the Board's current dividend
policy, management expects IP's retained earnings to be sufficient to support
Illinova common dividends. IP also is allowed to periodically repurchase its
common stock from Illinova in accordance with authority granted by the ICC,
contingent on IP meeting certain cash flow tests. IP currently does not satisfy
this cash flow test and it is anticipated that it will not satisfy the test
throughout 1999. This test would not interfere with the repurchases, if any, of
Illinova equity shares using securitization proceeds. Illinova's current
capacity under the existing revolving credit agreement and shelf registration
should meet its cash requirements through the third quarter of 1999. Illinova
and IGC are developing additional financing capabilities to meet future needs.
From the beginning of 1999, through July 16, 1999, IP redeemed $57.1
million of 8.75% First Mortgage Bonds due 2021, $229 million of 8.00% New
Mortgage Bonds due 2023, $22.9 million of 7.95% First Mortgage Bonds due 2004,
$36.8 million of 6.50% First Mortgage Bonds due 1999, $39.85 million of 7.50%
New Mortgage Bonds due 2025, along with 154,900 shares of Monthly Income
Preferred Securities (MIPS) and 154,295 shares of various serial preferred stock
series. These securities were retired using funds from securitization proceeds
received in December 1998.
On July 20, 1999, Illinois Power's 1943 mortgage (First Mortgage) was
retired. All remaining First Mortgage debt was substituted with debt issued
under the 1992 Mortgage (New Mortgage) or defeased. New Mortgage Bonds of $35.6
million with a coupon rate of 7.5% due 2024 (Series K) and $84.2 million with a
coupon rate of 7.4% due 2024 (Series L) were substituted for First Mortgage
Bonds with identical terms and amounts (replacement Series U and V). With
proceeds received from the December 1998 securitization issuance, IP defeased
$35.2 million of 6.50% First Mortgage Bonds due 1999, $16.1 million of 7.95%
First Mortgage Bonds due 2004 and $84.7 million of 7.375% First Mortgage Bonds
due 2021.
IP's capital requirements for construction were approximately $150
million and $115 million during the six months ended June 30, 1999 and 1998,
respectively. Through 2000, IP plans to complete improvements in its generation
facilities including pollution control equipment. Illinova estimates that it
will spend approximately $380 million for IP construction expenditures in 1999.
IP construction expenditures for 1999 through 2003 are expected to total
approximately $1.4 billion. In light of the December 1998 decision to exit
Clinton and the resulting Clinton impairment, Clinton capital expenditures are
expensed as incurred and are not included in the above estimates. On March 2,
1999, in accordance with a lease agreement between IP and IP Fuel Company, IP
paid $62.1 million for partially depleted nuclear fuel in the Clinton reactor to
IP Fuel Company as a result of Clinton Nuclear Station failing to restart by
January 31, 1999. The liability for the nuclear fuel was accrued as of December
31, 1998. As part of the Clinton impairment entries at year end, nuclear fuel
was written down to the expected consumption through August 31, 1999.
Additional expenditures may be required during this period to
accommodate the transition to a competitive environment, environmental
compliance, system upgrades, and other costs which cannot be determined at this
time.
In addition to IP construction expenditures, Illinova's capital
expenditures for 1999 through 2003 are expected to include $520 million for
mandatory debt retirement. In addition, IPSPT has long-term debt maturities of
$86.4 million in each of the above years.
On June 29, 1999, IP issued $250 million of Mortgage Bonds due 2009 with
an interest rate of 7.50%. Proceeds were used to reduce outstanding short-term
borrowings. IP currently has the authority to issue $500 million in short-term
debt, which includes $354 million in committed bank lines of credit. Of these
35
<PAGE>
authorized amounts, IP had $347 million at June 30, 1999, in remaining capacity
that may be utilized to issue commercial paper and extend floating rate notes.
IP anticipates that this liquidity will be sufficient to address its
requirements into the fourth quarter of 1999. IP is developing additional
financial capabilities to meet future needs.
Following the merger announcement, several rating agencies responded
with favorable outlooks on IP and Illinova credit quality. Standard & Poor's has
changed its outlook from stable to positive, and presently rates ILN at BBB- and
IP at BBB. Duff & Phelps has placed IP on Credit Watch-Up, with a present rating
of BBB+. Moody's, which rates IP bonds at Baal and ILN notes at Baa3, affirmed
its present ratings.
ACCOUNTING MATTERS
For further information on accounting issues, see "Accounting Matters"
under "Regulatory and Legal Matters" of the "Notes to Consolidated Financial
Statements" on page 15 of this report.
CLINTON POWER STATION
In September 1996, a leak in a recirculation pump seal caused IP
operations personnel to shut down Clinton. Clinton returned to service May 27,
1999.
The prolonged outage at Clinton has had an adverse effect on Illinova's
and IP's financial condition, through higher operating and maintenance and
capital costs, lost opportunities to sell energy, and replacement power costs.
In addition, in March 1999, due to the failure of Clinton to restart by January
31, 1999, a provision in the lease agreement between IP and the Fuel Company
required IP to pay $62.1 million cash for the acquisition of core fuel in March
1999, to the Fuel Company Trustee for the benefit of investors in secured Notes
of the Fuel Company.
PECO AND AMERGEN AGREEMENT
On April 15, 1999, IP announced that it had reached an interim agreement
with AmerGen Energy Company (AmerGen), whereby AmerGen would purchase and
operate Clinton and IP would buy at least 75 percent of the plant's electricity
output for the next several years. AmerGen is jointly owned by PECO Energy
Company (PECO), and British Energy. IP also announced on April 15, 1999, the
execution of a revised management agreement (Agreement) with PECO for the
operation of Clinton retroactive to April 1, 1999.
On July 1, 1999, IP announced that it had signed a definitive asset
purchase agreement with AmerGen. Basic terms for the sale remain essentially
unchanged from the framework proposed in the interim agreement. The asset
purchase agreement, signed June 30, 1999, provides that IP will purchase at
fixed prices, at least 75 percent of Clinton's electricity output for its
customers through 2004 at fixed prices which exceed current and projected
wholesale prices.
Terms of the interim agreement between PECO and IP will remain in effect
until the transaction closes. Specifically, PECO is responsible for Clinton's
direct operating and capital expenses and continues to manage the station under
the existing management contract, while IP compensates PECO for management
services based on the amount of electricity the station produces. This
eliminates IP's exposure to the uncertainty regarding the costs associated with
Clinton's operations. In return for transferring this financial risk, IP has
agreed to pay PECO a management fee calculated by multiplying a fixed dollar
amount per MWH times 80 percent of the electricity generated at Clinton during
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the interim period and to allow PECO to retain 20 percent of power generation
for its own use at no cost. The financial impact of this obligation is
contingent on two variables: (1) the capacity levels at which Clinton operates
and (2) the prices at which the electricity can be sold from time to time. Based
on the terms of the revised management agreement, the fees payable to PECO
during the interim period could equal or exceed the 1999 Clinton-related O&M and
capital costs for which PECO assumed full responsibility commencing April 1,
1999.
Under terms of the definitive asset purchase agreement, AmerGen will pay
up to $20 million for the plant and property and will assume full responsibility
and liability for operating and ultimately decommissioning the nuclear station.
IP will transfer to AmerGen the existing decommissioning trust funds, expected
to total approximately $95 million at the end of 1999. IP will also make
additional payments to the decommissioning trust funds intended to be sufficient
to provide for the actual decommissioning of Clinton by 2026, when the plant's
operating license is scheduled to expire. These payments may be in the form of a
single payment of $145 million at closing, one payment of $124.2 million plus
five annual payments of $5 million, or the provision of an insurance policy
purchased by IP.
Approvals must be obtained from various regulatory agencies including
the NRC, the ICC, and the FERC. Approvals for transfer of permits and licenses
must be granted by numerous agencies, including the Illinois Environmental
Protection Agency, the Illinois Department of Nuclear Safety, the Illinois
Department of Natural Resources, and others. Until all approvals are obtained
and the parties close on the sale, IP will continue to maintain the license for
Clinton's operation and retain the ultimate operating authority over the plant.
REGULATORY MATTERS
FOSSIL GENERATION FILING
On July 8, 1999, the ICC unanimously approved IP's filing to sell its
fossil generating assets to Illinova. Subsequently, Illinova intends to transfer
those assets to its wholly owned subsidiary IPMI. IPMI, which was incorporated
in April 1999, will become a wholesale generation and power marketing company.
On June 11, 1999, IP made a Part 205 filing with the FERC seeking approval of a
proposed Power Purchase Agreement between IP and IPMI. IP also filed a request
with the FERC, on June 29, 1999, seeking approval for asset transfer. A response
to both filings by the FERC is anticipated in the third quarter of 1999.
ATTORNEY GENERAL COMPLAINT
On July 17, 1998, a complaint against IP was filed at the ICC by the
Illinois State Attorney General. The complaint alleges that IP failed to meet
its statutory obligations to provide adequate and reliable service in connection
with last summer's electric supply situation (for further disclosure, see "Power
Supply and Reliability" on page 42). It asks the ICC to conduct a management
audit of IP and seeks an order requiring IP to offer compensation to customers
for voluntary conservation and service interruptions. The company provided the
Attorney General with a reliability report. The Attorney General and the Company
agreed on an independent committee of two outside experts to review the report.
In June, the Attorney General and IP signed a settlement agreement in which IP
agrees to provide three annual updates to the reliability report it submitted in
response to the complaint, and agrees to maintain and in some cases moderately
enhance existing systems and maintenance practices. The parties filed a joint
motion to dismiss the complaint on the basis of this agreement, which the ICC
unanimously approved on July 28, 1999. There are no significant costs resulting
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from the agreement. Although there were limited calls for voluntary
conservation, and interruptible customers were curtailed, no firm load was
interrupted or curtailed during 1998.
SOYLAND POWER COORDINATION AGREEMENT
In March 1999, Soyland and IP signed a new Power Coordination Agreement
(PCA) and filed this agreement with the FERC. The new agreement no longer
obligates IP to provide capacity and energy to Soyland with the exception of a
small amount of capacity for the purpose of supplying Soyland's load within the
IP Control Area. Therefore, the new PCA triggered the immediate recognition of
deferred revenue from the previous Soyland prepayment of the base capacity
charge. This resulted in an increase in interchange revenues of $61 million in
the first quarter of 1999.
UNIFORM FUEL ADJUSTMENT CLAUSE (UFAC)
Prior to March 1998, the costs of fuel for electric generation and
purchased power costs were deferred and recovered from customers pursuant to the
UFAC. On March 6, 1998, IP initiated an ICC proceeding to eliminate the UFAC in
accordance with P.A. 90-561. A new base fuel cost recoverable under IP's
electric tariffs was established, effective on the date of the filing. UFAC
elimination prevents IP from automatically passing cost increases through to its
customers and exposes IP to the risks and opportunities of cost fluctuations and
operating efficiencies.
Under UFAC, IP was subject to annual ICC audits of its actual allowable
fuel costs. Costs could be disallowed, resulting in negotiations and/or
litigation with the ICC. In 1998, IP agreed to settlements with the ICC which
closed the audits for all previously disputed years. As a result of the
settlements, IP electric customers received refunds totaling $32 million during
the first six months of 1999. These refunds complete the process of eliminating
the UFAC at IP.
DEREGULATION RULEMAKINGS AND TARIFFS
The Illinois Public Utilities Act was significantly modified in 1997 by
P.A. 90-561, but the ICC continues to have 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. Before a significant plant addition may be included in IP's rate base,
the ICC must determine that the addition is reasonable in cost, prudent and used
and useful in providing utility service to customers. IP must continue to
provide bundled retail electric service to all who choose to continue to take
service at tariff rates, and IP must provide unbundled electric distribution
services to all eligible customers as defined by P.A. 90-561 at rates to be
determined by the ICC. During 1998, pursuant to authority granted in P.A.
90-561, the ICC issued rules associated with (i) transactions between the
utility and its affiliates; (ii) service reliability; (iii) environmental
disclosure; and (iv) alternative retail electric supplier certification criteria
and procedures. During 1999, it is expected that the ICC will rule on (i) the
rates and terms associated with the provision of delivery services for
commercial and industrial customers; (ii) establishing the neutral fact finder
price utilized in (a) calculating competitive transition costs and (b) IP's
power purchase tariff; (iii) the competitive transition cost methodology; and
(iv) guidelines regarding standards of conduct and functional separation. A
proceeding will be opened in September 1999 to address the issue of unbundling
billing, metering, and customer handling with a final decision to be rendered
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prior to the third quarter of the year 2000. The final order on delivery service
tariffs is expected in August of 1999.
Under the new rules, Illinois utilities must keep records identifying
service interruptions experienced by each customer. Illinois utilities must also
file an annual report detailing the reliability of its service and explaining
its plans for reliability improvements. In addition, each utility must also
report the number and causes of service interruptions that were due to causes
within the utility's control. Outage targets were established for service to
individual customers and for system performance.
The extent to which revenues are affected by P.A. 90-561 will depend on
a number of factors including future market prices for wholesale and retail
energy, load growth and demand levels in the current IP service territory, and
success in marketing to customers outside IP's existing service territory. The
impact on net income will depend on, among other things, the amount of revenues
earned and the cost of doing business.
OPEN TRANSMISSION ACCESS AND COMPETITION
In January 1998, IP, in conjunction with eight other transmission-owning
entities, filed with the FERC for all approvals necessary to create and
implement the Midwest Independent Transmission System Operator, Inc. (MISO). On
September 16, 1998, the FERC issued an order authorizing the creation of a MISO.
The MISO has elected a seven-person independent board of directors. The goals of
this joint undertaking are to: 1) put in place a tariff allowing easy and
nondiscriminatory access to transmission facilities in a multi-state region, 2)
enhance regional reliability and 3) establish an entity that operates
independently of any transmission owner(s) or other market participants, thus
furthering competition in the wholesale generation market consistent with the
objectives of the FERC's Order No. 888. Since January 1998, four other
transmission-owning entities joined the MISO. Participation in an ISO by
utilities serving retail customers in Illinois was one of the requirements
included in P.A. 90-561, enacted in 1997. The MISO has a stated goal to be fully
operational by January 1, 2001.
See "Open Access and Competition" under "Regulatory and Legal Matters"
of the "Notes to Consolidated Financial Statements" on page 14 of this report
for additional information.
YEAR 2000 DATA PROCESSING
Passing from 1999 into 2000 creates a risk that computer-dependent
processes will fail because the date will be read as "1900." Illinova began its
Year 2000 (Y2K) project in November 1996. The project scope encompasses all of
Illinova's subsidiaries including IP, IGC, and IEP. A central organization
provides overall project guidance and coordination among the business groups,
meeting monthly to share information, conducting internal project reviews, and
producing monthly status reports to all levels of Illinova management.
Bi-monthly Year 2000 readiness reports are provided to the Illinova Board of
Directors.
The Year 2000 project involves evaluation and testing of software,
hardware, and business processes, including mainframe and personal computer
software and hardware, process computer software and hardware, end user
computing, telecommunications and networks, vendor purchased packages, embedded
systems, facility control systems, vendors/supplies, financial institutions, and
electronic interfaces with outside agencies.
The project is divided into two focus areas. The first focus area deals
with information technology (IT) software, hardware, and infrastructure. This
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includes such items as the billing system, payroll system, accounts payable
system, personal computers, telecommunications, networks, and mainframes.
The second focus area targets non-IT operational systems and processes
which encompass most of the systems and business processes actually used to
deliver electricity and gas to customers. This is also the area where embedded
systems and microprocessors are found. Included in this focus area are power
plant facilities, transportation systems such as railways and barges, fuel
suppliers, electric and gas transmission and distribution facilities,
substations and transformers, meters, building systems such as HVAC and
security, and financial institutions.
The overall status of Illinova's Y2K project is illustrated in the table
below.
Illinova Status
July 1999
IT Non-IT
% Completion * % Completion *
Complete Date Complete Date
Awareness 100 02/01/97 a 100 05/31/98 a
Inventory 100 01/20/97 a 100 02/28/99 a
Assessment 100 05/09/97 a 100 02/28/99 a
Process Analysis 100 11/30/98 a 100 03/31/99 a
Implementation -
(Mission Critical) 100 06/30/99 a 97 09/30/99 e
Implementation -
(Important to
Operations) 100 05/31/99 a 93 10/31/99 e
Contingency Planning 100 07/31/99 a 93 09/30/99 e
*"a" = Actual Completion Date, "e" = Estimated Completion Date
IP has completed its awareness, inventory, assessment, and process
analysis phases. The table below provides further details differentiating
between IT and non-IT for IP alone.
IP Status
July 1999
IT Non-IT
% Completion * % Completion *
Complete Date Complete Date
Awareness 100 02/01/97 a 100 04/29/98 a
Inventory 100 01/20/97 a 100 07/31/98 a
Assessment 100 05/09/97 a 100 09/30/98 a
Process Analysis 100 11/30/98 a 100 02/28/99 a
Implementation -
(Mission Critical) 100 06/30/99 a 100 07/19/99 a
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Implementation -
(Important to
Operations) 100 05/31/99 a 98 10/31/99 e**
Contingency Planning 100 07/31/99 a 100 06/30/99 a
*"a" = Actual Completion Date, "e" = Estimated Completion Date
** IP important to operations items were Year 2000 ready on July 30, 1999, with
the exception of one process computer system at Clinton and one process computer
system in our fossil power system.
IT systems (such as billing, payroll, etc.) and infrastructure were
completed June 30, 1999. The customer billing system, materials management
system, accounts payable system, power plant maintenance system, payroll system,
and shareholder system have been remediated and are now year 2000 ready. Year
2000 work has not caused any IT projects to be delayed, and thus no maintenance
costs have been deferred.
The United States Department of Energy (DOE) has charged the North
American Electric Reliability Council (NERC) with taking the lead in
facilitating North American-wide coordination of electric utilities' Year 2000
efforts. The collective efforts of the industry will minimize risks imposed by
Year 2000 to the reliable supply of electricity. NERC has in turn assigned the
regional reliability councils the responsibility of assessing their respective
networks to ensure reliable electric supply. IP is taking an active role within
its regional council (MAIN) in assessment and renovation of the grid and in
developing contingency plans to minimize any unexpected Year 2000 grid problems.
Illinois Power is also participating in NERC drills. IP's power plants and
transmission and distribution mission critical items are believed to be fully
Year 2000 ready.
The total cost for achieving Year 2000 readiness for Illinova is
estimated to be approximately $19.6 million through 1999. Through the end of
July 1999, $14.8 million, or 76% of the total $19.6 million had been spent.
Contingency plans focus on Illinova's "mission critical" business
processes. Contingency plans were developed in accordance with industry
guidelines, such as NERC and the General Accounting Office, and involved senior
management review and approval. These plans address business continuity and the
ability to deliver essential products and services to customers in the event of
unexpected Year 2000 problems. Drills will be conducted to test these
contingency plans.
Illinova has assessed potential worst-case scenarios and determined its
most reasonably likely worst-case scenario to be a severe winter storm coupled
with a loss of major telecommunications carrier causing disruptions in
dispatching generation, dispatching emergency response crews, and communicating
with financial institutions.
Contingency plans address the above scenarios as well as other potential
scenarios that could affect the ability to serve our customers and maintain the
financial viability of Illinova.
ENVIRONMENTAL MATTERS
GAS MANUFACTURING SITES
See "Manufactured Gas Plant Sites" under "Regulatory and Legal Matters"
of the "Notes to Consolidated Financial Statements" on page 16 of this report.
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NITROGEN OXIDE
On October 27, 1998, the U.S. EPA finalized air pollution rules that
will require substantial reductions of NOx emissions in Illinois and 21 other
states. This rule will require the installation of NOx controls by May 2003,
with each Illinois utility's exact reduction requirement to be specified in
1999. Preliminary estimates of the capital expenditures needed in 2000 through
2003 to comply with these new NOx limitations range from $90 million to $140
million. NOx estimates are included in forecasted capital expenditures. The
legality of this proposal, along with its technical feasibility, is being
successfully challenged by a number of states, utility groups, and utilities,
including IP.
EMISSION ALLOWANCE EXCHANGES
The value of emission allowances expected to be given up in future
periods as the result of exchange agreements was recorded in the third quarter
1998 at the current market price and a liability of $9.8 million was recognized.
This obligation will be adjusted as price fluctuates until the allowances are
surrendered. The market value and recorded liability of the allowances at June
30, 1999, was $19.9 million.
GLOBAL WARMING
On December 11, 1997, international negotiations to reduce greenhouse
gas emissions concluded with the adoption of the Kyoto Protocol. This Protocol
requires the United States to reduce greenhouse gas emissions to 7% below 1999
levels during the years 2008 through 2012 and to make further reductions
thereafter. Before it can take effect, this protocol must be ratified by the
United States Senate. However, United States Senate Resolution 98 which passed
95-0 in July 1997, says the Senate would not ratify an agreement that fails to
include commitments for all countries or would damage the economy of the United
States. Since the Protocol does not contain these key elements, ratification
would be a major political issue. It is anticipated that a ratification vote
will be delayed until the current administration feels the Protocol could pass,
or an attractive alternative to the Kyoto Protocol is found.
IP will face major changes in the way it generates electricity if the
Kyoto Protocol is ratified, or if the Protocol's reduction goals are
incorporated into other environmental regulations. IP would have to repower some
generating units and change from coal to natural gas in other units to reduce
greenhouse gas emissions. IP estimates that compliance with these proposed
regulations may require significant capital outlays and annual operating
expenses which could have a material adverse impact on Illinova and IP.
POWER SUPPLY AND RELIABILITY
Electricity was in short supply during the 1998 summer cooling season
because of an unusually high number of plant outages in the Midwest region. IP
bought generation and transmission capacity to prevent firm load curtailment and
took additional steps to avoid power outages, including upgrading transmission
lines and equipment, readying emergency procedures, and returning to service
five units that had been in cold shutdown. This resulted in a material adverse
financial impact on Illinova and IP.
The electric energy market experienced unprecedented prices for power
purchases during the last week of June 1998. IP's power purchases for 1998 were
$517 million higher than 1997 due to summer price spikes resulting in a $274
million increase in power purchased, additional purchases of $215 million to
serve increased volumes of interchange sales, and market losses of $28 million
recorded on forward power purchase and sales contracts as part of the wholesale
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trading business. Income from interchange sales was $382 million higher than in
1997 due to increased sales volumes and higher prices.
Excluding Clinton, IP has in excess of 400 MW of additional generation
on line for the summer of 1999 as compared to 1998. This includes approximately
235 MW from five oil-fired units which were brought up from cold shutdown during
the summer of 1998 and 176 MW from four natural gas turbines that IP installed
which became operational in June 1999. Total cost for the two projects is
approximately $87 million. IP also refurbished nine gas turbines already in
service at an approximate cost of $13 million. In addition, the restructuring of
the Soyland PCA agreement freed up an additional 287 MW of capacity. Clinton
returned to full power operation on June 2, 1999, providing additional
generating capacity to serve firm load. IP expects to have sufficient generating
capacity to serve firm load during the periods of peak summer demand using
demand-side and supply-side initiatives taken in response to the 1998 regional
supply crisis. If generation is lost or demand is at unprecedented levels, firm
load could be curtailed.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 AND 1998
Electric Operations - Electric revenues for the second quarter of 1999
decreased $27.9 million compared to the second quarter of 1998 primarily due to
the 15% residential rate decrease effective August 1, 1998, and the
reclassification of revenue-related taxes mandated by deregulation legislation.
Revenue-related taxes are now accounted for as a liability, and both revenues
and general taxes are reduced with no resultant impact on net income. The rate
decrease resulted in revenue reductions of $14.9 million in the second quarter
of 1999. The impact of the reclassification of $9.8 million in revenue-related
taxes from revenue and general taxes negatively impacted electric revenues.
Electric interchange revenues decreased $56.5 million. This decrease is
attributable to a decrease in interchange volume offset by $3.3 million of
income to reflect mark-to-market for forward contracts and options. Power
purchased decreased $182.8 million due largely to decreased interchange volume.
During the quarter, fuel for electric plants increased $6.1 million due to
increased generation. These factors combined to increase electric margin $92.3
million for the quarter.
Kilowatt hour (kwh) sales to ultimate consumers decreased 0.2% for the
quarter due to decreases of 5.3% and 0.3% in the residential and the commercial
markets, respectively, offset by an increase of 2.4% in the industrial market.
Cooling degree days decreased approximately 36% from 1998 which contributed to
the decrease in sales to the temperature-sensitive markets.
The equivalent availability of Clinton was 38.9% and 0.0% for the three
months ended June 30, 1999 and 1998, respectively, due to the return of Clinton
to full power on June 2, 1999. Clinton was previously unavailable due to an
outage which began September 6, 1996. The equivalent availability for IP's
coal-fired plants was 85.3% and 74.4% for the three months ended June 30, 1999
and 1998, respectively.
Gas Operations - For the quarter, gas margin increased $0.9 million.
Gas revenues decreased $4.5 million while therm sales (excluding transport) were
constant, caused by lower gas prices. Gas purchased costs decreased $5.4 million
due to the lower gas prices and fewer therms purchased.
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Operation and Maintenance Expenses - The current quarter decrease of
$15.8 million is primarily due to PECO's assumption of Clinton's direct
operating and capital expenses offset by Clinton management fees paid to PECO.
For more information, see "PECO Agreement" of the "Management's Discussion and
Analysis" on pages 36-37 of this report.
Depreciation and amortization - The increase in depreciation and
amortization for the second quarter of 1999 compared to 1998 was $0.4 million.
Due to the Clinton impairment, nuclear depreciation decreased approximately
$23.7 million but was offset by approximately $18 million for the depreciation
of the adjustment to fair value for the fossil generation assets. In addition,
approximately $5 million in expense related to the amortization of the
transition period cost recovery asset created as part of the 1998 Clinton
impairment was recognized in the second quarter.
Diversified enterprises - Diversified enterprise revenues increased
$21.0 million for the second quarter of 1999, which was offset by an increase in
diversified enterprise expenses of $29.5 million. A majority of the net increase
in diversified enterprise expense over diversified enterprise revenue is due to
merger related transactions.
Miscellaneous - net - Of the current quarter increase of $3.4 million,
$1.6 million of the increase is attributed to the adjustment in the net present
value of the decommissioning regulatory asset. Revenues from non-utility
operations also increased in the second quarter of 1999.
Interest expense - The increase in interest expense of $10.9 million in
the second quarter of 1999 is primarily the result of interest on increased
long-term debt of $3.9 million and the adjustment in the net present value of
the decommissioning liability of $7.3 million.
Earnings (loss) per Common Share - The earnings (loss) per common share
for Illinova during the second quarter of 1999 and 1998 resulted from the
interaction of all the factors discussed herein as well as fewer shares of
common stock outstanding.
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RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
Electric Operations - Electric revenues for the first six months of 1999
decreased $49.3 million as compared to the first six months of 1998 primarily
due to the 15% residential rate decrease effective August 1, 1998, and the
reclassification of revenue-related taxes mandated by deregulation legislation.
Revenue-related taxes are now accounted for as a liability, and both revenues
and general taxes are reduced. The rate decrease resulted in revenue reductions
of $32.3 million in the first six months of 1999. The impact of the
reclassification of $21.1 million in revenue-related taxes from revenue and
general taxes negatively impacted revenues. Electric interchange revenues
decreased $58.8 million. This decrease is attributable to a decrease in
interchange volume offset by $60.1 million revenue recognition resulting from
the restructuring of a Soyland Power Cooperative power supply contract. Power
purchased decreased $228.2 million due largely to decreased interchange volume.
During the first six months, fuel for electric plants increased $1.8 million due
to increased generation. These factors combined to increase electric margin
$118.3 million.
Kilowatt hour (kwh) sales to ultimate consumers increased 3.0% for the
first six months primarily due to increases of 3.3% and 4.4% in the residential
and the commercial markets, respectively. Cooling degree days decreased
approximately 36% from 1998 which contributed to the decrease in
temperature-sensitive markets, which was offset by an increase of 11% in heating
degree days.
The equivalent availability of Clinton was 19.5% and 0.0% for the six
months ended June 30, 1999 and 1998, respectively, due to the return of Clinton
to full power on June 2, 1999. Clinton was previously unavailable due to an
outage which began September 6, 1996. The equivalent availability for IP's
coal-fired plants was 83.1% and 76.9% for the six months ended June 30, 1999 and
1998, respectively.
Gas Operations - For the six months ended June 30, 1999, gas margin
increased $0.8 million. Gas revenues increased $2.0 million, while therm sales
(excluding transport) were constant, caused by colder winter weather, offset by
lower gas prices. Gas purchased costs increased $1.1 million due to higher
consumption, offset by lower gas prices and fewer therms purchased.
Operation and Maintenance Expenses - Of the increase for the first six
months of 1999 of $27.1 million, $29 million occurred during the first quarter
of 1999 due to higher operating and maintenance expenses associated with the
Clinton outage. This $29 million includes $12.4 million of costs which would
have been considered capital additions had Clinton not been impaired. During the
second quarter PECO assumed Clinton's direct operating and capital expenses,
which were offset by Clinton management fees paid to PECO. For more information,
see "PECO Agreement" of the "Management's Discussion and Analysis" on pages 36
and 37 of this report.
Depreciation and Amortization - The decrease in depreciation and
amortization for the first six months of 1999 as compared to 1998 was $4.2
million. Due to the Clinton impairment, nuclear depreciation decreased
approximately $47 million, but was offset by approximately $36 million for the
depreciation of the adjustment to fair value for the fossil generation assets.
In addition, approximately $5 million in expense related to the amortization of
the transition period cost recovery asset created as part of the Clinton
impairment was recognized in the second quarter.
Diversified enterprises - Diversified enterprise revenues increased
$11.2 million for the first six months of 1999, which was offset by an increase
in diversified enterprise expense of $16.3 million. The net increase of
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diversified enterprise expense over diversified enterprise revenues is due
primarily to merger related transaction costs.
Miscellaneous - net - Of the first six months increase of $15.8 million,
$6.5 million is miscellaneous credits of IGC. Interest income increased $3.0
million primarily due to the investment of the proceeds of the transitional
funding trust notes issued in December 1998 and the adjustment in the net
present value of the decommissioning regulatory asset. A $2.1 million increase
in miscellaneous non-operating income is attributable to the recognition of
nontaxable income related to the decommissioning regulatory asset. Revenues from
non-utility operations also increased during the first six months of 1999.
Interest expense - The increase in interest expense of $17.4 million in
the first six months of 1999 is the result of interest on increased long-term
debt of $5.6 million, the adjustment in the net present value of the
decommissioning liability of $14 million, and increased amortization of debt
expense and loss on reacquired debt of $2.6 million, offset by decreased
interest on short term debt of $4.8 million.
Earnings per Common Stock - The earnings per common share for Illinova
during the first six months of 1999 and 1998 resulted from the interaction of
all the factors discussed herein as well as fewer shares of common stock
outstanding.
RESULTS OF OPERATIONS - ILLINOVA SEGMENTS OF BUSINESS
THREE MONTHS ENDED JUNE 30, 1999
Customer Service
For the three months ended June 30, 1999, both the contribution margin and cash
flow measures were lower than for the corresponding period in 1998. Contribution
margin is lower for the quarter by $21 million, primarily due to decreased
electric revenues as discussed below. Other factors contributing to the decrease
are amortization of the regulatory asset, slightly higher O&M expenses; and
higher internal charges paid to the Wholesale Energy Group and Nuclear Group for
the purchase of electricity. Partially offsetting these items were slightly
lower gas purchases than in 1998.
Cash flow also reflected a decrease of about $36 million from 1998, primarily
due to lower net income.
Transmission, Distribution and Sale of Electric Energy
- ------------------------------------------------------
The Customer Service Business Group derives its revenues through regulated
tariffs. Its source of electricity is the Wholesale Energy business group and
the Nuclear group; electricity was provided to the Customer Service Business
Group at a fixed 2.9 cents per kwh in 1999 and 2.5 cents per kwh in 1998.
Retail electric revenues, excluding interchange sales, for the three months
ended June 30, 1999 decreased 10.0% over the corresponding period in 1998,
primarily due to the 15% residential decrease mandated by P.A. 90-561, which
became effective July 15, 1998, voluntarily advanced by IP from the statutory
effective date of August 1 and a slight decrease in kwh sales to customers.
Additionally, operating costs were higher during the three months ended June 30,
1999 compared to the same period in 1998.
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Transmission, Distribution and Sale of Natural Gas
- --------------------------------------------------
Revenues are derived through regulated tariffs. During the three months ended
June 30, 1999, revenues from gas sales and transportation were down 9.1%, while
therms sold and transported were up slightly (0.9%) over the second quarter of
1998. The decrease in revenues was due to lower gas prices in 1999, which
resulted in lower PGA revenues. The margin on gas sales and transportation
increased 3.3% during the period due to a prior-period PGA adjustment and the
slight increase in therm sales.
Wholesale Energy
Contribution margin during the three months ended June 30, 1999 is about $41
million higher than during the corresponding period in 1998, primarily due to
the significantly higher purchased power costs in 1998, when the Company
purchased high-priced electricity to meet system requirements and off-system
sale obligations. Partially offsetting this major variance in power purchases
are lower revenues, higher depreciation due to the write-up to market value of
the fossil assets, higher O&M costs and higher internal charges recorded for
power purchased from the nuclear facility.
Cash flow decreased about $129 million, primarily due to higher purchased power
costs in 1998, allocated to the Nuclear Group. Higher construction expenditures
in 1999 to reflect the installation of gas turbines at the Tilton Energy Center
were also a significant factor in this decrease.
Wholesale Energy provided power to the Customer Service business group at 2.9
cents per kwh during the three months ended June 30, 1999 compared to 2.5 cents
per kwh during the corresponding period in 1998.
Nuclear
Both the contribution margin and cash flow measures are higher in 1999 compared
to 1998. Contribution margin is higher than 1998 due to higher intersegment
revenues in 1999 related to the restart of the plant in 1999, coupled with lower
O&M and depreciation expenses in 1999.
Cash flow was positively impacted by net income.
Illinova Energy Partners, Inc.
For the three months ended June 30, 1999, the contribution margin is comparable
to the same period in 1998. Cash flow decreased $4.3 million, primarily due to a
negative change in working capital.
Illinova Generating Compan
For the three months ended June 30, 1999, the contribution margin variance from
1998 was less than $1 million. Cash flow increased about $10 million, primarily
due to a positive change in working capital.
Other
Included in this category are the Financial Business Group, the Support Services
Business Group, and Corporate. These segments did not individually meet the
minimum threshold requirements for separate disclosure.
See "Illinova Segments of Business" in the footnotes to the financial statements
on pages 19-25 for additional information.
47
<PAGE>
RESULTS OF OPERATIONS - ILLINOIS POWER SEGMENTS OF BUSINESS
THREE MONTHS ENDED JUNE 30, 1999
Customer Service
For the three months ended June 30, 1999, both the contribution margin and cash
flow measures were lower than for the corresponding period in 1998. Contribution
margin is lower for the quarter by $21 million, primarily due to decreased
electric revenues as discussed below. Other factors contributing to the decrease
are amortization of the regulatory asset, slightly higher O&M expenses; and
higher internal charges paid to the Wholesale Energy Group and the Nuclear Group
for the purchase of electricity. Partially offsetting these items were slightly
lower gas purchases than in 1998.
Cash flow also reflected a decrease of about $36 million from 1998, primarily
due to lower net income.
Transmission, Distribution and Sale of Electric Energy
- ------------------------------------------------------
The Customer Service Business Group derives its revenues through regulated
tariffs. Its source of electricity is the Wholesale Energy business group and
the Nuclear group; electricity was provided to the Customer Service Business
Group at a fixed 2.9 cents per kwh in 1999 and 2.5 cents per kwh in 1998.
Retail electric revenues, excluding interchange sales, for the three months
ended June 30, 1999 decreased 10.0% over the corresponding period in 1998,
primarily due to the 15% residential decrease mandated by P.A. 90-561, which
became effective July 15, 1998, voluntarily advanced by IP from the statutory
effective date of August 1 and a slight decrease in kwh sales to customers.
Additionally, operating costs were higher during the three months ended June 30,
1999 compared to the same period in 1998.
Transmission, Distribution and Sale of Natural Gas
- --------------------------------------------------
Revenues are derived through regulated tariffs. During the three months ended
June 30, 1999, revenues from gas sales and transportation were down 9.1%, while
therms sold and transported were up slightly (0.9%) over the second quarter of
1998. The decrease in revenues was due to lower gas prices in 1999, which
resulted in lower PGA revenues. The margin on gas sales and transportation
increased 3.3% during the period due to a prior-period PGA adjustment and the
slight increase in therm sales.
Wholesale Energy
Contribution margin during the three months ended June 30, 1999 is about $41
million higher than during the corresponding period in 1998, primarily due to
the significantly higher purchased power costs in 1998, when the Company
purchased extremely high-priced electricity to meet system requirements.
Partially offsetting this major variance in power purchases are lower revenues,
higher depreciation due to the write-up to market value of the fossil assets,
higher O&M costs and higher internal charges recorded for power purchased from
the nuclear facility.
Cash flow decreased about $129 million, primarily due to higher purchased power
costs in 1998 allocated to the Nuclear Group. Higher construction expenditures
in 1999 to reflect the installation of gas turbines at the Tilton Energy Center
were also a significant factor in this decrease.
Wholesale Energy provided power to the Customer Service business group at 2.9
cents per kwh during the three months ended June 30, 1999 compared to 2.5 cents
per kwh during the corresponding period in 1998.
48
<PAGE>
Nuclear
Both the contribution margin and cash flow measures are higher in 1999 compared
to 1998. Contribution margin is higher than 1998 due to higher intersegment
revenues in 1999 related to the restart of the plant in 1999, coupled with lower
O&M and depreciation expenses in 1999.
Cash flow was positively affected by net income.
Other
Included in this category are the Financial Business Group, the Support Services
Business Group, and other corporate functions. These segments did not
individually meet the minimum threshold requirements for separate disclosure.
See "Illinois Power Segments of Business" in the footnotes to the financial
statements on pages 25-31 for additional information.
RESULTS OF OPERATIONS - ILLINOVA SEGMENTS OF BUSINESS
SIX MONTHS ENDED JUNE 30, 1999
Customer Service
For the six months ended June 30, 1999, both the contribution margin and cash
flow measures were lower than for the corresponding period in 1998. Contribution
margin is lower by $46 million, primarily due to decreased electric revenues as
discussed below; higher O&M expenses; higher internal charges paid to the
Wholesale Energy Group and the Nuclear Group due to higher usage and higher
internal pricing and higher depreciation expenses, including regulatory asset
amortization.
Cash flow is lower by $67 million, due to decreased net income, partially offset
by lower construction expenditures.
Transmission, Distribution and Sale of Electric Energy
- ------------------------------------------------------
The Customer Service business group derives its revenues through regulated
tariffs. Its source of electricity is the Wholesale Energy business group and
the Nuclear group; electricity was provided to the Customer Service Business
Group at a fixed 2.9 cents per kwh in 1999 and 2.5 cents per kwh in 1998.
Retail electric revenues, excluding interchange sales, for the six months ended
June 30, 1999 decreased 8.5% over the corresponding period in 1998 due to the
15% residential decrease mandated by P.A. 90-561, which became effective July
15, 1998, voluntarily advanced by IP from the statutory effective date of August
1, partially offset by increased kwh sales to customers. Additionally, operating
costs were higher during the six months ended June 30, 1999 compared to the same
period in 1998.
Transmission, Distribution and Sale of Natural Gas
- --------------------------------------------------
Revenues are derived through regulated tariffs. During the six months ended June
30, 1999, revenues from gas sales and transportation were up 1.1%, while therms
sold and transported were up 5.6%. The increase in therm sales was caused by a
return to normal weather after the milder-than-usual weather experienced in
1998. The margin on gas sales and transportation increased 1.0% during the
period due to increases in both therms sold and therms transported.
Wholesale Energy
Contribution margin during the six months ended June 30, 1999 is $59 million
higher than during the corresponding period in 1998, due to significantly fewer
49
<PAGE>
power purchases in 1999 than in 1998 when the Company purchased extremely
high-priced electricity to meet system requirements. Partially offsetting this
major variance in power purchases are higher internal charges in 1999 for
purchase of Clinton-generated electricity, higher depreciation to reflect the
write-up of fossil assets in December 1998, higher O&M expenses and lower
interchange sales in 1999.
Cash flow is significantly less than 1998 ($260 million) primarily due to higher
power purchase costs in 1998, allocated to the Nuclear Group, higher
construction expenditures and the receipt of prepaid base capacity charges from
Soyland in 1998.
Wholesale Energy provided power to the Customer Service business group at 2.9
cents per kwh during the six months ended June 30, 1999 compared to 2.5 cents
per kwh during the corresponding period in 1998.
Nuclear
Contribution margin is higher than 1998 due to increased intersegment revenues
in 1999 related to the restart of the plant in 1999, lower depreciation in 1999
as a result of the write-off of nuclear facilities, and lower cost power
purchases to replace Clinton generation.
Cash flow was positively impacted by net income.
Illinova Energy Partners, Inc.
For the six months ended June 30, 1999, the contribution margin is comparable to
the same period in 1998. Cash flow increased about $8 million, primarily related
to changes in working capital.
Illinova Generating Company
For the six months ended June 30, 1999, the contribution margin variance from
1998 was less than $1 million. Cash flow increased about $18 million, primarily
due to changes in working capital.
Other
Included in this category are the Financial Business Group, the Support Services
Business Group, and Corporate. These segments did not individually meet the
minimum threshold requirements for separate disclosure.
See "Illinova Segments of Business" in the footnotes to the financial statements
on pages 19-25 for additional information.
50
<PAGE>
RESULTS OF OPERATIONS - ILLINOIS POWER SEGMENTS OF BUSINESS
SIX MONTHS ENDED JUNE 30, 1999
Customer Service
For the six months ended June 30, 1999, both the contribution margin and cash
flow measures were lower than for the corresponding period in 1998. Contribution
margin is lower by $46 million, primarily due to decreased electric revenues as
discussed below; higher O&M expenses; higher internal charges paid to the
Wholesale Energy Group and the Nuclear Group due to higher usage and higher
internal pricing and higher depreciation expenses, including regulatory asset
amortization.
Cash flow is lower by $67 million, due to decreased net income and reduced
changes in working capital, partially offset by lower construction expenditures.
Transmission, Distribution and Sale of Electric Energy
- ------------------------------------------------------
The Customer Service business group derives its revenues through regulated
tariffs. Its source of electricity is the Wholesale Energy business group and
the Nuclear group; electricity was provided to the Customer Service Business
Group at a fixed 2.9 cents per kwh in 1999 and 2.5 cents per kwh in 1998.
Retail electric revenues, excluding interchange sales, for the six months ended
June 30, 1999 decreased 8.5% over the corresponding period in 1998 due to the
15% residential decrease mandated by P.A. 90-561, which became effective July
15, 1998, voluntarily advanced by IP from the statutory effective date of August
1, partially offset by increased kwh sales to customers. Additionally, operating
costs were higher during the six months ended June 30, 1999 compared to the same
period in 1998.
Transmission, Distribution and Sale of Natural Gas
- --------------------------------------------------
Revenues are derived through regulated tariffs. During the six months ended June
30, 1999, revenues from gas sales and transportation were up 1.1%, while therms
sold and transported were up 5.6%. The increase in therm sales was caused by a
return to normal weather after the milder-than-usual weather experienced in
1998. The margin on gas sales and transportation increased 1.0% during the
period due to a prior year adjustment to gas costs and by increases in both
therms sold and therms transported.
Wholesale Energy
Contribution margin during the six months ended June 30, 1999 is $59 million
higher than during the corresponding period in 1998, due to significantly fewer
power purchases in 1999 than in 1998 when the Company purchased high-priced
electricity to meet system requirements and off-system sale obligations.
Partially offsetting this major variance in power purchases are higher internal
charges in 1999 for purchase of Clinton-generated electricity, higher
depreciation to reflect the write-up of fossil assets in December 1998, higher
O&M expenses and lower interchange sales in 1999.
Cash flow is significantly less than 1998 ($260 million) primarily due to higher
purchase power costs in 1998 allocated to the Nuclear Group, higher construction
expenditures and the receipt of prepaid base capacity charges from Soyland in
1998.
Wholesale Energy provided power to the Customer Service business group at 2.9
cents per kwh during the six months ended June 30, 1999 compared to 2.5 cents
per kwh during the corresponding period in 1998.
Nuclear
Contribution margin is higher than 1998 due to increased intersegment revenues
in 1999 related to restart of the plant in 1999, lower depreciation in 1999 as a
51
<PAGE>
result of the write-off of nuclear facilities, and lower cost power purchases to
replace Clinton generation.
Cash flow was positively impacted by net income.
Other
Included in this category are the Financial Business Group, the Support Services
Business Group, and Corporate. These segments did not individually meet the
minimum threshold requirements for separate disclosure.
See "Illinois Power Segments of Business" in the footnotes to the financial
statements on pages 25-31 for additional information.
52
<PAGE>
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
RISK MANAGEMENT
Illinova is exposed to both trading and non-trading market risks. The
non-trading market risks to which Illinova is exposed include interest rate
risk, equity price risk, foreign currency risks, and commodity price risks. The
market risk due to trading consists primarily of commodity price risk.
Illinova's risk management policy allows the use of financial derivative
products, like futures, swaps, and certain types of options to manage its
positions. Illinova uses various approaches to measure and monitor market risk,
which include Value-at-Risk (VaR) and position sensitivity measures to market
factors. VaR is the maximum potential loss that may be incurred on a portfolio
due to adverse movements in market factors, given a confidence level and
specified holding period. VaR does not represent the expected nor the maximum
loss that may actually occur since gains and losses may differ from those
estimated, based on actual fluctuations in market factors and changes in the
composition of the portfolio during a given evaluation period.
INTEREST RATE RISK
Illinova is exposed to interest rate risk from its financing activities,
through issuance of fixed or variable-rate debt and acquisition of bank notes.
IP is likewise exposed to interest rate risk resulting from its issuance of
fixed or variable-rate debt, commercial paper, and bank notes. Interest rate
exposure is managed in accordance with policy by limiting the variable-rate
exposure to a certain percentage of capitalization. Interest rate derivative
instruments are also used when deemed appropriate to change the composition of
variable to fixed-rate component. In addition, the sensitivity of the portfolio
to changes in market factors like interest rate levels and volatility are also
monitored. At June 30, 1999, there was no interest rate derivative instrument in
use.
Interest rate VaR is calculated based on a variance-covariance approach
using the RiskMetrics FourFifteen(TM) model. A 95 percent confidence level and a
one-day holding period is currently used. The interest rate risk as measured by
VaR at June 30, 1999, March 31, 1999, and December 31, 1998, is given below.
- --------------------------------------------------------------------------------
(Millions of dollars) June 30, 1999 March 31,1999 December 31,1998
- --------------------------------------------------------------------------------
VaR VaR VaR
Illinova, including IP debt $7.9 $9.2 $14.9
IP debt only $7.3 $8.7 $14.2
- --------------------------------------------------------------------------------
Contributing factors to the decrease in VaR were the retirement of high
coupon debt with maturities extending past the year 2020 and an increase in
commercial paper levels from that at year end. At December 31, 1998, VaR was
unusually high due to the issuance of securitized debt with the removal of
called bonds not occurring until after year end. The securitized debt has
shorter maturities than the called bonds, which further contributed to the
decrease in VaR.
53
<PAGE>
COMMODITY PRICE RISK
Trading Positions
Illinova is exposed to commodity price risk through IEP's power trading
activities and IP's trading and non-trading operations. IEP uses a
variance-covariance approach to calculate VaR, similar to the RiskMetrics(TM)
model, to monitor and control its market risk positions. IP measures, monitors,
and manages its commodity price risk using a proprietary VaR model employing a
Monte Carlo simulation technique. IP and IEP both use a 95 percent confidence
level and a five-day holding period to monitor their daily trading market risk
positions. During the first quarter of 1999, the Board approved a change in the
risk management policy, to use a five day holding period instead of a four-day
period. IP's and IEP's trading VaR at June 30, 1999, March 31, 1999, and
December 31, 1998, as restated using a five day holding period follow:
- --------------------------------------------------------------------------------
June 30, 1999 March 31, 1999 December 31, 1998
- --------------------------------------------------------------------------------
(Millions of Dollars) VaR VaR VaR
IP $0.3 $0.6 $1.4
IEP 0.1 0.1 0.1
- --------------------------------------------------------------------------------
IP and IEP both use stress and scenario testing to control "event risk",
(i.e., the risk that certain stressful market events will occur and result in a
loss). In addition, option positions are monitored using sensitivity limits such
as delta (sensitivity to price change), gamma (sensitivity of delta to price
change), and vega (sensitivity to change in implied volatility).
Non-Trading Positions
IP is also exposed to non-trading commodity price risk through its
energy generation business. IP uses physical contracts and is authorized to use
financial derivative instruments to manage its native load requirements. To
measure, monitor, and control the commodity price risk of its non-trading
portfolio, IP uses the same proprietary Monte Carlo model used in the trading
portfolio.
The Monte-Carlo simulation process used in this VaR model generates the
power price, fuel price and load series that are used to value the generation
assets, fuel assets, and contracts entered into by the firm (e.g., tolling,
forward, call and put options). A sophisticated process is used to generate
daily and hourly prices based on historical price series and volatility, wherein
"price spikes," a recent phenomenon in the electricity markets, are modeled into
the price series. The VaR calculated by this model represents the maximum
reduction in operating margin given a 95 percent confidence level. This means
that there is only a 5 percent probability that the reduction in operating
margin from the expected margin will be greater than what is provided by the VaR
number. In this model, a sufficient number of scenarios are generated, whereby
each scenario simulates a one-year margin (one-year holding period). The
expected margin is obtained by averaging the margins calculated from all the
simulation scenarios. The VaR is obtained by sorting the simulation results from
the lowest to highest value and taking the 95th percentile worst case value.
Since the new VaR methodology was implemented at the beginning of March
1999, there is no comparable VaR number at December 31, 1998. The VaR for the
non-trading portfolio at June 30, 1999 and March 31, 1999, using a five-day
holding period is $4.9 million and $11.6 million, respectively.
The overall IP electricity portfolio is also controlled using quarterly
expected margin reduction limits. In this process, the difference between the
current expected margin and last quarter's expected margin is monitored against
54
<PAGE>
the quarterly limits. To control "event risk," IP measures the "Stress-VaR,"
i.e., the VaR calculated using assumptions similar to the events that led to the
electricity price spikes in June 1998. The "Stress-VaR" is monitored against
stress limits that were approved by the Board of Directors.
FOREIGN OPERATIONS RISK
Illinova's foreign operations risk is its inherent risk of loss due to
the potential volatility of emerging countries and fluctuations in foreign
currency exchange rates in relation to the U.S. dollar. At June 30, 1999, IGC
had invested $78 million in several international operations, many of which are
joint ventures. Primarily, these investments are with affiliates owning
energy-related production, generation, and transmission facilities.
IGC is exposed to foreign currency risk, sovereign risk, and other
foreign operations risks, primarily through investments in affiliates of $48
million in Asia and $127 million in South and Central America. To mitigate risks
associated with foreign currency fluctuations, the majority of contracts entered
into by IGC or its affiliates are denominated in or indexed to the U.S. dollar.
OTHER MARKET RISK
Illinova is exposed to equity price risk primarily through IP. IP
maintains trust funds, as required by the NRC, to fund certain costs of nuclear
decommissioning. As of June 30, 1999, these funds were invested in domestic and
international equity securities, fixed income securities, and cash and cash
equivalents. By maintaining a portfolio that includes equity investments, IP is
maximizing the return to be used to fund nuclear decommissioning, which in the
long term will correlate better with inflationary increases in decommissioning
costs. The equity securities included in the Corporation's portfolio are exposed
to price fluctuations in equity markets as a result of fluctuations in interest
rates. IP actively monitors its portfolio by benchmarking the performance of its
investments against equity and fixed-income indexes. It maintains and
periodically reviews established target allocations of the trust assets approved
in the investment policy statement. VaR at June 30, 1999, and March 31, 1999,
calculated based on a 95 percent confidence level and a one day holding period
follows:
- --------------------------------------------------------------------------------
June 30, 1999 March 31, 1999
- --------------------------------------------------------------------------------
(Millions of dollars) VaR VaR
IP $1.4 $1.4
- --------------------------------------------------------------------------------
55
<PAGE>
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The Exhibits filed with this 10-Q are listed on the Exhibit Index.
(b) Reports on Form 8-K since March 31, 1999:
Report filed on Form 8-K on April 19, 1999
Item 5, Other Events: Press Release: Illinova
Releases 1999 first quarter earnings,
Announces expected sale of Clinton to
AmerGen.
Item 7, Exhibits: Illinova Consolidated
Income Statements.
Report filed on Form 8-K on June 14, 1999
Item 5: Illinova announces merger
agreement with Dynegy, Inc.
Report filed on Form 8-K on June 17, 1999
Item 5, Other Events: Merger agreement
update, Clinton Power Station update,
fossil generating subsidiary update.
Item 7, Exhibits: Illinova statement
regarding computation of ratios.
Report filed on Form 8-K on July 12, 1999
Item 5, Other Events: Press release: IP/
AmerGen sign Definitive Agreement for
Sale of Clinton. ICC approval of fossil
generating subsidiary.
Report filed on Form 8-K on July 16, 1999
Item 5, Other Events: Press release:
Illinova Releases 1999 second quarter
Earnings.
Item 7, Exhibits: Illinova Consolidated
Income Statements.
56
<PAGE>
SIGNATURES
Pursuant to the requirements 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)
/s/Larry F. Altenbaumer
---------------------------
Larry F. Altenbaumer
Senior Vice President,
Chief Financial Officer,
Treasurer and Controller
on behalf of
Illinova Corporation
Date: August 16, 1999
57
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
ILLINOIS POWER COMPANY
(Registrant)
/s/Larry F. Altenbaumer
---------------------------
Larry F. Altenbaumer
Senior Vice President and
Chief Financial Officer
on behalf of
Illinois Power Company
Date: August 16, 1999
58
<PAGE>
EXHIBIT INDEX
PAGE NO. WITHIN
SEQUENTIAL NUMBERING
EXHIBIT DESCRIPTION SYSTEM
4 Instruments Defining Rights of Security
Holders, Including Indentures - Illinois
Power Company
4.1 Supplemental Indenture dated as of June
15, 1999 to Mortgage and Deed of Trust
dated November 1, 1943 providing for the
issuance of $250,000,000 principal amount
of 7.5% mortgage bonds. 60 - 74
4.2 Supplemental Indenture dated as of June
15, 1999 to General Mortgage Indenture
and Deed of Trust dated as of November 1,
1992 providing for the issuance of 7.50%
New Mortgage Bonds. 75 - 84
4.3 Supplemental Indenture dated as of July
15, 1999 to Mortgage and Deed of Trust
dated November 1, 1943 providing for the
issuance of $35,615,000 principal amount
of 5.70% Series U Pollution Control Bonds. 85 - 98
4.4 Supplemental Indenture dated as of July
15, 1999 to General Mortgage Indenture and
Deed of Trust dated as of November 1, 1992
providing for the issuance of $35,615,000
principal amount of 5.70% Series U
Pollution Control Bonds. 99 - 110
4.5 Supplemental Indenture dated as of July
15, 1999 to Mortgage and Deed of Trust
dated November 1, 1943 providing for the
issuance of $84,150,000 principal amount
of 7.40% Series V Pollution Control Bonds. 111 - 124
4.6 Supplemental Indenture dated as of July
15, 1999 to General Mortgage Indenture and
Deed of Trust dated as of November 1, 1992
providing for the issuance of $84,150,000
principal amount of 7.40% series V
Pollution Control Bonds. 125 - 136
10.1 Clinton Nuclear Power Station Asset
Purchase Agreement by and between Illinois
Power Company, as Seller, and AmerGen
Energy Company, L.L.C, as Buyer, dated as
of June 30, 1999. 137 - 241
12.1 Computation of ratio of earnings to fixed
charges for Illinova Corporation. 242
12.2 Computation of ratio of earnings to fixed
charges for Illinois Power Company. 243
27 Financial Data Schedule UT
(filed herewith)
59
<PAGE>
Exhibit 4.1
ILLINOIS POWER COMPANY
TO
HARRIS TRUST AND SAVINGS BANK,
as Trustee
Supplemental Indenture
DATED AS OF JUNE 15, 1999
TO
Mortgage and Deed of Trust
DATED NOVEMBER 1, 1943
60
<PAGE>
Supplemental Indenture dated as of June 15, 1999 (the "Supplemental Indenture"),
made by and between ILLINOIS POWER COMPANY, a corporation organized and existing
under the laws of the State of Illinois (the "Company"), party of the first
part, and HARRIS TRUST AND SAVINGS BANK, a corporation organized and existing
under the laws of the State of Illinois (the "Trustee"), as Trustee under the
Mortgage and Deed of Trust dated November 1, 1943, hereinafter mentioned, party
of the second part;
WHEREAS, the Company has heretofore executed and delivered its Mortgage
and Deed of Trust dated November 1, 1943 ("Original Indenture"), to the Trustee,
for the security of the First Mortgage Bonds of the Company issued and to be
issued thereunder (the "Bonds"); and
WHEREAS, pursuant to the terms and provisions of the Original Indenture
there were created and authorized by Supplemental Indentures thereto bearing the
following dates, respectively, the First Mortgage Bonds of the series issued
thereunder and respectively identified opposite such dates:
Date of Supplemental Identification
Indenture of Series Called
November 1, 1943 4% Series due 1973 Bonds of the 1973 Series
(redeemed)
March 1, 1946 2 7/8% Series due 1976 Bonds of the 1976 Series
(paid at maturity)
February 1, 1948 3 1/2% Series due 1978 Bonds of the 1978 Series
(paid at maturity)
July 1, 1949 2 7/8% Series due 1979 Bonds of the 1979 Series
(paid at maturity)
April 1, 1950 2 3/4% Series due 1980 Bonds of the 1980 Series
(paid at maturity)
March 1, 1952 3 1/2% Series due 1982 Bonds of the 1982 Series
(paid at maturity)
November 1, 1953 3 1/2% Series due 1983 Bonds of the 1983 Series
(paid at maturity)
July 1, 1956 3 3/4% Series due 1986 Bonds of the 1986 Series
(paid at maturity)
May 1, 1958 4% Series due 1988 Bonds of the 1988 Series
(redeemed)
January 1, 1963 4 1/4% Series due 1993 Bonds of the 1993 Series
(paid at maturity)
October 1, 1966 5.85% Series due 1996 Bonds of the 1996 Series
(paid at maturity)
61
<PAGE>
Date of Supplemental Identification
Indenture of Series Called
January 1, 1968 6 3/8% Series due 1998 Bonds of the First 1998 Series
(redeemed)
October 1, 1968 6 3/4% Series due October 1, Bonds of the Second 1998 Series
1998 (redeemed)
October 1, 1969 8.35% Series due 1999 Bonds of the First 1999 Series
(redeemed)
November 1, 1970 9% Series due 2000 Bonds of the 2000 Series
(redeemed)
October 1, 1971 7.60% Series due 2001 Bonds of the 2001 Series
(redeemed)
June 1, 1973 7 5/8% Series due 2003 Bonds of the First 2003 Series
(redeemed)
May 1, 1974 Pollution Control Series A Bonds of the Pollution Control
Series A
September 1, 1974 10 1/2% Series due 2004 Bonds of the First 2004 Series
(redeemed)
July 1, 1976 8 3/4% Series due 2006 Bonds of the 2006 Series
(redeemed)
May 1, 1977 Pollution Control Series B Bonds of Pollution Control
(redeemed) Series B
November 1, 1977 8 1/4% Series due 2007 Bonds of the 2007 Series
(redeemed)
August 1, 1978 8 7/8% Series due 2008 Bonds of the 2008 Series
(redeemed)
July 1, 1979 9 7/8% Series due July 1, Bonds of the Second 2004 Series
2004 (redeemed)
July 31, 1980 11 3/8% Series due 1987 Bonds of the 1987 Series
(redeemed)
August 1, 1980 12 3/8% Series due 2010 Bonds of the 2010 Series
(redeemed)
July 1, 1982 14 1/2% Series due 1990 Bonds of the 1990 Series
(redeemed)
62
<PAGE>
Date of Supplemental Identification
Indenture of Series Called
November 1, 1982 12% Series due 2012 Bonds of the 2012 Series
(redeemed)
December 15, 1983 Pollution Control Series C Bonds of the Pollution Control
(redeemed) Series C
May 15, 1984 Pollution Control Series D Bonds of the Pollution Control
(redeemed) Series D
March 1, 1985 Pollution Control Series E Bonds of the Pollution Control
(redeemed) Series E
February 1, 1986 10 1/2% Series due 2016 Bonds of the First 2016 Series
(redeemed)
July 1, 1986 9 7/8% Series due 2016 Bonds of the Second 2016 Series
(redeemed)
September 1, 1986 9 3/8% Series due 2016 Bonds of the Third 2016 Series
(redeemed)
February 1, 1987 Pollution Control Series F Bonds of the Pollution Control
(redeemed) Series F
February 1, 1987 Pollution Control Series G Bonds of the Pollution Control
(redeemed) Series G
February 1, 1987 Pollution Control Series H Bonds of the Pollution Control
(redeemed) Series H
July 1, 1987 Pollution Control Series I Bonds of the Pollution Control
(redeemed) Series I
July 1, 1988 10% Series due 1998 Bonds of the Third 1998 Series
(redeemed)
July 1, 1991 Pollution Control Series J Bonds of the Pollution Control
Series J
June 1, 1992 Pollution Control Series K Bonds of the Pollution Control
Series K
June 1, 1992 Pollution Control Series L Bonds of the Pollution Control
Series L
July 1, 1992 7.95% Series due 2004 Bonds of the Third 2004 Series
July 1, 1992 8 3/4% Series due 2021 Bonds of the 2021 Series
(redeemed)
63
<PAGE>
Date of Supplemental Identification
Indenture of Series Called
September 1, 1992 6 1/2% Series due 1999 Bonds of the 1999 Series
February 15, 1993 8% Series due 2023 Bonds of the 2023 Series
(redeemed)
March 15, 1993 6 1/8% Series due 2000 Bonds of the 2000 Series
March 15, 1993 6 3/4% Series due 2005 Bonds of the 2005 Series
July 15, 1993 7 1/2% Series due 2025 Bonds of the 2025 Series
August 1, 1993 6 1/2% Series due 2003 Bonds of the Second 2003 Series
October 15, 1993 5 5/8% Series due 2000 Bonds of the Second 2000 Series
November 1, 1993 Pollution Control Series M Bonds of the Pollution Control
Series M
November 1, 1993 Pollution Control Series N Bonds of the Pollution Control
Series N
November 1, 1993 Pollution Control Series O Bonds of the Pollution Control
Series O
April 1, 1997 Pollution Control Series P Bonds of the Pollution Control
Series P
April 1, 1997 Pollution Control Series Q Bonds of the Pollution Control
Series Q
April 1, 1997 Pollution Control Series R Bonds of the Pollution Control
Series R
March 1, 1998 Pollution Control Series S Bonds of the Pollution Control
Series S
March 1, 1998 Pollution Control Series T Bonds of the Pollution Control
Series T
July 15, 1998 6 1/4% Series due 2002 Bonds of the 2002 Series
September 15, 1998 6% Series due 2003 Bonds of the Third 2003 Series
and
WHEREAS, the Company desires to create a new series of Bonds to be
issued under the Original Indenture, to be known as First Mortgage Bonds,
7.50% Series due 2009 (the "Bonds of the 2009 Series") and to issue additional
Bonds under the Original Indenture; and
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WHEREAS, the Bonds of the 2009 Series are to be issued to Harris Trust and
Savings Bank, as trustee (the "New Mortgage Trustee") under the Company's
General Mortgage Indenture and Deed of Trust dated as of November 1, 1992 (the
"New Mortgage") and are to be owned and held by the New Mortgage Trustee as
"Pledged Bonds" (as defined in the New Mortgage) in accordance with the terms of
the New Mortgage; and
WHEREAS, the Company, in the exercise of the powers and authority conferred
upon and reserved to it under the provisions of the Original Indenture, and
pursuant to appropriate resolutions of the Board of Directors, has duly resolved
and determined to make, execute and deliver to the Trustee a Supplemental
Indenture in the form hereof for the purposes herein provided; and
WHEREAS, all conditions and requirements necessary to make this
Supplemental Indenture a valid, binding and legal instrument have been done,
performed and fulfilled and the execution and delivery hereof have been in all
respects duly authorized;
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
THAT Illinois Power Company, in consideration of the purchase and ownership
from time to time of the Bonds and the service by the Trustee, and its
successors, under the Original Indenture and of One Dollar to it duly paid by
the Trustee at or before the ensealing and delivery of these presents, the
receipt whereof is hereby acknowledged, hereby covenants and agrees to and with
the Trustee and its successors in the trust under the Original Indenture, for
the benefit of the New Trustee and any successor holder of the Bonds as follows:
ARTICLE I.
DESCRIPTION OF BONDS OF THE 2009 SERIES.
SECTION 1. The Company hereby creates a new series of Bonds to be known
as "The First Mortgage Bonds, 7.50% Series due 2009" (the "Bonds of the 2009
Series"). The Bonds of the 2009 Series shall be executed, authenticated and
delivered in accordance with the provisions of, and shall in all respects be
subject to, all of the terms, conditions and covenants of the Original
Indenture, as supplemented and modified. The Bonds of the 2009 Series will be
issued only to the New Mortgage Trustee as security for a series of bonds being
issued under the Company's New Mortgage and the supplemental indenture to the
New Mortgage dated as of June 15, 1999 (the "New Mortgage Bonds of the 2009
Series").
The Bonds of the 2009 Series shall be dated as provided in Section 6 of
Article II of the Original Indenture and for the purposes of said Section 6 the
commencement of the first interest period shall be June 29, 1999. All Bonds of
the 2009 Series shall mature on June 15, 2009, and shall bear interest at the
rate of SEVEN AND ONE-HALF PER CENT (7.50%) per annum, payable semi-annually on
June 15 and December 15 of each year, commencing December 15, 1999, until the
principal sum is paid in full. Any payment by the Company of principal of, or
interest on, any Bonds of the 2009 Series shall be applied by the New Mortgage
Trustee to the payment of any principal or interest, as the case may be, in
respect of the New Mortgage Bonds of the 2009 Series due in accordance with the
terms of the New Mortgage.
SECTION 2. The Bonds of the 2009 Series and the Trustee's Certificate
shall be substantially in the following forms respectively:
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[FORM OF FACE OF BOND]
ILLINOIS POWER COMPANY
(Incorporated under the laws of the State of Illinois)
FIRST MORTGAGE BOND, 7.50% SERIES DUE 2009
No. $250,000,000
ILLINOIS POWER COMPANY, a corporation organized and existing under the
laws of the State of Illinois (the "Company," which term shall include any
successor corporation as defined in the Indenture hereinafter referred to), for
value received, hereby promises to pay to Harris Trust and Savings Bank as
trustee (the "New Mortgage Trustee") under the Company's General Mortgage
Indenture and Deed of Trust dated as of November 1, 1992 (the "New Mortgage") or
its registered assigns, the principal sum of Two Hundred and Fifty Million
Dollars ($250,000,000) on June 15, 2009, in any coin or currency of the United
States of America which at the time of payment is legal tender for public and
private debts, and to pay interest thereon in like coin or currency from June
29, 1999, payable semi-annually on June 15 and December 15 in each year,
commencing December 15, 1999, at the rate of SEVEN AND ONE-HALF PER CENT (7.50%)
per annum, until the Company's obligation with respect to the payment of such
principal shall be discharged as provided in the Indenture. Both the principal
of, and the interest on, this Bond are payable at the agency of the Company in
the City of Chicago, Illinois.
This First Mortgage Bond shall not be entitled to any benefit under the
Indenture or any indenture supplemental thereto, or become valid or obligatory
for any purpose, until the form of certificate endorsed hereon shall have been
signed by or on behalf of Harris Trust and Savings Bank, the Trustee under the
Indenture, or a successor trustee thereto under the Indenture (the "Trustee").
The provisions of this First Mortgage Bond are continued on the reverse
hereof and such continued provisions shall for all purposes have the same effect
as though fully set forth at this place.
IN WITNESS WHEREOF, Illinois Power Company has caused this First
Mortgage Bond to be signed (manually or by facsimile signature) in its name by
its President or a Vice President, and its corporate seal (or a facsimile
thereof) to be hereto affixed and attested (manually or by facsimile signature)
by its Secretary or an Assistant Secretary.
Dated: ILLINOIS POWER COMPANY,
By:
---------------------------
Vice President
(Corporate Seal)
ATTEST:
- -------------------------------------
Secretary or Assistant Secretary
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[FORM OF TRUSTEE'S CERTIFICATE]
This First Mortgage Bond is one of the Bonds of the series designated
therein, described in the within-mentioned Indenture and the Supplemental
Indenture dated as of June 15, 1999.
HARRIS TRUST AND SAVINGS BANK,
Trustee
By:
---------------------------
Authorized Officer
[FORM OF REVERSE OF BOND)
This First Mortgage Bond is one of a duly authorized issue of Bonds of
the Company (the "Bonds") in unlimited aggregate principal amount, of the series
hereinafter specified, all issued and to be issued under and equally secured by
the Mortgage and Deed of Trust (the "Indenture"), dated November 1, 1943,
executed by the Company to Harris Trust and Savings Bank (the "Trustee"), as
Trustee, to which Indenture and all indentures supplemental thereto, including
the Supplemental Indenture dated February 15, 1993, which amended Section 1 of
Article IX of the Indenture, reference is hereby made for a description of the
properties mortgaged and pledged, the nature and extent of the security, the
rights of the registered owners of the Bonds and of the Trustee in respect
thereof, and the terms and conditions upon which the Bonds are, and are to be,
secured. The Bonds may be issued in series, for various principal sums, may
mature at different times, may bear interest at different rates and may
otherwise vary as in the Indenture provided. This First Mortgage Bond is one of
a series designated as the First Mortgage Bonds, 7.50% Series Due 2009 (the
"Bonds of the 2009 Series") of the Company, unlimited in aggregate principal
amount, issued under and secured by the Indenture and described in the
supplemental indenture dated as of June 15, 1999 (the "Supplemental Indenture of
June 15, 1999"), between the Company and the Trustee, supplemental to the
Indenture.
The Bonds of the 2009 Series are subject to redemption on the terms and
subject to the conditions set forth in the Supplemental Indenture of June 15,
1999.
To the extent permitted by, and as provided in, the Indenture,
modifications or alterations of the Indenture, or of any indenture supplemental
thereto, and of the rights and obligations of the Company and of the holders of
the Bonds and coupons may be made with the consent of the Company by an
affirmative vote of the holders of not less than 66 2/3% in amount of the Bonds
entitled to vote then outstanding, at a meeting of Bondholders called and held
as provided in the Indenture, and by an affirmative vote of the holders of not
less than 66 2/3% in amount of the Bonds of any series entitled to vote then
outstanding and affected by such modification or alteration, in case one or more
but less than all of the series of Bonds then outstanding under the Indenture
are so affected; provided however, that no such modification or alteration shall
be made which will
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affect the terms of payment of the principal of, or interest or premium, if any,
on this First Mortgage Bond.
In case an Event of Default, as defined in the Indenture, shall occur,
the principal of all the Bonds at any such time outstanding under the Indenture
may be declared or may become due and payable, upon the conditions and in the
manner and with the effect provided in the Indenture. The Indenture provides
that such declaration may in certain events be rescinded by the holders of a
majority in principal amount of the Bonds outstanding.
No recourse shall be had for the payment of the principal of, or
premium or interest on this First Mortgage Bond, or for any claim based hereon
or on the Indenture or any indenture supplemental thereto, against any
incorporator, or against any stockholder, director or officer, as such, past,
present or future, of the Company, or of any predecessor or successor
corporation, either directly or through the Company or any such predecessor or
successor corporation, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise, all such
liability, whether at common law, in equity, by any constitution, statute, rule
of law, or otherwise, of incorporators, stockholders, directors or officers
being released by every owner hereof by the acceptance of this First Mortgage
Bond and as part of the consideration for the issue hereof, and being likewise
released by the terms of the Indenture; provided, however, that nothing herein
or in the Indenture or any indenture supplemental thereto contained shall
prevent the enforcement of the liability, if any, of any stockholder or
subscriber to capital stock upon or in respect of shares of capital stock not
fully paid up.
Notwithstanding any provision in the Indenture, the Supplemental
Indenture of June 15, 1999 or this First Mortgage Bond to the contrary, any
payment by the Company under the New Mortgage of principal of, or interest on,
bonds which shall have been authenticated and delivered under the New Mortgage
(the "New Mortgage Bonds of the 2009 Series") upon the basis of the issuance and
delivery to the New Mortgage Trustee of the Bonds of the 2009 Series shall, to
the extent thereof, be deemed to satisfy and discharge the obligation of the
Company to make a payment of principal or interest, as the case may be, in
respect of this First Mortgage Bond which is then due.
This First Mortgage Bond constitutes a "Pledged Bond" (as defined in
the New Mortgage) and is subject to all of the rights and restrictions
applicable to Pledged Bonds as set forth in the New Mortgage. Without limiting
the generality of the foregoing, this First Mortgage Bond shall be subject to
surrender by the New Mortgage Trustee in accordance with the provisions of
Section 7.03 of the New Mortgage. To the extent that any provisions in the
Indenture, the Supplemental Indenture of June 15, 1999 or this First Mortgage
Bond are inconsistent with the provisions relating to Pledged Bonds that are set
forth in the New Mortgage, the provisions of the New Mortgage shall apply.
SECTION 3. Notwithstanding any provision in the Original Indenture,
this Supplemental Indenture, or the Bonds of the 2009 Series to the contrary,
any payment by the Company under the New Mortgage of principal of, or interest
on, New Mortgage Bonds of the 2009 Series upon the basis of the issuance and
delivery to the New Mortgage Trustee of the Bonds of the 2009 Series shall, to
the extent thereof, be deemed to satisfy and discharge the obligation of the
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Company to make any payment of principal or interest, as the case may be, in
respect of the Bonds of the 2009 Series which is then due.
SECTION 4. The Bonds of the 2009 Series constitute "Pledged Bonds" (as
defined in the New Mortgage) and are subject to all of the rights and
restrictions applicable to Pledged Bonds as set forth in the New Mortgage.
Without limiting the generality of the foregoing, the Bonds of the 2009 Series
shall be subject to surrender by the New Mortgage Trustee in accordance with the
provisions of Section 7.03 of the New Mortgage. To the extent that any
provisions in the Original Indenture, this Supplemental Indenture or the Bonds
of the 2009 Series are inconsistent with the provisions relating to Pledged
Bonds that are set forth in the New Mortgage, the provisions of the New Mortgage
shall apply.
ARTICLE II.
ISSUE OF BONDS OF THE 2009 SERIES.
SECTION 1. The Company hereby exercises the right to obtain the
authentication of $250,000,000 principal amount of additional Bonds pursuant to
the terms of Section 6 of Article III of the Original Indenture in substitution
for refundable Bonds. All such additional Bonds shall be Bonds of the 2009
Series.
SECTION 2. Such Bonds of the 2009 Series may be authenticated and
delivered prior to the filing for recordation of this Supplemental Indenture.
SECTION 3. Notwithstanding any provision in the Original Indenture to
the contrary, execution of the Bonds of the 2009 Series on behalf of the
Company, and the attesting of the corporate seal of the Company affixed to the
Bonds of the 2009 Series by the officers of the Company authorized to do such
acts by Section 12 of Article II of the Original Indenture may be validly done
either by the manual or the facsimile signatures of such authorized officers of
the Company.
ARTICLE III.
REDEMPTION.
The Company at its option may, at any time, redeem the Bonds of the
2009 Series, in whole or in part (if in part, by lot or by such other method as
the Trustee shall deem fair or appropriate) prior to maturity, on any date, upon
payment of a redemption price equal to the greater of (i) 100% of the principal
amount of the Bonds of the 2009 Series to be redeemed plus accrued and unpaid
interest thereon, if any, from the last interest payment date to the date of
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redemption, or (ii) the Make Whole Amount plus accrued and unpaid interest, if
any, from the last interest payment date to the redemption date.
"Make Whole Amount" means, with respect to a Bond of the 2009 Series at any
time, the sum of the present values of the Remaining Scheduled Payments (as
defined below) discounted, on a semiannual basis assuming a 360-day year
consisting of twelve 30-day months), at a rate equal to the Treasury Rate (as
defined below) plus 20 basis points. The Make Whole Amount shall be computed as
of the third Business Day prior to the applicable redemption date, and
certified, by an Investment Banker (as defined below).
"Investment Banker" means an independent investment banking institution of
good standing selected by the Company.
"Remaining Scheduled Payments" means the remaining scheduled payment of the
principal and interest that would be due if such Bonds of the 2009 Series were
not redeemed. However, if the redemption date is not a scheduled interest
payment date, the amount of the next succeeding scheduled interest payment on
such Bond of the 2009 Series will be reduced by the amount of interest accrued
on such New Mortgage Bonds of the 2009 Series to such redemption date.
"Treasury Rate" means an annual rate equal to the semiannual equivalent
yield to maturity of the Comparable Treasury Issue (as defined below), assuming
a price for the Comparable Treasury Issue (expressed as a percentage of its
principal amount) equal to the Comparable Treasury Price (as defined below) for
the redemption date. The semiannual equivalent yield to maturity will be
computed as of the third Business Day immediately preceding the redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by Salomon Smith Barney Inc. or J.P. Morgan Securities Inc. or their
affiliates as having a maturity comparable to the remaining term of the Bonds of
the 2009 Series that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new issues of corporate
debt securities of comparable maturity to the remaining term of the Bonds of the
2009 Series.
"Comparable Treasury Price" means the average of three Reference Treasury
Dealer Quotations (as defined below) obtained by the Trustee for the redemption
date.
"Reference Treasury Dealers" means Salomon Smith Barney Inc. and J.P.
Morgan Securities Inc. (so long as they continue to be primary U.S. Government
securities dealers) and any one other primary U.S. Government securities dealer
chosen by the Company. If either Salomon Smith Barney Inc. or J.P. Morgan
Securities Inc. ceases to be a primary U.S. Government securities dealer, the
Company will appoint in its place another nationally recognized investment
banking firm that is a primary U.S. Government securities dealer.
"Reference Treasury Dealer Quotation" means the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a
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percentage of its principal amount) quoted in writing to the Trustee by a
Reference Treasury Dealer at 3:30 p.m., New York City time, on the third
Business Day preceding the redemption date.
ARTICLE IV.
THE TRUSTEE.
The Trustee hereby accepts the trusts hereby declared and provided, and
agrees to perform the same upon the terms and conditions in the Original
Indenture set forth and upon the following terms and conditions:
The Trustee shall not be responsible in any manner whatsoever
for or in respect of the validity or sufficiency of this Supplemental
Indenture or the due execution hereof by the Company or for or in
respect of the recitals contained herein, all of which recitals are
made by the Company solely. In general, each and every term and
condition contained in Article XIII of the Original Indenture shall
apply to this Supplemental Indenture with the same force and effect as
if the same were herein set forth in full, with such omissions,
variations and modifications thereof as may be appropriate to make the
same conform to this Supplemental Indenture.
ARTICLE V.
MISCELLANEOUS PROVISIONS.
This Supplemental Indenture may be simultaneously executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original; but such counterparts shall together constitute but one and the same
instrument.
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IN WITNESS WHEREOF, Illinois Power Company has caused this Supplemental
Indenture to be executed on its behalf by its Chairman and President, one of its
Executive Vice Presidents, one of its Senior Vice Presidents or one of its Vice
Presidents and its corporate seal to be hereto affixed and said seal and this
Supplemental Indenture to be attested by its Secretary or one of its Assistant
Secretaries; and said Harris Trust and Savings Bank, in evidence of its
acceptance of the trust hereby created, has caused this Supplemental Indenture
to be executed on its behalf by its President or one of its Vice Presidents and
its corporate seal to be hereto affixed and said seal and this Supplemental
Indenture to be attested by its Secretary or one of its Assistant Secretaries,
all as of the date first written above.
ILLINOIS POWER COMPANY
By
------------------------------------
Robert A. Schultz
Vice President - Finance
(CORPORATE SEAL)
ATTEST:
- ---------------------------
Leah Manning Stetzner
Corporate Secretary
HARRIS TRUST AND SAVINGS BANK, Trustee
By
------------------------------------
J. Bartolini
Vice President
(CORPORATE SEAL)
ATTEST:
- ------------------------------
C. Potter
Assistant Secretary
72
<PAGE>
STATE OF ILLINOIS )
)SS.:
COUNTY OF MACON )
BE IT REMEMBERED, that on this ____ day of _____, 1999, before me, the
undersigned, a Notary Public within and for the County and State aforesaid,
personally came Robert A. Schultz, Vice President - Finance and Leah Manning
Stetzner, Corporate Secretary, of Illinois Power Company, a corporation duly
organized, incorporated and existing under the laws of the State of Illinois,
who are personally known to me to be such officers, and who are personally known
to me to be the same persons who executed as such officers the within instrument
of writing, and such persons duly acknowledged that they signed, sealed and
delivered the said instrument as their free and voluntary act as such officers
and as the free and voluntary act of said Illinois Power Company for the uses
and purposes therein set forth.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my
official seal on the day and year last above written.
--------------------------------------
Notary Public, Macon County, Illinois
My Commission Expires on _________________.
(NOTARIAL SEAL)
STATE OF ILLINOIS )
)SS.:
COUNTY OF COOK )
BE IT REMEMBERED, that on this ___ day of ______, 1999, before me, the
undersigned, a Notary Public within and for the County and State aforesaid,
personally came J. Bartolini, Vice President, and C. Potter, Assistant
Secretary, of Harris Trust and Savings Bank, a corporation duly organized,
incorporated and existing under the laws of the State of Illinois, who are
personally known to me to be such officers, and who are personally known to me
to be the same persons who executed as such officers the within instrument of
writing, and such persons duly acknowledged that they signed, sealed and
delivered the said instrument as their free and voluntary act as such officers
and as the free and voluntary act of said Harris Trust and Savings Bank for the
uses and purposes therein set forth.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my
official seal on the day and year last above written.
--------------------------------------
Notary Public, Cook County, Illinois
My Commission Expires on ______________.
(NOTARIAL SEAL)
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Return To: This Instrument Was Prepared By:
ILLINOIS POWER COMPANY SCHIFF HARDIN & WAITE
Real Estate Dept. F-14 6600 Sears Tower
500 S. 27th Street 233 South Wacker Drive
Decatur, IL 62525 Chicago, IL 60606
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Exhibit 4.2
ILLINOIS POWER COMPANY
TO
HARRIS TRUST AND SAVINGS BANK,
as Trustee
------------------
Supplemental Indenture
DATED AS OF JUNE 15, 1999
TO
General Mortgage Indenture and Deed of Trust
DATED AS OF NOVEMBER 1, 1992
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Supplemental Indenture dated as of June 15, 1999 (the "Supplemental Indenture"),
made by and between ILLINOIS POWER COMPANY, a corporation organized and existing
under the laws of the State of Illinois (the "Company"), party of the first
part, and HARRIS TRUST AND SAVINGS BANK, a corporation organized and existing
under the laws of the State of Illinois (the "Trustee"), as Trustee under the
General Mortgage Indenture and Deed of Trust dated as of November 1, 1992,
hereinafter mentioned, party of the second part;
WHEREAS, the Company has heretofore executed and delivered its General
Mortgage Indenture and Deed of Trust dated as of November 1, 1992 (the
"Indenture"), to the Trustee, for the security of the Bonds of the Company
issued and to be issued thereunder (the "Bonds"); and
WHEREAS, pursuant to the terms and provisions of the Indenture there
were created and authorized by Supplemental Indentures thereto bearing the
following dates, respectively, the New Mortgage Bonds of the series issued
thereunder and respectively identified opposite such dates:
Date of Supplemental Identification
Indenture of Series Called
- -------------------- -------------- ------
February 15, 1993 8% Series due 2023 Bonds of the 2023 Series
March 15, 1993 6 1/2% Series due 2000 Bonds of the 2000 Series
March 15, 1993 6 3/4% Series due 2005 Bonds of the 2005 Series
July 15, 1993 7 1/2% Series due 2025 Bonds of the 2025 Series
August 1, 1993 6 1/2% Series due 2003 Bonds of the First 2003 Series
October 15, 1993 5 5/8% Series due 2000 Bonds of the Second 2000 Series
November 1, 1993 Pollution Control Series M Bonds of the Pollution Control
Series M
November 1, 1993 Pollution Control Series N Bonds of the Pollution Control
Series N
November 1, 1993 Pollution Control Series O Bonds of the Pollution Control
Series O
April 1, 1997 Pollution Control Series P Bonds of the Pollution Control
Series P
April 1, 1997 Pollution Control Series Q Bonds of the Pollution Control
Series Q
April 1, 1997 Pollution Control Series R Bonds of the Pollution Control
Series R M
March 1, 1998 Pollution Control Series S Bonds of the Pollution Control
Series S
March 1, 1998 Pollution Control Series T Bonds of the Pollution Control
Series T
July 15, 1998 6 1/4% Series due 2002 Bonds of the 2002 Series
September 15, 1998 6% Series due 2003 Bonds of the Second 2003 Series
WHEREAS, the Company desires to create a new series of Bonds to be
issued under the Indenture, to be known as New Mortgage Bonds, 7.50% Series due
2009 (the "New Mortgage Bonds of the 2009 Series"); and
WHEREAS, the Company, in the exercise of the powers and authority
conferred upon and reserved to it under the provisions of the Indenture, and
pursuant to appropriate resolutions of the Board of Directors, has duly resolved
and determined to make, execute and deliver to the Trustee a Supplemental
Indenture in the form hereof for the purposes herein provided; and
WHEREAS, all conditions and requirements necessary to make this
Supplemental Indenture a valid, binding and legal instrument have been done,
performed and fulfilled and the execution and delivery hereof have been in all
respects duly authorized;
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
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THAT Illinois Power Company, in consideration of the purchase and
ownership from time to time of the Bonds and the service by the Trustee, and its
successors, under the Indenture and of One Dollar to it duly paid by the Trustee
at or before the ensealing and delivery of these presents, the receipt whereof
is hereby acknowledged, hereby covenants and agrees to and with the Trustee and
its successors in the trust under the Indenture, for the benefit of those who
shall hold the Bonds as follows:
ARTICLE I.
DESCRIPTION OF NEW MORTGAGE BONDS OF THE 2009 SERIES.
SECTION 1. The Company hereby creates a new series of Bonds to be known
as the "New Mortgage Bonds of the 2009 Series." The New Mortgage Bonds of the
2009 Series shall be executed, authenticated and delivered in accordance with
the provisions of, and shall in all respects be subject to, all of the terms,
conditions and covenants of the Indenture, as supplemented and modified.
The commencement of the first interest period shall be June 29, 1999.
All New Mortgage Bonds of the 2009 Series shall mature on June 15, 2009, and
shall bear interest at the rate of SEVEN AND ONE-HALF PER CENT (7.50%) per
annum, payable semi-annually on June 15 and December 15 in each year, commencing
December 15,1999, until the principal sum is paid in full. The person in whose
name any of the New Mortgage Bonds of the 2009 Series are registered at the
close of business on any record date (as hereinafter defined) with respect to
any interest payment date shall be entitled to receive the interest payable on
such interest payment date notwithstanding the cancellation of such New Mortgage
Bonds of the 2009 Series upon any transfer or exchange subsequent to the record
date and prior to such interest payment date; provided, however, that if and to
the extent the Company shall default in the payment of the interest due on such
interest payment date, such defaulted interest shall be paid as provided in
Section 3.07 of the Indenture.
The term "record date" as used in this Section with respect to any
interest payment date shall mean the June 1 or December 1, as the case may be,
next preceding the semi-annual interest payment date, or, if such June 1 or
December 1 shall be a legal holiday or a day on which banking institutions in
the City of Chicago, Illinois, are authorized by law to close, then the next
preceding day which shall not be a legal holiday or a day on which such
institutions are so authorized to close.
SECTION 2. The New Mortgage Bonds of the 2009 Series shall be issued
only as registered Bonds without coupons of the denomination of $1,000, or any
integral multiple of $1,000, appropriately numbered. The New Mortgage Bonds of
the 2009 Series may be exchanged, upon surrender thereof, at the agency of the
Company in the City of Chicago, Illinois, for one or more New Mortgage Bonds of
the 2009 Series of other authorized denominations, for the same aggregate
principal amount, subject to the terms and conditions set forth in the
Indenture.
New Mortgage Bonds of the 2009 Series may be exchanged or transferred
without expense to the registered owner thereof except that any taxes or other
governmental charges required to be paid with respect to such transfer or
exchange shall be paid by the registered owner requesting such transfer or
exchange as a condition precedent to the exercise of such privilege.
SECTION 3. The New Mortgage Bonds of the 2009 Series and the Trustee's
Certificate of Authentication shall be substantially in the following forms
respectively:
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[FORM OF FACE OF BOND]
ILLINOIS POWER COMPANY
(Incorporated under the laws of the State of Illinois)
NEW MORTGAGE BOND, 7.50% SERIES DUE 2009
No $250,000,000
ILLINOIS POWER COMPANY, a corporation organized and existing under the
laws of the State of Illinois (the "Company," which term shall include any
successor corporation as defined in the Indenture hereinafter referred to), for
value received, hereby promises to pay to Cede & Co. or registered assigns, the
principal sum of Two Hundred and Fifty Million Dollars ($250,000,000) on June
15, 2009, in any coin or currency of the United States of America which at the
time of payment is legal tender for public and private debts, and to pay
interest thereon in like coin or currency from June 29, 1999, payable
semi-annually on June 15 and December 15 in each year, commencing December 15,
1999, at the rate of SEVEN AND ONE-HALF PER CENT (7.50%) per annum, until the
Company's obligation with respect to the payment of such principal shall be
discharged as provided in the Indenture hereinafter mentioned. The interest so
payable on any June 15 or December 15, will, subject to certain exceptions
provided in the Supplemental Indenture dated as of June 15, 1999, be paid to the
person in whose name this New Mortgage Bond is registered at the close of
business on the immediately preceding June 1 or December 1, as the case may be.
Both principal of, and interest on, this New Mortgage Bond are payable at the
agency of the Company in the City of Chicago, Illinois.
This New Mortgage Bond shall not be entitled to any benefit under the
Indenture or any indenture supplemental thereto, or become valid or obligatory
for any purpose, until the form of certificate endorsed hereon shall have been
signed by or on behalf of Harris Trust and Savings Bank, the Trustee under the
Indenture, or a successor trustee thereto under the Indenture (the "Trustee").
The provisions of this New Mortgage Bond are continued on the reverse
hereof and such continued provisions shall for all purposes have the same effect
as though fully set forth at this place.
Illinois Commerce Commission No. 6120
IN WITNESS WHEREOF, Illinois Power Company has caused this New Mortgage
Bond to be signed (manually or by facsimile signature) in its name by an
Authorized Executive Officer, as defined in the Indenture, and its corporate
seal (or a facsimile thereof) to be hereto affixed and attested (manually or by
facsimile signature) by an Authorized Executive Officer, as defined in the
Indenture.
Dated: ILLINOIS POWER COMPANY,
By:
---------------------------
Authorized Executive Officer
(Corporate Seal)
ATTEST:
- -----------------------------------
Authorized Executive Officer
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<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This New Mortgage Bond is one of the Bonds of the series designated
therein referred to in the within-mentioned Indenture dated as of November 1,
1992 and the Supplemental Indenture dated as of June 15, 1999.
HARRIS TRUST AND SAVINGS BANK,
Trustee
By:
----------------------------
Authorized Signatory
[FORM OF REVERSE OF BOND]
This New Mortgage Bond is one of a duly authorized issue of Bonds of
the Company (the "Bonds") in unlimited aggregate principal amount, of the series
hereinafter specified, all issued and to be issued under and equally secured by
a General Mortgage Indenture and Deed of Trust (the "Indenture"), dated as of
November 1, 1992, executed by the Company to Harris Trust and Savings Bank (the
"Trustee"), as Trustee, to which Indenture and all indentures supplemental
thereto reference is hereby made for a description of the properties mortgaged
and pledged, the nature and extent of the security, the rights of registered
owners of the Bonds and of the Trustee in respect thereof, and the terms and
conditions upon which the Bonds are, and are to be, secured. The Bonds may be
issued in series, for various principal sums, may mature at different times, may
bear interest at different rates and may otherwise vary as provided in the
Indenture. This New Mortgage Bond of the 2009 Series is one of a series
designated as the "New Mortgage Bonds, 7.50% Series Due 2009" (the "New Mortgage
Bonds of the 2009 Series") of the Company, unlimited in aggregate principal
amount, issued under and secured by the Indenture and described in the
supplemental indenture dated as of June 15, 1999 (the "Supplemental Indenture
dated as of June 15, 1999), between the Company and the Trustee, supplemental to
the Indenture.
The New Mortgage Bonds of the 2009 Series are subject to redemption on
the terms and subject to the conditions set forth in the Supplemental Indenture
dated as of June 15, 1999.
In case an Event of Default, as defined in the Indenture, shall occur,
the principal of all the Bonds at any such time outstanding under the Indenture
may be declared or may become due and payable, upon the conditions and in the
manner and with the effect provided in the Indenture. The Indenture provides
that such declaration may be rescinded under certain circumstances.
ARTICLE II.
ISSUE OF NEW MORTGAGE BONDS OF THE 2009 SERIES.
SECTION 1. The Company hereby exercises the right to obtain the
authentication of $250,000,000 principal amount of Bonds pursuant to the terms
of Section 4.02 of the Indenture. All such Bonds shall be New Mortgage Bonds of
the 2009 Series.
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SECTION 2. Such New Mortgage Bonds of the 2009 Series may be
authenticated and delivered prior to the filing for recordation of this
Supplemental Indenture.
ARTICLE III.
REDEMPTION.
The Company at its option may, at any time, redeem the New Mortgage
Bonds of the 2009 Series, in whole or in part (if in part, by lot or by such
other method as the Trustee shall deem fair or appropriate) prior to maturity,
on any date, upon payment of a redemption price equal to the greater of (i) 100%
of the principal amount of the New Mortgage Bonds of the 2009 Series to be
redeemed plus accrued and unpaid interest thereon, if any, from the last
interest payment date to the date of redemption, or (ii) the Make Whole Amount
plus accrued and unpaid interest, if any, from the last interest payment date to
the redemption date.
"Make Whole Amount" means, with respect to a New Mortgage Bond of the
2009 Series at any time, the sum of the present values of the Remaining
Scheduled Payments (as defined below) discounted, on a semiannual basis assuming
a 360-day year consisting of twelve 30-day months), at a rate equal to the
Treasury Rate (as defined below) plus 20 basis points. The Make Whole Amount
shall be computed as of the third Business Day prior to the applicable
redemption date, and certified, by an Investment Banker (as defined below).
"Investment Banker" means an independent investment banking institution
of good standing selected by the Company.
"Remaining Scheduled Payments" means the remaining scheduled payment of
the principal and interest that would be due if such New Mortgage Bonds of the
2009 Series were not redeemed. However, if the redemption date is not a
scheduled interest payment date, the amount of the next succeeding scheduled
interest payment on such New Mortgage Bond of the 2009 Series will be reduced by
the amount of interest accrued on such New Mortgage Bonds of the 2009 Series to
such redemption date.
"Treasury Rate" means an annual rate equal to the semiannual equivalent
yield to maturity of the Comparable Treasury Issue (as defined below), assuming
a price for the Comparable Treasury Issue (expressed as a percentage of its
principal amount) equal to the Comparable Treasury Price (as defined below) for
the redemption date. The semiannual equivalent yield to maturity will be
computed as of the third Business Day immediately preceding the redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by Salomon Smith Barney Inc. or J.P. Morgan Securities Inc. or their
affiliates as having a maturity comparable to the remaining term of the New
Mortgage Bonds of the 2009 Series that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of the New Mortgage Bonds of the 2009 Series.
"Comparable Treasury Price" means the average of three Reference
Treasury Dealer Quotations (as defined below) obtained by the Trustee for the
redemption date.
"Reference Treasury Dealers" means Salomon Smith Barney Inc. and J.P.
Morgan Securities Inc. (so long as they continue to be primary U.S. Government
securities dealers) and
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<PAGE>
any one other primary U.S. Government securities dealer chosen by the Company.
If either Salomon Smith Barney Inc. or J.P. Morgan Securities Inc. ceases to be
a primary U.S. Government securities dealer, the Company will appoint in its
place another nationally recognized investment banking firm that is a primary
U.S. Government securities dealer.
"Reference Treasury Dealer Quotation" means the average, as determined
by the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by a Reference Treasury Dealer at 3:30 p.m., New York
City time, on the third Business Day preceding the redemption date.
ARTICLE IV.
AMENDMENT OF INDENTURE.
Section 7.07(a)(iii)(A) is hereby amended by inserting in the fifth
line thereof the words "and all Retired Bonds" immediately following the words
"Bonds then Outstanding."
ARTICLE V.
THE TRUSTEE.
The Trustee hereby accepts the trusts hereby declared and provided, and
agrees to perform the same upon the terms and conditions in the Indenture set
forth and upon the following terms and conditions:
The Trustee shall not be responsible in any manner whatsoever
for or in respect of the validity or sufficiency of this Supplemental
Indenture or the due execution hereof by the Company or for or in
respect of the recitals contained herein, all of which recitals are
made by the Company solely. In general, each and every term and
condition contained in Article Eleven of the Indenture shall apply to
this Supplemental Indenture with the same force and effect as if the
same were herein set forth in full, with such omissions, variations and
modifications thereof as may be appropriate to make the same conform to
this Supplemental Indenture.
ARTICLE VI.
MISCELLANEOUS PROVISIONS.
This Supplemental Indenture may be simultaneously executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original; but such counterparts shall together constitute but one and the same
instrument.
81
<PAGE>
IN WITNESS WHEREOF, Illinois Power Company has caused this Indenture to
be executed on its behalf by an Authorized Executive Officer as defined in the
Indenture, and its corporate seal to be hereto affixed and said seal and this
Indenture to be attested by an Authorized Executive Officer as defined in the
Indenture; and said Harris Trust and Savings Bank, in evidence of its acceptance
of the trust hereby created, has caused this Indenture to be executed on its
behalf by its President or one of its Vice Presidents and its corporate seal to
be hereto affixed and said seal and this Indenture to be attested by its
Secretary or one of its Assistant Secretaries, all as of the date first written
above.
ILLINOIS POWER COMPANY
By
-----------------------------
(CORPORATE SEAL) Robert A. Schultz
Vice President - Finance
ATTEST:
- ------------------------------
Leah Manning Stetzner
Corporate Secretary
HARRIS TRUST AND SAVINGS BANK,
Trustee
By
----------------------------
J. Bartolini
Vice President
(CORPORATE SEAL)
ATTEST:
- ----------------------------
C. Potter
Assistant Secretary
82
<PAGE>
STATE OF ILLINOIS )
)SS.:
COUNTY OF MACON )
BE IT REMEMBERED, that on this ___ day of _____, 1999, before me, the
undersigned, a Notary Public within and for the County and State aforesaid,
personally came Robert A. Schultz, Vice President - Finance and Leah Manning
Stetzner, Corporate Secretary, of Illinois Power Company, a corporation duly
organized, incorporated and existing under the laws of the State of Illinois,
who are personally known to me to be such officers, and who are personally known
to me to be the same persons who executed as such officers the within instrument
of writing, and such persons duly acknowledged that they signed, sealed and
delivered the said instrument as their free and voluntary act as such officers,
and as the free and voluntary act of said Illinois Power Company for the uses
and purposes therein set forth.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my
official seal on the day and year last above written.
Notary Public, Macon County, Illinois
My Commission Expires _______________.
(NOTARIAL SEAL)
STATE OF ILLINOIS )
)SS.:
COUNTY OF COOK )
BE IT REMEMBERED, that on this ____ day of ______, 1999, before me, the
undersigned, a Notary Public within and for the County and State aforesaid,
personally came J. Bartolini, Vice President and C. Potter, Assistant Secretary,
of Harris Trust and Savings Bank, a corporation duly organized, incorporated and
existing under the laws of the State of Illinois, who are personally known to me
to be such officers, and who are personally known to me to be the same persons
who executed as such officers the within instrument of writing, and such persons
duly acknowledged that they signed, sealed and delivered the said instrument as
their free and voluntary act as such officers, and as the free and voluntary act
of said Harris Trust and Savings Bank for the uses and purposes therein set
forth.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my
official seal on the day and year last above written.
Notary Public, Cook County, Illinois
My Commission Expires _____________.
(NOTARIAL SEAL)
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<PAGE>
Return To: This Instrument Was Prepared By:
ILLINOIS POWER COMPANY SCHIFF HARDIN & WAITE
Real Estate Dept. F-14 6600 Sears Tower
500 S. 27th Street 233 South Wacker Drive
Decatur, IL 62525 Chicago, IL 60606
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<PAGE>
Exhibit 4.3
ILLINOIS POWER COMPANY
TO
HARRIS TRUST AND SAVINGS BANK,
as Trustee
SUPPLEMENTAL INDENTURE NO. 1
DATED AS OF JULY 15, 1999
TO
MORTGAGE AND DEED OF TRUST
DATED NOVEMBER 1, 1943
85
<PAGE>
Supplemental Indenture No. 1 dated as of July 15, 1999 (the "Supplemental
Indenture No. 1"), made by and between ILLINOIS POWER COMPANY, a corporation
organized and existing under the laws of the State of Illinois (the "Company"),
party of the first part, and HARRIS TRUST AND SAVINGS BANK, a corporation
organized and existing under the laws of the State of Illinois (the "Trustee"),
as Trustee under the Mortgage and Deed of Trust dated November 1, 1943,
hereinafter mentioned, party of the second part;
WHEREAS, the Company has heretofore executed and delivered its Mortgage
and Deed of Trust dated November 1, 1943 ("Original Indenture"), to the Trustee,
for the security of the First Mortgage Bonds of the Company issued and to be
issued thereunder (the "Bonds"); and
WHEREAS, pursuant to the terms and provisions of the Original Indenture
there were created and authorized by Supplemental Indentures thereto bearing the
following dates, respectively, the First Mortgage Bonds of the series issued
thereunder and respectively identified opposite such dates:
Date of Supplemental Identification
Indenture of Series Called
November 1, 1943 4% Series due 1973 Bonds of the 1973 Series
(redeemed)
March 1, 1946 2 7/8% Series due 1976 Bonds of the 1976 Series
(paid at maturity)
February 1, 1948 3 1/2% Series due 1978 Bonds of the 1978 Series
(paid at maturity)
July 1, 1949 2 7/8% Series due 1979 Bonds of the 1979 Series
(paid at maturity)
April 1, 1950 2 3/4% Series due 1980 Bonds of the 1980 Series
(paid at maturity)
March 1, 1952 3 1/2% Series due 1982 Bonds of the 1982 Series
(paid at maturity)
November 1, 1953 3 1/2% Series due 1983 Bonds of the 1983 Series
(paid at maturity)
July 1, 1956 3 3/4% Series due 1986 Bonds of the 1986 Series
(paid at maturity)
May 1, 1958 4% Series due 1988 Bonds of the 1988 Series
(redeemed)
January 1, 1963 4 1/4% Series due 1993 Bonds of the 1993 Series
(paid at maturity)
October 1, 1966 5.85% Series due 1996 Bonds of the 1996 Series
(paid at maturity)
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<PAGE>
Date of Supplemental Identification
Indenture of Series Called
January 1, 1968 6 3/8% Series due 1998 Bonds of the First 1998 Series
(redeemed)
October 1, 1968 6 3/4% Series due 1988 Bonds of the Second 1998 Series
(redeemed)
October 1, 1969 8.35% Series due 1999 Bonds of the First 1999 Series
(redeemed)
November 1, 1970 9% Series due 2000 Bonds of the 2000 Series
(redeemed)
October 1, 1971 7.60% Series due 2001 Bonds of the 2001 Series
(redeemed)
June 1, 1973 7 5/8% Series due 2003 Bonds of the First 2003 Series
(redeemed)
May 1, 1974 Pollution Control Bonds of the Pollution Control
Series A Series A
September 1, 1974 10 1/2% Series due 2004 Bonds of the First 2004 Series
(redeemed)
July 1, 1976 8 3/4% Series due 2006 Bonds of the 2006 Series
(redeemed)
May 1, 1977 Pollution Control Series B Bonds of Pollution Control
(redeemed) Series B
November 1, 1977 8 1/4% Series due 2007 Bonds of the 2007 Series
(redeemed)
August 1, 1978 8 7/8% Series due 2008 Bonds of the 2008 Series
(redeemed)
July 1, 1979 9 7/8% Series due 2004 Bonds of the Second 2004 Series
(redeemed)
July 31, 1980 11 3/8% Series due 1987 Bonds of the 1987 Series
(redeemed)
August 1, 1980 12 5/8% Series due 2010 Bonds of the 2010 Series
(redeemed)
July 1, 1982 14 1/2% Series due 1990 Bonds of the 1990 Series
(redeemed)
November 1, 1982 12% Series due 2012 Bonds of the 2012 Series
(redeemed)
87
<PAGE>
Date of Supplemental Identification
Indenture of Series Called
December 15, 1983 Pollution Control Series C Bonds of the Pollution Control
(redeemed) Series C
May 15, 1984 Pollution Control Series D Bonds of the Pollution Control
(redeemed) Series D
March 1, 1985 Pollution Control Series E Bonds of the Pollution Control
(redeemed) Series E
February 1, 1986 10 1/2% Series due 2016 Bonds of the First 2016 Series
(redeemed)
July 1, 1986 9 7/8% Series due 2016 Bonds of the Second 2016 Series
(redeemed)
September 1, 1986 9 3/8% Series due 2016 Bonds of the Third 2016 Series
(redeemed)
February 1, 1987 Pollution Control Series F Bonds of the Pollution Control
(redeemed) Series F
February 1, 1987 Pollution Control Series G Bonds of the Pollution Control
(redeemed) Series G
February 1, 1987 Pollution Control Series H Bonds of the Pollution Control
(redeemed) Series H
July 1, 1987 Pollution Control Series I Bonds of the Pollution Control
(redeemed) Series I
July 1, 1988 10% Series due 1998 Bonds of the Third 1998 Series
(redeemed)
July 1, 1991 Pollution Control Series J Bonds of the Pollution Control
Series J
June 1, 1992 Pollution Control Series K Bonds of the Pollution Control
Series K
June 1, 1992 Pollution Control Series L Bonds of the Pollution Control
Series L
July 1, 1992 7.95% Series due 2004 Bonds of the Third 2004 Series
July 1, 1992 8 3/4% Series due 2021 Bonds of the 2021 Series
(redeemed)
September 1, 1992 6 1/2% Series due 1999 Bonds of the 1999 Series
88
<PAGE>
Date of Supplemental Identification
Indenture of Series Called
February 15, 1993 8% Series due 2023 Bonds of the 2023 Series
(redeemed)
March 15, 1993 6 1/8% Series due 2000 Bonds of the 2000 Series
March 15, 1993 6 3/4% Series due 2005 Bonds of the 2005 Series
July 15, 1993 7 1/2% Series due 2025 Bonds of the 2025 Series
August 1, 1993 6 1/2% Series due 2003 Bonds of the Second 2003 Series
October 15, 1993 5 5/8% Series due 2000 Bonds of the Second 2000 Series
November 1, 1993 Pollution Control Series M Bonds of the Pollution Control
Series M
November 1, 1993 Pollution Control Series N Bonds of the Pollution Control
Series N
November 1, 1993 Pollution Control Series O Bonds of the Pollution Control
Series O
April 1, 1997 Pollution Control Series P Bonds of the Pollution Control
Series P
April 1, 1997 Pollution Control Series Q Bonds of the Pollution Control
Series Q
April 1, 1997 Pollution Control Series R Bonds of the Pollution Control
Series R
March 1, 1998 Pollution Control Series S Bonds of the Pollution Control
Series S
March 1, 1998 Pollution Control Series T Bonds of the Pollution Control
Series T
July 15, 1998 6 1/4% Series due 2002 Bonds of the 2002 Series
September 15, 1998 6% Series due 2003 Bonds of the Third 2003 Series
June 15, 1999 7.50% Series due 2009 Bonds of the 2009 Series
and
WHEREAS, the Company desires to create a new series of Bonds to be
issued under the Original Indenture, to be known as First Mortgage Bonds,
Pollution Control Series U (the "Pollution Control Series U Bonds") and to issue
additional Bonds under the Original Indenture; and
89
<PAGE>
WHEREAS, the Pollution Control Series U Bonds are to be issued to
Harris Trust and Savings Bank, as trustee (the "New Mortgage Trustee") under the
Company's General Mortgage Indenture and Deed of Trust dated as of November 1,
1992 (the "New Mortgage") and are to be owned and held by the New Mortgage
Trustee as "Pledged Bonds" (as defined in the New Mortgage) in accordance with
the terms of the New Mortgage; and
WHEREAS, the Company, in the exercise of the powers and authority
conferred upon and reserved to it under the provisions of the Original
Indenture, and pursuant to appropriate resolutions of the Board of Directors,
has duly resolved and determined to make, execute and deliver to the Trustee a
Supplemental Indenture No. 1 in the form hereof for the purposes herein
provided; and
WHEREAS, all conditions and requirements necessary to make this
Supplemental Indenture No. 1 a valid, binding and legal instrument have been
done, performed and fulfilled and the execution and delivery hereof have been in
all respects duly authorized;
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE NO. 1 WITNESSETH:
THAT Illinois Power Company, in consideration of the purchase and
ownership from time to time of the Bonds and the service by the Trustee, and its
successors, under the Original Indenture and of One Dollar to it duly paid by
the Trustee at or before the ensealing and delivery of these presents, the
receipt whereof is hereby acknowledged, hereby covenants and agrees to and with
the Trustee and its successors in the trust under the Original Indenture, for
the benefit of the New Trustee and any successor holder of the Bonds as follows:
ARTICLE I.
DESCRIPTION OF POLLUTION CONTROL SERIES U BONDS.
SECTION 1. The Company hereby creates a new series of Bonds to be known
as First Mortgage Bonds, Pollution Control Series U (the "Pollution Control
Series U Bonds"). The Pollution Control Series U Bonds shall be executed,
authenticated and delivered in accordance with the provisions of, and shall in
all respects be subject to, all of the terms, conditions and covenants of the
Original Indenture, as supplemented and modified. The Pollution Control Series U
Bonds will be issued only to the New Mortgage Trustee as security for a series
of bonds being issued under the Company's New Mortgage and the supplemental
indenture no. 1 to the New Mortgage dated as of July 15, 1999 (the "New Mortgage
Pollution Control Series U Bonds") and in the same principal amount as the New
Mortgage Pollution Control Series U Bonds.
The Pollution Control Series U Bonds shall be dated as provided in
Section 6 of Article II of the Original Indenture, and the commencement of the
first interest period shall be the date of issuance. All Pollution Control
Series U Bonds shall mature on February 1, 2024, and shall bear interest at the
rate of five and seven-tenths percent (5.70%) per annum, payable semi-annually
on February 1 and August 1 of each year until the principal sum is paid in full.
Any payment by the Company of principal of, or premium or interest on, any
Pollution Control Series U Bonds shall be applied by the New Mortgage Trustee to
the payment of any principal, premium or interest, as the case may be, in
respect of the New Mortgage Pollution Control Series U Bonds due in accordance
with the terms of the New Mortgage.
SECTION 2. The Pollution Control Series U Bonds and the Trustee's
Certificate shall be substantially in the following forms respectively:
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<PAGE>
[FORM OF FACE OF BOND]
ILLINOIS POWER COMPANY
(Incorporated under the laws of the State of Illinois)
FIRST MORTGAGE BOND, POLLUTION CONTROL SERIES U
No. __________ $35,615,000
ILLINOIS POWER COMPANY, a corporation organized and existing under the
laws of the State of Illinois (the "Company," which term shall include any
successor corporation as defined in the Indenture hereinafter referred to), for
value received, hereby promises to pay to Harris Trust and Savings Bank as
trustee (the "New Mortgage Trustee") under the Company's General Mortgage
Indenture and Deed of Trust dated as of November 1, 1992 (the "New Mortgage") or
its registered assigns, the principal sum of Thirty Five Million Six Hundred
Fifteen Thousand Dollars ($35,615,000) on February 1, 2024, in any coin or
currency of the United States of America which at the time of payment is legal
tender for public and private debts, and to pay interest thereon in like coin or
currency from the date of issuance, payable semi-annually on February 1 and
August 1 in each year, at the rate of five and seven-tenths percent (5.70%) per
annum, until the Company's obligation with respect to the payment of such
principal shall be discharged as provided in the Indenture. Both the principal
of, and the interest on, this Bond are payable at the agency of the Company in
the City of Chicago, Illinois.
This First Mortgage Bond shall not be entitled to any benefit under the
Indenture or any indenture supplemental thereto, or become valid or obligatory
for any purpose, until the form of certificate endorsed hereon shall have been
signed by or on behalf of Harris Trust and Savings Bank, the Trustee under the
Indenture, or a successor trustee thereto under the Indenture (the "Trustee").
The provisions of this First Mortgage Bond are continued on the reverse
hereof and such continued provisions shall for all purposes have the same effect
as though fully set forth at this place.
IN WITNESS WHEREOF, Illinois Power Company has caused this First
Mortgage Bond to be signed (manually or by facsimile signature) in its name by
its President or a Vice President, and its corporate seal (or a facsimile
thereof) to be hereto affixed and attested (manually or by facsimile signature)
by its Secretary or an Assistant Secretary.
Dated: July __, 1999 ILLINOIS POWER COMPANY
By:
----------------------------
Vice President
(Corporate Seal)
ATTEST:
- -------------------------------------
Secretary or Assistant Secretary
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<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE]
This First Mortgage Bond is one of the Bonds of the series designated
therein, described in the within-mentioned Indenture and the Supplemental
Indenture No. 1 dated as of July 15, 1999.
HARRIS TRUST AND SAVINGS BANK,
Trustee
By:
----------------------------
Authorized Officer
[FORM OF REVERSE OF BOND)
This First Mortgage Bond is one of a duly authorized issue of Bonds of
the Company (the "Bonds") in unlimited aggregate principal amount, of the series
hereinafter specified, all issued and to be issued under and equally secured by
the Mortgage and Deed of Trust (the "Indenture"), dated November 1, 1943,
executed by the Company to Harris Trust and Savings Bank (the "Trustee"), as
Trustee, to which Indenture and all indentures supplemental thereto, including
the Supplemental Indenture dated February 15, 1993, which amended Section 1 of
Article IX of the Indenture, reference is hereby made for a description of the
properties mortgaged and pledged, the nature and extent of the security, the
rights of the registered owners of the Bonds and of the Trustee in respect
thereof, and the terms and conditions upon which the Bonds are, and are to be,
secured. The Bonds may be issued in series, for various principal sums, may
mature at different times, may bear interest at different rates and may
otherwise vary as in the Indenture provided. This First Mortgage Bond is one of
a series designated as the First Mortgage Bonds, Pollution Control Series U (the
"Pollution Control Series U Bonds") of the Company, unlimited in aggregate
principal amount, issued under and secured by the Indenture and described in the
supplemental indenture no. 1 dated as of July 15, 1999 (the "Supplemental
Indenture No. 1 of July 15, 1999"), between the Company and the Trustee,
supplemental to the Indenture.
To the extent permitted by, and as provided in, the Indenture,
modifications or alterations of the Indenture, or of any indenture supplemental
thereto, and of the rights and obligations of the Company and of the holders of
the Bonds and coupons may be made with the consent of the Company by an
affirmative vote of the holders of not less than 66 2/3% in amount of the Bonds
entitled to vote then outstanding, at a meeting of Bondholders called and held
as provided in the Indenture, and by an affirmative vote of the holders of not
less than 66 2/3% in amount of the Bonds of any series entitled to vote then
outstanding and affected by such modification or alteration, in case one or more
but less than all of the series of Bonds then outstanding under the Indenture
are so affected; provided however, that no such modification or alteration shall
be made which will affect the terms of payment of the principal of, or interest
or premium, if any, on this First Mortgage Bond.
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<PAGE>
The Pollution Control Series U Bonds are subject to redemption in
accordance with the terms of Article III of the Supplemental Indenture No. 1 of
July 15, 1999.
In case an Event of Default, as defined in the Indenture, shall occur,
the principal of all the Bonds at any such time outstanding under the Indenture
may be declared or may become due and payable, upon the conditions and in the
manner and with the effect provided in the Indenture. The Indenture provides
that such declaration may in certain events be rescinded by the holders of a
majority in principal amount of the Bonds outstanding.
No recourse shall be had for the payment of the principal of, or
premium or interest on this First Mortgage Bond, or for any claim based hereon
or on the Indenture or any indenture supplemental thereto, against any
incorporator, or against any stockholder, director or officer, as such, past,
present or future, of the Company, or of any predecessor or successor
corporation, either directly or through the Company or any such predecessor or
successor corporation, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise, all such
liability, whether at common law, in equity, by any constitution, statute, rule
of law, or otherwise, of incorporators, stockholders, directors or officers
being released by every owner hereof by the acceptance of this First Mortgage
Bond and as part of the consideration for the issue hereof, and being likewise
released by the terms of the Indenture; provided, however, that nothing herein
or in the Indenture or any indenture supplemental thereto contained shall
prevent the enforcement of the liability, if any, of any stockholder or
subscriber to capital stock upon or in respect of shares of capital stock not
fully paid up.
Notwithstanding any provision in the Indenture, the Supplemental
Indenture No. 1 of July 15, 1999 or this First Mortgage Bond to the contrary,
any payment by the Company under the New Mortgage of principal of, or premium or
interest on, bonds which shall have been authenticated and delivered under the
New Mortgage (the "New Mortgage Pollution Control Series U Bonds") upon the
basis of the issuance and delivery to the New Mortgage Trustee of the Pollution
Control Series U Bonds shall, to the extent thereof, be deemed to satisfy and
discharge the obligation of the Company to make a payment of principal, premium
or interest, as the case may be, in respect of this First Mortgage Bond which is
then due.
This First Mortgage Bond constitutes a "Pledged Bond" (as defined in
the New Mortgage) and is subject to all of the rights and restrictions
applicable to Pledged Bonds as set forth in the New Mortgage. Without limiting
the generality of the foregoing, this First Mortgage Bond shall be subject to
surrender by the New Mortgage Trustee in accordance with the provisions of
Section 7.03 of the New Mortgage. To the extent that any provisions in the
Indenture, the Supplemental Indenture of July 15, 1999 or this First Mortgage
Bond are inconsistent with the provisions relating to Pledged Bonds that are set
forth in the New Mortgage, the provisions of the New Mortgage shall apply.
SECTION 3. Notwithstanding any provision in the Original Indenture,
this Supplemental Indenture No. 1, or the Pollution Control Series U Bonds to
the contrary, any payment by the Company under the New Mortgage of principal of,
or premium or interest on, New Mortgage Pollution Control Series U Bonds shall,
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to the extent thereof, be deemed to satisfy and discharge the obligation of the
Company to make any payment of principal, premium or interest, as the case may
be, in respect of the Pollution Control Series U Bonds which is then due.
SECTION 4. The Pollution Control Series U Bonds constitute "Pledged
Bonds" (as defined in the New Mortgage) and are subject to all of the rights and
restrictions applicable to Pledged Bonds as set forth in the New Mortgage.
Without limiting the generality of the foregoing, the Pollution Control Series U
Bonds shall be subject to surrender by the New Mortgage Trustee in accordance
with the provisions of Section 7.03 of the New Mortgage. To the extent that any
provisions in the Original Indenture, this Supplemental Indenture No. 1 or the
Pollution Control Series U Bonds are inconsistent with the provisions relating
to Pledged Bonds that are set forth in the New Mortgage, the provisions of the
New Mortgage shall apply.
ARTICLE II.
ISSUE OF POLLUTION CONTROL SERIES U BONDS.
SECTION 1. The Company hereby exercises the right to obtain the
authentication of $35,615,000 principal amount of additional Bonds pursuant to
the terms of Section 6 of Article III of the Original Indenture in substitution
for refundable Bonds.
All such additional Bonds shall be Pollution Control Series U Bonds.
SECTION 2. Such Pollution Control Series U Bonds may be authenticated
and delivered prior to the filing for recordation of this Supplemental Indenture
No. 1.
SECTION 3. Notwithstanding any provision in the Original Indenture to
the contrary, execution of the Pollution Control Series U Bonds on behalf of the
Company, and the attesting of the corporate seal of the Company affixed to the
Pollution Control Series U Bonds by the officers of the Company authorized to do
such acts by Section 12 of Article II of the Original Indenture may be validly
done either by the manual or the facsimile signatures of such authorized
officers of the Company.
ARTICLE III.
REDEMPTION.
The Pollution Control Series U Bonds shall, subject to the provisions
of the Original Indenture, be redeemable on the same terms, on the same dates
and in the same manner as the New Mortgage Pollution Control Series U Bonds
shall be redeemed under the terms of supplemental indenture no. 1 to the New
Mortgage dated as of July 15, 1999.
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ARTICLE IV.
THE TRUSTEE.
The Trustee hereby accepts the trusts hereby declared and provided, and
agrees to perform the same upon the terms and conditions in the Original
Indenture set forth and upon the following terms and conditions:
The Trustee shall not be responsible in any manner whatsoever
for or in respect of the validity or sufficiency of this Supplemental
Indenture No. 1 or the due execution hereof by the Company or for or in
respect of the recitals contained herein, all of which recitals are
made by the Company solely. In general, each and every term and
condition contained in Article XIII of the Original Indenture shall
apply to this Supplemental Indenture No. 1 with the same force and
effect as if the same were herein set forth in full, with such
omissions, variations and modifications thereof as may be appropriate
to make the same conform to this Supplemental Indenture No. 1.
ARTICLE V.
MISCELLANEOUS PROVISIONS.
This Supplemental Indenture No. 1 may be simultaneously executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original; but such counterparts shall together constitute but one and the same
instrument.
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IN WITNESS WHEREOF, Illinois Power Company has caused this Supplemental
Indenture No. 1 to be executed on its behalf by its Chairman and President, one
of its Executive Vice Presidents, one of its Senior Vice Presidents or one of
its Vice Presidents and its corporate seal to be hereto affixed and said seal
and this Supplemental Indenture No. 1 to be attested by its Secretary or one of
its Assistant Secretaries; and said Harris Trust and Savings Bank, in evidence
of its acceptance of the trust hereby created, has caused this Supplemental
Indenture No. 1 to be executed on its behalf by its President or one of its Vice
Presidents and its corporate seal to be hereto affixed and said seal and this
Supplemental Indenture No. 1 to be attested by its Secretary or one of its
Assistant Secretaries, all as of the date first above written.
ILLINOIS POWER COMPANY
By
-----------------------------
Robert A. Schultz
Vice President-Finance
(CORPORATE SEAL)
ATTEST:
- ------------------------
Leah Manning Stetzner
Corporate Secretary
HARRIS TRUST AND SAVINGS BANK, Trustee
By
------------------------------------
J. Bartolini
Vice President
(CORPORATE SEAL)
ATTEST:
- ------------------------
C. Potter
Assistant Secretary
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STATE OF ILLINOIS )
) SS.:
COUNTY OF MACON )
BE IT REMEMBERED, that on this ____ day of July, 1999, before me, the
undersigned, a Notary Public within and for the County and State aforesaid,
personally came Robert A. Schultz, Vice President-Finance and Leah Manning
Stetzner, Corporate Secretary, of Illinois Power Company, a corporation duly
organized, incorporated and existing under the laws of the State of Illinois,
who are personally known to me to be such officers, and who are personally known
to me to be the same persons who executed as such officers the within instrument
of writing, and such persons duly acknowledged that they signed, sealed and
delivered the said instrument as their free and voluntary act as such officers
and as the free and voluntary act of said Illinois Power Company for the uses
and purposes therein set forth.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my
official seal on the day and year last above written.
Notary Public, Macon County, Illinois
My Commission Expires on _____________.
(NOTARIAL SEAL)
STATE OF ILLINOIS )
) SS.:
COUNTY OF COOK )
BE IT REMEMBERED, that on this ____ day of July, 1999, before me, the
undersigned, a Notary Public within and for the County and State aforesaid,
personally came J. Bartolini, Vice President and C. Potter, Assistant Secretary,
of Harris Trust and Savings Bank, a corporation duly organized, incorporated and
existing under the laws of the State of Illinois, who are personally known to me
to be the same persons who executed as such officers the within instrument of
writing, and such persons duly acknowledged that they signed, sealed and
delivered the said instrument as their free and voluntary act as such officers,
and as the free and voluntary act of said Harris Trust and Savings Bank for the
uses and purposes therein set forth.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my
official seal on the day and year last above written.
Notary Public, Cook County, Illinois
My Commission Expires on ____________.
(NOTARIAL SEAL)
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Return To: This Instrument Was Prepared By:
ILLINOIS POWER COMPANY SCHIFF HARDIN & WAITE
Real Estate Dept. F-14 6600 Sears Tower
500 S. 27th Street 233 South Wacker Drive
Decatur, IL 62525 Chicago, IL 60606
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Exhibit 4.4
ILLINOIS POWER COMPANY
TO
HARRIS TRUST AND SAVINGS BANK,
as Trustee
------------------
SUPPLEMENTAL INDENTURE NO. 1
DATED AS OF JULY 15, 1999
TO
GENERAL MORTGAGE INDENTURE AND DEED OF TRUST
DATED AS OF NOVEMBER 1, 1992
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Supplemental Indenture No. 1 dated as of July 15, 1999 (the "Supplemental
Indenture No. 1"), made by and between ILLINOIS POWER COMPANY, a corporation
organized and existing under the laws of the State of Illinois (the "Company"),
party of the first part, and HARRIS TRUST AND SAVINGS BANK, a corporation
organized and existing under the laws of the State of Illinois (the "Trustee"),
as Trustee under the General Mortgage indenture and Deed of Trust dated as of
November 1, 1992, hereinafter mentioned, party of the second part;
WHEREAS, the Company has heretofore executed and delivered its General
Mortgage Indenture and Deed of Trust dated as of November 1, 1992 (the
"Indenture"), to the Trustee, for the security of the Bonds of the Company
issued and to be issued thereunder (the "Bonds"); and
WHEREAS, pursuant to the terms and provisions of the Indenture there
were created and authorized by Supplemental Indentures thereto bearing the
following dates, respectively, the New Mortgage Bonds of the series issued
thereunder and respectively identified opposite such dates:
Date of Supplemental Identification
Indenture of Series Called
- ------------------ -------------- ------
February 15, 1993 8% Series due 2023 Bonds of the 2023 Series
March 15, 1993 6 1/8% Series due 2000 Bonds of the 2000 Series
March 15, 1993 6 3/4% Series due 2005 Bonds of the 2005 Series
July 15, 1993 7 1/2% Series due 2025 Bonds of the 2025 Series
August 1, 1993 6 1/2% Series due 2003 Bonds of the First 2003 Series
October 15, 1993 5 5/8% Series due 2000 Bonds of the Second 2000 Series
November 1, 1993 Pollution Control Series M Bonds of the Pollution Control
Series M
November 1, 1993 Pollution Control Series N Bonds of the Pollution Control
Series N
November 1, 1993 Pollution Control Series O Bonds of the Pollution Control
Series O
April 1, 1997 Pollution Control Series P Bonds of the Pollution Control
Series P
April 1, 1997 Pollution Control Series Q Bonds of the Pollution Control
Series Q
April 1, 1997 Pollution Control Series R Bonds of the Pollution Control
Series R
March 1, 1998 Pollution Control Series S Bonds of the Pollution Control
Series S
March 1, 1998 Pollution Control Series T Bonds of the Pollution Control
Series T
July 15, 1998 6 1/4% Series due 2002 Bonds of the 2002 Series
September 15, 1998 6% Series due 2003 Bonds of the Second 2003 Series
June 15, 1999 7.50% Series due 2009 Bonds of the 2009 Series
WHEREAS, the Company desires to create a new series of Bonds to be
issued under the Indenture, to be known as New Mortgage Bonds, Pollution Control
Series U (the "Pollution Control Series U Bonds"); and
WHEREAS, the Company will deliver the Pollution Control Series U Bonds
to, and register them in the name of, Harris Trust and Savings Bank, as trustee
under the Indenture of Trust dated as of June 1, 1992 (the "Revenue Bond
Indenture"), between the Illinois Development Finance Authority (the
"Authority") and Harris Trust and Savings Bank, as Trustee, in substitution for
the Company's First Mortgage Bonds, Pollution Control Series K, as provided in
Section 4.2 of the Loan Agreement dated as of June 1, 1992 by and between the
Authority and the Company;
WHEREAS, the Company, in the exercise of the powers and authority
conferred upon and reserved to it under the provisions of the Indenture, and
pursuant to appropriate resolutions of the Board of Directors, has duly resolved
and determined to make, execute and deliver to the Trustee a Supplemental
Indenture in the form hereof for the purposes herein provided; and
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WHEREAS, all conditions and requirements necessary to make this
Supplemental Indenture No. 1 a valid, binding and legal instrument have been
done, performed and fulfilled and the execution and delivery hereof have been in
all respects duly authorized;
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE NO. 1 WITNESSETH:
THAT Illinois Power Company, in consideration of the purchase and
ownership from time to time of the Bonds and the service by the Trustee, and its
successors, under the Indenture and of One Dollar to it duly paid by the Trustee
at or before the ensealing and delivery of these presents, the receipt whereof
is hereby acknowledged, hereby covenants and agrees to and with the Trustee and
its successors in the trust under the Indenture, for the benefit of those who
shall hold the Bonds as follows:
ARTICLE I.
DESCRIPTION OF POLLUTION CONTROL SERIES U BONDS.
SECTION 1. The Company hereby creates a new series of Bonds to be known
as "New Mortgage Bonds, Pollution Control Series U." The Pollution Control
Series U Bonds shall be executed, authenticated and delivered in accordance with
the provisions of, and shall in all respects be subject to, all of the terms,
conditions and covenants of the Indenture, as supplemented and modified.
The Pollution Control Series U Bonds shall be dated as provided in
Section 3.03 of Article Three of the Indenture, and the commencement of the
first interest period shall be the date of issuance. All Pollution Control
Series U Bonds shall mature on February 1, 2024, and shall bear interest at the
rate of five and seven-tenths per cent (5.70%) per annum, payable semi-annually
on February 1 and August 1 in each year. The Pollution Control Series U Bonds
shall be payable as to principal and interest in any coin or currency of the
United States of America which at the time of payment is legal tender for public
and private debts, and shall be payable (as well the interest and the principal
thereof) at the agency of the Company in the City of Chicago, Illinois. The
person in whose name the Pollution Control Series U Bonds are registered at the
close of business on any record date (as hereinafter defined) with respect to
any interest payment date shall be entitled to receive the interest payable on
such interest payment date notwithstanding the cancellation of such Pollution
Control Series U Bonds upon any transfer or exchange subsequent to the record
date and prior to such interest payment date; provided, however, that if and to
the extent the Company shall default in the payment of the interest due on such
interest payment date, such defaulted interest shall be paid as provided in
Section 3.07 of the Indenture.
The term "record date" as used in this Section with respect to any
interest payment date shall mean the January 15 or July 15, as the case may be,
next preceding the semi-annual interest payment date, or, if such January 15 or
July 15, shall be a legal holiday or a day on which banking institutions in the
City of Chicago, Illinois, are authorized by law to close, then the next
preceding day which shall not be a legal holiday or a day on which such
institutions are so authorized to close.
SECTION 2. The Pollution Control Series U Bonds shall be issued only as
registered Bonds without coupons of the denomination of $5,000, or any integral
multiple of $5,000, appropriately numbered. Pollution Control Series U Bonds may
be exchanged, upon surrender thereof, at the agency of the Company in the City
of Chicago, Illinois, for one or more Pollution Control Series U Bonds of other
authorized denominations, for the same aggregate principal amount, subject to
the terms and conditions set forth in the Indenture.
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Pollution Control Series U Bonds may be exchanged or transferred
without expense to the registered owner thereof except that any taxes or other
governmental charges required to be paid with respect to such transfer or
exchange shall be paid by the registered owner requesting such transfer or
exchange as a condition precedent to the exercise of such privilege.
SECTION 3. The Pollution Control Series U Bonds and the Trustee's
Certificate of Authentication shall be substantially in the following forms
respectively:
[FORM OF FACE OF BOND]
ILLINOIS POWER COMPANY
(Incorporated under the laws of the State of Illinois)
NEW MORTGAGE BOND, POLLUTION CONTROL SERIES U
No. $35,615,000
ILLINOIS POWER COMPANY, a corporation organized and existing under the laws
of the State of Illinois (the "Company," which term shall include any successor
corporation as defined in the Indenture hereinafter referred to), for value
received, hereby promises to pay to . . . . . . or registered assigns, the
principal sum of Thirty-Five Million Six Hundred Fifteen Thousand Dollars
($35,615,000) on February 1, 2024, in any coin or currency of the United States
of America which at the time of payment is legal tender for public and private
debts, and to pay interest thereon in like coin or currency from the date of
issuance, payable semi-annually on February 1 and August 1 in each year, at the
rate of five and seven-tenths per cent (5.70%) per annum, until the Company's
obligation with respect to the payment of such principal shall be discharged as
provided in the Indenture hereinafter mentioned. The interest so payable on any
February 1 or August 1 will, subject to certain exceptions provided in the
Supplemental Indenture No. 1 of July 15, 1999, be paid to the person in whose
name this New Mortgage Bond is registered at the close of business on the
immediately preceding January 15 or July 15, as the case may be. Both principal
of, and interest on, this New Mortgage Bond are payable at the agency of the
Company in the City of Chicago, Illinois.
This New Mortgage Bond shall not be entitled to any benefit under the
Indenture or any indenture supplemental thereto, or become valid or obligatory
for any purpose, until the form of certificate endorsed hereon shall have been
signed by or on behalf of Harris Trust and Savings Bank, the Trustee under the
Indenture, or a successor trustee thereto under the Indenture (the "Trustee").
The provisions of this New Mortgage Bond are continued on the reverse
hereof and such continued provisions shall for all purposes have the same effect
as though fully set forth at this place.
Illinois Commerce Commission No. 6121
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IN WITNESS WHEREOF, Illinois Power Company has caused this New Mortgage
Bond to be signed (manually or by facsimile signature) in its name by an
Authorized Executive Officer, as defined in the Indenture, and its corporate
seal (or a facsimile thereof) to be hereto affixed and attested (manually or by
facsimile signature) by an Authorized Executive Officer, as defined in the
Indenture.
Dated: July __, 1999 ILLINOIS POWER COMPANY
By:
----------------------------
Authorized Executive Officer
(Corporate Seal)
ATTEST:
- -------------------------------
Authorized Executive Officer
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This New Mortgage Bond is one of the Bonds of the series designated
therein referred to in the within-mentioned Indenture dated as of November 1,
1992 and the Supplemental Indenture No. 1 of July 15, 1999.
HARRIS TRUST AND SAVINGS BANK,
Trustee
By:
---------------------------
Authorized Signatory
[FORM OF REVERSE OF BOND]
This New Mortgage Bond is one of a duly authorized issue of Bonds of
the Company (the "Bonds") in unlimited aggregate principal amount, of the series
hereinafter specified, all issued and to be issued under and equally secured by
a General Mortgage Indenture and Deed of Trust (the "Indenture"), dated as of
November 1, 1992, executed by the Company to Harris Trust and Savings Bank (the
"Trustee"), as Trustee, to which Indenture and all indentures supplemental
thereto reference is hereby made for a description of the properties mortgaged
and pledged, the nature and extent of the security, the rights of registered
owners of the Bonds and of the Trustee in respect thereof, and the terms and
conditions upon which the Bonds are, and are to be, secured. The Bonds may be
issued in series, for various principal sums, may mature at different times, may
bear interest at different rates and may otherwise vary as provided in the
Indenture. This New Mortgage Bond is one of a series designated as the "New
Mortgage Bonds, Pollution Control Series U" (the "Pollution Control Series U
Bonds") of the Company, unlimited in aggregate principal amount, issued under
and secured by the Indenture and described in supplemental indenture no. 1 dated
as of July 15, 1999 (the "Supplemental Indenture No. 1 of July 15, 1999"),
between the Company and the Trustee, supplemental to the Indenture.
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The Pollution Control Series U Bonds are subject to redemption at any
time or from time to time on or after February 1, 2004 and prior to maturity, at
the option of the Company, either as a whole or in part by lot, upon payment of
the following percentages of the principal amounts thereof;
If redeemed during the twelve month period beginning with the first day
of February in the year:
(The years and the percentages of principal amount set forth in the
table in Section 1 of Article III in the Supplemental Indenture No. 1
of July 15, 1999 are to be inserted here.)
together, in each case, with accrued interest to the redemption date, upon
notice given by mail, postage prepaid (such mailing to be not less than thirty
days before the redemption date) to the registered owners of such Bonds at their
addresses as the same shall appear, if at all, on the transfer register of the
Company, all subject to the conditions and as more fully set forth in the
Indenture and Supplemental Indenture No. 1 of July 15, 1999.
The Pollution Control Series U Bonds are also subject to redemption in
accordance with the terms of Sections 2 and 3 of Article III in the Supplemental
Indenture No. 1 of July 15, 1999.
If this New Mortgage Bond or any portion thereof is called for
redemption and payment duly provided, this New Mortgage Bond or such portion
shall be deemed to be redeemed and cease to bear interest on or after the date
fixed for such redemption.
In case an Event of Default, as defined in the Indenture, shall occur,
the principal of all the Bonds at any such time outstanding under the Indenture
may be declared or may become due and payable, upon the conditions and in the
manner and with the effect provided in the Indenture. The Indenture provides
that such declaration may be rescinded under certain circumstances.
No recourse shall be had for the payment of the principal of, or
premium or interest on this New Mortgage Bond, or for any claim based hereon or
on the Indenture or any indenture supplemental thereto, against any
incorporator, or against any stockholder, director or officer, as such, past,
present or future, of the Company, or of any predecessor or successor
corporation, either directly or through the Company or any such predecessor or
successor corporation, either directly or through the Company or any such
predecessor or successor corporation, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise, all such liability, whether at common law, in equity, by any
constitution, statute, rule of law, or otherwise, of incorporators,
stockholders, directors or officers being released by every owner hereof by the
acceptance of this New Mortgage Bond and as part of the consideration for the
issue hereof, and being likewise released by the terms of the Indenture;
provided, however, that nothing herein or in the Indenture or any indenture
supplemental thereto contained shall prevent the enforcement of the liability,
if any, of any stockholder or subscriber to capital stock upon or in respect of
shares of capital stock not fully paid up.
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ARTICLE II.
ISSUE OF POLLUTION CONTROL SERIES U BONDS.
SECTION 1. The Company hereby exercises the right to obtain the
authentication of $35,615,000 principal amount of additional Bonds pursuant to
the terms of Section 4.02 of the Indenture. All such additional Bonds shall be
Pollution Control Series U Bonds.
SECTION 2. Such Pollution Control Series U Bonds may be authenticated and
delivered prior to the filing for recordation of this Supplemental Indenture No.
1.
ARTICLE III.
REDEMPTION.
SECTION 1. The Pollution Control Series U Bonds shall, subject to the
provisions of Article Five of the Indenture, be redeemable upon the concurrent
redemption of bonds issued under the Revenue Bond Indenture at any time or from
time to time on or after February 1, 2004, and prior to maturity, at the option
of the Board of Directors of the Company, either as a whole or in part by lot,
at the percentages of the principal amount thereof specified in the following
table together, in each case, with accrued interest to the redemption date:
Redemption
Redemption Dates (inclusive) Price
February 1, 2004 through January 31, 2005 102%
February 1, 2005 through January 31, 2006 101%
February 1, 2006 and thereafter 100%
SECTION 2. Pollution Control Series U Bonds shall be redeemable in
whole at the option of the Board of Directors of the Company prior to maturity
at a redemption price equal to 100% of the principal amount plus interest
thereon accrued to the date fixed for redemption, whenever the Company shall
file the required resolution with the Authority and the trustee under the
Revenue Bond Indenture, such resolution as required by the terms of the Revenue
Bond Indenture, stating that one or more of the following events shall have
occurred:
(a) Damage or destruction to the Company's Clinton Generating
Station near Clinton, Illinois (the "Plant"), or the air and water
pollution control, sewage and solid waste disposal facilities located
at the Plant, which include among other things, sanitary treatment
facilities, water pollution control facilities, and certain liquid,
gaseous and solid radioactive waste treatment facilities together with
certain miscellaneous facilities which are functionally related and
subordinate thereto (the "Project") to such extent that in the opinion
of the Company's Board of Directors (expressed in a resolution) filed
with the Authority and the trustee under the Revenue Bond Indenture,
(1) the Plant or the Project, as the case may be, cannot reasonably be
repaired, rebuilt or restored within a period of six months to its
condition immediately preceding such damage or destruction, or (2) the
Company is thereby prevented from carrying on its normal operation at
the Plant for a period of six months; or
(b) Loss of title to or use of a substantial part of the
Company's Plant or the Project as a result of the exercise of the power
of eminent domain which, in the opinion of the Company's Board of
Directors (expressed in a resolution ) filed with the Authority and the
trustee under the Revenue Bond Indenture, results or is likely to
result in the Company
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being thereby prevented from carrying on its normal operations therein
for period of six months; or
(c) A change in the Constitution of Illinois or of the United
States of America or legislative or administrative action (whether
local, state or Federal) or a final decree, judgment or order of any
court or administrative body (whether local, state or Federal) which
causes the Loan Agreement dated as of June 1, 1992 between the
Authority and the Company (the "Agreement") to become void or
unenforceable or impossible of performance in accordance with the
intent and purpose of the parties as expressed therein or unreasonable
burdens or excessive liabilities to be imposed upon the Authority or
the Company with respect to the Plant or the Project or the operation
thereof; or
(d) Any event occurs which, in the opinion of the Company's
Board of Directors (expressed in a resolution) renders the Project or
the Plant so uneconomical that it is abandoned.
Any such redemption under this Section 2 shall be on any date within 90 days
from the time the Company files such required resolution and directs that the
Pollution Control Series U Bonds are to be redeemed, which direction must be
given, if at all, within 180 days following the occurrence of one of the events
listed in (a) through (d) of this Section 2.
SECTION 3. If a Determination of Taxability as defined in Section
301(c) of the Revenue Bond Indenture occurs, then the Pollution Control Series U
Bonds shall be redeemed in whole or in part by the Company prior to maturity
upon the terms and conditions set forth in Section 301(c) of the Revenue Bond
Indenture.
SECTION 4. For the purposes of Section 3 of this Article III, a demand
form the trustee under the Revenue Bond Indenture shall be executed on behalf of
such trustee by its President or a Vice President or a Trust Officer and shall
be deemed received by the Trustee when delivered at its Corporate trust office
in Chicago, Illinois. The Trustee may be conclusively rely as to the truth of
the statements contained therein, upon any such demand.
SECTION 5. Subject to the provisions of Article Five of the Indenture,
notice of redemption of Pollution Control Series U Bonds shall be sent by the
Company by certified mail, postage prepaid, at least thirty (30) days prior to
the date fixed for redemption, to the registered owners of such Bonds at their
addresses as the same shall appear, if at all, on the transfer register of the
Company. Any notice which is mailed in the manner herein provided shall be
conclusively presumed to have been duly given whether or not the holders receive
such notice, but failure to give notice by mail, or any defect in such notice,
to the holder of any such Bonds designated for redemption in whole or in part
shall not affect the validity of the redemption of any other such Bond.
ARTICLE IV.
ADDITIONAL COVENANTS.
The Company hereby covenants and agrees that:
SECTION 1. So long as any Pollution Control Series U Bonds are
outstanding, in the event all or substantially all of the electric properties
shall have been released as an entirety from
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the lien of the Indenture pursuant to Section 8.03 or Section 8.07 of Article
Eight of the Indenture, the Company will, at any time or from time to time
within six months after the date of such release, retire Bonds outstanding under
the Indenture in an aggregate principal amount equal to the fair value of the
electric properties so released pursuant to Section 8.03 of Article Eight of the
Indenture, as stated in the engineer's certificate required by Section
8.03(a)(iii) of said Article Eight, and the proceeds of the electric properties
so released pursuant to Section 8.07 of said Article Eight. Such retirement of
Bonds shall be effected by causing the Trustee to purchase or redeem Bonds,
pursuant to Section 8.06 of Article Eight of the Original Indenture, out of any
moneys deposited with the Trustee pursuant to Sections 8.03(a)(iv) and 8.07 of
Article Eight of the Indenture upon such release.
The Bonds to be so retired on or after, but only on or after February 1, 2004,
shall include a principal amount of Pollution Control Series U Bonds which,
computed to the nearest $5,000, bears the same ratio to the aggregate principal
amount of all Bonds so retired as the aggregate principal amount of all
Pollution Control Series U Bonds outstanding immediately prior to such release
bears to the aggregate principal amount of all Bonds then outstanding.
SECTION 2. All Pollution Control Series U Bonds delivered to the
Trustee or purchased or redeemed pursuant to this Article shall be canceled by
the Trustee, which shall deliver them to the Company. Pollution Control Series U
Bonds so canceled shall not be reissued, and no additional Bonds shall be
authenticated and delivered in substitution therefor and no property or
obligations shall be released or cash withdrawn or reduced under the provisions
of the Indenture on the basis thereof.
ARTICLE V.
THE TRUSTEE.
The Trustee hereby accepts the trusts hereby declared and provided, and
agrees to perform the same upon the terms and conditions in the Indenture set
forth and upon the following terms and conditions:
The Trustee shall not be responsible in any manner whatsoever
for or in respect of the validity or sufficiency of this Supplemental
Indenture No. 1 or the due execution hereof by the Company or for or in
respect of the recitals contained herein, all of which recitals are
made by the Company solely. In general, each and every term and
condition contained in Article Eleven of the Indenture shall apply to
this Supplemental Indenture No. 1 with the same force and effect as if
the same were herein set forth in full, with such omissions, variations
and modifications thereof as may be appropriate to make the same
conform to this Supplemental Indenture No. 1.
ARTICLE VI.
MISCELLANEOUS PROVISIONS.
This Supplemental Indenture No. 1 may be simultaneously executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and the same
instrument.
107
<PAGE>
IN WITNESS WHEREOF, Illinois Power Company has caused this Supplemental
Indenture No. 1 to be executed on its behalf by an Authorized Executive Officer
as defined in the Indenture, and its corporate seal to be hereto affixed and
said seal and this Indenture to be attested by an Authorized Executive Officer
as defined in the Indenture; and said Harris Trust and Savings Bank, in evidence
of its acceptance of the trust hereby created, has caused this Indenture to be
executed on its behalf by its President or one of its Vice Presidents and its
corporate seal to be hereto affixed and said seal and this Indenture to be
attested by its Secretary or one of its Assistant Secretaries, all as of the
date first written above.
ILLINOIS POWER COMPANY
By
--------------------------------------
Robert A. Schultz
Vice President -- Finance
(CORPORATE SEAL)
ATTEST:
- -----------------------------
Leah Manning Stetzner
Corporate Secretary
HARRIS TRUST AND SAVINGS BANK, Trustee
By
------------------------------------
J. Bartolini
Vice President
(CORPORATE SEAL)
ATTEST:
- ----------------------------
C. Potter
Assistant Secretary
108
<PAGE>
STATE OF ILLINOIS )
)SS.:
COUNTY OF MACON )
BE IT REMEMBERED, that on this ___ day of July 1999, before me, the
undersigned, a Notary Public within and for the County and State aforesaid,
personally came Robert A. Schultz, Vice President--Finance and Leah Manning
Stetzner, Corporate Secretary, of Illinois Power Company, a corporation duly
organized, incorporated and existing under the laws of the State of Illinois,
who are personally known to me to be such officers, and who are personally known
to me to be the same persons who executed as such officers the within instrument
of writing, and such persons duly acknowledged that they signed, sealed and
delivered the said instrument as their free and voluntary act as such officers,
and as the free and voluntary act of said Illinois Power Company for the uses
and purposes therein set forth.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my
official seal on the day and year last above written.
-------------------------------------
Notary Public, Macon County, Illinois
My Commission Expires _______________.
(NOTARIAL SEAL)
STATE OF ILLINOIS )
)SS.:
COUNTY OF COOK )
BE IT REMEMBERED, that on this ____ day of July, 1999, before me, the
undersigned, a Notary Public within and for the County and State aforesaid,
personally came J. Bartolini, Vice President and C. Potter, Assistant Secretary,
of Harris Trust and Savings Bank, a corporation duly organized, incorporated and
existing under the laws of the State of Illinois, who are personally known to me
to be the same persons who executed as such officers the within instrument of
writing, and such persons duly acknowledged that they signed, sealed and
delivered the said instrument as their free and voluntary act as such officers,
and as the free and voluntary act of said Harris Trust and Savings Bank for the
uses and purposes therein set forth.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my
official seal on the day and year last above written.
------------------------------------
Notary Public, Cook County, Illinois
My Commission Expires: ___________
(NOTARIAL SEAL)
109
<PAGE>
Return To: This Instrument Was Prepared By:
ILLINOIS POWER COMPANY SCHIFF HARDIN & WAITE
Real Estate Dept. F-14 6600 Sears Tower
500 S. 27th Street 233 South Wacker Drive
Decatur, IL 62525 Chicago, IL 60606
110
<PAGE>
Exhibit 4.5
ILLINOIS POWER COMPANY
TO
HARRIS TRUST AND SAVINGS BANK,
as Trustee
SUPPLEMENTAL INDENTURE NO. 2
DATED AS OF JULY 15, 1999
TO
MORTGAGE AND DEED OF TRUST
DATED NOVEMBER 1, 1943
111
<PAGE>
Supplemental Indenture No. 2 dated as of July 15, 1999 (the "Supplemental
Indenture No. 1"), made by and between ILLINOIS POWER COMPANY, a corporation
organized and existing under the laws of the State of Illinois (the "Company"),
party of the first part, and HARRIS TRUST AND SAVINGS BANK, a corporation
organized and existing under the laws of the State of Illinois (the "Trustee"),
as Trustee under the Mortgage and Deed of Trust dated November 1, 1943,
hereinafter mentioned, party of the second part;
WHEREAS, the Company has heretofore executed and delivered its Mortgage
and Deed of Trust dated November 1, 1943 ("Original Indenture"), to the Trustee,
for the security of the First Mortgage Bonds of the Company issued and to be
issued thereunder (the "Bonds"); and
WHEREAS, pursuant to the terms and provisions of the Original Indenture
there were created and authorized by Supplemental Indentures thereto bearing the
following dates, respectively, the First Mortgage Bonds of the series issued
thereunder and respectively identified opposite such dates:
Date of Supplemental Identification
Indenture of Series Called
November 1, 1943 4% Series due 1973 Bonds of the 1973 Series
(redeemed)
March 1, 1946 2 7/8% Series due 1976 Bonds of the 1976 Series
(paid at maturity)
February 1, 1948 3 1/2% Series due 1978 Bonds of the 1978 Series
(paid at maturity)
July 1, 1949 2 7/8% Series due 1979 Bonds of the 1979 Series
(paid at maturity)
April 1, 1950 2 3/4% Series due 1980 Bonds of the 1980 Series
(paid at maturity)
March 1, 1952 3 1/2% Series due 1982 Bonds of the 1982 Series
(paid at maturity)
November 1, 1953 3 1/2% Series due 1983 Bonds of the 1983 Series
(paid at maturity)
July 1, 1956 3 3/4% Series due 1986 Bonds of the 1986 Series
(paid at maturity)
May 1, 1958 4% Series due 1988 Bonds of the 1988 Series
(redeemed)
January 1, 1963 4 1/4% Series due 1993 Bonds of the 1993 Series
(paid at maturity)
October 1, 1966 5.85% Series due 1996 Bonds of the 1996 Series
(paid at maturity)
112
<PAGE>
Date of Supplemental Identification
Indenture of Series Called
January 1, 1968 6 3/8% Series due 1998 Bonds of the First 1998 Series
(redeemed)
October 1, 1968 6 3/4% Series due 1998 Bonds of the Second 1998 Series
(redeemed)
October 1, 1969 8.35% Series due 1999 Bonds of the First 1999 Series
(redeemed)
November 1, 1970 9% Series due 2000 Bonds of the 2000 Series
(redeemed)
October 1, 1971 7.60% Series due 2001 Bonds of the 2001 Series
(redeemed)
June 1, 1973 7 5/8% Series due 2003 Bonds of the First 2003 Series
(redeemed)
May 1, 1974 Pollution Control Series A Bonds of the Pollution Control
Series A
September 1, 1974 10 1/2% Series due 2004 Bonds of the First 2004 Series
(redeemed)
July 1, 1976 8 3/4% Series due 2006 Bonds of the 2006 Series
(redeemed)
May 1, 1977 Pollution Control Series B Bonds of Pollution Control
(redeemed) Series B
November 1, 1977 8 1/4% Series due 2007 Bonds of the 2007 Series
(redeemed)
August 1, 1978 8 7/8% Series due 2008 Bonds of the 2008 Series
(redeemed)
July 1, 1979 9 7/8% Series due 2004 Bonds of the Second 2004 Series
(redeemed)
July 31, 1980 11 3/8% Series due 1987 Bonds of the 1987 Series
(redeemed)
August 1, 1980 12 5/8% Series due 2010 Bonds of the 2010 Series
(redeemed)
July 1, 1982 14 1/2% Series due 1990 Bonds of the 1990 Series
(redeemed)
November 1, 1982 12% Series due 2012 Bonds of the 2012 Series
(redeemed)
113
<PAGE>
Date of Supplemental Identification
Indenture of Series Called
December 15, 1983 Pollution Control Series C Bonds of the Pollution Control
(redeemed) Series C
May 15, 1984 Pollution Control Series D Bonds of the Pollution Control
(redeemed) Series D
March 1, 1985 Pollution Control Series E Bonds of the Pollution Control
(redeemed) Series E
February 1, 1986 10 1/2% Series due 2016 Bonds of the First 2016 Series
(redeemed)
July 1, 1986 9 7/8% Series due 2016 Bonds of the Second 2016 Series
(redeemed)
September 1, 1986 9 3/8% Series due 2016 Bonds of the Third 2016 Series
(redeemed)
February 1, 1987 Pollution Control Series F Bonds of the Pollution Control
(redeemed) Series F
February 1, 1987 Pollution Control Series G Bonds of the Pollution Control
(redeemed) Series G
February 1, 1987 Pollution Control Series H Bonds of the Pollution Control
(redeemed) Series H
July 1, 1987 Pollution Control Series I Bonds of the Pollution Control
(redeemed) Series I
July 1, 1988 10% Series due 1998 Bonds of the Third 1998 Series
(redeemed)
July 1, 1991 Pollution Control Series J Bonds of the Pollution Control
Series J
June 1, 1992 Pollution Control Series K Bonds of the Pollution Control
Series K
June 1, 1992 Pollution Control Series L Bonds of the Pollution Control
Series L
July 1, 1992 7.95% Series due 2004 Bonds of the Third 2004 Series
July 1, 1992 8 3/4% Series due 2021 Bonds of the 2021 Series
(redeemed)
September 1, 1992 6 1/2% Series due 1999 Bonds of the 1999 Series
114
<PAGE>
Date of Supplemental Identification
Indenture of Series Called
February 15, 1993 8% Series due 2023 Bonds of the 2023 Series
(redeemed)
March 15, 1993 6 1/8% Series due 2000 Bonds of the 2000 Series
March 15, 1993 6 3/4% Series due 2005 Bonds of the 2005 Series
July 15, 1993 7 1/2% Series due 2025 Bonds of the 2025 Series
August 1, 1993 6 1/2% Series due 2003 Bonds of the Second 2003 Series
October 15, 1993 5 5/8% Series due 2000 Bonds of the Second 2000 Series
November 1, 1993 Pollution Control Series M Bonds of the Pollution Control
Series M
November 1, 1993 Pollution Control Series N Bonds of the Pollution Control
Series N
November 1, 1993 Pollution Control Series O Bonds of the Pollution Control
Series O
April 1, 1997 Pollution Control Series P Bonds of the Pollution Control
Series P
April 1, 1997 Pollution Control Series Q Bonds of the Pollution Control
Series Q
April 1, 1997 Pollution Control Series R Bonds of the Pollution Control
Series R
March 1, 1998 Pollution Control Series S Bonds of the Pollution Control
Series S
March 1, 1998 Pollution Control Series T Bonds of the Pollution Control
Series T
July 15, 1998 6 1/4% Series due 2002 Bonds of the 2002 Series
September 15, 1998 6% Series due 2003 Bonds of the Third 2003 Series
June 15, 1999 7.50% Series due 2009 Bonds of the 2009 Series
July 15, 1999 Pollution Control Series U Bonds of the Pollution Control
Series U
and
115
<PAGE>
WHEREAS, the Company desires to create a new series of Bonds to be issued
under the Original Indenture, to be known as First Mortgage Bonds, Pollution
Control Series V (the "Pollution Control Series V Bonds") and to issue
additional Bonds under the Original Indenture; and
WHEREAS, the Pollution Control Series V Bonds are to be issued to Harris
Trust and Savings Bank, as trustee (the "New Mortgage Trustee") under the
Company's General Mortgage Indenture and Deed of Trust dated as of November 1,
1992 (the "New Mortgage") and are to be owned and held by the New Mortgage
Trustee as "Pledged Bonds" (as defined in the New Mortgage) in accordance with
the terms of the New Mortgage; and
WHEREAS, the Company, in the exercise of the powers and authority conferred
upon and reserved to it under the provisions of the Original Indenture, and
pursuant to appropriate resolutions of the Board of Directors, has duly resolved
and determined to make, execute and deliver to the Trustee a Supplemental
Indenture No. 2 in the form hereof for the purposes herein provided; and
WHEREAS, all conditions and requirements necessary to make this
Supplemental Indenture No. 2 a valid, binding and legal instrument have been
done, performed and fulfilled and the execution and delivery hereof have been in
all respects duly authorized;
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE NO. 2 WITNESSETH:
THAT Illinois Power Company, in consideration of the purchase and ownership
from time to time of the Bonds and the service by the Trustee, and its
successors, under the Original Indenture and of One Dollar to it duly paid by
the Trustee at or before the ensealing and delivery of these presents, the
receipt whereof is hereby acknowledged, hereby covenants and agrees to and with
the Trustee and its successors in the trust under the Original Indenture, for
the benefit of the New Trustee and any successor holder of the Bonds as follows:
ARTICLE I.
DESCRIPTION OF POLLUTION CONTROL SERIES V BONDS.
SECTION 1. The Company hereby creates a new series of Bonds to be known
as First Mortgage Bonds, Pollution Control Series V (the "Pollution Control
Series V Bonds"). The Pollution Control Series V Bonds shall be executed,
authenticated and delivered in accordance with the provisions of, and shall in
all respects be subject to, all of the terms, conditions and covenants of the
Original Indenture, as supplemented and modified. The Pollution Control Series V
Bonds will be issued only to the New Mortgage Trustee as security for a series
of bonds being issued under the Company's New Mortgage and the supplemental
indenture no. 2 to the New Mortgage dated as of July 15, 1999 (the "New Mortgage
Pollution Control Series V Bonds") and in the same principal amount as the New
Mortgage Pollution Control Series V Bonds.
The Pollution Control Series V Bonds shall be dated as provided in
Section 6 of Article II of the Original Indenture, and the commencement of the
first interest period shall be the date of issuance. All Pollution Control
Series V Bonds shall mature on December 1, 2024, and shall bear interest at the
rate of seven and four-tenths per cent (7.40%) per annum, payable semi-annually
on June 1 and December 1 of each year until the principal sum is paid in full.
Any payment by the Company of principal of, or premium or interest on, any
Pollution Control Series V Bonds shall be applied by the New Mortgage Trustee to
the payment of any principal, premium or interest, as the case may be, in
respect of the New Mortgage Pollution Control Series V Bonds due in accordance
with the terms of the New Mortgage.
116
<PAGE>
SECTION 2. The Pollution Control Series V Bonds and the Trustee's
Certificate shall be substantially in the following forms respectively:
[FORM OF FACE OF BOND]
ILLINOIS POWER COMPANY
(Incorporated under the laws of the State of Illinois)
FIRST MORTGAGE BOND, POLLUTION CONTROL SERIES V
No. ____________ $84,150,000
ILLINOIS POWER COMPANY, a corporation organized and existing under the
laws of the State of Illinois (the "Company," which term shall include any
successor corporation as defined in the Indenture hereinafter referred to), for
value received, hereby promises to pay to Harris Trust and Savings Bank as
trustee (the "New Mortgage Trustee") under the Company's General Mortgage
Indenture and Deed of Trust dated as of November 1, 1992 (the "New Mortgage") or
its registered assigns, the principal sum of Eighty-Four Million One Hundred
Fifty Thousand Dollars ($84,150,000) on December 1, 2024, in any coin or
currency of the United States of America which at the time of payment is legal
tender for public and private debts, and to pay interest thereon in like coin or
currency from the date of issuance, payable semi-annually on June 1 and December
1 in each year, at the rate of seven and four-tenths per cent (7.40%) per annum,
until the Company's obligation with respect to the payment of such principal
shall be discharged as provided in the Indenture. Both the principal of, and the
interest on, this Bond are payable at the agency of the Company in the City of
Chicago, Illinois.
This First Mortgage Bond shall not be entitled to any benefit under the
Indenture or any indenture supplemental thereto, or become valid or obligatory
for any purpose, until the form of certificate endorsed hereon shall have been
signed by or on behalf of Harris Trust and Savings Bank, the Trustee under the
Indenture, or a successor trustee thereto under the Indenture (the "Trustee").
The provisions of this First Mortgage Bond are continued on the reverse
hereof and such continued provisions shall for all purposes have the same effect
as though fully set forth at this place.
IN WITNESS WHEREOF, Illinois Power Company has caused this First
Mortgage Bond to be signed (manually or by facsimile signature) in its name by
its President or a Vice President, and its corporate seal (or a facsimile
thereof) to be hereto affixed and attested (manually or by facsimile signature)
by its Secretary or an Assistant Secretary.
Dated: July __, 1999 ILLINOIS POWER COMPANY
By:
---------------------------
Vice President
(Corporate Seal)
ATTEST:
- --------------------------------
Secretary or Assistant Secretary
117
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE]
This First Mortgage Bond is one of the Bonds of the series designated
therein, described in the within-mentioned Indenture and the Supplemental
Indenture No. 2 dated as of July 15, 1999.
HARRIS TRUST AND SAVINGS BANK,
Trustee
By:
---------------------------
Authorized Officer
[FORM OF REVERSE OF BOND)
This First Mortgage Bond is one of a duly authorized issue of Bonds of the
Company (the "Bonds") in unlimited aggregate principal amount, of the series
hereinafter specified, all issued and to be issued under and equally secured by
the Mortgage and Deed of Trust (the "Indenture"), dated November 1, 1943,
executed by the Company to Harris Trust and Savings Bank (the "Trustee"), as
Trustee, to which Indenture and all indentures supplemental thereto, including
the Supplemental Indenture dated February 15, 1993, which amended Section 1 of
Article IX of the Indenture, reference is hereby made for a description of the
properties mortgaged and pledged, the nature and extent of the security, the
rights of the registered owners of the Bonds and of the Trustee in respect
thereof, and the terms and conditions upon which the Bonds are, and are to be,
secured. The Bonds may be issued in series, for various principal sums, may
mature at different times, may bear interest at different rates and may
otherwise vary as in the Indenture provided. This First Mortgage Bond is one of
a series designated as the First Mortgage Bonds, Pollution Control Series V (the
"Pollution Control Series V Bonds") of the Company, unlimited in aggregate
principal amount, issued under and secured by the Indenture and described in the
supplemental indenture no. 2 dated as of July 15, 1999 (the "Supplemental
Indenture No. 2 of July 15, 1999"), between the Company and the Trustee,
supplemental to the Indenture.
To the extent permitted by, and as provided in, the Indenture,
modifications or alterations of the Indenture, or of any indenture supplemental
thereto, and of the rights and obligations of the Company and of the holders of
the Bonds and coupons may be made with the consent of the Company by an
affirmative vote of the holders of not less than 66 2/3% in amount of the Bonds
entitled to vote then outstanding, at a meeting of Bondholders called and held
as provided in the Indenture, and by an affirmative vote of the holders of not
less than 66 2/3% in amount of the Bonds of any series entitled to vote then
outstanding and affected by such modification or alteration, in case one or more
but less than all of the series of Bonds then outstanding under the Indenture
are so affected; provided however, that no such modification or alteration shall
be made which will affect the terms of payment of the principal of, or interest
or premium, if any, on this First Mortgage Bond.
The Pollution Control Series V Bonds are subject to redemption in
accordance with the terms of Article III of the Supplemental Indenture No. 2 of
July 15, 1999.
118
<PAGE>
In case an Event of Default, as defined in the Indenture, shall occur,
the principal of all the Bonds at any such time outstanding under the Indenture
may be declared or may become due and payable, upon the conditions and in the
manner and with the effect provided in the Indenture. The Indenture provides
that such declaration may in certain events be rescinded by the holders of a
majority in principal amount of the Bonds outstanding.
No recourse shall be had for the payment of the principal of, or
premium or interest on this First Mortgage Bond, or for any claim based hereon
or on the Indenture or any indenture supplemental thereto, against any
incorporator, or against any stockholder, director or officer, as such, past,
present or future, of the Company, or of any predecessor or successor
corporation, either directly or through the Company or any such predecessor or
successor corporation, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise, all such
liability, whether at common law, in equity, by any constitution, statute, rule
of law, or otherwise, of incorporators, stockholders, directors or officers
being released by every owner hereof by the acceptance of this First Mortgage
Bond and as part of the consideration for the issue hereof, and being likewise
released by the terms of the Indenture; provided, however, that nothing herein
or in the Indenture or any indenture supplemental thereto contained shall
prevent the enforcement of the liability, if any, of any stockholder or
subscriber to capital stock upon or in respect of shares of capital stock not
fully paid up.
Notwithstanding any provision in the Indenture, the Supplemental
Indenture No. 2 of July 15, 1999 or this First Mortgage Bond to the contrary,
any payment by the Company under the New Mortgage of principal of, or premium or
interest on, bonds which shall have been authenticated and delivered under the
New Mortgage (the "New Mortgage Pollution Control Series V Bonds") upon the
basis of the issuance and delivery to the New Mortgage Trustee of the Pollution
Control Series V Bonds shall, to the extent thereof, be deemed to satisfy and
discharge the obligation of the Company to make a payment of principal, premium
or interest, as the case may be, in respect of this First Mortgage Bond which is
then due.
This First Mortgage Bond constitutes a "Pledged Bond" (as defined in
the New Mortgage) and is subject to all of the rights and restrictions
applicable to Pledged Bonds as set forth in the New Mortgage. Without limiting
the generality of the foregoing, this First Mortgage Bond shall be subject to
surrender by the New Mortgage Trustee in accordance with the provisions of
Section 7.03 of the New Mortgage. To the extent that any provisions in the
Indenture, the Supplemental Indenture of July 15, 1999 or this First Mortgage
Bond are inconsistent with the provisions relating to Pledged Bonds that are set
forth in the New Mortgage, the provisions of the New Mortgage shall apply.
SECTION 3. Notwithstanding any provision in the Original Indenture,
this Supplemental Indenture No. 2, or the Pollution Control Series V Bonds to
the contrary, any payment by the Company under the New Mortgage of principal of,
or premium or interest on, New Mortgage Pollution Control Series V Bonds shall,
to the extent thereof, be deemed to satisfy and discharge the obligation of the
Company to make any payment of principal, premium or interest, as the case may
be, in respect of the Pollution Control Series V Bonds which is then due.
119
<PAGE>
SECTION 4. The Pollution Control Series V Bonds constitute "Pledged
Bonds" (as defined in the New Mortgage) and are subject to all of the rights and
restrictions applicable to Pledged Bonds as set forth in the New Mortgage.
Without limiting the generality of the foregoing, the Pollution Control Series V
Bonds shall be subject to surrender by the New Mortgage Trustee in accordance
with the provisions of Section 7.03 of the New Mortgage. To the extent that any
provisions in the Original Indenture, this Supplemental Indenture No. 2 or the
Pollution Control Series V Bonds are inconsistent with the provisions relating
to Pledged Bonds that are set forth in the New Mortgage, the provisions of the
New Mortgage shall apply.
ARTICLE II.
ISSUE OF POLLUTION CONTROL SERIES V BONDS.
SECTION 1. The Company hereby exercises the right to obtain the
authentication of $84,150,000 principal amount of additional Bonds pursuant to
the terms of Section 6 of Article III of the Original Indenture in substitution
for refundable Bonds.
All such additional Bonds shall be Pollution Control Series V Bonds.
SECTION 2. Such Pollution Control Series V Bonds may be authenticated
and delivered prior to the filing for recordation of this Supplemental Indenture
No. 2.
SECTION 3. Notwithstanding any provision in the Original Indenture to
the contrary, execution of the Pollution Control Series V Bonds on behalf of the
Company, and the attesting of the corporate seal of the Company affixed to the
Pollution Control Series V Bonds by the officers of the Company authorized to do
such acts by Section 12 of Article II of the Original Indenture may be validly
done either by the manual or the facsimile signatures of such authorized
officers of the Company.
ARTICLE III.
REDEMPTION.
The Pollution Control Series V Bonds shall, subject to the provisions
of the Original Indenture, be redeemable on the same terms, on the same dates
and in the same manner as the New Mortgage Pollution Control Series V Bonds
shall be redeemed under the terms of supplemental indenture no. 2 to the New
Mortgage dated as of July 15, 1999.
120
<PAGE>
ARTICLE IV.
THE TRUSTEE.
The Trustee hereby accepts the trusts hereby declared and provided, and
agrees to perform the same upon the terms and conditions in the Original
Indenture set forth and upon the following terms and conditions:
The Trustee shall not be responsible in any manner whatsoever
for or in respect of the validity or sufficiency of this Supplemental
Indenture No. 2 or the due execution hereof by the Company or for or in
respect of the recitals contained herein, all of which recitals are
made by the Company solely. In general, each and every term and
condition contained in Article XIII of the Original Indenture shall
apply to this Supplemental Indenture No. 2 with the same force and
effect as if the same were herein set forth in full, with such
omissions, variations and modifications thereof as may be appropriate
to make the same conform to this Supplemental Indenture No. 2.
ARTICLE V.
MISCELLANEOUS PROVISIONS.
This Supplemental Indenture No. 2 may be simultaneously executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original; but such counterparts shall together constitute but one and the same
instrument.
121
<PAGE>
IN WITNESS WHEREOF, Illinois Power Company has caused this Supplemental
Indenture No. 2 to be executed on its behalf by its Chairman and President, one
of its Executive Vice Presidents, one of its Senior Vice Presidents or one of
its Vice Presidents and its corporate seal to be hereto affixed and said seal
and this Supplemental Indenture No. 2 to be attested by its Secretary or one of
its Assistant Secretaries; and said Harris Trust and Savings Bank, in evidence
of its acceptance of the trust hereby created, has caused this Supplemental
Indenture No. 2 to be executed on its behalf by its President or one of its Vice
Presidents and its corporate seal to be hereto affixed and said seal and this
Supplemental Indenture No. 2 to be attested by its Secretary or one of its
Assistant Secretaries, all as of the date first above written.
ILLINOIS POWER COMPANY
By
------------------------------------
Robert A. Schultz
Vice President - Finance
(CORPORATE SEAL)
ATTEST:
- ------------------------------
Leah Manning Stetzner
Corporate Secretary
HARRIS TRUST AND SAVINGS BANK, Trustee
By
------------------------------------
J. Bartolini
Vice President
(CORPORATE SEAL)
ATTEST:
- --------------------------
C. Potter
Assistant Secretary
122
<PAGE>
STATE OF ILLINOIS )
)SS.:
COUNTY OF MACON )
BE IT REMEMBERED, that on this ____ day of July, 1999, before me, the
undersigned, a Notary Public within and for the County and State aforesaid,
personally came Robert A. Schultz, Vice President--Finance and Leah Manning
Stetzner, Corporate Secretary, of Illinois Power Company, a corporation duly
organized, incorporated and existing under the laws of the State of Illinois,
who are personally known to me to be such officers, and who are personally known
to me to be the same persons who executed as such officers the within instrument
of writing, and such persons duly acknowledged that they signed, sealed and
delivered the said instrument as their free and voluntary act as such officers
and as the free and voluntary act of said Illinois Power Company for the uses
and purposes therein set forth.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my
official seal on the day and year last above written.
-------------------------------------
Notary Public, Macon County, Illinois
My Commission Expires on _________________.
(NOTARIAL SEAL)
STATE OF ILLINOIS )
)SS.:
COUNTY OF COOK )
BE IT REMEMBERED, that on this ____ day of July, 1999, before me, the
undersigned, a Notary Public within and for the County and State aforesaid,
personally came J. Bartolini, Vice President and C. Potter, Assistant Secretary,
of Harris Trust and Savings Bank, a corporation duly organized, incorporated and
existing under the laws of the State of Illinois, who are personally known to me
to be the same persons who executed as such officers the within instrument of
writing, and such persons duly acknowledged that they signed, sealed and
delivered the said instrument as their free and voluntary act as such officers,
and as the free and voluntary act of said Harris Trust and Savings Bank for the
uses and purposes therein set forth.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my
official seal on the day and year last above written.
Notary Public, Cook County, Illinois
My Commission Expires on ______________.
(NOTARIAL SEAL)
123
<PAGE>
Return To: This Instrument Was Prepared By:
ILLINOIS POWER COMPANY SCHIFF HARDIN & WAITE
Real Estate Dept. F-14 6600 Sears Tower
500 S. 27th Street 233 South Wacker Drive
Decatur, IL 62525 Chicago, IL 60606
124
<PAGE>
Exhibit 4.6
ILLINOIS POWER COMPANY
TO
HARRIS TRUST AND SAVINGS BANK,
as Trustee
------------------
SUPPLEMENTAL INDENTURE NO. 2
DATED AS OF JULY 15, 1999
TO
GENERAL MORTGAGE INDENTURE AND DEED OF TRUST
DATED AS OF NOVEMBER 1, 1992
125
<PAGE>
Supplemental Indenture No. 2 dated as of July 15, 1999 (the "Supplemental
Indenture No. 2"), made by and between ILLINOIS POWER COMPANY, a corporation
organized and existing under the laws of the State of Illinois (the "Company"),
party of the first part, and HARRIS TRUST AND SAVINGS BANK, a corporation
organized and existing under the laws of the State of Illinois (the "Trustee"),
as Trustee under the General Mortgage indenture and Deed of Trust dated as of
November 1, 1992, hereinafter mentioned, party of the second part;
WHEREAS, the Company has heretofore executed and delivered its General
Mortgage Indenture and Deed of Trust dated as of November 1, 1992 (the
"Indenture"), to the Trustee, for the security of the Bonds of the Company
issued and to be issued thereunder (the "Bonds"); and
WHEREAS, pursuant to the terms and provisions of the Indenture there
were created and authorized by Supplemental Indentures thereto bearing the
following dates, respectively, the New Mortgage Bonds of the series issued
thereunder and respectively identified opposite such dates:
Date of Supplemental Identification
Indenture of Series Called
- -------------------- ------------- ------
February 15, 1993 8% Series due 2023 Bonds of the 2023 Series
March 15, 1993 6 1/8% Series due 2000 Bonds of the 2000 Series
March 15, 1993 6 3/4% Series due 2005 Bonds of the 2005 Series
July 15, 1993 7 1/2% Series due 2025 Bonds of the 2025 Series
August 1, 1993 6 1/2% Series due 2003 Bonds of the First 2003 Series
October 15, 1993 5 5/8% Series due 2000 Bonds of the Second 2000 Series
November 1, 1993 Pollution Control Series M Bonds of the Pollution Control
Series M
November 1, 1993 Pollution Control Series N Bonds of the Pollution Control
Series N
November 1, 1993 Pollution Control Series O Bonds of the Pollution Control
Series O
April 1, 1997 Pollution Control Series P Bonds of the Pollution Control
Series P
April 1, 1997 Pollution Control Series Q Bonds of the Pollution Control
Series Q
April 1, 1997 Pollution Control Series R Bonds of the Pollution Control
Series R
March 1, 1998 Pollution Control Series S Bonds of the Pollution Control
Series S
March 1, 1998 Pollution Control Series T Bonds of the Pollution Control
Series T
July 15, 1998 6 1/4% Series due 2002 Bonds of the 2002 Series
September 15, 1998 6% Series due 2003 Bonds of the Second 2003 Series
June 15, 1999 7.50% Series due 2009 Bonds of the 2009 Series
July 15, 1999 Pollution Control Series U Bonds of the Pollution Control
Series U
WHEREAS, the Company desires to create a new series of Bonds to be
issued under the Indenture, to be known as New Mortgage Bonds, Pollution Control
Series V (the "Pollution Control Series U Bonds"); and
WHEREAS, the Company will deliver the Pollution Control Series V Bonds
to, and register them in the name of, Harris Trust and Savings Bank, as trustee
under the Indenture of Trust dated as of June 1, 1992 (the "Revenue Bond
Indenture"), between the Illinois Development Finance Authority (the
"Authority") and Harris Trust and Savings Bank, as Trustee, in substitution for
the Company's First Mortgage Bonds, Pollution Control Series L, as provided in
Section 4.2 of the Loan Agreement dated as of June 1, 1992 by and between the
Authority and the Company;
WHEREAS, the Company, in the exercise of the powers and authority
conferred upon and reserved to it under the provisions of the Indenture, and
pursuant to appropriate resolutions of the Board of Directors, has duly resolved
and determined to make, execute and deliver to the Trustee a Supplemental
Indenture in the form hereof for the purposes herein provided; and
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WHEREAS, all conditions and requirements necessary to make this
Supplemental Indenture No. 2 a valid, binding and legal instrument have been
done, performed and fulfilled and the execution and delivery hereof have been in
all respects duly authorized;
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE NO. 2 WITNESSETH:
THAT Illinois Power Company, in consideration of the purchase and
ownership from time to time of the Bonds and the service by the Trustee, and its
successors, under the Indenture and of One Dollar to it duly paid by the Trustee
at or before the ensealing and delivery of these presents, the receipt whereof
is hereby acknowledged, hereby covenants and agrees to and with the Trustee and
its successors in the trust under the Indenture, for the benefit of those who
shall hold the Bonds as follows:
ARTICLE I.
DESCRIPTION OF POLLUTION CONTROL SERIES V BONDS.
SECTION 1. The Company hereby creates a new series of Bonds to be known
as "New Mortgage Bonds, Pollution Control Series V." The Pollution Control
Series V Bonds shall be executed, authenticated and delivered in accordance with
the provisions of, and shall in all respects be subject to, all of the terms,
conditions and covenants of the Indenture, as supplemented and modified.
The Pollution Control Series V Bonds shall be dated as provided in
Section 3.03 of Article Three of the Indenture, and the commencement of the
first interest period shall be the date of issuance. All Pollution Control
Series V Bonds shall mature on December 1, 2024, and shall bear interest at the
rate of seven and four-tenths per cent (7.40%) per annum, payable semi-annually
on June 1 and December 1 in each year. The Pollution Control Series V Bonds
shall be payable as to principal and interest in any coin or currency of the
United States of America which at the time of payment is legal tender for public
and private debts, and shall be payable (as well the interest and the principal
thereof) at the agency of the Company in the City of Chicago, Illinois. The
person in whose name the Pollution Control Series V Bonds are registered at the
close of business on any record date (as hereinafter defined) with respect to
any interest payment date shall be entitled to receive the interest payable on
such interest payment date notwithstanding the cancellation of such Pollution
Control Series V Bonds upon any transfer or exchange subsequent to the record
date and prior to such interest payment date; provided, however, that if and to
the extent the Company shall default in the payment of the interest due on such
interest payment date, such defaulted interest shall be paid as provided in
Section 3.07 of the Indenture.
The term "record date" as used in this Section with respect to any
interest payment date shall mean the May 15 or November 15, as the case may be,
next preceding the semi-annual interest payment date, or, if such May 15 or
November 15, shall be a legal holiday or a day on which banking institutions in
the City of Chicago, Illinois, are authorized by law to close, then the next
preceding day which shall not be a legal holiday or a day on which such
institutions are so authorized to close.
SECTION 2. The Pollution Control Series V Bonds shall be issued only as
registered Bonds without coupons of the denomination of $5,000, or any integral
multiple of $5,000, appropriately numbered. Pollution Control Series V Bonds may
be exchanged, upon surrender thereof, at the agency of the Company in the City
of Chicago, Illinois, for one or more Pollution Control Series V Bonds of other
authorized denominations, for the same aggregate principal amount, subject to
the terms and conditions set forth in the Indenture.
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Pollution Control Series V Bonds may be exchanged or transferred
without expense to the registered owner thereof except that any taxes or other
governmental charges required to be paid with respect to such transfer or
exchange shall be paid by the registered owner requesting such transfer or
exchange as a condition precedent to the exercise of such privilege.
SECTION 3. The Pollution Control Series V Bonds and the Trustee's
Certificate of Authentication shall be substantially in the following forms
respectively:
[FORM OF FACE OF BOND]
ILLINOIS POWER COMPANY
(Incorporated under the laws of the State of Illinois)
NEW MORTGAGE BOND, POLLUTION CONTROL SERIES V
No. ________________ $84,150,000
ILLINOIS POWER COMPANY, a corporation organized and existing under the laws
of the State of Illinois (the "Company," which term shall include any successor
corporation as defined in the Indenture hereinafter referred to), for value
received, hereby promises to pay to . . . . . . or registered assigns, the
principal sum of Eighty-Four Million One Hundred Fifty Thousand Dollars
($84,150,000) on December 1, 2024, in any coin or currency of the United States
of America which at the time of payment is legal tender for public and private
debts, and to pay interest thereon in like coin or currency from the date of
issuance, payable semi-annually on June 1 and December 1 in each year, at the
rate of seven and four-tenths per cent (7.40%) per annum, until the Company's
obligation with respect to the payment of such principal shall be discharged as
provided in the Indenture hereinafter mentioned. The interest so payable on any
June 1 or December 1 will, subject to certain exceptions provided in the
Supplemental Indenture No. 2 of July 15, 1999, be paid to the person in whose
name this New Mortgage Bond is registered at the close of business on the
immediately preceding May 15 or November 15, as the case may be. Both principal
of, and interest on, this New Mortgage Bond are payable at the agency of the
Company in the City of Chicago, Illinois.
This New Mortgage Bond shall not be entitled to any benefit under the
Indenture or any indenture supplemental thereto, or become valid or obligatory
for any purpose, until the form of certificate endorsed hereon shall have been
signed by or on behalf of Harris Trust and Savings Bank, the Trustee under the
Indenture, or a successor trustee thereto under the Indenture (the "Trustee").
The provisions of this New Mortgage Bond are continued on the reverse
hereof and such continued provisions shall for all purposes have the same effect
as though fully set forth at this place.
Illinois Commerce Commission No. 6122
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IN WITNESS WHEREOF, Illinois Power Company has caused this New
Mortgage Bond to be signed (manually or by facsimile signature) in its name
by an Authorized Executive Officer, as defined in the Indenture, and its
corporate seal (or a facsimile thereof) to be hereto affixed
and attested (manually or by facsimile signature) by
an Authorized Executive Officer, as defined in the
Indenture.
Dated: July __, 1999 ILLINOIS POWER COMPANY
By:
----------------------------
Authorized Executive Officer
(Corporate Seal)
ATTEST:
- ------------------------------
Authorized Executive Officer
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This New Mortgage Bond is one of the Bonds of the series designated
therein referred to in the within-mentioned Indenture dated as of November 1,
1992 and the Supplemental Indenture No. 2 of July 15, 1999.
HARRIS TRUST AND SAVINGS BANK,
Trustee,
By:
---------------------------
Authorized Signatory
[FORM OF REVERSE OF BOND]
This New Mortgage Bond is one of a duly authorized issue of Bonds of
the Company (the "Bonds") in unlimited aggregate principal amount, of the series
hereinafter specified, all issued and to be issued under and equally secured by
a General Mortgage Indenture and Deed of Trust (the "Indenture"), dated as of
November 1, 1992, executed by the Company to Harris Trust and Savings Bank (the
"Trustee"), as Trustee, to which Indenture and all indentures supplemental
thereto reference is hereby made for a description of the properties mortgaged
and pledged, the nature and extent of the security, the rights of registered
owners of the Bonds and of the Trustee in respect thereof, and the terms and
conditions upon which the Bonds are, and are to be, secured. The Bonds may be
issued in series, for various principal sums, may mature at different times, may
bear interest at different rates and may otherwise vary as provided in the
Indenture. This New Mortgage Bond is one of a series designated as the "New
Mortgage Bonds, Pollution Control Series V" (the "Pollution Control Series V
Bonds") of the Company, unlimited in aggregate principal amount, issued under
and secured by the Indenture and described in supplemental indenture no. 2 dated
as of July 15, 1999 (the "Supplemental Indenture No. 2 of July 15, 1999"),
between the Company and the Trustee, supplemental to the Indenture.
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The Pollution Control Series V Bonds are subject to redemption at any
time or from time to time on or after December 1, 2004 and prior to maturity, at
the option of the Company, either as a whole or in part by lot, upon payment of
the following percentages of the principal amounts thereof;
If redeemed during the twelve month period beginning with the first day
of December in the year:
(The years and the percentages of principal amount set forth in the
table in Section 1 of Article III in the Supplemental Indenture No. 2
of July 15, 1999 are to be inserted here.)
together, in each case, with accrued interest to the redemption date, upon
notice given by mail, postage prepaid (such mailing to be not less than thirty
days before the redemption date) to the registered owners of such Bonds at their
addresses as the same shall appear, if at all, on the transfer register of the
Company, all subject to the conditions and as more fully set forth in the
Indenture and Supplemental Indenture No. 2 of July 15, 1999.
The Pollution Control Series V Bonds are also subject to redemption in
accordance with the terms of Sections 2 and 3 of Article III in the Supplemental
Indenture No. 2 of July 15, 1999.
If this New Mortgage Bond or any portion thereof is called for
redemption and payment duly provided, this New Mortgage Bond or such portion
shall be deemed to be redeemed and cease to bear interest on or after the date
fixed for such redemption.
In case an Event of Default, as defined in the Indenture, shall occur,
the principal of all the Bonds at any such time outstanding under the Indenture
may be declared or may become due and payable, upon the conditions and in the
manner and with the effect provided in the Indenture. The Indenture provides
that such declaration may be rescinded under certain circumstances.
No recourse shall be had for the payment of the principal of, or
premium or interest on this New Mortgage Bond, or for any claim based hereon or
on the Indenture or any indenture supplemental thereto, against any
incorporator, or against any stockholder, director or officer, as such, past,
present or future, of the Company, or of any predecessor or successor
corporation, either directly or through the Company or any such predecessor or
successor corporation, either directly or through the Company or any such
predecessor or successor corporation, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise, all such liability, whether at common law, in equity, by any
constitution, statute, rule of law, or otherwise, of incorporators,
stockholders, directors or officers being released by every owner hereof by the
acceptance of this New Mortgage Bond and as part of the consideration for the
issue hereof, and being likewise released by the terms of the Indenture;
provided, however, that nothing herein or in the Indenture or any indenture
supplemental thereto contained shall prevent the enforcement of the liability,
if any, of any stockholder or subscriber to capital stock upon or in respect of
shares of capital stock not fully paid up.
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ARTICLE II.
ISSUE OF POLLUTION CONTROL SERIES V BONDS.
SECTION 1. The Company hereby exercises the right to obtain the
authentication of $84,150,000 principal amount of additional Bonds pursuant to
the terms of Section 4.02 of the Indenture. All such additional Bonds shall be
Pollution Control Series V Bonds.
SECTION 2. Such Pollution Control Series V Bonds may be authenticated
and delivered prior to the filing for recordation of this Supplemental Indenture
No. 2.
ARTICLE III.
REDEMPTION.
SECTION 1. The Pollution Control Series V Bonds shall, subject to the
provisions of Article Five of the Indenture, be redeemable upon the concurrent
redemption of bonds issued under the Revenue Bond Indenture at any time or from
time to time on or after December 1, 2004, and prior to maturity, at the option
of the Board of Directors of the Company, either as a whole or in part by lot,
at the percentages of the principal amount thereof specified in the following
table together, in each case, with accrued interest to the redemption date:
Redemption
Redemption Dates (inclusive) Price
December 1, 2004 through November 30, 2005 102%
December 1, 2005 through November 30, 2006 101%
December 1, 2006 and thereafter 100%
SECTION 2. Pollution Control Series V Bonds shall be redeemable in
whole at the option of the Board of Directors of the Company prior to maturity
at a redemption price equal to 100% of the principal amount plus interest
thereon accrued to the date fixed for redemption, whenever the Company shall
file the required resolution with the Authority and the trustee under the
Revenue Bond Indenture, such resolution as required by the terms of the Revenue
Bond Indenture, stating that one or more of the following events shall have
occurred:
(a) Damage or destruction to the Company's Clinton Generating
Station near Clinton, Illinois (the "Plant"), or the air and water
pollution control, sewage and solid waste disposal facilities located
at the Plant, which include among other things, sanitary treatment
facilities, water pollution control facilities, and certain liquid,
gaseous and solid radioactive waste treatment facilities together with
certain miscellaneous facilities which are functionally related and
subordinate thereto (the "Project") to such extent that in the opinion
of the Company's Board of Directors (expressed in a resolution) filed
with the Authority and the trustee under the Revenue Bond Indenture,
(1) the Plant or the Project, as the case may be, cannot reasonably be
repaired, rebuilt or restored within a period of six months to its
condition immediately preceding such damage or destruction, or (2) the
Company is thereby prevented from carrying on its normal operation at
the Plant for a period of six months; or
(b) Loss of title to or use of a substantial part of the
Company's Plant or the Project as a result of the exercise of the power
of eminent domain which, in the opinion of the Company's Board of
Directors (expressed in a resolution ) filed with the Authority and the
trustee under the Revenue Bond Indenture, results or is likely to
result in the
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Company being thereby prevented from carrying on its normal operations
therein for period of six months; or
(c) A change in the Constitution of Illinois or of the United
States of America or legislative or administrative action (whether
local, state or Federal) or a final decree, judgment or order of any
court or administrative body (whether local, state or Federal) which
causes the Loan Agreement dated as of June 1, 1992 between the
Authority and the Company (the "Agreement") to become void or
unenforceable or impossible of performance in accordance with the
intent and purpose of the parties as expressed therein or unreasonable
burdens or excessive liabilities to be imposed upon the Authority or
the Company with respect to the Plant or the Project or the operation
thereof; or
(d) Any event occurs which, in the opinion of the Company's
Board of Directors (expressed in a resolution) renders the Project or
the Plant so uneconomical that it is abandoned.
Any such redemption under this Section 2 shall be on any date within 90 days
from the time the Company files such required resolution and directs that the
Pollution Control Series V Bonds are to be redeemed, which direction must be
given, if at all, within 180 days following the occurrence of one of the events
listed in (a) through (d) of this Section 2.
SECTION 3. If a Determination of Taxability as defined in Section
301(c) of the Revenue Bond Indenture occurs, then the Pollution Control Series V
Bonds shall be redeemed in whole or in part by the Company prior to maturity
upon the terms and conditions set forth in Section 301(c) of the Revenue Bond
Indenture.
SECTION 4. For the purposes of Section 3 of this Article III, a demand
form the trustee under the Revenue Bond Indenture shall be executed on behalf of
such trustee by its President or a Vice President or a Trust Officer and shall
be deemed received by the Trustee when delivered at its Corporate trust office
in Chicago, Illinois. The Trustee may be conclusively rely as to the truth of
the statements contained therein, upon any such demand.
SECTION 5. Subject to the provisions of Article Five of the Indenture,
notice of redemption of Pollution Control Series V Bonds shall be sent by the
Company by certified mail, postage prepaid, at least thirty (30) days prior to
the date fixed for redemption, to the registered owners of such Bonds at their
addresses as the same shall appear, if at all, on the transfer register of the
Company. Any notice which is mailed in the manner herein provided shall be
conclusively presumed to have been duly given whether or not the holders receive
such notice, but failure to give notice by mail, or any defect in such notice,
to the holder of any such Bonds designated for redemption in whole or in part
shall not affect the validity of the redemption of any other such Bond.
ARTICLE IV.
ADDITIONAL COVENANTS.
The Company hereby covenants and agrees that:
SECTION 1. So long as any Pollution Control Series V Bonds are
outstanding, in the event all or substantially all of the electric properties
shall have been released as an entirety from
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the lien of the Indenture pursuant to Section 8.03 or Section 8.07 of Article
Eight of the Indenture, the Company will, at any time or from time to time
within six months after the date of such release, retire Bonds outstanding under
the Indenture in an aggregate principal amount equal to the fair value of the
electric properties so released pursuant to Section 8.03 of Article Eight of the
Indenture, as stated in the engineer's certificate required by Section
8.03(a)(iii) of said Article Eight, and the proceeds of the electric properties
so released pursuant to Section 8.07 of said Article Eight. Such retirement of
Bonds shall be effected by causing the Trustee to purchase or redeem Bonds,
pursuant to Section 8.06 of Article Eight of the Original Indenture, out of any
moneys deposited with the Trustee pursuant to Sections 8.03(a)(iv) and 8.07 of
Article Eight of the Indenture upon such release.
The Bonds to be so retired on or after, but only on or after December 1, 2004,
shall include a principal amount of Pollution Control Series V Bonds which,
computed to the nearest $5,000, bears the same ratio to the aggregate principal
amount of all Bonds so retired as the aggregate principal amount of all
Pollution Control Series V Bonds outstanding immediately prior to such release
bears to the aggregate principal amount of all Bonds then outstanding.
SECTION 2. All Pollution Control Series V Bonds delivered to the
Trustee or purchased or redeemed pursuant to this Article shall be canceled by
the Trustee, which shall deliver them to the Company. Pollution Control Series V
Bonds so canceled shall not be reissued, and no additional Bonds shall be
authenticated and delivered in substitution therefor and no property or
obligations shall be released or cash withdrawn or reduced under the provisions
of the Indenture on the basis thereof.
ARTICLE V.
THE TRUSTEE.
The Trustee hereby accepts the trusts hereby declared and provided, and
agrees to perform the same upon the terms and conditions in the Indenture set
forth and upon the following terms and conditions:
The Trustee shall not be responsible in any manner whatsoever
for or in respect of the validity or sufficiency of this Supplemental
Indenture No. 2 or the due execution hereof by the Company or for or in
respect of the recitals contained herein, all of which recitals are
made by the Company solely. In general, each and every term and
condition contained in Article Eleven of the Indenture shall apply to
this Supplemental Indenture No. 2 with the same force and effect as if
the same were herein set forth in full, with such omissions, variations
and modifications thereof as may be appropriate to make the same
conform to this Supplemental Indenture No. 2.
ARTICLE VI.
MISCELLANEOUS PROVISIONS.
This Supplemental Indenture No. 2 may be simultaneously executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and the same
instrument.
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IN WITNESS WHEREOF, Illinois Power Company has caused this Supplemental
Indenture No. 2 to be executed on its behalf by an Authorized Executive Officer
as defined in the Indenture, and its corporate seal to be hereto affixed and
said seal and this Indenture to be attested by an Authorized Executive Officer
as defined in the Indenture; and said Harris Trust and Savings Bank, in evidence
of its acceptance of the trust hereby created, has caused this Indenture to be
executed on its behalf by its President or one of its Vice Presidents and its
corporate seal to be hereto affixed and said seal and this Indenture to be
attested by its Secretary or one of its Assistant Secretaries, all as of the day
first above written.
ILLINOIS POWER COMPANY
By
------------------------------------
Robert A. Schultz
Vice President--Finance
(CORPORATE SEAL)
ATTEST:
- ------------------------------
Leah Manning Stetzner
Corporate Secretary
HARRIS TRUST AND SAVINGS BANK, Trustee
By
------------------------------------
J. Bartolini
Vice President
(CORPORATE SEAL)
ATTEST:
- -------------------------------
C. Potter
Assistant Secretary
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STATE OF ILLINOIS )
)SS.:
COUNTY OF MACON )
BE IT REMEMBERED, that on this ___ day of July, 1999, before me, the
undersigned, a Notary Public within and for the County and State aforesaid,
personally came Robert A. Schultz, Vice President--Finance, and Leah Manning
Stetzner, Corporate Secretary, of Illinois Power Company, a corporation duly
organized, incorporated and existing under the laws of the State of Illinois,
who are personally known to me to be such officers, and who are personally known
to me to be the same persons who executed as such officers the within instrument
of writing, and such persons duly acknowledged that they signed, sealed and
delivered the said instrument as their free and voluntary act as such officers,
and as the free and voluntary act of said Illinois Power Company for the uses
and purposes therein set forth.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my
official seal on the day and year last above written.
Notary Public, Macon County, Illinois
My Commission Expires _______________.
(NOTARIAL SEAL)
STATE OF ILLINOIS )
)SS.:
COUNTY OF COOK )
BE IT REMEMBERED, that on this ___ day of July, 1999, before me, the
undersigned, a Notary Public within and for the County and State aforesaid,
personally came J. Bartolini, Vice President and C. Potter, Assistant Secretary,
of Harris Trust and Savings Bank, a corporation duly organized, incorporated and
existing under the laws of the State of Illinois, who are personally known to me
to be the same persons who executed as such officers the within instrument of
writing, and such persons duly acknowledged that they signed, sealed and
delivered the said instrument as their free and voluntary act as such officers,
and as the free and voluntary act of said Harris Trust and Savings Bank for the
uses and purposes therein set forth.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my
official seal on the day and year last above written.
Notary Public, Cook County, Illinois
My Commission Expires: ___________
(NOTARIAL SEAL)
135
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Return To: This Instrument Was Prepared By:
ILLINOIS POWER COMPANY SCHIFF HARDIN & WAITE
Real Estate Dept. F-14 6600 Sears Tower
500 S. 27th Street 233 South Wacker Drive
Decatur, IL 62525 Chicago, IL 60606
136
<PAGE>
Exhibit 10.1
CLINTON NUCLEAR POWER STATION
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
ILLINOIS POWER COMPANY, as SELLER,
AND
AMERGEN ENERGY COMPANY, L.L.C., as BUYER
Dated as of June 30, 1999
REDACTED AREAS IN THIS DOCUMENT CONTAIN CONFIDENTIAL MATERIAL WITHHELD
FROM PUBLIC DISCLOSURE PURSUANT TO 220 ILCS 5/4-404 AND 5-108.
137
<PAGE>
REDACTED AREAS CONTAIN CONFIDENTIAL MATERIAL WITHHELD FROM PUBLIC
DISCLOSURE PURSUANT TO 220 ILCS 5/4-404 AND 5-108.
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS 1
1.1 Definitions 1
1.2 Certain Interpretive Matters 20
ARTICLE II
PURCHASE AND SALE 21
2.1 Transfer of Assets 21
2.2 Excluded Assets 23
2.3 Assumed Liabilities and Obligations 25
2.4 Excluded Liabilities 26
2.5 Control of Litigation 30
ARTICLE III
THE CLOSING 30
3.1 Closing 30
3.2 Purchase Price; Payment 31
3.3 Adjustment to Cash Purchase Price 31
3.4 Allocation of Purchase Price 33
3.5 Prorations 33
3.6 Deliveries by Seller 34
3.7 Deliveries by Buyer 35
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER 37
4.1 Organization; Qualification 37
4.2 Authority 37
4.3 Consents and Approvals; No Violation 37
4.4 Financial Statements; Reports 38
4.5 Undisclosed Liabilities 38
4.6 Absence of Certain Changes or Events 39
4.7 Title and Related Matters 39
138
<PAGE>
REDACTED AREAS CONTAIN CONFIDENTIAL MATERIAL WITHHELD FROM PUBLIC
DISCLOSURE PURSUANT TO 220 ILCS 5/4-404 AND 5-108.
4.8 Real Property Agreements 39
4.9 Insurance 39
4.10 Environmental Matters 40
4.11 Labor Matters 41
4.12 ERISA; Benefit Plans 41
4.13 Real Property; Plant and Equipment 42
4.14 Condemnation; Public Improvements 43
4.15 Certain Contracts and Arrangements 43
4.16 Legal Proceedings, etc 44
4.17 Permits; Compliance with Law 44
4.18 NRC Licenses 44
4.19 Regulation as a Utility 45
4.20 Taxes 45
4.21 Year 2000 Compliance 46
4.22. Qualified Decommissioning Fund 46
4.23 Nonqualified Decommissioning Fund 48
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER 49
5.1 Organization 49
5.2 Authority 50
5.3 Consents and Approvals; No Violation 50
5.4 Availability of Funds 51
5.5 Legal Proceedings 51
5.6 WARN Act 51
5.7 Regulation as a Utility 51
5.8 Qualified Buyer 51
5.9 Limited Liability Company Agreement 51
ARTICLE VI
COVENANTS OF THE PARTIES 52
6.1 Conduct of Business Relating to the Purchased Assets 52
6.2 Access to Information 55
6.3 Expenses 58
6.4 Further Assurances; Cooperation 58
6.5 Public Statements 60
139
<PAGE>
REDACTED AREAS CONTAIN CONFIDENTIAL MATERIAL WITHHELD FROM PUBLIC
DISCLOSURE PURSUANT TO 220 ILCS 5/4-404 AND 5-108.
6.6 Consents and Approvals 60
6.7 Brokerage Fees and Commissions 62
6.8 Tax Matters 62
6.9 Advice of Changes 64
6.10 Employees 65
6.11 Risk of Loss 70
6.12 Decommissioning Funds 71
6.13 Spent Nuclear Fuel Fees 77
6.14 Department of Energy Decontamination and Decommissioning Fees 77
6.15 Cooperation Relating to Insurance and Price-Anderson Act 78
6.16 Tax Clearance Certificates 78
6.17 Remediation 78
6.18 NRC License Transfer Requirements 79
6.19 Metering 79
6.20 Right to Participate in Electric Generating Projects 80
6.21 xxxxxxxxxxxxxxxxxxxxxxxxx 82
6.22 Personal Property Insurance 82
ARTICLE VII
CONDITIONS 82
7.1 Conditions to Obligations of Buyer 82
7.2 Conditions to Obligations of Seller 85
ARTICLE VIII
INDEMNIFICATION 87
8.1 Indemnification 87
8.2 Defense of Claims 89
8.3 Waiver and Release 91
ARTICLE IX
TERMINATION 91
9.1 Termination 91
9.2 Procedure and Effect of No-Default Termination 93
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REDACTED AREAS CONTAIN CONFIDENTIAL MATERIAL WITHHELD FROM PUBLIC
DISCLOSURE PURSUANT TO 220 ILCS 5/4-404 AND 5-108.
ARTICLE X
MISCELLANEOUS PROVISIONS 93
10.1 Amendment and Modification 93
10.2 Waiver of Compliance; Consents 93
10.3 Survival of Representations, Warranties, Covenants 93
10.4 Notices 94
10.5 Assignment 95
10.6 Governing Law 96
10.7 Counterparts 96
10.8 Interpretation 96
10.9 Schedules and Exhibits 97
10.10 Entire Agreement 97
10.11 Bulk Sales Laws 97
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REDACTED AREAS CONTAIN CONFIDENTIAL MATERIAL WITHHELD FROM PUBLIC
DISCLOSURE PURSUANT TO 220 ILCS 5/4-404 AND 5-108.
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A Form of Assignment and Assumption Agreement
Exhibit B Form of Bill of Sale
Exhibit C Easements
Exhibit D Form of FIRPTA Affidavit
Exhibit E Form of Interconnection Agreement
Exhibit F Information Technology Service Terms
Exhibit G xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Exhibit H Form of Power Purchase Agreement
Exhibit I Form of Special Warranty Deed
Exhibit J Form of Opinion from Seller's Counsel
Exhibit K Form of Opinion from Buyer's Counsel
Exhibit L xxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Exhibit M xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
SCHEDULES
1.1 (91) List of Seller's Officers
1.1(112) Exceptions to Title
1.1(158) Transferable Permits
2.1(l) Intellectual Property
2.2(a) Excluded Transmission and other Assets
2.2(k) Excluded Real Property Agreements
2.2(l) Excluded Parcels
2.2(m) Excluded Other Assets
2.3(i) Assumed Liabilities and Claims
4.3(a) Seller's Third Party Consents
4.3(b) Seller's Required Regulatory Approvals
4.4 Financial Statements; Reports
4.5 Liabilities
4.6 Absence of Certain Changes or Events
4.8 Real Property Agreements
4.9 Insurance Policies and Exceptions
4.10 Environmental Matters
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REDACTED AREAS CONTAIN CONFIDENTIAL MATERIAL WITHHELD FROM PUBLIC
DISCLOSURE PURSUANT TO 220 ILCS 5/4-404 AND 5-108.
4.11 Noncompliance with Employment Laws
4.12(a) Benefit Plans
4.12(b) Benefit Plan Exceptions
4.13(a) Description of Real Property
4.13(b) Description of Major Equipment Components and Personal Property
4.14 Notices of Condemnation
4.15(a) List of Seller's Agreements
4.15(b) Agreement Exceptions
4.15(c) Agreement Defaults
4.16 Legal Proceedings and Court Orders
4.17(a) Permit Violations
4.17(b) List of Material Permits (other than Transferable Permits)
4.18(a) License Violations
4.18(b) List of Material NRC Licenses
4.19 Utility Matters regarding Seller
4.20 Tax Matters
4.21 Year 2000 Compliance
4.22 Tax and Financial Matters Relating to Qualified Decommissioning Fund
4.23 Financial Matters Relating to Nonqualified Decommissioning Fund
5.3(a) Buyer's Third Party Consents
5.3(b) Buyer's Required Regulatory Approvals
5.7 Utility Matters regarding Buyer
6.1 Permitted Activities Prior to Closing
6.8(e) Pollution Control Facilities
6.10(d) IBEW Collective Bargaining Agreements
6.15 Buyer's Required Insurance
6.17 Site Remediation
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of June 30, 1999, by and between Illinois
Power Company, an Illinois corporation ("IP" or "Seller"), and AmerGen Energy
Company, L.L.C., a Delaware limited liability company ("Buyer"). Seller and
Buyer are referred to individually as a "Party," and collectively as the
"Parties."
W I T N E S S E T H
WHEREAS, Seller owns the Clinton Power Station ("CPS"), NRC Facility Operating
License No. NPF-62, located near Clinton, Illinois, and certain facilities and
other assets associated therewith and ancillary thereto; and
WHEREAS, Buyer desires to purchase and assume, and Seller desires to sell and
assign, the Purchased Assets (as defined in Section 2.1 below) and certain
associated liabilities, upon the terms and conditions hereinafter set forth in
this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements hereinafter set forth, and intending to be legally
bound hereby, the Parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms have the
meanings specified in this Section 1.1.
(1) "Affiliate" has the meaning set forth in Rule 12b-2 of the General
Rules and Regulations under the
Exchange Act.
(2) "Agreement" means this Asset Purchase Agreement together with the
Schedules and Exhibits hereto, as the same may be amended from time to time.
(3) "Ancillary Agreements" means the Assignment and Assumption Agreement,
the Easement Agreement, the Interconnection Agreement, the PPA, the Post-Closing
Decommissioning Trust Agreement, the Electric Service Agreement, the
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Environmental Laboratory Lease, the Emergency Off-Site Facility Lease, and the
IP Service Agreement, as the same may be amended from time to time.
(4) "Assignment and Assumption Agreement" means the Assignment and
Assumption Agreement between Seller and Buyer, substantially in the form of
Exhibit A hereto, by which Seller, subject to the terms and conditions hereof,
shall assign Seller's Agreements, the Real Property Agreements, the Transferable
Permits, certain intangible assets and other Purchased Assets to Buyer and
whereby Buyer shall assume the Assumed Liabilities and Obligations.
(5) "Assumed Liabilities and Obligations" has the meaning set forth in
Section 2.3.
(6) "Atomic Energy Act" means the Atomic Energy Act of 1954, as amended.
(7) "Benefit Plans" has the meaning set forth in Section 4.12(a).
(8) "Bill of Sale" means the Bill of Sale, substantially in the form of
Exhibit B hereto, to be delivered at the Closing, with respect to the Tangible
Personal Property included in the Purchased Assets transferred to Buyer at the
Closing.
(9) "Business Day" means any day other than Saturday, Sunday and any day on
which banking institutions in the State of Illinois are authorized by law or
other governmental action to close.
(10) "Buyer Benefit Plans" has the meaning set forth in Section 6.10(f).
(11) "Buyer Indemnitee" has the meaning set forth in Section 8.1(b).
(12) "Buyer Material Adverse Effect" has the meaning set forth in Section
5.3(a).
(13) "Buyer NQF" has the meaning set forth in Section 6.12(a).
(14) "Buyer QF" has the meaning set forth in Section 6.12(a).
(15) "Buyer's Required Regulatory Approvals" has the meaning set forth in
Section 5.3(b).
(16) "Buyer's Total Basis" has the meaning set forth in Section 6.12(b).
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(17) "Byproduct Material" means any radioactive material (except Special
Nuclear Material) yielded in, or made radioactive by, exposure to radiation in
the process of producing or utilizing Special Nuclear Material.
(18) "Cash Purchase Price" has the meaning set forth in Section 3.2.
(19) "Closing" has the meaning set forth in Section 3.1.
(20) "Closing Adjustment" has the meaning set forth in Section 3.3(b).
(21) "Closing Date" has the meaning set forth in Section 3.1.
(22) "COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
(23) "Code" means the Internal Revenue Code of 1986, as amended.
(24) "Commercially Reasonable Efforts" means efforts which are designed to
enable a Party, directly or indirectly, to satisfy a condition to, or otherwise
assist in the consummation of, the transactions contemplated by this Agreement
and which do not require the performing Party to expend any funds or assume
liabilities other than expenditures and liabilities which are customary and
reasonable in nature and amount in the context of the transactions contemplated
by this Agreement.
(25) "Confidentiality Agreement" means the Confidentiality Agreement, dated
March 12, 1999, by and among Seller, Buyer and PECO, as modified by the Interim
Agreement.
(26) "Construction Waste Landfill" means the real property containing the
demolition and construction landfill, which is identified separately on Schedule
4.13(a) but is included as part of the Purchased Assets.
(27) "CPS" has the meaning set forth in the preamble.
(28) "Decommissioning" means the complete retirement and removal of the
Facilities from service and the restoration of the Site, as well as any planning
and administrative activities incidental thereto, including, without limitation,
(a) the dismantlement, decontamination, storage and/or entombment of the
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Facilities, in whole or in part, and any reduction or removal, whether before or
after termination of the NRC license for the Facilities, of radioactivity at the
Site and (b) all activities necessary for the retirement, dismantlement and
decontamination of the Facilities to comply with all applicable Nuclear Laws and
Environmental Laws, including the applicable requirements of the Illinois Public
Utilities Act, Atomic Energy Act and the NRC's rules, regulations, orders and
pronouncements thereunder, the NRC Operating License for the Facilities and any
related decommissioning plan.
(29) "Decommissioning Funds" means the Qualified Decommissioning Fund and
the Nonqualified Decommissioning Fund.
(30) "Department of Energy" means the United States Department of Energy
and any successor agency thereto.
(31) "Department of Energy Decontamination and Decommissioning Fees" means
all fees related to the Department of Energy's Special Assessment of utilities
for the Uranium Enrichment Decontamination and Decommissioning Fund pursuant to
Sections 1801, 1802 and 1803 of the Atomic Energy Act and the Department of
Energy's implementing regulations at 10 C.F.R. Part 766, or any similar fees
assessed under amended or superseding statutes or regulations applicable to
separative work units purchased from the Department of Energy in order to
decontaminate and decommission the Department of Energy's gaseous diffusion
enrichment facilities.
(32) "Department of Justice" means the United States Department of Justice
and any successor agency thereto.
(33) "Direct Claim" has the meaning set forth in Section 8.2(c).
(34) "Easement Agreement" means the Easement Agreement between Buyer and
Seller, to be entered into at the Closing, containing the Easements with respect
to the Real Property referred to on Exhibit C hereto and such other Easements as
shall be mutually acceptable to Buyer and Seller.
(35) "Easements" means, with respect to the Purchased Assets, the
easements, licenses and access rights to be granted by Buyer or Seller or
reserved by Seller pursuant to the Interconnection Agreement or the Easement
Agreement, including, without limitation, easements authorizing access, use,
maintenance, construction, repair, replacement and other activities by Seller or
Buyer, as the case may be.
(36) "Electric Service Agreement" means the service agreement, to be
entered into at the Closing, under which Seller shall provide electric service
to CPS after the Closing Date.
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(37) "Emergency Off-Site Facility Lease" means the lease between Buyer and
Seller, to be entered into at the Closing, under which Buyer shall lease from
Seller certain back-up emergency off-Site facilities and a public information
center in Decatur, Illinois, which lease shall comply with applicable NRC
requirements and shall contain such other terms and conditions as shall be
mutually acceptable to Buyer and Seller.
(38) "Emission Allowance" means all authorizations to emit specified units
of pollutants or Hazardous Substances from the Purchased Assets, which units are
established by the Governmental Authority with jurisdiction over the Purchased
Assets under (a) an air pollution control and emission reduction program
designed to mitigate global warming or interstate or intrastate transport of air
pollutants, (b) a program designed to mitigate impairment of surface waters,
watersheds, or groundwater or (c) any pollution reduction program with a similar
purpose. Allowances include allowances, as described above, regardless of
whether the Governmental Authority establishing such allowances designates such
allowances by a name other than "allowances." The amount of the Emission
Allowances shall be the amount in effect on the date hereof or subsequently
authorized in respect of the Purchased Assets, reduced by the Emission
Allowances consumed in the operation of the Purchased Assets between the date
hereof and the Closing Date in the ordinary course of business.
(39) "Emission Reduction Credits" means credits, in units that are
established by the Governmental Authority with jurisdiction over the Purchased
Assets that has obtained the credits, resulting from reductions in the emissions
of air pollutants from an emitting source or facility (including, without
limitation, and to the extent allowable under applicable law, reductions from
shutdowns or control of emissions beyond that required by applicable law) that
(a) have been identified by the IEPA as complying with applicable Illinois law
governing the establishment of such credits (including, without limitation, that
such emissions reductions are enforceable, permanent, quantifiable and surplus)
and listed in the Emissions Reduction Credit Registry maintained by the IEPA or
with respect to which such identification and listing are pending or (b) have
been certified by any other applicable Governmental Authority as complying with
the law and regulations governing the establishment of such credits (including,
without limitation, certification that such emissions reductions are
enforceable, permanent, quantifiable and surplus). The term includes Emission
Reduction Credits that have been approved by the IEPA and are awaiting USEPA
approval. The term also includes certified air emissions reductions, as
described above, regardless as to whether the Governmental Authority certifying
such reductions designates such certified air emissions reductions by a name
other than "emission reduction credits." The amount of the Emission Reduction
Credits shall be the amount in effect on the date hereof or subsequently
authorized in respect of the Purchased Assets, reduced by the Emission Reduction
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Credits consumed in the operation of the Purchased Assets between the date
hereof and the Closing Date in the ordinary course of business.
(40) "Encumbrances" means any mortgages, pledges, liens, security
interests, conditional and installment sale agreements, activity and use
limitations, conservation easements, deed restrictions, easements, encumbrances
and charges of any kind.
(41) "Energy Reorganization Act" means the Energy Reorganization Act of
1974, as amended.
(42) "Environment" means all air, surface water, groundwater or land,
including land surface or subsurface, including all fish, wildlife, biota and
all other natural resources.
(43) "Environmental Claim" means any and all pending and/or threatened
administrative or judicial actions, suits, orders, claims, liens, notices,
notices of violation, investigations, complaints, requests for information,
proceedings or other written communication, whether criminal or civil, pursuant
to or relating to any applicable Environmental Law by any Person (including,
without limitation, any Governmental Authority, private person and citizens'
group) based upon, alleging, asserting, or claiming any actual or potential (a)
violation of, or liability under any Environmental Law, (b) violation of any
Environmental Permit, or (c) liability for investigatory costs, cleanup costs,
removal costs, remedial costs, response costs, natural resource damages,
property damage, personal injury, fines, or penalties arising out of, based on,
resulting from or related to, the presence, Release, or threatened Release into
the Environment of any Hazardous Substances at any location related to the
Purchased Assets, including, without limitation, any off-Site location to which
Hazardous Substances, or materials containing Hazardous Substances, were sent
for handling, storage, treatment or disposal prior to the Closing Date.
(44) "Environmental Clean-up Site" means any location which is listed or
publicly proposed for listing on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System, or on any
similar state list of sites requiring investigation or cleanup.
(45) "Environmental Condition" means the presence or Release of Hazardous
Substances at the Site prior to the Closing Date.
(46) "Environmental Laboratory Lease" means the lease between Buyer and Seller,
to be entered into at the Closing, under which Seller shall lease from Buyer the
environmental testing laboratory located on the Site, which lease shall comply
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with applicable NRC requirements and shall contain such other terms and
conditions as shall be mutually acceptable to Buyer and Seller.
(47) "Environmental Laws" means all federal, state and local civil and
criminal laws, regulations, rules, ordinances, codes, decrees, judgments,
directives, or judicial or administrative orders relating to pollution or
protection of the Environment, natural resources or human health and safety,
including, without limitation, laws relating to Releases or threatened Releases
of Hazardous Substances (including, without limitation, Releases to ambient air,
surface water, groundwater, land, surface and subsurface strata) or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
Release, transport, disposal or handling of Hazardous Substances. "Environmental
Laws" include, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") (42 U.S.C. sections 9601 et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. sections 1801 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. sections 6901 et seq.), the
Federal Water Pollution Control Act (33 U.S.C. sections 1251 et seq.), the Clean
Air Act (42 U.S.C. sections 7401 et seq.), the Toxic Substances Control Act (15
U.S.C. sections 2601 et seq.), the Oil Pollution Act (33 U.S.C. sections 2701 et
seq.), the Emergency Planning and Community Right-to-Know Act (42 U.S.C.
sections 11001 et seq.), the Occupational Safety and Health Act (29 U.S.C.
sections 651 et seq.), the Illinois Environmental Protection Act (415 ILCS
5/1-101 et seq.), the Illinois Solid Waste Management Act (415 ILCS 20/1-101 et
seq.), the Illinois Water Pollutant Discharge Act (415 ILCS 25/1-101 et seq.),
the Illinois Groundwater Protection Act (415 ILCS 55/1-101 et seq.), the
Illinois Toxic Pollution Prevention Act (415 ILCS 85/1-101 et seq.), the
Illinois Pollution Prevention Act (415 ILCS 115/1-101 et seq.), the Illinois
Responsible Party Transfer Act (765 ILCS 90/1-101 et seq.), and regulations
promulgated under such federal and state laws, and all other state and local
laws analogous to any of the above, and any common law doctrine, including,
without limitation, negligence, nuisance, trespass, personal injury, or property
damage related to or arising out of the presence, Release or exposure to
Hazardous Substances. Notwithstanding the foregoing, Environmental Laws do not
include Nuclear Laws.
(48) "Environmental Permit" means any federal, state or local permits,
licenses, approvals, consents or authorizations required by any Governmental
Authority under or in connection with any Environmental Law and includes any and
all orders, consent orders or binding agreements issued or entered into by a
Governmental Authority under any applicable Environmental Law.
(49) "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
(50) "ERISA Affiliate" has the meaning set forth in Section 2.4(k).
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(51) "ERISA Affiliate Plans" has the meaning set forth in Section 2.4(k).
(52) "Estimated Adjustment" has the meaning set forth in Section 3.3(b).
(53) "Estimated Closing Statement" has the meaning set forth in Section
3.3(b).
(54) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(55) "Excluded Assets" has the meaning set forth in Section 2.2 and
includes, without limitation, the "Excluded Parcels" described in Schedule
2.2(l), and the "Excluded Other Assets" described in Schedule 2.2(m).
(56) "Excluded Liabilities" has the meaning set forth in Section 2.4.
(57) "Exempt Wholesale Generator" means an exempt wholesale generator as
defined in Section 32 of the Holding Company Act and the regulations issued
thereunder.
(58) "Facilities" means the plant, facilities, equipment, materials,
supplies and improvements owned by Seller and included in the Purchased Assets.
(59) xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxx
(60) "Federal Power Act" means the Federal Power Act, as amended.
(61) "Federal Trade Commission" means the United States Federal Trade
Commission and any successor agency thereto.
(62) "FERC" means the United States Federal Energy Regulatory Commission
and any successor agency thereto.
(63) "FIRPTA Affidavit" means the Foreign Investment in Real Property Tax
Act Certification and Affidavit, substantially in the form of Exhibit D hereto.
(64) "Good Utility Practices" means any of the practices, methods and
activities approved by a significant portion of the electric utility industry as
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good practices applicable to nuclear generating facilities of similar design,
size and capacity or any of the practices, methods or activities which, in the
exercise of reasonable judgment by a prudent nuclear operator in light of the
facts known at the time the decision was made, reasonably could have been
expected to accomplish the desired result consistent with good business
practices, reliability, efficiency, safety, expedition and applicable law. Good
Utility Practices are not intended to be limited to the optimal practices,
methods or acts to the exclusion of all others, but rather to be practices,
methods or acts generally accepted in the electric utility industry.
(65) "Governmental Authority" means any federal, state or local
governmental, regulatory, legislative, executive or administrative agency,
authority, commission, body, department, board, or other governmental
subdivision, court, tribunal, arbitrating body or other governmental authority.
(66) "Hazardous Substances" means (a) any petrochemical or petroleum
products, oil or coal ash, radioactive materials, radon gas, asbestos in any
form that is or could become friable, urea formaldehyde foam insulation and
transformers or other equipment that contains dielectric fluid which contain
levels of polychlorinated biphenyls, (b) any chemicals, materials or substances
defined as or included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "hazardous constituents," "restricted hazardous
materials," "extremely hazardous substances," "toxic substances,"
"contaminants," "pollutants," "toxic pollutants" or words of similar meaning and
regulatory effect under any applicable Environmental Law, and (c) any other
chemical, material or substance, exposure to which is prohibited, limited or
regulated by any applicable Environmental Law; excluding, however, any Nuclear
Material to the extent regulated under any Nuclear Laws.
(67) "High Level Waste" means (a) irradiated nuclear reactor fuel, (b)
liquid wastes resulting from the operation of the first cycle solvent extraction
system, or its equivalent, and the concentrated wastes from subsequent
extraction cycles, or their equivalent, in a facility for reprocessing
irradiated reactor fuel, and (c) solids into which such liquid wastes have been
converted.
(68) "High Level Waste Repository" means a facility which is designed,
constructed and operated by or on behalf of the Department of Energy for the
storage and disposal of Spent Nuclear Fuel and other High Level Waste in
accordance with the requirements set forth in the Nuclear Waste Policy Act.
(69) "Holding Company Act" means the Public Utility Holding Company Act of
1935, as amended.
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(70) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
(71) "IBEW" means Locals 51 and 1306 of the International Brotherhood of
Electrical Workers.
(72) "IBEW Collective Bargaining Agreements" has the meaning set forth in
Section 6.10(d).
(73) "ICC" means the Illinois Commerce Commission and any successor agency
thereto.
(74) "IDNR" means the Illinois Department of Natural Resources and any
successor agency thereto.
(75) "IDNS" means the Illinois Department of Nuclear Safety and any
successor agency thereto.
(76) "IEPA" means the Illinois Environmental Protection Agency and any
successor agency thereto.
(77) "IPCB" means the Illinois Pollution Control Board and any successor
agency thereto.
(78) "Income Tax" means any federal, state, local or foreign Tax (a) based
upon, measured by or calculated with respect to net income, profits or receipts
(including, without limitation, capital gains Taxes and minimum Taxes) or (b)
based upon, measured by or calculated with respect to multiple bases (including,
without limitation, corporate franchise taxes) if one or more of the bases on
which such Tax may be based, measured by or calculated with respect to, is
described in clause (a), in each case together with any interest, penalties or
additions to such Tax.
(79) "Indemnifiable Loss" has the meaning set forth in Section 8.1(a).
(80) "Indemnifying Party" has the meaning set forth in Section 8.1(d) .
(81) "Indemnitee" means a Buyer Indemnitee or Seller Indemnitee, as the
case may be.
(82) "Independent Accounting Firm" means such independent accounting firm
of national reputation as is mutually appointed by Seller and Buyer.
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(83) "Inspection" means all tests, reviews, examinations, inspections,
investigations, verifications, samplings and similar activities conducted by
Buyer or its agents or Representatives with respect to the Purchased Assets
prior to the Closing.
(84) "Intellectual Property" means all patents and patent rights,
trademarks and trademark rights, inventions, copyrights and copyright rights
owned by Seller and necessary for the operation and maintenance of the Purchased
Assets, and all pending applications for registrations of patents, trademarks
and copyrights, as set forth in Schedule 2.1(l).
(85) "Interconnection Agreement" means the Interconnection Agreement,
between Seller and Buyer, substantially in the form of Exhibit E hereto.
(86) "Interim Agreement" means the letter agreement, dated March 31, 1999,
addressed to IP and which is by and among Buyer, PECO and IP.
(87) "Inventories" means nuclear fuel (including fuel in the reactor) or
alternative fuel inventories, materials, spare parts, consumable supplies and
chemical and gas inventories relating to the operation of the Facilities located
at, or in transit to, the Facilities.
(88) "IP" has the meaning set forth in the preamble.
(89) "IP Service Agreement" means the IP Service Agreement between Seller
and Buyer, to be entered into at the Closing, containing the terms set forth on
Exhibit F hereto with respect to information technology services, and containing
such other terms and conditions as shall be mutually acceptable to Buyer and
Seller, under which the Seller will provide certain administrative and other
services to Buyer for a specified period after the Closing Date.
(90) "IRS" means the United States Internal Revenue Service and any
successor agency thereto.
(91) "Knowledge" means the actual knowledge of the corporate officers of
the specified Person charged with responsibility for the particular function,
and with respect to the Seller, only those corporate officers and employees of
Seller set forth on Schedule 1.1(91), after reasonable inquiry by them of
selected employees of such Person whom they believe, in good faith, to be the
persons responsible for the subject matter of the inquiry.
(92) "Leased Employee Agreement" means the Leased Employee Agreement, dated
March 31, 1999, by and among PECO, IP and John P. McElwain.
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(93) "Loss" means any and all damages, fines, fees, penalties,
deficiencies, losses and expenses (including, without limitation, all
Remediation costs, fees of attorneys, accountants and other experts, or other
expenses of litigation or proceedings or of any claim, default or assessment).
(94) "Low Level Waste" means waste material which contains radioactive
nuclides emitting primarily beta or gamma radiation, or both, in concentrations
or quantities which exceed applicable federal or state standards for
unrestricted release. Low Level Waste does not include waste containing more
than ten (10) nanocuries of transuranic contaminants per gram of material, Spent
Nuclear Fuel, or material classified as either High Level Waste or waste which
is unsuited for disposal by near-surface burial under any applicable federal
regulations.
(95) "Management Agreement" means the Agreement, dated as of January 15,
1998, by and between PECO and IP, as amended by that certain Incentive
Compensation Agreement to Amend the Management Agreement, dated as of May 19,
1998, by Amendment No. 2, dated March 31, 1999, and by Amendment No. 3, dated
April 21, 1999.
(96) "Material Adverse Effect" means any change (or changes taken together)
in, or effect on, the Purchased Assets that is materially adverse to the
operations or condition (financial or otherwise) of the Purchased Assets, taken
as a whole, other than (i) any change or effect (or changes or effects taken
together) generally affecting the international, national, regional or local
electric industry as a whole, or the nuclear power industry as a whole, and not
affecting the Purchased Assets or the Parties in any manner or degree
significantly different than such industries as a whole, including, without
limitation, changes in local wholesale or retail markets for electric power;
national, regional or local electric transmission systems or the operation
thereof, (ii) any change or effect (or changes or effects taken together)
resulting from action or inaction by a Governmental Authority not specifically
relating to the Purchased Assets, or (iii) any change or effect (or changes or
effects taken together) directly arising out of or resulting from a material
breach by PECO under Section 6.2 of the Management Agreement or directly arising
out of or resulting from conduct of a PECO employee that constitutes willful
misconduct or gross negligence; provided, however, that conduct of non-PECO
employees shall not be imputed to PECO for purposes of this Agreement.
(97) "Mortgage Indenture" means the mortgage and deed of trust originally
granted to Harris Trust and Savings Bank, as Trustee, dated as of November 1,
1943, and all supplements thereto; and the deed of trust originally granted to
Harris Trust and Savings Bank, as Trustee, dated as of November 1, 1992, and all
supplements thereto.
(98) "National Labor Relations Board" means the United States National
Labor Relations Board and any successor agency thereto.
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(100) "Non-Union Employees" has the meaning set forth in Section 6.10(b).
(101) "NRC" means the United States Nuclear Regulatory Commission and any
successor agency thereto.
(102) "Nuclear Insurance Policies" means all insurance policies carried by
or for the benefit of Seller with respect to the ownership, operation or
maintenance of the Facilities, including all liability, property damage and
business interruption policies in respect thereof. Without limiting the
generality of the foregoing, the term "Nuclear Insurance Policies" includes all
policies issued or administered by Nuclear Electric Insurance Limited ("NEIL")
or American Nuclear Insurers ("ANI").
(103) "Nuclear Laws" means all federal, state, local, provincial, foreign
and international civil and criminal laws, regulations, rules, ordinances,
codes, decrees, judgments, directives, or judicial or administrative orders
relating to the regulation of nuclear power plants, Source Material, Byproduct
and Special Nuclear Material; the regulation of Low Level Waste and High Level
Waste; the transportation and storage of Nuclear Material; the regulation of
Safeguards Information; the regulation of nuclear fuel; the enrichment of
uranium; the disposal and storage of High Level Waste and Spent Nuclear Fuel;
contracts for and payments into the Nuclear Waste Fund; and, as applicable, the
antitrust laws and the Federal Trade Commission Act to specified activities or
proposed activities of certain licensees of commercial nuclear reactors, but
shall not include Environmental Laws. "Nuclear Laws" include the Atomic Energy
Act of 1954, the Price-Anderson Act, the Energy Reorganization Act, the
Convention on the Physical Protection of Nuclear Material Implementation Act of
1982 (Public Law 97 - 351; 96 Stat. 1663), the Foreign Assistance Act of 1961
(22 U.S.C. section 2429 et seq.), the Nuclear Non-Proliferation Act of 1978 (22
U.S.C. section 3201), the Low-Level Radioactive Waste Policy Act (42 U.S.C.
section 2021b et seq.), the Nuclear Waste Policy Act, the Low-Level Radioactive
Waste Policy Amendments Act of 1985 (42 U.S.C. section 2021d, 471), the Energy
Policy Act of 1992 (4 U.S.C. section 13201 et seq.), and any state or local laws
analogous to the foregoing.
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(104) "Nuclear Material" means Source Material, Special Nuclear Material,
Low Level Waste, High Level Waste, Byproduct Material and Spent Nuclear Fuel.
(105) "Nuclear Waste Fund" means the fund established by the Department of
Energy under the Nuclear Waste Policy Act in which the Spent Nuclear Fuel Fees
to be used for the design, construction and operation of a High Level Waste
Repository and other activities related to the storage and disposal of Spent
Nuclear Fuel and/or High Level Waste are deposited.
(106) "Nuclear Waste Policy Act" means the Nuclear Waste Policy Act of
1982, as amended.
(107) "Observers" has the meaning set forth in Section 6.1(c).
(108) "Party" (and the corresponding term "Parties") has the meaning set
forth in the preamble.
(109) "PBGC" means the Pension Benefit Guaranty Corporation established by
ERISA.
(110) "PECO" means PECO Energy Company, a Pennsylvania corporation.
(111) "Permits" has the meaning set forth in Section 4.17(a).
(112) "Permitted Encumbrances" means (a) the Easements, (b) those
exceptions to title to the Purchased Assets listed in Schedule 1.1(112) with
respect to Real Property and Tangible Personal Property, (c) with respect to any
date before the Closing Date, Encumbrances created by the Mortgage Indenture,
(d) statutory liens for Taxes or other governmental charges or assessments not
yet due or delinquent or the validity of which is being contested in good faith
by appropriate proceedings provided that the aggregate amount being so contested
does not exceed $250,000, (e) mechanics', materialmens', carriers', workers',
repairers' and other similar liens arising or incurred in the ordinary course of
business relating to obligations as to which there is no default on the part of
Seller or the validity of which is being contested in good faith, and which do
not, individually or in the aggregate, exceed $250,000, (f) zoning, entitlement,
conservation restriction and other land use and environmental regulations
imposed by Governmental Authorities which do not, individually or in the
aggregate, materially detract from the value of the Purchased Assets as
currently used and neither secure indebtedness nor, individually or in the
aggregate, result in a Material Adverse Effect, and (g) such other liens,
imperfections in or failure of title, charges, restrictions, encroachments and
defects in title which do not materially, individually or in the aggregate,
detract from the value of the Purchased Assets as currently used or interfere
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with the present use or operation of the Purchased Assets and neither secure
indebtedness, nor individually or in the aggregate, result in a Material Adverse
Effect.
(113) "Person" means any individual, partnership, limited liability
company, joint venture, corporation, trust, unincorporated organization or
Governmental Authority.
(114) "Pollution Control Bonds" has the meaning set forth in Section
2.4(p).
(115) "Pollution Control Facilities" has the meaning set forth in Section
6.8(e).
(116) "Post-Closing Adjustment" has the meaning set forth in Section
3.3(c).
(117) "Post-Closing Decommissioning Trust Agreement" means the Post-Closing
Decommissioning Trust Agreement between the Buyer and the Trustee, substantially
in the form of Exhibit G hereto, pursuant to which any assets of any of the
Decommissioning Funds to be transferred by Seller at the Closing pursuant to
Section 6.12 hereof will be held in trust.
(118) "Post-Closing Statement" has the meaning set forth in Section 3.3(c).
(119) "PPA" means the Power Purchase Agreement between Seller and Buyer,
substantially in the form of Exhibit H hereto, under which Seller will agree to
purchase capacity and energy from Buyer for a period after the Closing Date.
(120) "Price-Anderson Act" means Section 170 of the Atomic Energy Act and
related provisions of Section 11 of the Atomic Energy Act.
(121) "Proposed Post-Closing Adjustment" has the meaning set forth in
Section 3.3(c).
(122) "Proprietary Information" of a Party means all information about the
Party or its Affiliates, including their respective properties or operations,
furnished to the other Party or its Representatives by such Party or its
Representatives, after the date hereof, regardless of the manner or medium in
which it is furnished, including information provided to a Party pursuant to the
Confidentiality Agreement. In addition, after the Closing Date, "Proprietary
Information" includes any non-public information regarding the Purchased Assets
or the transactions contemplated by this Agreement. Proprietary Information does
not include information that (a) is or becomes generally available to the public
(other than as a result of a disclosure by the other Party or its
Representatives in violation of a confidentiality agreement), (b) was available
to the other Party on a nonconfidential basis prior to its disclosure by the
Party or its Representatives, (c) becomes available to the other Party on a
nonconfidential basis from a Person, other than the disclosing Party or its
Representatives, who is not otherwise bound by a confidentiality agreement with
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the disclosing Party or its Representatives, or is not otherwise under any
obligation to the disclosing Party or any of its Representatives not to transmit
the information to the other Party or its Representatives, or (d) is
independently developed by the other Party.
(123) "Purchased Assets" has the meaning set forth in Section 2.1.
(124) "Purchase Price" has the meaning set forth in Section 3.2.
(125) "Qualified Decommissioning Fund" means the external trust fund that
meets the requirements of Code Section 468A and Treas. Reg. section 1.468A-5,
maintained by Seller with respect to the Facilities prior to the Closing
pursuant to the Seller's Decommissioning Trust Agreement and maintained by Buyer
after the Closing pursuant to the Post-Closing Decommissioning Trust Agreement
to the extent assets are transferred to such fund by Seller pursuant to Section
6.12.
(126) "Real Property" has the meaning set forth in Section 2.1(a).
(127) "Real Property Agreements" has the meaning set forth in Section 4.8.
(128) "Receiving Party" has the meaning set forth in Section 6.6(f).
(129) "Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing of a
Hazardous Substance into the Environment.
(130) "Remediation" means action of any kind required under applicable
Environmental Law to address a Release, the threat of a Release or the presence
of Hazardous Substances at the Site or an off-Site location, including, without
limitation, any or all of the following activities to the extent they relate to
or arise from the presence of a Hazardous Substance at the Site or an off-Site
location: (a) monitoring, investigation, assessment, treatment, cleanup,
containment, removal, mitigation, response or restoration work, (b) obtaining
any permits, consents, approvals or authorizations of any Governmental Authority
necessary to conduct any such activity, (c) preparing and implementing any plans
or studies for any such activity, (d) obtaining a written notice from a
Governmental Authority with jurisdiction over the Site or an off-Site location
under Environmental Laws that no material additional work is required by such
Governmental Authority, (e) the use, implementation, application, installation,
operation or maintenance of remedial or removal actions on the Site or an
off-Site location, remedial technologies applied to the surface or subsurface
soils, excavation and off-Site treatment or disposal of soils, systems for long
term treatment of surface water or groundwater, engineering controls or
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institutional controls, and (f) any other activities reasonably determined by a
Party to be necessary or appropriate or required under Environmental Laws to
address the presence or Release of Hazardous Substances at the Site or an
off-Site location.
(131) "Replacement Welfare Plans" has the meaning set forth in Section
6.10(e).
(132) "Reportable Environmental Condition" means an Environmental Condition
for which a release notification must be made to the National Response Center
pursuant to 40 C.F.R. section 302.6, as may be amended from time to time.
(133) "Representatives" of a Party means the Party and its Affiliates and
their directors, officers, employees, agents, partners, advisors (including,
without limitation, accountants, counsel, environmental consultants, financial
advisors and other authorized representatives) and parents and other controlling
persons.
(134) "Safeguards Information" means information not otherwise classified
as national security information or restricted data under NRC's regulations
which specifically identifies an NRC licensee's detailed (a) security measures
for the physical protection of Special Nuclear Material or (b) security measures
for the physical protection and location of certain plant equipment vital to the
safety of production or utilization facilities.
(135) "SEC" means the United States Securities and Exchange Commission and
any successor agency thereto.
(136) "Securities Act" means the Securities Act of 1933, as amended.
(137) "Seller" has the meaning set forth in the preamble.
(138) "Seller Benefit Plans" has the meaning set forth in Section 6.10(f).
(139) "Seller's Agreements" means those contracts, agreements, licenses and
leases relating to the ownership, operation and maintenance of the Purchased
Assets that are being assigned to Buyer as part of the Purchased Assets, as more
particularly described in Schedule 4.15(a).
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(141) "Seller Indemnitee" has the meaning set forth in Section 8.1(a).
(142) "Seller's Required Regulatory Approvals" has the meaning set forth in
Section 4.3(b).
(143) "Seller's Savings Plans" has the meaning set forth in Section
6.10(g).
(144) "Site" means the parcels of land included in the Real Property. Any
reference to the Site shall include, by definition, the surface and subsurface
elements, including the soils and groundwater present at the Site, and any
reference to items "at the Site" shall include all items "at, on, in, upon,
over, across, under and within" the Site.
(145) "Source Material" means (a) uranium or thorium; or any combination
thereof, in any physical or chemical form or (b) ores which contain by weight
one-twentieth of one percent (0.05%) or more of (i) uranium, (ii) thorium, or
(iii) any combination thereof. Source Material does not include Special Nuclear
Material.
(146) "Special Nuclear Material" means plutonium, uranium-233, uranium
enriched in the isotope-233 or in the isotope-235, and any other material that
the NRC determines to be "Special Nuclear Material." Special Nuclear Material
also refers to any material artificially enriched by any of the above-listed
materials or isotopes. Special Nuclear Material does not include Source
Material.
(147) "Spent Nuclear Fuel" means fuel that has been withdrawn from a
nuclear reactor following irradiation, and has not been chemically separated
into its constituent elements by reprocessing. Spent Nuclear Fuel includes
Special Nuclear Material, Byproduct Material, Source Material and other
radioactive materials associated with nuclear fuel assemblies.
(148) "Spent Nuclear Fuel Fees" means those fees assessed on electricity
generated at CPS and sold pursuant to the Standard Contract for Disposal of
Spent Nuclear Fuel and/or High Level Waste, as provided in Section 302 of the
Nuclear Waste Policy Act and 10 C.F.R. Part 961, as the same may be amended from
time to time.
(149) "Supplemental Payments" has the meaning set forth in Section 6.12.
(150) "Tangible Personal Property" has the meaning set forth in Section
2.1(c).
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(151) "Tax Basis" means the adjusted tax basis determined for federal
income tax purposes under Code Section 1011(a).
(152) "Tax Return" means any return, report, information return,
declaration, claim for refund or other document (including any schedule or
related or supporting information) required to be supplied to any taxing
authority with respect to Taxes including amendments thereto.
(153) "Taxes" means all taxes, charges, fees, levies, penalties or other
assessments imposed by any federal, state, local, provincial or foreign taxing
authority, including, without limitation, income, excise, real or personal
property, sales, transfer, franchise, payroll, withholding, social security,
gross receipts, license, stamp, occupation, employment or other taxes, including
any interest, penalties or additions attributable thereto.
(154) "Technical Specifications" means the technical specifications
included in the NRC Operating License for CPS in accordance with the
requirements of 10 C.F.R. section 50.36.
(155) "Termination Date" has the meaning set forth in Section 9.1(b).
(156) "Third Party Claim" has the meaning set forth in Section 8.2(a).
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(158) "Transferable Permits" means those Permits and Environmental Permits
identified in Schedule 1.1(156), which may be transferred to Buyer without a
filing with, notice to, consent or approval of any Governmental Authority.
(159) "Transferred Employee Records" means all records related to
Transferred Employees, including, without limitation, the following information:
(a) skill and development training, (b) biographies, (c) seniority histories,
(d) salary and benefit information, (e) Occupational, Safety and Health
Administration reports, (f) active medical restriction forms, (g) fitness for
duty, and (h) disciplinary actions.
(160) "Transferred Employees" has the meaning set forth in Section 6.10(b).
(161) "Transferred Non-Union Employees" has the meaning set forth in
Section 6.10(b).
(162) "Transferred Union Employees" has the meaning set forth in Section
6.10(b).
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(163) "Transition Committee" has the meaning set forth in Section 6.1(b).
(164) "Transmission Assets" has the meaning set forth in Section 2.2(a).
(165) "Trustee" means, as the case may be, prior to the Closing the trustee
of the Decommissioning Funds appointed by Seller pursuant to the Seller's
Decommissioning Trust Agreements or after the Closing to the extent the assets
of the Decommissioning Funds are transferred by Seller pursuant to Section 6.12,
the trustee appointed pursuant to the Post-Closing Decommissioning Trust
Agreement.
(166) "Union Employees" has the meaning set forth in Section 6.10(a).
(167) "Updated Safety Analysis Report" or "USAR" means the report, as
updated, that is required to be maintained for CPS in accordance with the
requirements of 10 C.F.R. section 50.71(e).
(168) "USEPA" means the United States Environmental Protection Agency and
any successor agency thereto.
(169) "WARN Act" means the Federal Worker Adjustment Retraining and
Notification Act of 1988, as amended.
(170) "Year 2000 Compliant," "Year 2000 Qualified," "Year 2000 Assets" and
"Year 2000 Ready" have the meanings set forth in Section 4.21. "Year 2000
Compliance" has a meaning correlative to the foregoing.
1.2 Certain Interpretive Matters. In this Agreement, unless the context
otherwise requires, the singular shall include the plural, the masculine shall
include the feminine and neuter, and vice versa. The term "includes" or
"including" shall mean "including without limitation." References to a Section,
Article, Exhibit or Schedule shall mean a Section, Article, Exhibit or Schedule
of this Agreement, and reference to a given agreement or instrument shall be a
reference to that agreement or instrument as modified, amended, supplemented and
restated through the date as of which such reference is made. With respect to
the Schedules under Articles IV and V of this Agreement (other than Schedules
4.8, 4.10, 4.13, 4.15, 4.16, 4.22, 4.23, 5.3(a) and 5.3(b)), matters fully and
adequately disclosed on one Schedule shall be deemed disclosed for purposes of
any other relevant Schedule under such Articles.
ARTICLE II
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PURCHASE AND SALE
2.1 Transfer of Assets. Upon the terms and subject to the satisfaction of
the conditions contained in this Agreement, at the Closing Seller will sell,
assign, convey, transfer and deliver to Buyer, and Buyer will purchase, assume
and acquire from Seller, free and clear of all Encumbrances (except for and
subject to Permitted Encumbrances), all of Seller's right, title and interest in
and to all of the assets constituting, or used in the ordinary course of
business to operate the Facilities (but excluding assets used only incidentally
in the operation of the Facilities and assets or systems which (i) are
ordinarily stored or located off-Site and (ii) are used to service multiple
facilities of Seller or its Affiliates), including, without limitation, those
assets described below (but excluding the Excluded Assets) (collectively,
"Purchased Assets"):
(a) Except for the Excluded Parcels, the land described on Schedule 4.13(a)
(which land comprises the Site), together with all buildings, facilities and
other improvements thereon, including the Facilities, and all appurtenances
thereto, including, without limitation, all related rights of ingress and egress
(collectively, the "Real Property");
(b) All Spent Nuclear Fuel at the Site and all Inventories;
(c) Except for property used in the ordinary course of business to operate
the Transmission Assets (but excluding property used only incidentally in the
operation of the Transmission Assets), other items on Schedule 2.2(a) and the
Excluded Other Assets, all machinery, mobile or otherwise, equipment (including
computer hardware and software and communications equipment), vehicles, tools,
spare parts, fixtures, furniture and furnishings and other personal property
used in the ordinary course of business to operate the Facilities (but excluding
such items used only incidentally in the operation of the Facilities),
including, without limitation, the items of personal property included in
Schedule 4.13(b) (collectively, "Tangible Personal Property");
(d) Subject to the provisions of Section 6.4(c), all Seller's Agreements
other than those identified on Schedules 2.2(k) or 2.2(m);
(e) All Real Property Agreements other than those identified on Schedule
2.2(k);
(f) All Transferable Permits;
(g) All books, operating records, operating, safety and maintenance
manuals, inspection reports, engineering design plans, documents, blueprints and
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as built plans, specifications, procedures and similar items of Seller, wherever
located, to the extent such items relate to the Facilities and the other
Purchased Assets (and subject to the right of Seller to retain copies of same
for its use) other than general ledger accounting records, minutes of meetings
of the Board of Directors and shareholders of Seller and other records having to
do with the corporate organization of Seller;
(h) All Emission Allowances and Emission Reduction Credits, if any (but
only to the extent necessary to operate the Purchased Assets in the ordinary
course of business);
(i) All unexpired, transferable warranties and guarantees from third
parties with respect to any item of Real Property or personal property
constituting part of the Purchased Assets;
(j) The name "Clinton Power Station" and any derivation thereof;
(k) All drafts, memoranda, reports, information, technology and
specifications to the extent relating to Seller's plans for Year 2000 Compliance
with respect to the Facilities (subject to the right of Seller to retain copies
of same for its use);
(l) Except as set forth in Section 2.2(n) or for the Intellectual Property
described on Schedule 2.2(l), (i) all Intellectual Property owned by Seller and
used in the ordinary course of business to operate the Purchased Assets (or, in
common with Seller, a royalty-free, non-exclusive license to use such
Intellectual Property at the Site), and (ii) to the extent transferrable, a
non-assignable (except to Affiliates), royalty-free, non-exclusive site license
to use the Intellectual Property described in Schedule 2.1(l);
(m) The substation equipment set forth in Schedule A to the Interconnection
Agreement and designated therein as being transferred to Buyer;
(n) The assets comprising the Decommissioning Funds together with all
related accounting and other records (subject to the right of Seller to retain
copies of same for its use), including, without limitation, records necessary to
determine the Tax Basis of each asset in the Decommissioning Funds;
(o) All rights in and to any causes of action against third parties
(including indemnification and contribution) relating to any Real Property or
personal property, Permits, Environmental Permits, Taxes, Real Property
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Agreements or Seller's Agreements, if any, including any claims for refunds,
prepayments, offsets, recoupment, insurance proceeds, condemnation awards,
judgments and the like, whether received as payment or credit against future
liabilities, relating specifically to the Facilities or the Site, to the extent
such rights relate to the Assumed Liabilities and Obligations arising prior to
the Closing Date;
(p) The right to proceeds from insurance policies to the extent covering
Assumed Liabilities and Obligations; and
(q) Any claims of Seller related to the Department of Energy's defaults
under the Standard Contract for Disposal of Spent Nuclear Fuel and/or High Level
Waste other than any claim relating to Seller's investment in the Private Fuel
Storage L.L.C. facility in Utah.
2.2 Excluded Assets. Notwithstanding anything to the contrary in this
Agreement, nothing in this Agreement shall be construed as conferring on Buyer,
and Buyer is not acquiring, any right, title or interest in or to the following
specific assets which are associated with the Purchased Assets, but which are
hereby specifically excluded from the sale and the definition of Purchased
Assets herein (the "Excluded Assets"):
(a) Except as expressly identified in Schedule 4.13(b) or Schedule A to the
Interconnection Agreement, the electrical transmission or distribution
facilities (as opposed to generation facilities), the gas transmission and
distribution facilities (and all communication facilities related thereto) of
Seller or any of its Affiliates located at the Site or forming part of the
Facilities (whether or not regarded as a "transmission" or "generation" asset
for regulatory or accounting purposes), including all switchyard facilities,
substation facilities and support equipment, as well as all permits, contracts
and warranties, to the extent they relate to such transmission and distribution
assets (collectively, the "Transmission Assets"), and those certain assets,
facilities and agreements identified in Schedule 2.2(a);
(b) Certain switches and meters in the Facilities, gas facilities, revenue
meters and remote testing units, drainage pipes and systems, as identified in
the special warranty deed or the Easement Agreement;
(c) Certificates of deposit, shares of stock, securities, bonds,
debentures, evidences of indebtedness, and interests in joint ventures,
partnerships, limited liability companies and other entities (including, without
limitation, Seller's investment in the Private Fuel Storage L.L.C. facility in
Utah), except the assets comprising the Decommissioning Funds;
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(d) All cash, cash equivalents, bank deposits, accounts and notes
receivable (trade or otherwise), and any income, sales, payroll or other Tax
receivables, except the assets comprising the Decommissioning Funds;
(e) All rights to distributions, credits (including shutdown credits),
premium refunds or premium returns based upon activities prior to the Closing
Date under any insurance policies of Seller, including, without limitation, all
rights to (i) Seller's member insurance accounts under its Nuclear Insurance
Policies and (ii) Seller's future distributions, credits, refunds or returns
from its Nuclear Insurance Policies;
(f) All claims for refunds of Department of Energy Decontamination and
Decommissioning Fees paid by Seller prior to the Closing;
(g) All tariffs, agreements and arrangements to which Seller is a party for
the purchase or sale of electric capacity and/or energy or for the purchase of
transmission or ancillary services;
(h) Except as provided in Section 2.1(h), (i), (o), (p) and (q), the rights
of Seller in and to any causes of action against third parties (including
indemnification and contribution) relating to any Real Property or personal
property, Permits, Environmental Permits, Taxes, Real Property Agreements or
Seller's Agreements, including without limitation, any claim for refunds,
prepayments, offsets, recoupment, insurance proceeds, condemnation awards,
judgments and the like, whether received as payment or credit against future
liabilities, including, without limitation, any claim relating to Seller's
investment in the Private Fuel Storage L.L.C. facility in Utah;
(i) Any rights that accrue or will accrue to Seller under this Agreement,
the Ancillary Agreements or the Interim Agreement, the Management Agreement or
the Leased Employee Agreement;
(j) Any and all of Seller's rights in any contract representing an
intercompany transaction between Seller and an Affiliate of Seller, whether or
not such transaction relates to the provision of goods and services, payment
arrangements, intercompany charges or balances, or the like;
(k) The Real Property Agreements set forth in Schedule 2.2(k);
(l) The real property described in Schedule 2.2(l) (the "Excluded
Parcels");
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(m) The personal property and other assets of Seller set forth in Schedule
2.2(m) (the "Excluded Other Assets");
(n) The rights of Seller and its Affiliates to the name "Illinova" or
"Illinois Power," or any related or similar trade names, trademarks, service
marks, corporate names or logos, or any part, derivative or combination thereof;
(o) Subject to Section 2.1(h), all Emission Allowances and Emission
Reduction Credits, if any; and
(p) Subject to Section 2.1(p), all insurance policies of Seller related to
the Purchased Assets, including, without limitation, all Nuclear Insurance
Policies.
2.3 Assumed Liabilities and Obligations. On the Closing Date, Buyer shall
deliver to Seller the Assignment and Assumption Agreement pursuant to which
Buyer shall assume and agree to discharge in accordance with their respective
terms, all of the following liabilities and obligations of Seller (collectively,
"Assumed Liabilities and Obligations"):
(a) All liabilities and obligations of Seller arising (or related to
periods) on or after the Closing Date under Seller's Agreements (other than
those identified in Schedule 2.2(m)), the Real Property Agreements (other than
those identified in Schedule 2.2(k)) and the Transferable Permits in accordance
with the terms thereof, including, without limitation, (i) the contracts,
licenses, agreements and personal property leases entered into by Seller with
respect to the Purchased Assets and disclosed on the relevant schedule and (ii)
the contracts, licenses, agreements and personal property leases entered into by
Seller with respect to the Purchased Assets after the date hereof consistent
with the terms of this Agreement, except in each case to the extent such
liabilities and obligations, but for a breach or default by Seller or a related
waiver or extension, would have been paid, performed or otherwise discharged on
or prior to the Closing Date or to the extent the same arise out of any such
breach or default or related waiver or extension or out of any event which after
the giving of notice would constitute a default by Seller;
(b) Except as provided in Sections 2.4(d), 2.4(g), 2.4(q) and 2.4(r) and
except for the Remediation work specifically identified and required by Section
6.17 to be performed by or on behalf of Seller, any liabilities, claims
(including, without limitation, third party claims), obligations or
responsibilities under or related to applicable Environmental Laws, Nuclear Laws
or Environmental Permits with respect to the ownership or operation of the
Purchased Assets, whether such liability, obligation or responsibility is known
or unknown, contingent or accrued, and whether occurring prior to, on or after
the Closing Date;
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(c) All liabilities and obligations associated with the Purchased Assets in
respect of Taxes for which Buyer is liable pursuant to Section 3.5 or 6.8(a)
hereof;
(d) All liabilities and obligations with respect to the Transferred
Employees on and after the Closing Date except for those retained by Seller as
provided in Section 6.10;
(e) With respect to the Purchased Assets, any Tax that may be imposed by
any federal, state or local government on the ownership, sale, operation or use
of the Purchased Assets on or after the Closing Date, except for any Income
Taxes attributable to income received by Seller;
(f) All liabilities and obligations of Seller for Decommissioning of the
Facilities, except for Seller's obligations to make the payments specified in
Section 6.12;
(g) All liabilities and obligations of Seller to dispose of Nuclear
Material located in, on or under the Site on or after the Closing Date;
(h) Subject to Section 6.10, all liabilities and obligations relating to
Buyer's hiring, discrimination in hiring, or unfair labor practices with respect
to the employees of CPS;
(i) All liabilities and obligations of Seller set forth on Schedule 2.3(i);
and
(j) All liabilities or obligations for (i) any insurance premiums
(including deferred premiums or retrospective premium adjustments) under the
nuclear liability and property damage insurance policies which Buyer is required
to maintain pursuant to Section 6.15 hereof, and (ii) any retrospective premium
adjustments under the Price-Anderson Act's secondary layer of financial
protection, in either case arising from events occurring on or after the Closing
Date.
2.4 Excluded Liabilities. Notwithstanding anything to the contrary in this
Agreement, nothing in this Agreement shall be construed to impose on Buyer, and
Buyer shall not assume or be obligated to pay, perform or otherwise discharge
the following liabilities or obligations (the "Excluded Liabilities"):
(a) Any liabilities or obligations of Seller in respect of any Excluded
Assets or other assets of Seller which are not Purchased Assets;
(b) Any liabilities or obligations in respect of Taxes attributable to the
ownership, operation or use of Purchased Assets for taxable periods, or portions
thereof, ending before the Closing Date, except for Taxes for which Buyer is
liable pursuant to Sections 3.5 or 6.8(a) hereof;
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(c) Any liabilities or obligations of Seller accruing under any of Seller's
Agreements prior to the Closing Date;
(d) All liabilities or obligations of Seller arising under or relating to
Nuclear Laws or relating to any claim by third parties based on common law, in
either case arising as a result of the off-Site disposal, treatment, storage,
transportation or recycling of Low Level Waste prior to the Closing Date,
including any and all asserted or unasserted liabilities or obligations to third
parties (including employees) for property damage, personal injury or tort, or
similar causes of action arising with respect thereto;
(e) Any fines, penalties or costs imposed by a Governmental Authority with
respect to the Purchased Assets resulting from (i) an investigation, proceeding,
request for information or inspection before or by a Governmental Authority
relating to actions or omissions of Seller prior to the Closing Date, except for
liabilities and obligations which have been assumed by Buyer under Section
2.3(b), or (ii) criminal acts, willful misconduct or gross negligence of Seller;
(f) Any payment obligations of Seller for goods delivered or services
rendered prior to the Closing Date, including, without limitation, rental or
lease payments pursuant to the Real Property Agreements and any leases relating
to Tangible Personal Property;
(g) Any liability, obligation or responsibility under or related to
Environmental Laws or the common law, whether such liability, obligation or
responsibility is known or unknown, contingent or accrued (whether or not
arising or made manifest before the Closing Date or on or after the Closing
Date), arising as a result of, in connection with or allegedly caused by, the
off-Site disposal, treatment, storage, transportation or recycling of Hazardous
Substances (including any discharge or Release in connection therewith) prior to
the Closing Date in connection with the ownership or operation of the Purchased
Assets;
(h) Except to the extent caused by Buyer or any of its Affiliates, any
liabilities, obligations or responsibilities to the extent relating to (i) the
property, equipment or machinery within the switchyard for which Seller will
retain an Easement, (ii) the transmission lines delineated in the Easements, or
(iii) Seller's operations on, or usage of, the Easements, including, without
limitation, liabilities, obligations or responsibilities arising as a result of
or in connection with (A) any violation or alleged violation of Environmental
Law and (B) loss of life, injury to persons or property or damage to natural
resources;
(i) Except as provided in Section 2.3(h), any liabilities or obligations
relating to personal injury or tort, discrimination, wrongful discharge, unfair
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labor practice or similar claim or cause of action filed with or pending before
any court or administrative agency on the Closing Date with respect to the
Purchased Assets or the Transferred Employees or where the material facts of
such claim or cause of action occurred prior to the Closing Date;
(j) Except as provided in Section 2.3(b) or 2.3(i) any asserted or
unasserted liabilities or obligations to third parties (including employees) for
personal injury or tort, or similar causes of action arising out of the
ownership or operation of the Purchased Assets prior to the Closing Date;
(k) Subject to Section 6.10, any liabilities or obligations relating to any
Benefit Plan maintained by Seller, or any employee benefit plan as defined in
Section 3(3) of ERISA and maintained by any trade or business (whether or not
incorporated) which is or ever has been under common control, or which is or
ever has been treated as a single employer, with Seller under Section 414 (b) ,
(c) , (m) or (o) of the Code ("ERISA Affiliate") or to which Seller or any ERISA
Affiliate contributed (the "ERISA Affiliate Plans"), including any
multi-employer plan contributed to at any time by Seller or any ERISA Affiliate,
or any multi-employer plan to which Seller or any ERISA Affiliate is or was
obligated at any time to contribute, including, without limitation, any such
liability (i) relating to benefits payable under any Benefit Plans, (ii)
relating to the PBGC under Title IV of ERISA, (iii) relating to a multi-employer
plan, (iv) with respect to noncompliance with the notice and benefit
continuation requirements of COBRA, (v) with respect to any noncompliance with
ERISA or any other applicable laws, or (vi) with respect to any suit, proceeding
or claim which is brought against Buyer, any Benefit Plan, ERISA Affiliate Plan,
or any fiduciary or former fiduciary of any such Benefit Plan or ERISA Affiliate
Plan and the basis of which is related to actions of Seller or its ERISA
Affiliates or which is otherwise related to the ownership or operation of the
Purchased Assets prior to the Closing Date;
(l) Subject to Section 6.10 and Section 2.3(h), any liabilities or
obligations relating to the employment or termination of employment, including
discrimination, wrongful discharge, unfair labor practices, or constructive
termination by Seller of any individual, attributable to any actions or
inactions by Seller prior to the Closing Date other than such actions or
inactions taken at the written request or with the written consent of Buyer;
(m) Subject to Section 6.10, any obligations for wages, overtime,
employment Taxes, severance pay, transition payments in respect of compensation
or similar benefits or similar claims or causes of action arising or related to
facts or performance occurring prior to the Closing Date under any term or
provision of any contract, plan, instrument or agreement relating to any of the
Purchased Assets;
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(n) Any liability of Seller arising out of a breach by Seller or any of its
Affiliates of any of its obligations under this Agreement or the Ancillary
Agreements;
(o) Any obligation of Seller to indemnify a Buyer Indemnitee under this
Agreement;
(p) Any liabilities relating to the following bonds (collectively, the
"Pollution Control Bonds") and any agreements relating thereto: (i) $84,710,000
aggregate principal amount of Illinois Development Finance Authority 7 3/8%
Pollution Control Refunding Revenue Bonds, 1991 Series A (Illinois Power Company
Project), (ii) $84,150,000 aggregate principal amount of Illinois Development
Finance Authority 7.40% Pollution Control Refunding Revenue Bonds, 1994 Series B
(Illinois Power Company Project), (iii) $51,770,000 aggregate principal amount
of Illinois Development Finance Authority Adjustable Rate Pollution Control
Revenue Refunding Bonds, 1993 Series A (Illinois Power Company Project), (iv)
$30,000,000 aggregate principal amount of Illinois Development Finance Authority
Adjustable Rate Pollution Control Revenue Refunding Bonds, 1993 Series B
(Illinois Power Company Project), (v) $30,000,000 aggregate principal amount of
Illinois Development Finance Authority Adjustable Rate Pollution Control Revenue
Refunding Bonds, 1993 Series C (Illinois Power Company Project), (vi)
$70,000,000 aggregate principal amount of Illinois Development Finance Authority
Adjustable Rate Pollution Control Revenue Refunding Bonds, 1997 Series A
(Illinois Power Company Project), (vii) $45,000,000 aggregate principal amount
of Illinois Development Finance Authority Adjustable Rate Pollution Control
Revenue Refunding Bonds, 1997 Series B (Illinois Power Company Project), (viii)
$35,000,000 aggregate principal amount of Illinois Development Finance Authority
Adjustable Rate Pollution Control Revenue Refunding Bonds, 1997 Series C
(Illinois Power Company Project), (ix) $18,700,000 aggregate principal amount of
Illinois Development Finance Authority 5.40% Pollution Control Revenue Refunding
Bonds, 1998 Series A (Illinois Power Company Project), (x) $33,755,000 aggregate
principal amount of Illinois Development Finance Authority 5.40% Pollution
Control Revenue Refunding Bonds, 1998 Series B (Illinois Power Company Project),
(xi) $25,000,000 aggregate principal amount of Illinois Development Finance
Authority Pollution Control Revenue Bonds, 1987 Series B (Illinois Power Company
Project) (Adjustable Convertible Exchange Securities), (xii) $25,000,000
aggregate principal amount of Illinois Development Finance Authority Pollution
Control Revenue Bonds, 1987 Series C (Illinois Power Company Project)
(Adjustable Convertible Exchange Securities), (xiii) $25,000,000 aggregate
principal amount of Illinois Development Finance Authority Pollution Control
Revenue Bonds, 1987 Series D (Illinois Power Company Project) (Adjustable
Convertible Exchange Securities) and (xiv) $35,615,000 aggregate principal
amount of Illinois Development Finance Authority 5.70% Pollution Control
Refunding Revenue Bonds, 1994 Series A (Illinois Power Company Project);
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(q) Any Environmental Claim related to or any other liability, obligation
or responsibility attributable to any Environmental Condition at the
Construction Waste Landfill, including any Remediation required by an order of a
Governmental Authority under Environmental Law; provided, however that Seller
shall not have any liability, obligation or responsibility with respect to the
Construction Waste Landfill to the extent arising from or attributable to the
acts of Buyer or its employees, agents or contractors after the Closing Date,
other than for acts required by an order of a Governmental Authority under
Environmental Law;
(r) Subject to Section 6.17, any Remediation work identified on Schedule
6.17;
(s) All liabilities or obligations for (i) any insurance premiums
(including deferred premiums or retrospective premium adjustments) under the
Nuclear Insurance Policies, and (ii) any retrospective premium adjustments under
the Price-Anderson Act's secondary layer of financial protection, in either case
arising from events occurring prior to the Closing Date; and
(t) Any other liability or obligation of Seller not specifically assumed
hereunder.
2.5 Control of Litigation. The Parties agree and acknowledge that Seller
shall be entitled exclusively to control, defend and settle any litigation,
administrative or regulatory proceeding, and any investigation or other
activities arising out of or related to any Excluded Liabilities, and Buyer
agrees to cooperate with Seller (at Seller's expense) in connection therewith,
including, without limitation, providing access to any relevant real or personal
property and staff transferred to Buyer pursuant to this Agreement, so long as
such defense, settlement or other activities do not unreasonably interfere with
Buyer's operation of the Facilities.
ARTICLE III
THE CLOSING
3.1 Closing. Upon the terms and subject to the satisfaction of the
conditions contained in Article VII of this Agreement, the sale, assignment,
conveyance, transfer and delivery of the Purchased Assets to Buyer, the payment
of the Cash Purchase Price to Seller, the assumption of the Assumed Liabilities
and Obligations by Buyer, and the consummation of the other respective
obligations of the Parties contemplated by this Agreement shall take place at a
closing (the "Closing") (except for obligations specifically contemplated hereby
to be completed after the Closing), to be held at the offices of Morgan, Lewis &
Bockius LLP, 1701 Market Street, Philadelphia, Pennsylvania, at 10:00 a.m. local
time, or another mutually acceptable time and location, on the date that is
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fifteen (15) Business Days following the date on which the last of the
conditions precedent to Closing set forth in Article VII of this Agreement have
been either satisfied or waived by the Party for whose benefit such conditions
precedent exist but in any event not after the Termination Date, unless the
Parties mutually agree on another date. The date of Closing is hereinafter
called the "Closing Date." The Closing shall be effective for all purposes as of
12:01 a.m. on the Closing Date.
3.2 Purchase Price; Payment. Upon the terms and subject to the satisfaction
of the conditions contained in this Agreement, in consideration of Seller's
sale, assignment, conveyance, transfer and delivery of the Purchased Assets to
Buyer, at the Closing Buyer will (a) pay or cause to be paid to Seller an
aggregate amount of Twenty Million Dollars ($20,000,000), plus or minus any
adjustments pursuant to the provisions of Section 3.3 (as so adjusted, the "Cash
Purchase Price"), by wire transfer of immediately available funds denominated in
U.S. dollars or by such other means as are agreed upon by Seller and Buyer, and
(b) assume the Assumed Liabilities and Obligations specified in Section 2.3 (the
sum of the Cash Purchase Price and the Assumed Liabilities and Obligations is
referred to herein collectively as the "Purchase Price").
3.3 Adjustment to Cash Purchase Price. (a) Subject to Section 3.3(b), at
the Closing, the Cash Purchase Price shall be adjusted, without duplication, to
account for the items set forth in this Section 3.3(a):
(i) The Cash Purchase Price shall be adjusted to account for the items
prorated as of the Closing Date pursuant to Section 3.5.
(ii) The Cash Purchase Price shall be increased by the amount expended by
Seller between the date hereof and the Closing Date for capital additions to or
replacements of property, plant and equipment included in the Purchased Assets
and other expenditures or repairs on property, plant and equipment included in
the Purchased Assets that are capitalized by Seller in accordance with its
normal accounting policies to the extent that Seller has not been reimbursed by
Buyer prior to the Closing for such expenditures by Seller; provided, that such
expenditures (A) are not described in the capital budgets listed in Schedule
6.1, (B) are not required (1) for the customary operation and maintenance of
CPS, (2) to replace equipment which has failed for any other reason, or (3) to
comply with applicable laws, rules and regulations, and (C) Buyer has
specifically requested or approved such expenditures in writing. Nothing in this
paragraph should be construed to limit Seller's rights and obligations to make
all capital expenditures necessary to comply with NRC licenses and other
Permits.
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(iii) xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxxxxxxxxx
(b) At least thirty (30) calendar days prior to the Closing Date, Seller
shall prepare and deliver to Buyer an estimated closing statement (the
"Estimated Closing Statement") that shall set forth Seller's best estimate of
all estimated adjustments to the Cash Purchase Price required by Section 3.3(a)
(the "Estimated Adjustment"). Within ten (10) calendar days after the delivery
of the Estimated Closing Statement by Seller to Buyer, Buyer may object in good
faith to the Estimated Adjustment in writing. If Buyer objects to the Estimated
Adjustment within such ten (10) day period, the Parties shall attempt to resolve
their differences by negotiation. If the Parties are unable to do so prior to
the Closing Date (or if Buyer does not object to the Estimated Adjustment), the
Cash Purchase Price shall be adjusted (the "Closing Adjustment") for the Closing
by the amount of the Estimated Adjustment not in dispute. The disputed portion
shall be resolved in accordance with the provisions of Section 3.3(c) and paid
as part of any Post-Closing Adjustment to the extent required by Section 3.3(c).
(c) Within sixty (60) days after the Closing Date, Seller shall prepare and
deliver to Buyer a final closing statement (the "Post-Closing Statement") that
shall set forth all adjustments to the Cash Purchase Price required by Section
3.3(a) not previously effected by the Closing Adjustment (the "Proposed
Post-Closing Adjustment") and all work papers detailing such adjustments. The
Post-Closing Statement shall be prepared using the same accounting principles,
policies and methods as Seller has historically used in connection with the
calculation of the items reflected on such Post-Closing Statement. Within thirty
(30) days after the delivery of the Post-Closing Statement by Seller to Buyer,
Buyer may object to the Proposed Post-Closing Adjustment in writing, stating in
reasonable detail its objections thereto. Seller agrees to cooperate with Buyer
to provide Buyer with the information used to prepare the Post-Closing Statement
and information relating thereto. If Buyer objects to the Proposed Post-Closing
Adjustment, the Parties shall attempt to resolve such dispute by negotiation. If
the Parties are unable to resolve such dispute within thirty (30) days after any
objection by Buyer, the Parties shall appoint the Independent Accounting Firm,
which shall, at Seller's and Buyer's joint expense, review the Proposed
Post-Closing Adjustment and determine the appropriate adjustment to the Cash
Purchase Price, if any, within thirty (30) days after such appointment. The
Parties agree to cooperate with the Independent Accounting Firm and provide it
with such information as it reasonably requests to enable it to make such
determination. The finding of such Independent Accounting Firm shall be binding
on the Parties hereto. Upon determination of the appropriate adjustment (the
"Post-Closing Adjustment") by agreement of the Parties or by binding
determination of the Independent Accounting Firm, the Party owing the difference
shall deliver such amount to the other Party no later than two (2) Business Days
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after such determination, in immediately available funds or in any other manner
as reasonably requested by the payee.
3.4 Allocation of Purchase Price. Buyer and Seller shall agree upon an
allocation among the Purchased Assets of the Purchase Price consistent with
Section 1060 of the Code and the Treasury Regulations thereunder within sixty
(60) days after the Closing Date, except to the extent any such allocation is
required for the calculation of transfer taxes to be paid at Closing in which
case Buyer and Seller shall agree upon an allocation for Purchased Assets
subject to such transfer taxes at least ten (10) days prior to the Closing Date.
If Buyer and Seller cannot agree on any such allocation, such dispute shall be
resolved in accordance with Section 6.8(d) of this Agreement. The allocation
required by this Section 3.4 shall be revised based on the Post-Closing
Adjustment within one hundred and eighty (180) days after the Closing Date. Each
of Buyer and Seller agrees to file IRS Form 8594, and all federal, state, local
and foreign Tax Returns, in accordance with any such agreed allocation as
adjusted as provided herein. Each of Buyer and Seller shall report the
transactions contemplated by this Agreement for federal Tax and all other Tax
purposes in a manner consistent with any such allocation determined pursuant to
this Section 3.4. Each of Buyer and Seller agrees to provide the other promptly
with any information required to complete Form 8594. Buyer and Seller shall
notify and provide the other with reasonable assistance in the event of an
examination, audit or other proceeding regarding any allocation of the Purchase
Price determined pursuant to this Section 3.4. Buyer and Seller shall not take
any position in any Tax Return, Tax proceeding or audit that is inconsistent
with such allocation. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
3.5 Prorations. (a) Buyer and Seller agree that all of the items normally
prorated, including those listed below (but not including Income Taxes),
relating to the business and operation of the Purchased Assets shall be prorated
as of the Closing Date, with Seller liable to the extent such items relate to
any time period prior to the Closing Date, and Buyer liable to the extent such
items relate to periods commencing with the Closing Date (measured in the same
units used to compute the item in question, otherwise measured by calendar
days):
(i) Personal property, real estate and occupancy Taxes, assessments and
other charges, if any, on or with respect to the business and operation of the
Purchased Assets;
(ii) Rent, Taxes and all other items (including prepaid services or goods
not included in Inventory) payable by or to Seller under any of Seller's
Agreements assigned to Buyer pursuant to Section 2.1(d) hereof;
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(iii) Any permit, license, registration, compliance assurance fees or other
fees with respect to any Transferable Permit;
(iv) Sewer rents and charges for water, telephone, electricity and other
utilities;
(v) Rent and Taxes and other items payable by Seller under the Real
Property Agreements assigned to Buyer; and
(vi) Dues and fees payable to industry organizations under Seller's
Agreements assumed by Buyer pursuant to Section 2.1(d) hereof.
(b) In connection with the prorations referred to in (a) above, in the
event that actual figures are not available at the Closing Date, the proration
shall be based upon the actual Taxes or other amounts accrued through the
Closing Date or paid for the most recent year (or other appropriate period) for
which actual Taxes or other amounts paid are available. Such prorated Taxes or
other amounts shall be re-prorated and paid to the appropriate Party within
sixty (60) days of the date that the previously unavailable actual figures
become available. The prorations shall be based on the number of days in a year
or other appropriate period (i) before the Closing Date and (ii) including and
after the Closing Date. Seller and Buyer agree to furnish each other with such
documents and other records as may be reasonably requested in order to confirm
all adjustment and proration calculations made pursuant to this Section 3.5.
3.6 Deliveries by Seller. At the Closing, Seller will deliver, or cause to
be delivered, the following to Buyer:
(a) The Bill of Sale, duly executed by Seller;
(b) Copies of any and all governmental and other third party consents,
waivers or approvals obtained by Seller with respect to the transfer of the
Purchased Assets, or the consummation of the transactions contemplated by this
Agreement;
(c) The opinion of counsel, officer's certificate and other items
contemplated by Section 7.1;
(d) One or more special warranty deeds conveying the Real Property to
Buyer, substantially in the form of Exhibit I hereto, duly executed and
acknowledged by Seller in recordable form, and any other customary certificates
or other documents reasonably required by the title company;
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(e) All Ancillary Agreements, duly executed by Seller;
(f) A FIRPTA Affidavit, duly executed by Seller;
(g) Copies, certified by the Secretary or Assistant Secretary of Seller, of
corporate resolutions authorizing the execution and delivery of this Agreement
and all of the agreements and instruments to be executed and delivered by Seller
in connection herewith, and the consummation of the transactions contemplated
hereby;
(h) A certificate of the Secretary or Assistant Secretary of Seller
identifying the name and title and bearing the signatures of the officers of
Seller authorized to execute and deliver this Agreement and the other agreements
and instruments to be executed and delivered by Seller in connection herewith;
(i) A certificate of good standing with respect to Seller (dated within
three (3) Business Days of the Closing Date), issued by the Secretary of State
of the State of Illinois;
(j) To the extent available, originals of the IBEW Collective Bargaining
Agreements, all Seller's Agreements, Real Property Agreements and Transferable
Permits to be transferred to Buyer hereunder, and, if not available, true and
correct copies thereof, together with any required notices to and consents by
other Persons which are parties to such Seller's Agreement, Real Property
Agreements and Transferable Permits;
(k) The assets of the Decommissioning Funds to be transferred pursuant to
Section 6.12 shall be delivered to the trustee under the Post-Closing
Decommissioning Trust Agreement;
(l) All such other instruments of assignment, transfer or conveyance as
shall, in the reasonable opinion of Buyer and its counsel, be necessary or
desirable to transfer to Buyer the Purchased Assets, in accordance with this
Agreement and where necessary or desirable in recordable form; and
(m) Such other agreements, consents, documents, instruments and writings as
are required to be delivered by Seller at or prior to the Closing Date pursuant
to this Agreement or otherwise reasonably required in connection herewith.
3.7 Deliveries by Buyer. At the Closing, Buyer will deliver, or cause to be
delivered, the following to Seller:
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(a) The Cash Purchase Price, as adjusted pursuant to Section 3.3;
(b) The opinions of counsel, officer's certificates and other items
contemplated by Section 7.2;
(c) All Ancillary Agreements, duly executed by Buyer;
(d) Copies, certified by the Secretary or Assistant Secretary of Buyer, of
resolutions authorizing the execution and delivery of this Agreement, and all of
the agreements and instruments to be executed and delivered by Buyer in
connection herewith, and the consummation of the transactions contemplated
hereby;
(e) A certificate of the Secretary or Assistant Secretary of Buyer
identifying the name and title and bearing the signatures of the officers of
Buyer authorized to execute and deliver this Agreement, and the other agreements
to be executed and delivered by Buyer in connection herewith;
(f) A certificate of good standing with respect to Buyer (dated within
three (3) Business Days of the Closing Date), issued by the Secretary of State
of the State of Delaware;
(g) All such other instruments of assumption as shall, in the reasonable
opinion of Seller and its counsel, be necessary for Buyer to assume the Assumed
Liabilities and Obligations in accordance with this Agreement and where
necessary or desirable in recordable form;
(h) Copies of any and all governmental and other third party consents,
waivers or approvals obtained by Buyer with respect to the transfer of the
Purchased Assets, or the consummation of the transactions contemplated by this
Agreement;
(i) Letters of assurance from PECO and British Energy plc in substantially
the form of Exhibits L and M, respectively; and
(j) Such other agreements, documents, instruments and writings as are
required to be delivered by Buyer at or prior to the Closing Date pursuant to
this Agreement or otherwise reasonably required in connection herewith.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
4.1 Organization; Qualification. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Illinois
and has all requisite corporate power and authority to own, lease, and operate
its properties and to carry on its business as is now being conducted. Seller
has heretofore delivered to Buyer complete and correct copies of its Articles of
Incorporation and Bylaws as currently in effect.
4.2 Authority. Seller has full corporate power and authority to execute and
deliver this Agreement and the Ancillary Agreements to which it is a party and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the Ancillary Agreements to which it is a
party and the consummation of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary corporate action required
on the part of Seller and no other corporate proceedings on the part of Seller
are necessary to authorize this Agreement and the Ancillary Agreements to which
it is a party or to consummate the transactions contemplated hereby and thereby.
This Agreement has been duly and validly executed and delivered by Seller, and
assuming that this Agreement constitutes a valid and binding agreement of Buyer,
and subject to the receipt of Seller's Required Regulatory Approvals,
constitutes the legal, valid and binding agreement of Seller, enforceable
against Seller in accordance with its terms , except that such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws affecting or relating to the
enforcement of creditors rights generally or general principles of equity
(regardless of whether enforcement is considered in a proceeding at law or in
equity).
4.3 Consents and Approvals; No Violation.
(a) Except as set forth in Schedule 4.3(a), and subject to the receipt of
Seller's Required Regulatory Approvals, neither the execution and delivery by
Seller of this Agreement or the Ancillary Agreements to which Seller is a party
nor the consummation of the transactions contemplated hereby or thereby will (i)
conflict with or result in the breach or violation of any provision of the
Articles of Incorporation or Bylaws of Seller, (ii) result in a default (or give
rise to any right of termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which Seller is a party or by
which Seller or any of the Purchased Assets are bound, except for such defaults
(or rights of termination, cancellation or acceleration) as to which requisite
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waivers or consents have been obtained or which would not, individually or in
the aggregate, create a Material Adverse Effect, or (iii) constitute violations
of any order, writ, injunction, decree, statute, rule or regulation applicable
to Seller, or any of its assets, except where such violations, individually or
in the aggregate, would not create a Material Adverse Effect.
(b) Except as set forth in Schedule 4.3(b) (the filings and approvals
referred to in Schedule 4.3(b) are collectively referred to as the "Seller's
Required Regulatory Approvals"), no declaration, filing or registration with, or
notice to, or authorization, consent or approval of any Governmental Authority
is necessary for the consummation by Seller of the transactions contemplated
hereby, other than (i) such declarations, filings, registrations, notices,
authorizations, consents or approvals which, if not obtained or made, will not,
individually or in the aggregate, create a Material Adverse Effect or (ii) such
declarations, filings, registrations, notices, authorizations, consents or
approvals which become applicable to Seller as a result of the specific
regulatory status of Buyer (or any of its Affiliates) or the result of any other
facts that specifically relate to the business or activities in which Buyer (or
any of its Affiliates) is or proposes to be engaged.
4.4 Financial Statements; Reports. Except as set forth in Schedule 4.4,
since January 1, 1996, Seller has filed or caused to be filed with the SEC, the
applicable state or local utility commissions or regulatory bodies, the NRC and
the FERC, as the case may be, all material forms, statements, reports and
documents (including all exhibits, amendments and supplements thereto) required
to be filed by Seller with respect to the Purchased Assets or the operation
thereof under each of the Securities Act, the Exchange Act, the applicable state
public utility laws, the Federal Power Act, the Holding Company Act, the Atomic
Energy Act, the Energy Reorganization Act and the Price-Anderson Act and the
respective rules and regulations thereunder, all of which complied in all
material respects with all applicable requirements of the appropriate act and
the rules and regulations thereunder in effect on the date each such report was
filed, and, to Seller's Knowledge, there were no material misstatements or
omissions relating to the Purchased Assets as of the date of such filings in any
such report; provided however, that Seller shall not be deemed to be making any
representation or warranty to Buyer hereunder concerning the financial
statements of Seller contained in any such reports.
4.5 Undisclosed Liabilities. Except as set forth in Schedule 4.5, to
Seller's Knowledge, the Purchased Assets are not subject to any material
liability or obligation (whether absolute, accrued, contingent or otherwise)
required to be accrued or reserved against in Seller's financial statements as
of the most recent fiscal quarter in accordance with generally accepted
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accounting principles consistently applied and that was not so accrued or
reserved against in Seller's financial statements for such fiscal quarter.
4.6 Absence of Certain Changes or Events. Since January 1, 1999, except as
set forth in Schedule 4.6, there has not been (a) any Material Adverse Effect,
or (b) any damage, destruction or casualty loss, whether or not covered by
insurance, which, individually or in the aggregate, created a Material Adverse
Effect.
4.7 Title and Related Matters. Except for Permitted Encumbrances, to
Seller's Knowledge, Seller has good and marketable title, insurable at regular
rates by a nationally recognized title insurance company, to the Real Property
to be conveyed by it hereunder free and clear of all Encumbrances. The Real
Property constitutes all of the real property necessary to operate the
Facilities as currently operated. Except for Permitted Encumbrances, to Seller's
Knowledge, Seller has good and valid title to each of the Purchased Assets not
constituting Real Property free and clear of all Encumbrances.
4.8 Real Property Agreements. Schedule 4.8 lists, as of the date of this
Agreement, all real property leases, easements, licenses and other rights in
real property (collectively, the "Real Property Agreements") to which Seller is
a party and which (a) are to be transferred and assigned to Buyer on the Closing
Date, (b) affect all or any part of any Real Property, and (c) (i) provide for
annual payments of more than $100,000 or (ii) are material to the ownership or
operation of the Purchased Assets. Except as set forth in Schedule 4.8, all such
Real Property Agreements are valid, binding and enforceable in accordance with
their terms, and are in full force and effect; there are no existing material
defaults by Seller or, to Seller's Knowledge, any other party thereunder; and no
event has occurred which (whether with or without notice, lapse of time or both)
would constitute a material default by Seller or, to Seller's Knowledge, any
other party thereunder.
4.9 Insurance. All material policies of fire, liability, property damage,
worker's compensation and other forms of insurance owned or held by Seller and
insuring the Purchased Assets are listed in Schedule 4.9 along with the amount
of the coverage, the type of insurance, and the policy renewal date. Except as
set forth in Schedule 4.9, to Seller's Knowledge, all of such policies of fire,
liability, worker's compensation and other forms of insurance owned or held by
Seller and insuring the Purchased Assets are in full force and effect, all
premiums with respect thereto covering all periods up to and including the date
as of which this representation is being made have been paid (other than
retrospective premiums which may be payable with respect to nuclear liability
and property insurance policies), and no notice of cancellation or termination
has been received with respect to any such policy which was not replaced on
substantially similar terms prior to the date of such cancellation. Except as
described in Schedule 4.9, as of the date of this Agreement, to Seller's
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Knowledge, Seller has not been refused any insurance with respect to the
Purchased Assets nor has Seller's coverage with respect to the Purchased Assets
been limited by any insurance carrier to which it has applied for any such
insurance or with which it has carried insurance during the last twelve months.
4.10 Environmental Matters. With respect to the Purchased Assets and the
ownership or operation thereof by Seller, to Seller's Knowledge, except as
disclosed in Schedule 4.10:
(a) Seller has obtained and holds all material Environmental Permits used
in or necessary for the ownership or operation of the Purchased Assets as
presently conducted;
(b) Seller is in compliance in all material respects with all terms,
conditions and provisions of (i) all applicable Environmental Laws and (ii) all
material Environmental Permits;
(c) there are no pending or threatened Environmental Claims relating to or
with respect to the Purchased Assets, and Seller is not aware of any facts or
circumstances which could reasonably be expected to form the basis for any
material Environmental Claim with respect to the Purchased Assets;
(d) no Releases of Hazardous Substances have occurred at, from, in, to, on,
adjacent to or under the Site and no Hazardous Substances are present in, on,
about or migrating to or from the Site that would give rise to a material
liability of Seller under applicable Environmental Laws for Remediation of
Hazardous Substances, except for the Remediation contemplated by Section 6.17;
(e) Seller has not transported or arranged for the treatment, storage,
handling, disposal or transportation of any Hazardous Substance from the Site to
any off-Site location which is an Environmental Clean-up Site;
(f) the Site is not a current or proposed Environmental Clean-up Site;
(g) except for Permitted Encumbrances, there are no Encumbrances existing
under or pursuant to any Environmental Law with respect to the Purchased Assets
and there are no facts, circumstances, or conditions that could reasonably be
expected to result in a material Encumbrance under any Environmental Law with
respect to the ownership, occupancy, development, use or transferability of the
Purchased Assets;
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(h) there are not, at the Site (i) any underground storage tanks, active or
abandoned, (ii) polychlorinated-biphenyl-containing equipment or (iii)
asbestos-containing material, in any such case (i), (ii) or (iii) that requires
removal or Remediation under applicable Environmental Law;
(i) there have been no environmental investigations, studies, audits,
tests, reviews or other analyses concerning the Purchased Assets conducted by or
on behalf of Seller, or which are in the possession of Seller, revealing any
violation of applicable Environmental Law or any Release of Hazardous Substances
that have not been made available to Buyer prior to execution of this Agreement;
and
(j) there are no pending claims by Seller against comprehensive general
liability and excess insurance carriers for any Loss resulting from, relating to
or arising from Environmental Claims.
4.11 Labor Matters. Seller has previously delivered to Buyer a true,
correct and complete copy of the IBEW Collective Bargaining Agreements, which
are the only agreements with unionized workers to which Seller is a party or is
subject and which relates to the Purchased Assets. With respect to the ownership
or operation of the Purchased Assets, to Seller's Knowledge, except to the
extent set forth in Schedule 4.11 (which matters shall remain the sole
responsibility of Seller): (a) Seller is in compliance in all material respects
with all applicable laws respecting employment and employment practices, terms
and conditions of employment and wages and hours; (b) Seller has not received
notice of any unfair labor practice complaint pending before the National Labor
Relations Board; (c) there is no labor strike, slowdown or stoppage actually
pending or threatened by any authorized representative of any union or other
representative of employees against or affecting Seller; (d) Seller has not
received notice that any representation petition respecting the employees of
Seller has been filed with the National Labor Relations Board; (e) no
arbitration proceeding arising out of or under collective bargaining agreements
is pending against Seller; and (f) Seller has not experienced any primary work
stoppage since at least December 31, 1995.
4.12 ERISA; Benefit Plans.
(a) Schedule 4.12(a) lists all deferred compensation, profit-sharing,
retirement and pension plans, and all material bonus and other employee benefit
or fringe benefit plans, maintained or with respect to which contributions are
made by Seller in respect of employees employed at the Purchased Assets
("Benefit Plans"). True, correct and complete copies of all such Benefit Plans
have been made available to Buyer.
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(b) Except as set forth in Schedule 4.12(b), Seller and any ERISA
Affiliates have fulfilled their respective obligations under the minimum funding
requirements of Section 302 of ERISA and Section 412 of the Code with respect to
each Benefit Plan which is an "employee pension benefit plan" as defined in
Section 3(2) of ERISA and to which Section 302 of ERISA applies, and each such
plan is in compliance in all material respects with the presently applicable
provisions of ERISA and the Code. Except as set forth in Schedule 4.12(b), to
Seller's Knowledge, neither Seller nor any ERISA Affiliate has incurred any
liability under Sections 4062(b), 4063 or 4064 of ERISA to the PBGC in
connection with any Benefit Plan which is subject to Title IV of ERISA, nor any
withdrawal liability to any multiemployer pension plan under Section 4201 et
seq. of ERISA or to any multiemployer welfare benefit plan, nor is there or has
there been any reportable event (as defined in Section 4043 of ERISA) with
respect to any Benefit Plan except as set forth in Schedule 4.12(b). Except as
set forth in Schedule 4.12(b), the IRS has issued a letter for each Benefit Plan
which is intended to be qualified determining that such plan is exempt from
federal Income Tax under Sections 401(a) and 501(a) of the Code, and, to
Seller's Knowledge, there has been no occurrence since the date of any such
determination letter (including, without limitation, statutory or regulatory
changes to the requirements of Section 401(a) of the Code for which the remedial
amendment period has expired) which has or will have adversely affected such
qualification.
(c) Neither Seller nor any ERISA Affiliate or parent or successor
corporation (within the meaning of Section 4069(b) of ERISA) has engaged in any
transaction which may be disregarded under Section 4069 or Section 4212(c) of
ERISA. Seller does not contribute to and has no liabilities or obligations under
any multiemployer plan (within the meaning of Section 3(37) of ERISA). No
Benefit Plan or ERISA Affiliate Plan is a multiemployer plan.
(d) Seller has complied in all material respects with all reporting,
disclosure, notice, election, coverage and other benefit requirements of
Sections 4980B and 9801-9833 of the Code and Sections 601-734 of ERISA as and
when applicable to any Benefit Plan.
4.13 Real Property; Plant and Equipment.
(a) Schedule 4.13(a) contains a legal description of, and exhibits
indicating the location of, the Real Property owned by Seller and included in
the Purchased Assets. All Encumbrances on the Real Property (other than
Permitted Encumbrances) shall be released on or before the Closing Date.
Complete and correct copies of any current surveys in Seller's possession or any
policies of title insurance currently in force and in the possession of Seller
with respect to the Real Property have heretofore been delivered by Seller to
Buyer. To Seller's knowledge, there are no encroachments onto, overlaps,
boundary line disputes or other similar matters with respect to the Real
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Property and no improvements included in the Real Property encroach upon any
adjacent property or any easement or right-of-way.
(b) Schedule 4.13(b) contains a description of the major equipment
components and personal property comprising the Purchased Assets.
4.14 Condemnation; Public Improvements. Except as set forth in Schedule
4.14, neither the whole nor any part of the Real Property or any other real
property or rights leased, used or occupied by Seller in connection with the
ownership or operation of the Purchased Assets is subject to any pending suit
for condemnation or other taking by any Governmental Authority, and, to Seller's
Knowledge, no such condemnation or other taking has been threatened. No
assessment for public improvements has been served upon Seller with respect to
the Real Property which remains unpaid, including, without limitation, those for
construction of sewer, water, electric, gas or steam lines and mains, streets,
sidewalks and curbing. To Seller's Knowledge, there are no required public
improvements with respect to the Real Property that have not been completed,
assessed and paid for prior to the date hereof.
4.15 Certain Contracts and Arrangements.
(a) Except (i) as listed in Schedule 4.15(a) or the other schedules to this
Agreement (all such agreements being collectively referred to herein as the
"Seller's Agreements") or (ii) for contracts, agreements, personal property
leases, commitments, understandings or instruments in which all obligations of
Seller will expire prior to the Closing Date, Seller is not a party to any
written contract, agreement, personal property lease, commitment, understanding
or instrument which is material to the ownership or operation of the Purchased
Assets.
(b) Except as disclosed in Schedule 4.15(b), each of Seller's Agreements
(i) constitutes the legal, valid and binding obligation of Seller, and, to
Seller's Knowledge, constitutes the legal, valid and binding obligation of the
other parties thereto, (ii) to Seller's Knowledge, is in full force and effect,
and (iii) to Seller's Knowledge, may be transferred or assigned to Buyer at the
Closing without consent or approval of the other parties thereto, in each case
without breaching the terms thereof or resulting in the forfeiture or impairment
of any material rights thereunder.
(c) Except as set forth in Schedule 4.15(c), there is not, to Seller's
Knowledge, any default or event which, with notice or lapse of time or both,
would constitute a default on the part of Seller or any of the other parties
thereto, except such events of default and other events as to which requisite
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waivers or consents have been obtained or which would not, individually or in
the aggregate, create a Material Adverse Effect.
4.16 Legal Proceedings, etc. Except as set forth in Schedule 4.16 or in any
filing made by Seller or any of its Affiliates pursuant to the Securities Act,
the Exchange Act, the Nuclear Waste, Policy Act or the Atomic Energy Act, there
are no claims, actions, proceedings or investigations concerning the Purchased
Assets pending or, to Seller's Knowledge, threatened against or relating to
Seller before any Governmental Authority or body which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
Except as set forth in Schedule 4.16 or in any filing made by Seller or any of
its Affiliates pursuant to the Securities Act, the Exchange Act, the Nuclear
Waste Policy Act or the Atomic Energy Act, Seller is not subject to any
outstanding judgment, rule, order, writ, injunction or decree of any
Governmental Authority with respect to the Purchased Assets which, individually
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect.
4.17 Permits; Compliance with Law.
(a) Seller has all material permits, licenses, franchises and other
governmental authorizations, consents and approvals, other than with respect to
permits under Environmental Laws referred to in Section 4.10 hereof or permits
issued by the NRC referred to in Section 4.18 hereof (collectively, "Permits"),
used in or necessary for the ownership and operation of the Purchased Assets as
presently conducted. Except as set forth in Schedule 4.17(a), Seller has not
received any written notification that it is in violation of any such Permits,
or any law, statute, order, rule, regulation, ordinance or judgment of any
Governmental Authority applicable to the Purchased Assets, except for
notifications of violations which would not, individually or in the aggregate,
have a Material Adverse Effect. Except with respect to Environmental Laws
referred to in Section 4.10 and NRC matters referred to in Section 4.18, Seller
is in compliance with all Permits, laws, statutes, orders, rules, regulations,
ordinances or judgments of any Governmental Authority applicable to the
Purchased Assets, except for violations which would not, individually or in the
aggregate, have a Material Adverse Effect.
(b) Schedule 4.17(b) sets forth all material Permits and Environmental
Permits other than Transferable Permits (which are set forth in Schedule
1.1(156) applicable to the Purchased Assets.
4.18 NRC Licenses.
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(a) Seller has all material permits, licenses, and other consents and
approvals issued by the NRC necessary to own and operate the Purchased Assets as
presently operated, pursuant to the requirements of all Nuclear Laws. Except as
set forth in Schedule 4.18(a), Seller has not received any written notification
since the CPS shutdown in September 1996, that it is in violation of any such
licenses, or any order, rule, regulation or decision of the NRC with respect to
the Purchased Assets, except for notifications of violations which would not,
individually or in the aggregate, have a Material Adverse Effect. Seller is in
compliance with all Nuclear Laws and all orders, rules, regulations or decisions
of the NRC applicable to Seller with respect to the Purchased Assets, except for
violations which would not, individually or in the aggregate, have a Material
Adverse Effect.
(b) Schedule 4.18(b) sets forth all material permits, licenses, and other
consents and approvals issued by the NRC applicable to the Purchased Assets.
4.19 Regulation as a Utility. Seller is an electric utility company within
the meaning of the Holding Company Act, a public utility within the meaning of
the Federal Power Act and an electric utility within the meaning of the NRC
regulations implementing the Atomic Energy Act. Except as set forth in Schedule
4.19 or with respect to local tax, zoning laws and municipal franchises, Seller
is not, specifically as a result of its ownership or operation of the Purchased
Assets, subject to regulation as a public utility or public service company (or
similar designation) by the United States, any state of the United States, any
foreign country or any municipality or any political subdivision of the
foregoing.
4.20 Taxes. Except as set forth in Schedule 4.20, with respect to the
Purchased Assets (a) all Tax Returns required to be filed have been filed and
(b) all material Taxes shown to be due on such Tax Returns have been paid in
full. Except as set forth in Schedule 4.20, no notice of deficiency or
assessment has been received from any taxing authority with respect to
liabilities for Taxes of Seller in respect of the Purchased Assets, which have
not been fully paid or finally settled, and any such deficiency shown in such
Schedule 4.20 is being contested in good faith through appropriate proceedings.
Except as set forth in Schedule 4.20, there are no outstanding agreements or
waivers extending the applicable statutory periods of limitation for Taxes
associated with the Purchased Assets for any period. Schedule 4.20 sets forth
the taxing jurisdictions in which Seller owns assets or conducts business that
require a notification to a taxing authority of the transactions contemplated by
this Agreement, if the failure to make such notification, or obtain Tax
clearances in connection therewith, would either require Buyer to withhold any
portion of the Purchase Price or would subject Buyer to any liability for any
Taxes of Seller.
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4.21 Year 2000 Compliance. Seller has made available to Buyer its Y2K
Program Manual (the "Y2K Plan"), which complies in all material respects with
the standards set forth in Nuclear Utility Year 2000 Readiness, NEI/NUSMG 97-07.
Subject to the timely completion of the work described in the Y2K Plan and
except as set forth in Schedule 4.21, all of the computer hardware, software and
firmware products (including embedded microcontrollers in non-computer
equipment), interfaces with internal and external systems, and computer systems
(including all constituent programs, processors, controllers, applications,
routines, modules, processes, tools and other components) which are included in
the Purchased Assets and are identified as "mission critical" in the Y2K Plan
(collectively, the "Year 2000 Assets") will be Year 2000 Qualified. For purposes
of this Agreement, "Year 2000 Qualified" means that all Year 2000 Assets are
either "Year 2000 Compliant" or "Year 2000 Ready" as defined in NEI/NUSMG 97-07
and as restated below. Notwithstanding the foregoing definitions, an item
required to be Year 2000 Qualified that does not satisfy the definition of Year
2000 Compliant shall only be considered Year 2000 Ready (and consequently Year
2000 Qualified) if (a) the item maintains its function as it crosses any key
date even if there may be date errors or some form of compensatory action
required to maintain valid functional operation; (b) a deficiency can be
addressed by pre-defined manual action; and (c) the integration of all manual
actions required are confirmed to be reasonably within the capability of the
facility resources and can be accomplished without any risk of loss, damage or
destruction to facility equipment or the operation of the Facilities or material
loss of time. As used herein (and as defined in NEI/NUSMG 97-07) (x) the term
"Year 2000 Compliant" means Year 2000 Assets that accurately process date/time
data (including, without limitation, calculating, comparing, and sequencing)
from, into and between the twentieth and twenty-first centuries, the years 1999
and 2000, and leap years (including accurate leap-year calculations) and (y) the
term "Year 2000 Ready" means a Year 2000 Asset that has been determined to be
suitable for continued use into the year 2000 even though the Year 2000 Asset is
not fully Year 2000 Compliant. For purposes of this Section 4.21, "key dates"
include, without limitation, the following: 12/31/99, 1/1/00, 2/28/00, 2/29/00,
3/1/00, 12/31/00, 1/1/01, 2/28/01, 3/1/01, 2/28/04, 2/29/04 and 3/1/04.
4.22. Qualified Decommissioning Fund.
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EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS ARTICLE IV, THE
PURCHASED ASSETS ARE BEING SOLD AND TRANSFERRED "AS IS, WHERE IS," AND SELLER IS
NOT MAKING ANY OTHER REPRESENTATIONS OR WARRANTIES, WRITTEN OR ORAL, STATUTORY,
EXPRESS OR IMPLIED, CONCERNING SUCH PURCHASED ASSETS, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR
OTHER IMPLIED WARRANTY, ALL OF WHICH ARE HEREBY EXPRESSLY EXCLUDED AND
DISCLAIMED.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
5.1 Organization. Buyer is a limited liability company duly formed, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to own, lease and operate its
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properties and to carry on its business as is now being conducted. Buyer has
heretofore delivered to Seller complete and correct copies of its Certificate of
Formation and Operating Agreement (or other similar governing documents), as
currently in effect.
5.2 Authority. Buyer has full organizational power and authority to execute
and deliver this Agreement and the Ancillary Agreements and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action required on the part of Buyer and no other corporate
proceedings on the part of Buyer are necessary to authorize this Agreement and
the Ancillary Agreements or to consummate the transactions contemplated hereby
and thereby. This Agreement has been duly and validly executed and delivered by
Buyer, and assuming that this Agreement constitutes a valid and binding
agreement of Seller, and subject to the receipt of Buyer's Required Regulatory
Approvals, constitutes a valid and binding agreement of Buyer, enforceable
against Buyer in accordance with its terms.
5.3 Consents and Approvals; No Violation.
(a) Except as set forth in Schedule 5.3(a), and subject to the receipt of
Buyer's Required Regulatory Approvals, neither the execution and delivery by
Buyer of this Agreement and the Ancillary Agreements nor the purchase by Buyer
of the Purchased Assets pursuant to this Agreement will (i) conflict with or
result in any breach of any provision of the Certificate of Formation or
Operating Agreement (or other similar governing documents) of Buyer, (ii)
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, (iii) result in a default (or give
rise to any right of termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
agreement, lease or other instrument or obligation to which Buyer is a party or
by which any of its assets may be bound, except for such defaults (or rights of
termination, cancellation or acceleration) as to which requisite waivers or
consents have been obtained or which would not, individually or in the
aggregate, have a material adverse effect on the ability of Buyer to perform its
obligations hereunder ("Buyer Material Adverse Effect"), or (iv) violate any
law, regulation, order, judgment or decree applicable to Buyer, which
violations, individually or in the aggregate, would create a Buyer Material
Adverse Effect.
(b) Except as set forth in Schedule 5.3(b) (the filings and approvals
referred to such Schedule are collectively referred to as the "Buyer's Required
Regulatory Approvals"), no declaration, filing or registration with, or notice
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to, or authorization, consent or approval of any Governmental Authority is
necessary for the consummation by Buyer of the transactions contemplated hereby.
5.4 Availability of Funds. Buyer has sufficient funds available to it or
has received binding written commitments from third parties to provide
sufficient funds to enable Buyer on the Closing Date to (i) pay the Cash
Purchase Price as adjusted by Section 3.3 on the Closing Date, (ii) satisfy NRC
financial qualifications requirements contained in 10 C.F.R. section 50.33(f),
(iii) guarantee payment of deferred premiums of $10 million annually pursuant to
10 C.F.R. section 140.21, and (iv) perform all of its obligations under this
Agreement and the Ancillary Agreements.
5.5 Legal Proceedings. There are no domestic or international actions,
suits or proceedings pending against Buyer or its members before any court,
arbitrator or Governmental Authority which, individually or in the aggregate,
could have a Buyer Material Adverse Effect. Neither Buyer nor its members is
subject to any outstanding judgments, rules, orders, writs, injunctions or
decrees of any court, arbitrator or Governmental Authority which, individually
or in the aggregate, have a Buyer Material Adverse Effect.
5.6 WARN Act. Buyer does not intend with respect to the Purchased Assets to
engage in a "plant closing" or "mass layoff," as such terms are defined in the
WARN Act within sixty (60) days after the Closing Date.
5.7 Regulation as a Utility. As of the date hereof, Buyer is a public
utility company within the meaning of the Federal Power Act and may be an
electric utility within the meaning of NRC regulations implementing the Atomic
Energy Act. Except as set forth on Schedule 5.7, or with respect to local tax
and zoning laws, Buyer is not subject to regulation as a public utility or
public services company by the United States, any State of the United States,
any foreign country, or any municipality or any political subdivision of the
foregoing.
5.8 Qualified Buyer. To Buyer's Knowledge, nothing has come to Buyer's
attention that would indicate that Buyer is not legally qualified, or will not
be legally qualified as of the Closing Date, to obtain all Buyer's Required
Regulatory Approvals in a timely manner.
5.9 Limited Liability Company Agreement. Buyer has delivered to Seller a
true and complete copy of the Limited Liability Company Agreement between PECO
and British Energy, Inc., and all amendments thereto in effect on the date of
this Agreement.
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ARTICLE VI
COVENANTS OF THE PARTIES
6.1 Conduct of Business Relating to the Purchased Assets
(a) Except as required by law, any Governmental Authority or the Management
Agreement, or as described in Schedule 6.1 or to the extent Buyer otherwise
consents in writing, during the period from the date of this Agreement to the
Closing Date, Seller (i) shall operate the Purchased Assets in the ordinary
course consistent with Good Utility Practices, (ii) shall use Commercially
Reasonable Efforts to preserve intact the Purchased Assets and preserve the
goodwill and relationships with customers, suppliers and others having business
dealings with Seller with respect to the Purchased Assets, (iii) shall maintain
the insurance coverage described in Section 4.9 or other insurance reasonably
equivalent thereto, (iv) shall comply in all material respects with all
applicable laws, rules and regulations relating to the Purchased Assets,
including, without limitation, all Nuclear Laws and Environmental Laws, and (v)
shall continue to implement in accordance with Good Utility Practices and in
conformity with all applicable legal requirements Seller's Y2K Plan. Without
limiting the generality of the foregoing, and, except as contemplated in this
Agreement or the Management Agreement, or as described in Schedule 6.1, or as
required under applicable law or by any Governmental Authority, prior to the
Closing Date, without the prior written consent of Buyer, Seller will not with
respect to the Purchased Assets:
(i) make any material change in the levels of fuel inventory customarily
maintained by Seller with respect to the Purchased Assets other than the
scheduled November 1999 fuel purchase;
(ii) except for Permitted Encumbrances, sell, lease (as lessor), pledge,
encumber, restrict, transfer or otherwise dispose of, or grant any right with
respect to, (A) any Real Property, or (B) any of the other Purchased Assets
other than assets used, consumed or replaced in the operation of the Facilities
in the ordinary course of business consistent with Good Utility Practices;
(iii) modify, amend or voluntarily terminate prior to the expiration date
thereof any of Seller's Agreements, and leases listed in Schedule 4.8 (or any
other lease to the extent any such extension or amendment thereof would require
the lease to be disclosed in Schedule 4.8) or any material Permit or
Environmental Permit or waive any default by, or release, settle or compromise
any claim against, any other party thereto, other than (A) in the ordinary
course of business, to the extent consistent with Good Utility Practices, (B)
with cause, to the extent consistent with Good Utility Practices or (C) as may
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be required in connection with Seller's obligations to Buyer under this
Agreement;
(iv) enter into any commitment for the purchase or sale of nuclear fuel
having a term that extends beyond December 31, 1999, or such other date that the
Parties mutually agree to be the date on which the Closing is expected to occur;
(v) enter into any power sales agreement with respect to CPS that obligates
or encumbers the Facilities for a term that extends beyond December 31, 1999
(other than with respect to the CPS switchyard so long as there is no impairment
of Buyer's access to Seller's Transmission system), or such other date that the
Parties mutually agree to be the date on which the Closing is expected to occur;
provided, however, that Seller shall be entitled to enter into power sales
agreements involving power to be purchased by Seller under the Power Purchase
Agreement or terminable by Seller (or after the Closing Date by Buyer) on not
more than ten (10) days notice without further liability, or that do not relate
to the Purchased Assets;
(vi) amend in any material respect or cancel any liability or casualty
insurance policies related thereto, or fail to maintain the policies of
insurance required by Section 4.9 or other insurance reasonably equivalent
thereto with financially responsible insurance companies;
(vii) enter into any commitment or contract for goods or services not
addressed in clauses (i) through (vi) above that will be delivered or provided
after December 31, 1999 or such other date that the Parties mutually agree to be
the date on which the Closing is expected to occur that exceeds $250,000 in the
aggregate, unless such commitment or contract is terminable by Seller (or after
the Closing Date by Buyer) without further liability, upon not more than sixty
(60) days notice;
(viii) except as required by the terms of the IBEW Collective Bargaining
Agreements or regulatory requirements (A) other than consistent with past
practice, increase salaries or wages of employees employed in connection with
the Purchased Assets prior to Closing, (B) take any action prior to Closing to
effect a material change in the IBEW Collective Bargaining Agreements or enter
into any other collective bargaining or representation agreement for employees,
or (C) take any action prior to the Closing to increase materially the aggregate
benefits payable to employees; or
(ix) enter into any agreement or settlement with any Governmental Authority
relating to or regarding the tax status of the Purchased Assets for any taxable
period ending after December 31, 1999;
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(x) amend or modify Seller's Decommissioning Trust Agreement except as
contemplated by this Agreement, provided, however, that Buyer's consent shall
not be unreasonably withheld; or
(xi) enter into any written or oral contract, agreement, commitment or
arrangement with respect to any of the transactions set forth in the foregoing
paragraphs (i) through (x).
Notwithstanding the provisions of this Section 6.1(a), Buyer acknowledges
and agrees that Seller shall not be responsible for any breach of this Section
6.1(a) if such breach directly arises out of or results from the performance of
services, or any breach by, PECO under the Management Agreement.
(b) A committee comprised of one or more senior representatives designated
by Seller and one or more senior representatives designated by Buyer (the
"Transition Committee") will be established as soon as practicable after the
execution of this Agreement to permit Buyer to observe the operation of the
Purchased Assets and to facilitate the transfer of the Purchased Assets to Buyer
at the Closing. The Transition Committee will be kept fully apprised by Seller
of all material CPS management and operating developments. The Transition
Committee shall have regular access to the management and Nuclear Oversight
Committee of the Board of Directors of Seller (including any management reports
on CPS operations given to the Board). The Transition Committee shall be
accountable directly to the respective chief executive officers of Buyer and
Seller and shall from time to time report its findings to the senior management
of each of Seller and Buyer. The Transition Committee shall have no authority to
take any action inconsistent with Seller's control of NRC licensed activities or
to enter into a legally binding agreement to bind Seller or Buyer.
(c) Between the date of this Agreement and the Closing Date, in the
interest of cooperation between Seller and Buyer and to permit informed action
by Buyer regarding its rights pursuant to Section 6.1(a), the Parties agree that
at the sole responsibility and expense of Buyer, and subject to compliance with
all applicable NRC rules and regulations and other applicable law, Seller will
permit a reasonable number of designated employees ("Observers") of Buyer to
observe all operations of Seller that relate to the Purchased Assets, and such
observation will be permitted on a cooperative basis in the presence of
personnel of Seller but not restricted to the normal business hours of Seller;
provided, however, that such Observers shall abide by all NRC rules and
regulations with respect to the Site and their actions shall not interfere with
the operation of CPS. Buyer's Observers may recommend or suggest actions be
taken or not be taken by Seller; provided, however, that Seller will be under no
obligation to follow any such recommendations or suggestions and Seller shall be
entitled, subject to this Agreement, to conduct its business in accordance with
its own judgment and discretion. Buyer's Observers shall have no authority to
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bind or make agreements on behalf of Seller; to conduct discussions with or make
representations to third parties on behalf of Seller; or to issue instructions
to or direct or exercise authority over Seller or any of Seller's officers,
employees, advisors or agents. Buyer shall be responsible for any breach by
Buyer's Observers of this Section 6.1(c).
(d) Seller shall advise Buyer regarding implementation of changes in ICC
rules or procedures of which Seller has Knowledge which are reasonably likely to
have a Material Adverse Effect on CPS.
(e) Nothing in this Section 6.1 is intended to amend or modify the
respective duties, liabilities and obligations of the Parties under the Interim
Agreement, the Management Agreement and Leased Employee Agreement.
6.2 Access to Information.
(a) In addition to the rights granted by Sections 6.1 (b), (c) and (d),
between the date of this Agreement and the Closing Date, Seller will, during
ordinary business hours and upon reasonable notice and subject to compliance
with all applicable NRC rules and regulations and other applicable law (i) give
Buyer and Buyer's Representatives reasonable access to all books, records,
plants, offices and other facilities and properties constituting the Purchased
Assets; (ii) make available copies of all insurance policies covering the
Purchased Assets and the Assumed Liabilities and Obligations; (iii) furnish
Buyer with such financial and operating data and other information with respect
to the Purchased Assets as Buyer may from time to time reasonably request; and
(iv) make available to Buyer a copy of each material report, schedule or other
document filed or received by Seller with respect to the Purchased Assets with
the SEC, NRC, FERC, ICC or any other Governmental Authority having jurisdiction
over the Purchased Assets; provided, however, that (A) any such inspection shall
be conducted in such a manner as not to interfere unreasonably with the
operation of the Purchased Assets, (B) Seller shall not be required to take any
action which would constitute a waiver of the attorney-client privilege and (C)
Seller need not supply Buyer with any information that Seller is legally
prohibited from supplying. Seller will provide Buyer with access to the
Transferred Employee Records, but Seller shall not be required to provide access
to other employee records or medical information unless required by law or
specifically authorized by the affected employee.
(b) Buyer and Seller acknowledge that all information furnished to or
obtained by Buyer or Buyer's Representatives pursuant to this Section 6.2 shall
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be subject to the provisions of the Confidentiality Agreement and shall be
treated as "Proprietary Information" (as defined in the Confidentiality
Agreement).
(c) For a period of seven (7) years after the Closing Date and subject to
all applicable NRC rules and regulations, each Party and its respective
Representatives shall have reasonable access to (i) all of the books and records
relating to the Purchased Assets, including all Transferred Employee Records or
other personnel and medical records required by law, legal process or subpoena,
in the possession of the other Party, and (ii) personnel employed by the other
Party, in each case to the extent that such access may reasonably be required by
the requesting Party in connection with the Assumed Liabilities and Obligations
or the Excluded Liabilities, or other matters relating to or affected by the
operation of the Purchased Assets, including, without limitation, compliance
with applicable laws and regulations and any investigations, audits or inquiries
by Governmental Authorities. Such access shall be afforded by the Party in
possession of such books and records or employing such Persons upon receipt of
reasonable advance notice and during normal business hours. The Party exercising
this right of access shall be solely responsible for any costs or expenses
incurred by the Parties pursuant to this Section 6.2(c). If the Party or Parties
in possession of such books and records shall desire to dispose of any such
books and records upon or prior to the expiration of such seven-year period,
such Party or Parties shall, prior to such disposition, give the other Party a
reasonable opportunity at such other Party's expense, to segregate and remove
such books and records as such other Party may select. Notwithstanding the
foregoing, the rights of access to medical records and other confidential
employee records shall be subject to all applicable legal requirements.
(d) Seller agrees (i) not to release any Person (other than Buyer) from any
confidentiality agreement now existing with respect to the Purchased Assets, or
waive or amend any provision thereof and (ii) at Closing, to assign any rights
arising under any such confidentiality agreement (to the extent assignable) to
Buyer.
(e) Notwithstanding the terms of the Confidentiality Agreement and Section
6.2(b) above, the Parties agree that prior to the Closing Buyer may reveal or
disclose Proprietary Information to any other Persons to the extent necessary in
connection with Buyer's financing and risk management of the Purchased Assets,
and, to the extent that Seller consents, which consent shall not be unreasonably
withheld, to (i) existing and potential customers and suppliers, and (ii) to
such Persons with whom Buyer expects it may have business dealings regarding the
Purchased Assets from and after the Closing Date; provided, however, that all
such Persons agree in writing to maintain the confidentiality of the Proprietary
Information on substantially the same terms and conditions as the
Confidentiality Agreement. The Parties further agree that prior to the Closing
Seller may reveal or disclose Proprietary Information to any other Persons in
connection with Seller's financing and risk management and business and
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financing matters involving Seller's parent, Illinova Corporation, and, to the
extent that Buyer consents, which consent shall not be unreasonably withheld,
with other Persons; provided, however, that all such Persons agree in writing to
maintain the confidentiality of the Proprietary Information on substantially the
same terms and conditions as the Confidentiality Agreement.
(f) Except as may be permitted in the Confidentiality Agreement, Interim
Agreement, Management Agreement or Leased Employee Agreement, or during the
course of Buyer's due diligence investigation of the Purchased Assets prior to
the date hereof, Buyer agrees that, prior to the Closing Date, it will not
contact any vendors, suppliers, employees or other contracting parties of Seller
or Seller's Affiliates with respect to any aspect of the Purchased Assets or the
transactions contemplated hereby, without the prior written consent of Seller,
which consent shall not be unreasonably withheld.
(g) Upon the other Party's prior written approval (which approval shall not
be unreasonably withheld or delayed) either Party may provide Proprietary
Information of the other Party to the SEC, NRC, FERC, ICC, IDNS, IPSC or any
other Governmental Authority having jurisdiction over the Purchased Assets or
any stock exchange, as may be necessary to obtain Seller's Required Regulatory
Approvals or Buyer's Required Regulatory Approvals, respectively, or to comply
generally with any relevant law, rule or regulation. The disclosing Party shall
seek confidential treatment for the Proprietary Information provided to any such
Governmental Authority and the disclosing Party shall notify the other Party as
far in advance as practical of its intention to release to any Governmental
Authority any such Proprietary Information.
(h) Except as set forth in Section 6.2(e) or as required by law or
Governmental Authority, or unless otherwise agreed to in writing by the Parties,
the Parties shall keep (i) all Proprietary Information confidential and not
disclose or reveal any Proprietary Information to any Person other than
Representatives of the Parties who are actively and directly participating in
the transactions contemplated hereby or who otherwise need to know the
Proprietary Information for such purpose and to cause those Persons to observe
the terms of this Section 6.2(h) and (ii) not to use Proprietary Information for
any purpose other than consistent with the terms of this Agreement. The Parties
shall continue to hold all Proprietary Information according to the same
internal security procedures and with the same degree of care regarding its
secrecy and confidentiality as currently applicable thereto. Either Party shall
notify the other Party of any unauthorized disclosure to third parties that it
discovers, and shall endeavor to prevent any further such disclosures. Seller
shall be responsible for any breach of the terms of this Section 6.2(h) by
Seller or Seller's Representatives. Buyer's obligations with respect to the
confidentiality of Proprietary Information relating to the Purchased Assets
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shall terminate on the Closing Date except as otherwise provided in the
Confidentiality Agreement.
After the Closing Date, in the event that Seller is requested pursuant to,
or required by, applicable law or regulation or by legal process to disclose any
Proprietary Information, Seller shall provide Buyer with prompt notice of such
request or requirement in order to enable Buyer to seek an appropriate
protective order or other remedy, to consult with Seller with respect to taking
steps to resist or narrow the scope of such request or legal process, or to
waive compliance, in whole or in part, with the terms of this Section 6.2(h).
Seller agrees not to oppose any action by Buyer to obtain a protective order or
other appropriate remedy after the Closing Date. In the event that no such
protective order or other remedy is obtained, or that Buyer waives compliance
with the terms of this Section 6.2(h), Seller shall furnish only that portion of
the Proprietary Information which Seller is advised by counsel is legally
required. In any such event Seller shall use its Commercially Reasonable Efforts
to ensure that all Proprietary Information that is so disclosed will be accorded
confidential treatment.
(i) The Parties agree that the Confidentiality Agreement will terminate in
accordance with its terms, without further act or evidence by the Parties.
6.3 Expenses. Except to the extent specifically provided herein, whether or
not the transactions contemplated hereby are consummated, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby, including the cost of legal, technical and financial consultants and the
cost of filing for and prosecuting applications for Required Regulatory
Approvals, shall be borne by the Party incurring such costs and expenses.
Notwithstanding anything to the contrary herein, Buyer and Seller will share
equally the cost of all filing and other fees with respect to any NRC filings,
and Buyer shall be responsible for all HSR filing fees, required to consummate
the transactions contemplated hereby.
6.4 Further Assurances; Cooperation.
(a) Subject to the terms and conditions of this Agreement, each of the
Parties hereto will use Commercially Reasonable Efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the sale of the Purchased Assets pursuant to this Agreement,
including, without limitation, using Commercially Reasonable Efforts to ensure
satisfaction of the conditions precedent to each Party's obligations hereunder.
Neither of the Parties hereto will, without the prior written consent of the
other Party or as required by applicable law, take or fail to take any action
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which would reasonably be expected to prevent or materially impede, interfere
with or delay the transactions contemplated by this Agreement.
(b) From time to time after the Closing Date, without further
consideration, Seller will, at its own expense, execute and deliver such
documents to Buyer as Buyer may reasonably request in order to more effectively
consummate the sale and purchase of the Purchased Assets or to more effectively
vest in Buyer good and marketable title to the Purchased Assets subject to the
Permitted Encumbrances. Seller shall cooperate with Buyer, at Buyer's expense,
in Buyer's efforts to cure or remove any Permitted Encumbrances that Buyer
reasonably deems objectionable. From time to time after the Closing Date,
without further consideration, Buyer will, at its own expense, execute and
deliver such documents to Seller as Seller may reasonably request in order to
evidence Buyer's assumption of the Assumed Liabilities and Obligations.
(c) To the extent that Seller's rights under any Seller's Agreement to be
transferred to Buyer hereunder may not be assigned without the consent of
another Person which consent has not been obtained, this Agreement shall not
constitute an agreement to assign the same if an attempted assignment would
constitute a breach thereof or be unlawful, and Seller, at its expense, shall
use Commercially Reasonable Efforts to obtain any such required consent(s) as
promptly as possible. Seller and Buyer agree that if any consent to an
assignment of any Seller's Agreement to be transferred hereunder shall not be
obtained or if any attempted assignment would be ineffective or would impair
Buyer's rights and obligations under the applicable Seller's Agreement so that
Buyer would not in effect acquire the benefit of all such rights and
obligations, Seller, to the maximum extent permitted by law and such Seller's
Agreement, shall after the Closing appoint Buyer to be Seller's representative
and agent with respect to such Seller's Agreement, and Seller shall, to the
maximum extent permitted by law and such Seller's Agreement, enter into such
reasonable arrangements with Buyer as are necessary to provide Buyer with the
benefits and obligations of such Seller's Agreement. Seller and Buyer shall
cooperate and shall each use Commercially Reasonable Efforts after the Closing
to obtain an assignment of such Seller's Agreement to Buyer.
(d) For a reasonable time after the Closing Date and in addition to the
services contemplated by the IP Services Agreement, Buyer and Seller agree to
provide services to each other as reasonably required to the extent necessary to
ensure the continuity of support for CPS and the orderly completion of projects
or other work in progress that would be adversely affected if those services
were interrupted. Such support by one Party to the other will not be
unreasonably withheld, provided that requests for such support are made in a
timely manner. The Party providing the requested support will be reimbursed for
all reasonable costs thereof in accordance with established accounting
procedures or on an alternative cost reimbursement basis as mutually agreed by
the Parties.
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6.5 Public Statements. From the date hereof until thirty (30) days after
the Closing Date, the Parties shall not issue any public announcement, statement
or other disclosure with respect to this Agreement or the transactions
contemplated hereby without the prior written consent of the other Party, which
consent will not be unreasonably withheld or delayed, except as may be required
by law or Governmental Authority or the rules or regulations of the New York
Stock Exchange.
6.6 Consents and Approvals.
(a) Seller and Buyer shall each file or cause to be filed with the Federal
Trade Commission and the Department of Justice any notifications required to be
filed under the HSR Act and the rules and regulations promulgated thereunder
with respect to the transactions contemplated hereby. The Parties shall consult
with each other as to the appropriate time of filing such notifications and
shall agree upon the timing of such filings, respond promptly to any requests
for additional information made by either of such agencies, and cause the
waiting periods under the HSR Act to terminate or expire at the earliest
possible date after the date of filing. Each Party will bear its own costs for
the preparation of any such filing.
(b) As promptly as practicable after the date of this Agreement and in any
event by no later than 60 days after the receipt of any findings required to be
made by any other Governmental Authority as a condition to Buyer making the
filings contemplated by this Agreement, Seller and Buyer shall (i) promptly
prepare and file all necessary documentation, (ii) effect all necessary
applications, notices, petitions and filings and execute all agreements and
documents, (iii) use Commercially Reasonable Efforts to obtain the transfer or
reissuance to Buyer of all necessary Permits, Environmental Permits, consents,
approvals and authorizations of all Governmental Authorities, including, without
limitation, Seller's Required Regulatory Approvals and Buyer's Required
Regulatory Approvals, and (iv) use Commercially Reasonable Efforts to obtain all
necessary consents, approvals and authorizations of all other parties necessary
or advisable to consummate the transactions contemplated by this Agreement or
required by the terms of any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, contract, lease or other instrument to
which Seller or Buyer is a party or by which any of them is bound. The Parties
shall respond promptly to any requests for additional information made by such
Governmental Authorities, and use their respective Commercially Reasonable
Efforts to cause regulatory approval to be obtained at the earliest possible
date after the date of filing. Each Party will bear its own costs of the
preparation of such filings. Each of Seller and Buyer shall have the right to
review in advance all characterizations of the information relating to the
transactions contemplated by this Agreement which appear in any filing made in
connection with the transactions contemplated hereby.
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(c) Seller and Buyer shall cooperate with each other and promptly prepare
and file notifications with, and request Tax clearances from, state and local
taxing authorities in jurisdictions in which a portion of the Purchase Price may
be required to be withheld or in which Buyer would otherwise be liable for any
Tax liabilities of Seller pursuant to such state and local Tax law.
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(e) Buyer shall have the primary responsibility for securing the transfer,
reissuance or procurement of the Permits and Environmental Permits (other than
Transferable Permits) effective as of the Closing Date. Seller shall cooperate
with Buyer's efforts in this regard and provide reasonable assistance in any
transfer or reissuance of a Permit or Environmental Permit held by Seller or the
procurement of any other Permit or Environmental Permit when so requested by
Buyer.
(f) Within fifteen (15) days after the receipt of any Buyer's or Seller's
Required Regulatory Approval, the Party receiving such approval (the "Receiving
Party") shall notify the other Party in writing if the approval contains any
condition that the Receiving Party determines could reasonably be expected to
have a Material Adverse Effect on the Receiving Party or, in the case of Buyer,
on the Purchased Assets; provided, however, that if the Receiving Party does not
provide such notice to the other Party within the fifteen (15)-day period
specified in this sentence, the Receiving Party shall be deemed to have accepted
such Required Regulatory Approval, including any condition contained therein,
and the condition to Closing set forth in Section 7.1(c) or Section 7.2(c), as
applicable to such Party with respect to such Required Regulatory Approval,
shall be deemed satisfied, except to the extent such Required Regulatory
Approval is not then final and non-appealable. Within fifteen (15) days after
receipt of any notice specified in the previous sentence, Seller and Buyer shall
meet to consider what commercially reasonable efforts the Receiving Party
intends to take in order to obtain the Required Regulatory Approval or to
eliminate the materially adverse conditions. After the Receiving Party has
completed such agreed upon commercially reasonable efforts with respect to the
materially adverse condition contained in such Required Regulatory Approval,
within fifteen (15) days of such completion, the Receiving Party shall notify
the other Party if the materially adverse condition has been eliminated or
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remains in effect, and whether the Receiving Party either will accept such
materially adverse condition by a waiver of the applicable Closing condition in
Section 7.1(c) or 7.2(c) with respect to such materially adverse condition or
deem that the applicable Closing condition in Section 7.1(c) or 7.2(c) cannot be
satisfied due to the materially adverse condition in such Required Regulatory
Approval.
6.7 Brokerage Fees and Commissions. Seller and Buyer each represent and
warrant to the other that no broker, finder or other Person is entitled to any
brokerage fees, commissions or finder's fees in connection with the transactions
contemplated hereby by reason of any action taken by the Party making such
representation. Seller and Buyer will pay to the other or otherwise discharge,
and will indemnify and hold the other harmless from and against, any and all
claims or liabilities for all brokerage fees, commissions and finder's fees
incurred by reason of any action taken by the indemnifying party.
6.8 Tax Matters.
(a) All transfer and sales Taxes incurred in connection with this Agreement
and the transactions contemplated hereby shall be borne equally by Buyer and
Seller. Buyer will file, to the extent required by applicable law, all necessary
Tax Returns and other documentation with respect to all such transfer or sales
Taxes, and Seller will be entitled to review such returns in advance and, if
required by applicable law, will join in the execution of any such Tax Returns
or other documentation. Prior to the Closing Date, Buyer will provide to Seller,
to the extent possible, an appropriate exemption certificate in connection with
this Agreement and the transactions contemplated hereby, due from each
applicable taxing authority.
(b) With respect to Taxes to be prorated in accordance with Section 3.5 of
this Agreement, Buyer shall prepare and timely file all Tax Returns required to
be filed after the Closing with respect to the Purchased Assets, if any, and
shall duly and timely pay all such Taxes shown to be due on such Tax Returns.
Buyer's preparation of any such Tax Returns shall be subject to Seller's
approval, which approval shall not be unreasonably withheld. Buyer shall make
such Tax Returns available for Seller's review and approval no later than twenty
(20) Business Days prior to the due date for filing such Tax Return. Not less
than ten (10) Business Days prior to the due date of any such Tax Return, Seller
shall pay to Buyer the amount shown as due on such Tax Return as determined in
accordance with Section 3.5 of this Agreement or shall notify Buyer of any error
on such return. Buyer and Seller shall negotiate in good faith to resolve any
disagreement. If Buyer and Seller are unable to agree to any such Tax Return
within five (5) Business Days following Buyer's receipt of notification of an
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error from Seller, the Parties shall submit the dispute to the Independent
Accounting Firm in accordance with the procedures set forth in Section 6.8(d)
(c) Buyer and Seller shall provide the other Party with such assistance as
may reasonably be requested by the other Party in connection with the
preparation of any Tax Return, any audit or other examination by any taxing
authority, or any judicial or administrative proceedings relating to liability
for Taxes, and each will retain and provide the requesting Party with any
records or information which may be relevant to such return, audit or
examination, proceedings or determination. Any information obtained pursuant to
this Section 6.8(c) or pursuant to any other Section hereof providing for the
sharing of information or review of any Tax Return or other schedule relating to
Taxes shall be kept confidential by the Parties hereto.
(d) In the event that a dispute arises between Seller and Buyer as to the
amount of Taxes, or the amount of any allocation of Purchase Price under Section
3.4, the Parties shall attempt in good faith to resolve such dispute, and any
amount so agreed upon shall be paid to the appropriate party. If such dispute is
not resolved within thirty (30) days thereafter, the Parties shall submit the
dispute to the Independent Accounting Firm for resolution, which resolution
shall be final, conclusive and binding on the Parties. Notwithstanding anything
in this Agreement to the contrary, the fees and expenses of the Independent
Accounting Firm in resolving the dispute shall be borne equally by Seller and
Buyer. Any payment required to be made as a result of the resolution of the
dispute by the Independent Accounting Firm shall be made within ten (10) days
after such resolution, together with any interest determined by the Independent
Accounting Firm to be appropriate.
(e) On and after the Closing Date until the maturity or redemption date of
the Pollution Control Bonds which were issued to finance or refinance all or a
portion of the cost of the Pollution Control Facilities:
(i) Except as otherwise permitted in clauses (ii) and (iv) below, Buyer
will not change or permit to be changed the character or nature of the use of
those facilities listed in Schedule 6.8(e) hereto (the "Pollution Control
Facilities") from the manner Seller has used such facilities prior to the sale
of the Purchased Assets, unless such changed use would constitute a use or
purpose of the Pollution Control Facilities (A) permitted under the tax
compliance documents or the non-arbitrage certificates for the Pollution Control
Bonds or (B) for which tax-exempt bonds have been issued pursuant to Treas. Reg.
section 1.103-8(f) or (g) or its successor Income Tax regulations, unless Buyer
has obtained at its own expense an opinion addressed to Seller of nationally
recognized bond counsel reasonably acceptable to Seller ("Bond Counsel") that
such use will not impair (x) the exclusion from gross income of the interest on
any issue of Pollution Control Bonds for Federal income tax purposes or (y) the
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deductibility of Seller's payments of interest based on the restrictions in
Section 150(b) of the Code;
(ii) Buyer and any transferee which becomes subject to the provisions of
the foregoing clause (i) by reason of this clause (ii) will not sell or
otherwise transfer any portion of the Pollution Control Facilities unless (A)
the transferee covenants to satisfy the conditions of the foregoing clause (i)
with respect to its ownership and use of the Pollution Control Facilities or (B)
the transfer relates to personal property;
(iii) Buyer will cooperate with Seller and use Commercially Reasonable
Efforts to permit Seller to have access to the Pollution Control Facilities at
reasonable times to examine them; and
(iv) The foregoing clause (i) shall not be construed to prevent Buyer (or
any transferee) from maintaining or repairing the Pollution Control Facilities,
ceasing to operate, maintain or repair any element or item of the Pollution
Control Facilities, suspending the operation of the Pollution Control Facilities
on a temporary basis, or from terminating the operation of the Pollution Control
Facilities on a permanent basis and shutting down, retiring, abandoning and/or
decommissioning the Pollution Control Facilities; provided, however, that if the
Pollution Control Facilities, in whole or in part, are dismantled and sold
(including any sale for scrap), and if the operation of the Purchased Assets has
not been terminated, then, to the extent it is possible to do so, the proceeds
of such sale of the Pollution Control Facilities shall within six months from
the date of sale be expended to acquire replacement property to be used for the
same qualifying purpose as the Pollution Control Facilities so sold. Seller
shall notify Buyer when the Pollution Control Bonds have matured or been
redeemed.
6.9 Advice of Changes. Prior to the Closing Date, each Party will promptly
advise the other in writing with respect to any matter arising after execution
of this Agreement which, if existing or occurring at the date of this Agreement,
would have been required to be set forth in this Agreement, including any of the
Schedules hereto. If Seller advises Buyer in writing of any change occurring
after the date of this Agreement but prior to Closing that is material to any
representation, warranty or covenant of Seller under this Agreement, Buyer shall
have the right to terminate this Agreement pursuant to Section 9.1(e). If Buyer
fails to exercise its termination right, Seller's written notice under this
Section 6.9 will be deemed to have amended this Agreement, including the
appropriate schedule, or to have qualified the representations and warranties
contained in Article IV. Seller shall be entitled to amend, substitute or
otherwise modify any Seller's Agreement to the extent that such Seller's
Agreement expires by its terms prior to the Closing Date or is terminable
without liability to Buyer on or after the Closing Date, or if the terms and
conditions of such modified Seller's Agreement constituting the Assumed
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Liabilities and Obligations are on terms and conditions not less favorable to
Buyer than the original Seller's Agreement. Nothing contained herein shall
relieve Seller or Buyer of any breach of representation, warranty or covenant
under this Agreement existing as of the date hereof or any subsequent date as of
which such representation, warranty or covenant shall have been made.
6.10 Employees.
(a) Buyer will offer employment, effective on the Closing Date, to all
employees of Seller who are covered by the IBEW Collective Bargaining Agreements
and are actively employed as of the Closing Date in positions relating to the
Purchased Assets ("Union Employees").
(b) (i) Buyer will offer employment, effective on the Closing Date, to all
CPS employees whose principal place of employment is located at the Purchased
Assets who are not covered by the IBEW Collective Bargaining Agreements on the
Closing Date, and who provide services in support of CPS, but excluding
employees of Seller's Support Services Business Group, and (ii) Buyer may offer
employment to any other employee of Seller provided that Buyer obtains Seller's
written consent prior to any such offer (collectively, the "Non-Union
Employees"). Subject to its obligations hereunder, Seller retains the right to
transfer any of its employees employed at CPS to any other Seller facility prior
to the Closing Date; provided, however, that key employees critical to the
operations of CPS, as determined by Buyer from time to time, shall be
transferred only with the written consent of the Buyer. Each person who becomes
employed by Buyer pursuant to Section 6.10(a) or (b) shall be referred to herein
as a "Transferred Union Employee" or "Transferred Non-Union Employee",
respectively, and collectively as "Transferred Employees".
(c) All offers of employment made by Buyer to any of Seller's employees
will be made subject to the Parties' satisfaction that an employee is (i)
qualified to perform the duties and responsibilities of their current job
assignment with or without reasonable accommodation (or will be capable of doing
so upon return from authorized leave of absence), and (ii) has the appropriate
nuclear power plant access authorization. All offers of employment shall be made
in accordance with all applicable federal, state and local laws and regulations
(including, without limitation, Section 16-128 of the Illinois Public Utilities
Act) and, with respect to Union Employees, the IBEW Collective Bargaining
Agreements. All such offers of employment will be made in accordance with
Section 16-128 of the Illinois Public Utilities Act and will therefore be at no
less than the wage rates, and substantially equivalent fringe benefits and terms
and conditions of employment that are in effect at the time of transfer of
ownership of the Purchased Assets; and such wage rates and substantially
equivalent fringe benefits and terms and conditions of employment shall continue
for at least 30 months from the time of said transfer of ownership unless the
parties mutually agree to different terms and conditions of employment within
that 30-month period. Seller and Buyer shall cooperate in developing a
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transition plan (the "Transition Plan") for Union Employees and Non-Union
Employees in accordance with Section 16-128 of the Illinois Public Utilities
Act. Seller shall be responsible for implementing and funding the Transition
Plan for all such Union Employees and Non-Union Employees who are not
Transferred Employees.
(d) Schedule 6.10(d) sets forth the collective bargaining agreements, and
all amendments thereto, to which Seller is a party with the IBEW in connection
with the Purchased Assets ("IBEW Collective Bargaining Agreements"). Unless
specifically provided for herein, all Transferred Union Employees shall retain
their seniority and receive full credit for service with the Seller for
eligibility and vesting purposes with regard to Benefit Plans with Seller
(including service with a Sponsor to the extent credited by Seller) in
connection with entitlement to compensation, vacation, benefits and rights under
the IBEW Collective Bargaining Agreements, and benefits and rights under each
retirement or employee benefit plan or program Buyer is required to maintain for
Transferred Union Employees pursuant to the IBEW Collective Bargaining
Agreements. Buyer agrees to recognize the IBEW as the collective bargaining
agent for the Transferred Union Employees.
(e) As of the Closing Date, all Transferred Employees shall commence
participation in welfare benefit plans of Buyer or its Affiliates (the
"Replacement Welfare Plans") that will provide benefits or coverage
substantially similar to the benefits or coverage provided to the Transferred
Employees under Seller's plans and programs in effect for the Transferred
Employees immediately prior to the Closing Date. Buyer shall (i) waive all
limitations as to pre-existing condition exclusions and waiting periods with
respect to the Transferred Employees under the Replacement Welfare Plans, other
than, but only to the extent of, limitations or waiting periods that were in
effect with respect to such employees under the welfare benefit plans maintained
by Seller and that have not been satisfied as of the Closing Date, and (ii)
provide each Transferred Employee with credit for any co-payments and
deductibles paid prior to the Closing Date during a plan year under Seller's
plan that has not ended as of the Closing Date, in satisfying any deductible or
out-of-pocket requirements under the Replacement Welfare Plans (on a pro-rata
basis in the event of a difference in plan years).
(f) (i) Effective as of the Closing Date, Buyer shall, in accordance with
Section 16-128 of the Illinois Public Utilities Act, cause to be established
defined benefit pension plans, 401(k) plans, post-retirement medical and life
insurance, and other welfare benefit plans and fringe benefit plans for the
benefit of the Transferred Employees (the "Buyer Benefit Plans"). The Buyer
Benefit Plans shall have substantially the same terms as Seller's defined
benefit plans, 401(k) plans, post-retirement medical and life insurance, and
other welfare benefit plans and fringe benefit plans (the "Seller Benefit
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Plans") as of the Closing Date provided that no improvements are made after the
date of this Agreement and prior to the Closing Date.
(ii) The Transferred Employees shall be given credit in the Buyer Benefit
Plans for all service with Seller as if it were service with Buyer for purposes
of determining eligibility for and vesting of benefits under the Buyer Benefit
Plans.
(iii) Effective as of the Closing Date, Transferred Employees shall cease
to actively participate in all Seller Benefit Plans.
(iv) Following the Closing Date:
(A) Transferred Employees' accrued benefits under Seller's defined benefit
pension plans shall be frozen and shall not be increased as the result of any
service completed or any compensation received for employment with the Buyer
after the Closing Date. Notwithstanding the preceding sentence, and only for
purposes of determining vesting and eligibility for early retirement subsidies
under the Seller's defined benefit retirement plans, Seller shall recognize the
Transferred Employees' employment with the Buyer after the Closing Date as if
such employment was with the Seller. Transferred Employees shall have a right to
commence benefits in accordance with Seller's defined benefit plans; provided,
however, any subsidies reflecting employment described in this subparagraph
shall be paid only if the Transferred Employee terminates employment with the
Buyer.
(B) Transferred Employees who, on or before the Closing Date, have
satisfied the eligibility requirements for post-retirement health benefits
and/or life insurance benefits under the plans maintained by the Seller shall
remain eligible for post-retirement benefits pursuant to the terms of such
plans. With respect to these Transferred Employees, Seller shall recognize
employment with the Buyer after the Closing Date for purposes of determining the
amount of such post-retirement benefits and the eligibility for commencement of
such post-retirement benefits.
(C) With respect to Transferred Employees who attain age 50 on or before
the Closing Date, Seller shall recognize employment with the Buyer after the
Closing Date for purposes of determining eligibility for post-retirement health
and life insurance benefits under the post-retirement benefit plans maintained
by the Seller. With respect to these Transferred Employees, Seller shall also
recognize employment with the Buyer after the Closing Date for purposes of
determining the amount of such post-retirement benefits and the eligibility for
commencement of such post-retirement benefits.
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(D) Buyer shall provide Seller with information regarding the employment
status of Transferred Employees no less often than annually. Such data shall be
sufficient to enable Seller to implement the provisions of this Section 6.10.
(E) Nothing in this Section 6.10(f) shall limit Seller's ability to amend
Seller's Benefit Plans after the Closing Date.
(g) To the extent allowable by law, and subject to Seller obtaining written
agreement from the IBEW, Seller shall cause to be transferred assets
representing the account balance of all Transferred Employees under the
qualified defined contribution plans maintained by the Seller (the "Seller's
Savings Plans"). In implementing this Section 6.10(g):
(i) The transfer shall be made as soon as practicable following the Closing
Date, in cash and cash equivalents, and shall be made to Buyer's tax-qualified
401(k) plans in which Transferred Employees participate after the Closing Date.
(ii) Buyer agrees that the assets so transferred may include promissory
notes evidencing loans from the Seller's Savings Plans to Transferred Employees
that are outstanding as of the transfer date. However, except as provided in
Section 6.10(d), any defined contribution plan of Buyer or its Affiliates
accepting such a transfer shall not be required to make any further loans to
Transferred Employees after the Closing Date.
(iii) Buyer agrees that the assets so transferred may include shares of
common stock of Seller or its Affiliates representing Transferred Employees'
investment in such stock as of the Closing Date. Buyer agrees to maintain the
availability to Transferred Employees of an investment in such stock for a
period of at least 30 months from the Closing Date. During such period, no
additional shares of such stock will be purchased either pursuant to employee or
employer contributions to the plan or pursuant to the reinvestment of dividends.
However, Transferred Employees may transfer assets out of such stock fund
pursuant to rules established under Buyer's tax-qualified 401(k) plan.
(h) Buyer shall establish severance plans ("Buyer's Severance Plans") which
will provide (i) benefits to Transferred Union Employees no greater than those
benefits provided to Seller's Union Employees pursuant to the "Utility
Agreement" dated May 9, 1997, and (ii) benefits to Transferred Non-Union
Employees no greater than those benefits provided to Seller's Non-Union
Employees pursuant to the "Illinova Severance Policy for Nonunion Salaried
Employees" dated January 1, 1997. Seller shall reimburse Buyer, on no less than
an annual basis, for the actual severance payments made to any Transferred
Employee who is eligible for a benefit under Buyer's Severance Plans and who is
terminated for reasons other than for cause or disability during the period
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beginning on the Closing Date and ending on the second anniversary thereof;
provided, however, that if more than 25% of the total number of Transferred
Employees are so terminated during such two-year period, Seller's liability
shall be limited to the actual severance payments made to the first 25% of the
total number of Transferred Employees who are so terminated.
(i) Seller shall be responsible, with respect to the Purchased Assets, for
performing and discharging all requirements to be performed by Seller up to the
Closing Date as set forth under the WARN Act and under applicable state and
local laws and regulations.
(j) Seller is responsible for extending COBRA continuation coverage to all
employees and former employees at CPS, and qualified beneficiaries of such
employees and former employees, who become or became entitled to such COBRA
continuation coverage on or before the Closing Date by reason of the occurrence
of a qualifying event on or before the Closing Date, including those for whom
the Closing Date occurs during their COBRA election period. Buyer shall be
responsible for providing COBRA continuation coverage only to Transferred
Employees and qualified beneficiaries of such employees who become entitled to
such COBRA continuation coverage on or after the Closing Date by reason of the
occurrence of a qualifying event after the Closing Date.
(k) Seller shall remain responsible for paying Transferred Employees: (i)
all salary and wages, and a pro rata portion of any bonuses and/or incentive
compensation that were earned for time worked for Seller prior to the Closing
Date; and (ii) all workers' compensation, disability benefits, or other
insurance benefits that were accrued or for which entitlement to payment is
based upon events occurring prior to the Closing Date, including any incurred
but unreported claims under employee benefit plans maintained by Seller. Seller
shall pay to Buyer as promptly as practicable following the Closing Date, but no
later than the 45th day, the cash equivalent for all accrued and unused vacation
time for Transferred Employees which has accrued as of the Closing Date.
(l) Individuals who are otherwise "Union Employees" or "Non-Union
Employees" but who are not actively at work on the Closing Date due to a leave
of absence covered by the Family and Medical Leave Act, or due to any other
authorized leave of absence, shall nevertheless be treated as "Union Employees"
or as "Non-Union Employees," as the case may be, on such date if they are able
(i) to return to work within the protected period under the Family Medical Leave
Act or such other leave time, whichever is applicable, and (ii) to perform the
essential functions of their job, with or without a reasonable accommodation.
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(m) All Transferred Employee Records shall be delivered promptly after the
Closing Date to Buyer.
6.11 Risk of Loss.
(a) Between the date hereof and the Closing Date, Buyer shall not bear any
risk of loss or damage to the property included in the Purchased Assets except
to the extent arising out of or resulting from a material breach by PECO under
Section 6.2 of the Management Agreement or directly resulting from conduct of a
PECO employee that constitutes willful misconduct or gross negligence; provided,
however, that conduct of non-Peco employees shall not be imputed to PECO for
purposes of this Agreement. Seller shall replace or repair any damage to the
Purchased Assets in accordance with Good Utility Practices, except as otherwise
provided in the following sentence or in paragraphs (b) or (c) below.
(b) If, before the Closing Date all or any portion of the Purchased Assets
are taken by eminent domain or are the subject of a pending or (to the Knowledge
of Seller) contemplated taking which has not been consummated, Seller shall
notify Buyer promptly in writing of such fact. If such taking would create a
Material Adverse Effect, Buyer and Seller shall negotiate in good faith to
settle the loss resulting from such taking (including, without limitation, by
making a fair and equitable adjustment to the Purchase Price) and, upon such
settlement, consummate the transactions contemplated by this Agreement pursuant
to the terms of this Agreement. If no such settlement is reached within sixty
(60) days after Seller has notified Buyer of such taking, then Buyer or Seller
may terminate this Agreement pursuant to Section 9.1(g).
(c) If, before the Closing Date all or any portion of the Purchased Assets
are damaged or destroyed by fire or other casualty, Seller shall notify Buyer
promptly in writing of such fact. If such damage or destruction would create a
Material Adverse Effect and Seller has not notified Buyer of its intention to
cure such damage or destruction within fifteen (15) days after its occurrence,
Buyer and Seller shall negotiate in good faith to settle the loss resulting from
such casualty (including, without limitation, by making a fair and equitable
adjustment to the Purchase Price) and, upon such settlement, consummate the
transactions contemplated by this Agreement pursuant to the terms of this
Agreement. If no such settlement is reached within sixty (60) days after Seller
has notified Buyer of such casualty, then Buyer may terminate this Agreement
pursuant to Section 9.1(g).
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6.12 Decommissioning Funds.
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6.13 Spent Nuclear Fuel Fees. Between the date hereof and the Closing Date,
and at all times thereafter, subject to the terms of the Interim Agreement and
the Management Agreement, Seller will pay all Spent Nuclear Fuel Fees and any
other fees associated with electricity generated at CPS and sold prior to the
Closing Date, and Buyer shall have no liability or responsibility therefor.
Buyer shall pay and discharge all fees and expenses associated with the nuclear
fuel consumed in CPS and sold from and after the Closing Date, including Spent
Nuclear Fuel Fees, calculated based upon electricity generated from such
consumed nuclear fuel, as provided in Department of Energy regulations, and
Seller shall have no liability or responsibility therefor. Buyer shall assume
title to and responsibility for the storage and disposal of the spent nuclear
fuel at the Site as of the Closing Date. Subject to Seller's rights to recover
its investment in the Private Fuel Storage L.L.C. facility in Utah, Seller shall
assign to Buyer the Department of Energy Standard Contract for Disposal of Spent
Fuel and/or High Level Waste and shall provide the required notice to the
Department of Energy within ninety (90) days of transfer of title to spent fuel.
6.14 Department of Energy Decontamination and Decommissioning Fees. Seller
will continue to pay all Department of Energy Decontamination and
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Decommissioning Fees relating to nuclear fuel purchased and consumed at CPS
prior to the Closing Date, including, without limitation, all annual Special
Assessment invoices to be issued after the Closing Date by the Department of
Energy, as contemplated by its regulations at 10 C.F.R. Part 766 implementing
Sections 1801, 1802 and 1803 of the Atomic Energy Act, relating to such nuclear
fuel purchased and consumed prior to the Closing Date.
6.15 Cooperation Relating to Insurance and Price-Anderson Act. Until the
Closing, Seller will maintain in effect the same level of property damage and
liability insurance for the Facilities as in effect on the date hereof,
including, without limitation, those insurance policies described in Schedule
4.9 (unless substitute policies are obtained under Section 6.1). Buyer shall
obtain prior to or on the Closing Date nuclear insurance and other insurance
policies in accordance with Schedule 6.15 or as otherwise required by law.
Seller shall reasonably cooperate with Buyer's efforts to obtain insurance,
including insurance required under the Price-Anderson Act or other Nuclear Laws
with respect to the Purchased Assets. In addition, Seller agrees to use
reasonable efforts to assist Buyer in making any claims against pre-Closing
insurance policies of Seller that may provide coverage related to Assumed
Liabilities and Obligations. Buyer agrees that it will indemnify Seller for its
reasonable out-of-pocket expenses incurred in providing such assistance and
cooperation.
6.16 Tax Clearance Certificates. Seller and Buyer shall cooperate and use
their best efforts to cause the tax clearance certificates described in Schedule
4.20 of this Agreement to be issued by the appropriate taxing authorities prior
to the Closing Date or as soon as practicable thereafter.
6.17 Remediation. Buyer has previously completed its Phase I and Phase II
environmental site assessments at the Site and has identified those
Environmental Conditions at the Site set forth on Schedule 6.17. Buyer will not
conduct any additional environmental site assessments unless Buyer becomes aware
of any Environmental Condition at the Site that is reasonably likely to give
rise to an Environmental Claim or Remediation activity that would result in a
liability or obligation in excess of $250,000 or unless otherwise required by
law. Buyer agrees to share with Seller all reports, analyses, and other
documents produced or prepared by Buyer, its Affiliates or Buyer's environmental
consultants with respect to Buyer's environmental due diligence at the Site.
Seller hereby agrees to perform the type and scope of Remediation set forth on
Schedule 6.17 in accordance with applicable Environmental Law. Seller shall use
Commercially Reasonable Efforts to complete any such Remediation work prior to
the Closing Date to the extent such Remediation work is capable of being
performed prior to the Closing Date. With respect to any Remediation work, or
portion thereof, which reasonably cannot be completed prior to the Closing Date,
Seller may elect to complete such work or permit Buyer to complete such
Remediation and Seller shall indemnify Buyer for all reasonable costs thereof.
However, Seller shall not be required to perform or indemnify Buyer for any
Remediation (1) which is required as a result of any use of or operations at the
Site other than such use and operations as they existed on or prior to the
Closing Date (including, without limitation, any improvement or expansion of the
current operations or other construction, demolition or excavation activities at
the Site), or (2) which arises from acts of Buyer or its employees, agents or
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independent contractors after the Closing Date. To the extent allowed under
Environmental Law, the Remediation measures under this Section 6.17 may include
reasonable land use controls, as appropriate, to the extent that such controls
do not unreasonably interfere with the use or operation of the Purchased Assets
after the Closing Date. Between the date hereof and the Closing Date, Seller
shall have exclusive authority over the performance of the Remediation set forth
on Schedule 6.17, and except as otherwise required by Environmental Law, Buyer
shall not initiate or permit any communication, orally or in writing, with any
Governmental Authority regarding such Remediation without the prior written
consent of Seller. With respect to any Remediation to be performed by Seller
after the Closing Date, Buyer will grant to Seller and its contractors an
appropriate license to enter the Site at reasonable times and perform the
Remediation work, provided that Seller and its contractors shall comply with all
rules and regulations of Buyer and any Governmental Authority with respect to
the Site and shall not unreasonably interfere with the operations of Buyer at
the Site.
6.18 NRC License Transfer Requirements. Buyer will accept conditions in an
NRC license transfer order that approves transfer of the CPS license to Buyer
that are reasonable, appropriate and similar in scope to the requirements
imposed on Buyer by that certain NRC Order Approving Transfer of License and
Conforming Amendment, and the associated Safety Evaluation Report, dated April
12, 1999, with respect to the transfer of the NRC license for the Three Mile
Island Unit 1 nuclear plant from GPU Nuclear, Inc. to Buyer.
6.19 Metering. The Parties have heretofore engaged a consultant (the
"Metering Consultant") to examine the Facilities and related infrastructure for
the purpose of providing two estimates for the cost of acquiring and installing
"Revenue Grade Metering" (as defined in Amendment No. 3 to the Management
Agreement) at the metering points and in accordance with the proposal set forth
in Amendment No. 3 to the Management Agreement, with one (1) estimate being the
cost of acquiring and installing Revenue Grade Metering on the "low side" of the
main power transformer located in the CPS switchyard (the "Low Side Estimate")
and the other estimate being the cost of acquiring and installing Revenue Grade
Metering on the "high side" of the main power transformer located in the CPS
switchyard (the "High Side Estimate"). The Parties agree to share equally the
fees and expenses of the Metering Consultant and to install Revenue Grade
Metering on the "high side" of the main power transformer as proposed in the
High Side Estimate. Buyer and Seller shall share equally all acquisition and
installation costs equal to the Low Side Estimate; Seller agrees to pay the next
xxxxxxxx of construction costs, and the Parties agree to share equally any
amount above such xxxxxxxx.
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6.20 Right to Participate in Electric Generating Projects.
(a) For a period of ten (10) years following the Closing Date (the
"Restricted Period"), Buyer hereby grants to Seller (i) the first right and
option to participate with Buyer equally in any non-CPS electric generating
facilities or projects to be constructed or developed at the Site for the
generation of electric energy to be transmitted to customers or users off-Site
(each, a "Generating Project") and (ii) a right of first refusal to provide any
transmission services with respect to any Generating Project. For purposes of
determining what constitutes equal participation in a Generating Project, the
value of any land, facilities or other property contributed by Buyer to the
Generating Project which were included in the Purchased Assets shall be deemed
to be zero. Buyer shall promptly notify Seller in writing if during the
Restricted Period Buyer decides to proceed with a Generating Project or enters
into discussions with a third party concerning a Generating Project (including,
without limitation, financial costs and projections). Within ninety (90) days
following receipt of written notice from Buyer, Seller shall notify Buyer
whether or not it desires to participate in the Generating Project; provided,
however, if Seller requires more information concerning the Generating Project
and such information is reasonably available to or can be reasonably generated
by Buyer in order to evaluate participation in the Project, then Seller shall
request such information in writing, and Seller shall have until the later of
(i) thirty (30) days following receipt of such additional information, or (ii)
expiration of the original ninety (90) day period to notify Buyer whether it
desires to participate in the Generating Project. Buyer shall notify Seller at
least five (5) Business Days in advance of any meetings with third parties
concerning the Generating Project which are to be held either during any of
Seller's evaluation periods or after Seller has notified Buyer of its intent to
participate in the Generating Project, and Seller shall have the right to
participate in any such meetings. Following Seller's notification of Buyer that
Seller intends to participate in a Generating Project, Seller and Buyer shall
promptly document their joint participation, seek to obtain all necessary
approvals by Governmental Authorities and agree on schedule, budget and
management responsibilities for the Generating Project. Seller's participation
in any Generating Project may be through Seller or any of its Affiliates, and
all instruments or agreements documenting the Generating Project (and the
Parties' respective rights and obligations with respect to the Project) shall be
reasonably acceptable to Buyer and Seller.
(b) (i) Subject to the exceptions set forth in subsection (ii) of this
Section 6.20(b), Buyer agrees that during the Restricted Period, it will not
sell, transfer, lease or license to a third party any of the Real Property
transferred to Buyer hereunder or enter into any discussions with respect
thereto (a "Transfer") without first offering such Real Property to Seller. In
the event Buyer decides to Transfer any such Real Property, Buyer will promptly
notify Seller of such fact, and Seller shall have the exclusive right to
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negotiate with Buyer concerning the Transfer of such Real Property for a period
of sixty (60) days (the "Exclusive Negotiation Period"). If Buyer and Seller are
unable to agree on the terms of the Transfer of such Real Property to Seller
during the Exclusive Negotiation Period, or in the event Seller notifies Buyer
in writing that it does not desire to Transfer such Real Property prior to
expiration of the Exclusive Negotiation Period, Buyer may offer such Real
Property to third parties. If Buyer thereafter receives an offer from a third
party with respect to such Real Property (a "Third Party Offer"), Buyer shall
promptly notify Seller in writing (setting forth the terms and condition of the
Third Party Offer) and Seller shall have the right and option (exercisable by
delivery of written notice to Buyer within the third (30) day period following
Seller's receipt of written notice of the Third Party Offer) to buy or lease
such Real Property on the same terms and conditions set forth in the Third Party
Offer. If Seller does not notify Buyer that it desires to buy or lease such Real
Property within such thirty (30) day period, Buyer may Transfer such Real
Property to the third party (but only upon the terms and conditions set forth in
the Third Party Offer) within one hundred eighty (180) days following the
earlier of Seller's notification that it does not desire to buy or lease such
Real Property or expiration of the thirty (30) day period. If Buyer fails to
Transfer such Real Property to the third party within such one hundred eighty
(180) day period, such Real Property shall again be subject to the terms and
condition of this Section 6.20. The covenants of Buyer set forth in this Section
6.20(b) shall be covenants running with the land and shall be included in and/or
recorded with the special warranty deed with respect to the Real Property to be
delivered to Buyer at Closing.
(ii) The requirements of Section 6.20(b)(i) shall not apply to any of the
following Transfers during the Restricted Period:
(A) Any Transfer to an Affiliate of Buyer which agrees in the Transfer
documents for the benefit of Seller to be bound in the same manner and degree as
Buyer to the provisions of this Section 6.20;
(B) Any lease respecting the Real Property existing at the time of Closing
and constituting a portion of the Assumed Liabilities and Obligations, but no
extensions or modifications thereof unless such extensions or modifications
specifically contain for the benefit of Seller restrictive covenants consistent
with this Section 6.20; or
(C) Any Transfer of the Real Property to a third party in an arms-length
transaction in which the buyer or lessee agrees not to use, directly or
indirectly, such Real Property during the Restricted Period for the
construction, operation, or use of any electric generating facility or equipment
that produces, individually or in the aggregate, more than 1MW of electricity
for consumption by customers or users off-Site.
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6.22 Personal Property Insurance. Buyer (on behalf of itself and its
Affiliates) agrees to (i) request its insurers to include Seller's Transmission
Assets, Excluded Other Assets, and other items of tangible personal property
owned by Seller at the Site under Buyer's insurance policies after the Closing
Date and to name Seller as an additional insured thereunder, and (ii) waive any
right of recovery against Seller for "accidental property damage" (as defined in
the NEIL policies); provided, however, that Buyer shall provide Seller with
quotes from its insurers regarding any incremental premium or other costs
related to including Seller's assets under such policies, including, without
limitation, any deductible, retention or similar costs, and Buyer shall obtain
Seller's approval before incurring any such incremental premiums or other costs
on Seller's behalf.
ARTICLE VII
CONDITIONS
7.1 Conditions to Obligations of Buyer. The obligations of Buyer to
purchase the Purchased Assets and to consummate the other transactions
contemplated by this Agreement shall be subject to the fulfillment at or prior
to the Closing Date (or the waiver in writing by Buyer) of the following
conditions:
(a) The waiting period under the HSR Act applicable to the consummation of
the sale of the Purchased Assets contemplated hereby shall have expired or been
terminated;
(b) No preliminary or permanent injunction or other order or decree by any
federal or state court or Governmental Authority which prevents the consummation
of the sale of the Purchased Assets contemplated herein shall have been issued
and remain in effect (each Party agreeing to cooperate in all efforts to have
any such injunction, order or decree lifted) and no statute, rule or regulation
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shall have been enacted by any state or federal government or Governmental
Authority which prohibits the consummation of the sale of the Purchased Assets;
(c) Buyer shall have received all of Buyer's Required Regulatory Approvals,
which approvals shall contain no condition which could reasonably be expected to
have a material adverse effect on the Purchased Assets or Buyer, and such
approvals shall be final and non-appealable;
(d) Seller shall have performed and complied in all material respects with
the covenants and agreements contained in this Agreement which are required to
be performed and complied with by Seller on or prior to the Closing Date;
(e) The representations and warranties of Seller set forth in this
Agreement that are qualified by materiality shall be true and correct as of the
Closing Date and all other representations and warranties shall be true and
correct in all material respects as of the Closing Date, in each case as though
made at and as of the Closing Date;
(f) Buyer shall have received certificates from an authorized officer of
Seller, dated the Closing Date, to the effect that, to such officer's Knowledge,
the conditions set forth in Sections 7.1(d), (e), (j), (l), (m), (n), (p), (t)
and (u) have been satisfied by Seller;
(g) Buyer shall have received an opinion as to the matters contained in
Exhibit J hereto from Seller's counsel (which, except as to regulatory matters,
may be delivered by Seller's general counsel), dated the Closing Date and
reasonably satisfactory in form and substance to Buyer and its counsel;
(h) Seller shall have delivered, or caused to be delivered, to Buyer at the
Closing, Seller's closing deliveries described in Section 3.6;
(i) Buyer shall have received from a title insurance company reasonably
acceptable to Buyer ALTA owner's title insurance policies on the Real Property,
in form and substance reasonably satisfactory (including no materially adverse
conditions) to Buyer and containing affirmative insurance as Buyer may
reasonably request with respect to the Permitted Encumbrances and Real Property
Agreements, insuring title as described in Section 4.7, subject only to the
Permitted Encumbrances. Buyer shall provide Seller with a copy of a preliminary
title report and an updated survey for the Real Property to the extent obtained
by Buyer;
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(j) Since the date of this Agreement, no Material Adverse Effect shall have
occurred and be continuing;
(k) The IRS rulings or opinions of counsel applicable to Buyer as provided
in Section 6.12 shall have been received;
(l) Seller shall have filed, or cause to be filed, in the land records of
Dewitt County, a restrictive covenant, in form and substance reasonably
satisfactory to Buyer, prohibiting the use of the Excluded Parcels for a term of
not less than 25 years for any purpose related to electric generation of more
than 1 MW of electricity for consumption by customers or users off-Site;
(m) Seller shall have completed in accordance with Good Utility Practices
and in conformity with all applicable legal requirements all material work
required to be accomplished by the Closing Date under Seller's Y2K Plan;
(n) All Low Level Waste that has been generated in the operations of the
Facilities more than 60 days prior to the Closing Date shall have been shipped
off-Site by Seller for permanent disposal in accordance with all applicable
legal requirements, and all Low Level Waste generated in the operations of the
Facilities prior to the Closing Date shall have been properly bagged, tagged,
packaged and/or stored by Seller at the Facilities in accordance with Good
Utility Practice for handling Low Level Waste;
(o) The lien of the Mortgage Indenture on the Purchased Assets shall have
been released and any documents necessary to evidence such release shall have
been delivered to the title company;
(p) All consents and approvals for the consummation of the sale of the
Purchased Assets contemplated hereby required under the terms of any note, bond,
mortgage, indenture, material agreement or other instrument or obligation to
which Seller is a party or by which Seller, or any of the Purchased Assets, may
be bound, shall have been obtained, other than those which if not obtained,
would not, individually and in the aggregate, create a Material Adverse Effect;
(q) Buyer and Seller shall have agreed to the terms and conditions of the
Easement Agreement, the Environmental Laboratory Lease, the Emergency Off-Site
Facilities Lease and the Electric Service Agreement; Buyer shall be reasonably
satisfied with the scope and amounts to be charged by Seller under the IP
Service Agreement (other than information technology charges described in
Exhibit F); Seller shall have entered into each of the Ancillary Agreements; and
the Ancillary Agreements shall be in full force and effect;
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(r) The Total FMV of the Decommissioning Funds shall be as set forth in
Section 6.12;
(s) Buyer shall not have become aware of any Environmental Condition at the
Site (other than those described in Schedules 4.10 or 6.17) that is reasonably
likely to give rise to an Environmental Claim or Remediation activity that would
result in a liability or obligation in excess of $250,000, unless Seller has
agreed to indemnify Buyer for any liability or obligation in excess of such
amount;
(t) Seller shall have completed all Remediation required under Section
6.17, or, alternatively, shall indemnify Buyer for any and all such Remediation
costs to be incurred after the Closing Date; and
(u) Seller shall not be in default of any of its material obligations under
the Management Agreement.
7.2 Conditions to Obligations of Seller. The obligations of Seller to sell
the Purchased Assets and to consummate the other transactions contemplated by
this Agreement shall be subject to the fulfillment at or prior to the Closing
Date (or the waiver in writing by Seller) of the following conditions:
(a) The waiting period under the HSR Act applicable to the consummation of
the sale of the Purchased Assets contemplated hereby shall have expired or been
terminated;
(b) No preliminary or permanent injunction or other order or decree by any
federal or state court or Governmental Authority which prevents the consummation
of the sale of the Purchased Assets contemplated herein shall have been issued
and remain in effect (each Party agreeing to use its best efforts to have any
such injunction, order or decree lifted) and no statute, rule or regulation
shall have been enacted by any state or federal government or Governmental
Authority in the United States which prohibits the consummation of the sale of
the Purchased Assets;
(c) Seller shall have received all of Seller's Required Regulatory
Approvals, which approvals shall contain no condition which could reasonably be
expected to have a material adverse effect on Seller, and such approvals shall
be final and non-appealable;
(d) Buyer shall have performed and complied with in all material respects
the covenants and agreements contained in this Agreement which are required to
be performed and complied with by Buyer on or prior to the Closing Date;
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(e) The representations and warranties of Buyer set forth in this Agreement
that are qualified by materiality shall be true and correct as of the Closing
Date and all other representations and warranties shall be true and correct in
all material respects as of the Closing Date, in each case as though made at and
as of the Closing Date;
(f) Seller shall have received a certificate from an authorized officer of
Buyer, dated the Closing Date, to the effect that the conditions set forth in
Sections 7.2(d) and (e) have been satisfied by Buyer;
(g) Effective upon Closing, Buyer shall have assumed, as set forth in
Section 6.10, all of the applicable obligations under the IBEW Collective
Bargaining Agreements as they relate to Transferred Union Employees;
(h) Seller shall have received an opinion as to the matters set forth on
Exhibit K hereto from Buyer's counsel (which, except as to regulatory matters,
may be delivered by Buyer's general counsel), dated the Closing Date and
reasonably satisfactory to Seller and its counsel;
(i) Buyer shall have delivered, or caused to be delivered, to Seller at the
Closing, Buyer's closing deliveries described in Section 3.7;
(j) Buyer and Seller shall agreed to the terms and conditions of the
Easement Agreement, the Environmental Laboratory Lease, the Emergency Off-Site
Facilities Lease and the Electric Service Agreement; Seller shall be reasonably
satisfied with the amounts to be paid by Buyer under the IP Service Agreement
(other than information technology charges described in Exhibit F); Buyer shall
have entered into each of the Ancillary Agreements, and the Ancillary Agreements
shall be in full force and effect;
(k) Since the date of this Agreement, no Material Adverse Effect shall have
occurred and be continuing;
(l) The IRS rulings or opinions of counsel applicable to Seller as provided
in Section 6.12 shall have been received;
(m) The lien of the Mortgage Indenture on the Purchased Assets shall have
been released and any documents necessary to evidence such release shall have
been delivered to the title company; and
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(n) Each of PECO and British Energy plc shall have executed and delivered
the financial assurance letters set forth in Exhibits L and M, respectively; and
(o) PECO shall not be in default of any of its material obligations under
the Management Agreement.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification.
(1) Buyer shall indemnify, defend and hold harmless Seller, its Affiliates, and
their respective officers, directors, employees, shareholders, and agents (each,
a "Seller Indemnitee") from and against any and all claims, demands, suits,
losses, liabilities, damages, obligations, payments, costs and expenses
(including, without limitation, the costs and expenses of any and all actions,
suits, proceedings, assessments, judgments, settlements and compromises relating
thereto and reasonable attorneys' fees and reasonable disbursements in
connection therewith) (each, an "Indemnifiable Loss"), asserted against or
suffered by any Seller Indemnitee relating to, resulting from or arising out of
(i) any breach by Buyer of any representations, warranties or covenants
contained in this Agreement, (ii) the Assumed Liabilities and Obligations, (iii)
any Inspection, or the use by Buyer of the non-exclusive license granted under
Section 2.1(l), (iv) any Third Party Claims against a Seller Indemnitee arising
out of or in connection with Buyer's ownership or operation of CPS and other
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(b) Seller shall indemnify, defend and hold harmless Buyer, its officers,
directors, members, employees, shareholders, Affiliates and agents (each, a
"Buyer Indemnitee") from and against any and all Indemnifiable Losses asserted
against or suffered by any Buyer Indemnitee relating to, resulting from or
arising out of (i) any breach by Seller of any representations, warranties or
covenants contained in this Agreement, (ii) the Excluded Liabilities, (iii)
noncompliance by Seller with any bulk sales or transfer laws as provided in
Section 10.11, (iv) any Third Party Claims against a Buyer Indemnitee arising
out of or in connection with Seller's ownership or operation of the Purchased
Assets on or prior to the Closing Date, except for Assumed Liabilities and
Obligations, (v) any Third Party Claims against a Buyer Indemnitee arising out
of or in connection with Seller's ownership or operation of the Excluded Assets,
(vi) all Taxes incurred by reason of any act of Seller that either constitutes
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an act of "self-dealing" as defined in Treas. Reg. section 1.468A-5(b)(2) or
results in the disqualification of the Qualified Decommissioning Fund under
Treas. Reg. section 1.468A-5 (except as otherwise contemplated by Section 6.12),
or (vii) any claims or attachments of Seller or any creditor of Seller against
the Decommissioning Funds after the Closing Date.
(c) Notwithstanding anything to the contrary contained herein:
(i) Any Person entitled to receive indemnification under this Agreement (an
"Indemnitee") shall use Commercially Reasonable Efforts to mitigate all losses,
damages, and the like relating to a claim under these indemnification
provisions, including availing itself of any defenses, limitations, rights of
contribution, claims against third Persons and other rights at law or equity.
The Indemnitee's Commercially Reasonable Efforts shall include the reasonable
expenditure of money to mitigate or otherwise reduce or eliminate any loss or
expenses for which indemnification would otherwise be due, and the Indemnitee
shall advise Indemnitor promptly of such expenditure (or provide Indemnitor with
the opportunity to pay such expenditures directly). The Indemnitor shall
promptly reimburse Indemnitee for the Indemnitee's reasonable expenditures in
undertaking the mitigation (together with interest thereon from the date of
payment thereof to the date of repayment at the "prime rate" as published in The
Wall Street Journal).
(ii) Any Indemnifiable Loss shall be net of (i) the dollar amount of any
insurance or other proceeds actually received by the Indemnitee or any of its
Affiliates with respect to the Indemnifiable Loss, and (ii) Income Tax benefits
to the Indemnitee to the extent realized by the Indemnitee, but such net amount
shall be increased to give effect to the Income Taxes attributable to the
receipt of any indemnification payment hereunder. Any Party seeking
indemnification hereunder shall use best efforts to make claims (including both
cost of defense and indemnity) under applicable insurance policies with respect
to any such Indemnifiable Loss.
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(d) The expiration or termination of any representation or warranty shall
not affect the Parties' obligations under this Section 8.1 if the Indemnitee
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provided the Person required to provide indemnification under this Agreement
(the "Indemnifying Party") with proper notice of the claim or event for which
indemnification is sought prior to such expiration, termination or
extinguishment.
(e) Except to the extent otherwise provided in Article IX, the rights and
remedies of Seller and Buyer under this Article VIII are exclusive and in lieu
of any and all other rights and remedies which Seller and Buyer may have under
this Agreement or otherwise for monetary relief, with respect to (i) any breach
of or failure to perform any covenant, agreement, or representation or warranty
set forth in this Agreement, after the occurrence of the Closing, or (ii) the
Assumed Liabilities and Obligations or the Excluded Liabilities, as the case may
be. The indemnification obligations of the Parties set forth in this Article
VIII apply only to matters arising out of this Agreement, excluding the
Ancillary Agreements. Any Indemnifiable Loss arising under or pursuant to an
Ancillary Agreement shall be governed by the indemnification obligations, if
any, contained in the Ancillary Agreement under which the Indemnifiable Loss
arises.
(f) Notwithstanding anything to the contrary herein, no Party (including an
Indemnitee) shall be entitled to recover from the other Party (including an
Indemnifying Party) for any liabilities, damages, obligations, payments, losses,
costs or expenses under this Agreement any amount in excess of the actual
compensatory damages, court costs and reasonable attorney's and other advisor
fees suffered by such Party. Buyer and Seller waive any right to recover
punitive, incidental, special, exemplary and consequential damages arising in
connection with or with respect to this Agreement. The provisions of this
Section 8.1(f) shall not apply to indemnification for a Third Party Claim.
8.2 Defense of Claims.
(a) If any Indemnitee receives notice of the assertion of any claim or of
the commencement of any claim, action or proceeding made or brought by any
Person who is not a Party to this Agreement or any Affiliate of a Party to this
Agreement (a "Third Party Claim") with respect to which indemnification is to be
sought from an Indemnifying Party, the Indemnitee shall give such Indemnifying
Party reasonably prompt written notice thereof, but in any event such notice
shall not be given later than twenty (20) calendar days after the Indemnitee's
receipt of notice of such Third Party Claim. Such notice shall describe the
nature of the Third Party Claim in reasonable detail and shall indicate the
estimated amount, if practicable, of the Indemnifiable Loss that has been or may
be sustained by the Indemnitee. The Indemnifying Party will have the right to
participate in or, by giving written notice to the Indemnitee, to elect to
assume the defense of any Third Party Claim at such Indemnifying Party's expense
and by such Indemnifying Party's own counsel, provided that the counsel for the
Indemnifying Party who shall conduct the defense of such Third Party Claim shall
be reasonably satisfactory to the Indemnitee. The Indemnitee shall cooperate in
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good faith in such defense at such Indemnitee's own expense. If an Indemnifying
Party elects not to assume the defense of any Third Party Claim, the Indemnitee
may compromise or settle such Third Party Claim over the objection of the
Indemnifying Party, which settlement or compromise shall conclusively establish
the Indemnifying Party's liability pursuant to this Agreement.
(b) (i) If, within twenty (20) calendar days after an Indemnitee provides
written notice to the Indemnifying Party of any Third Party Claims, the
Indemnitee receives written notice from the Indemnifying Party that such
Indemnifying Party has elected to assume the defense of such Third Party Claim
as provided in Section 8.2(a) , the Indemnifying Party will not be liable for
any legal expenses subsequently incurred by the Indemnitee in connection with
the defense thereof; provided, however, that if the Indemnifying Party shall
fail to take reasonable steps necessary to defend diligently such Third Party
Claim within twenty (20) calendar days after receiving notice from the
Indemnitee that the Indemnitee believes the Indemnifying Party has failed to
take such steps, the Indemnitee may assume its own defense and the Indemnifying
Party shall be liable for all reasonable expenses thereof.
(ii) Without the prior written consent of the Indemnitee, the Indemnifying
Party shall not enter into any settlement of any Third Party Claim which would
lead to liability or create any financial or other obligation on the part of the
Indemnitee for which the Indemnitee is not entitled to indemnification
hereunder. If a firm offer is made to settle a Third Party Claim without leading
to liability or the creation of a financial or other obligation on the part of
the Indemnitee for which the Indemnitee is not entitled to indemnification
hereunder and the Indemnifying Party desires to accept and agree to such offer,
the Indemnifying Party shall give written notice to the Indemnitee to that
effect. If the Indemnitee fails to consent to such firm offer within twenty (20)
calendar days after its receipt of such notice, the Indemnifying Party shall be
relieved of its obligations to defend such Third Party Claim and the Indemnitee
may contest or defend such Third Party Claim. In such event, the maximum
liability of the Indemnifying Party as to such Third Party Claim will be the
amount of such settlement offer plus reasonable costs and expenses paid or
incurred by Indemnitee up to the date of such notice.
(c) Any claim by an Indemnitee on account of an Indemnifiable Loss which
does not result from a Third Party Claim (a "Direct Claim") shall be asserted by
giving the Indemnifying Party reasonably prompt written notice thereof, stating
the nature of such claim in reasonable detail and indicating the estimated
amount, if practicable, but in any event such notice shall not be given later
than twenty (20) calendar days after the Indemnitee becomes aware of such Direct
Claim, and the Indemnifying Party shall have a period of twenty (20) calendar
days within which to respond to such Direct Claim. If the Indemnifying Party
does not respond within such twenty (20) calendar day period, the Indemnifying
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Party shall be deemed to have accepted such claim. If the Indemnifying Party
rejects such claim, the Indemnitee will be free to seek enforcement of its right
to indemnification under this Agreement.
(d) If the amount of any Indemnifiable Loss, at any time subsequent to the
making of an indemnity payment in respect thereof, is reduced by recovery,
settlement or otherwise under or pursuant to any insurance coverage, or pursuant
to any claim, recovery, settlement or payment by, from or against any other
entity, the amount of such reduction, less any costs, expenses or premiums
incurred in connection therewith (together with interest thereon from the date
of payment thereof to the date or repayment at the "prime rate" as published in
The Wall Street Journal) shall promptly be repaid by the Indemnitee to the
Indemnifying Party.
(e) A failure to give timely notice as provided in this Section 8.2 shall
not affect the rights or obligations of any Party hereunder except if, and only
to the extent that, as a result of such failure, the Party which was entitled to
receive such notice was actually prejudiced as a result of such failure.
8.3 Waiver and Release. To the extent any right, cause of action, or claim
hereunder constitutes Assumed Liabilities and Obligations, and subject to any
indemnification rights of Buyer under Section 8.1(b), the Buyer waives,
relinquishes and forgives, effective as of the Closing Date, any statutory or
common law rights that otherwise would relate to such right, cause of action or
claim, including, without limitation, CERLCA.
ARTICLE IX
TERMINATION
9.1 Termination. (a) This Agreement may be terminated at any time prior to
the Closing Date by mutual written consent of Seller and Buyer.
(b) This Agreement may be terminated by Seller or Buyer, if (i) any federal
or state court of competent jurisdiction shall have issued an order, judgment or
decree permanently restraining, enjoining or otherwise prohibiting the Closing,
and such order, judgment or decree shall have become final and nonappealable; or
(ii) any statute, rule, order or regulation shall have been enacted or issued by
any Governmental Authority which, directly or indirectly, prohibits the
consummation of the Closing; or (iii) the Closing contemplated hereby shall have
not occurred on or before the day which is eighteen (18) months from the date of
this Agreement (the "Termination Date"); provided, however, that the right to
terminate this Agreement under this Section 9.1(b) (iii) shall not be available
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to any Party whose failure to fulfill any obligation under this Agreement has
been the cause of, or resulted in, the failure of the Closing to occur on or
before such date.
(c) Except as otherwise provided in this Agreement, this Agreement may be
terminated by Buyer if (i) any of Buyer's Required Regulatory Approvals, the
receipt of which is a condition to Closing as set forth in Section 7.1(c), shall
have been denied (and a petition for rehearing or refiling of an application
initially denied without prejudice shall also have been denied) or shall have
been granted but such Approval contains conditions (other than the conditions
accepted by Buyer in Section 6.18) that would have a material adverse effect on
the operations or condition (financial or otherwise) of the Purchased Assets or
a material adverse effect on the business, assets, operations or condition
(financial or otherwise) of Buyer or its members; or (ii) the receipt of the IRS
rulings or opinions of counsel, which is a condition to Closing as set forth in
Section 7.1(k), shall not have been satisfied or waived by Buyer on or before
May 30, 2000.
(d) This Agreement may be terminated by Seller, if (i) any of Seller's
Required Regulatory Approvals applicable to Seller, the receipt of which is a
condition to the obligation of Seller to consummate the Closing as set forth in
Section 7.2(c), shall have been denied (and a petition for rehearing or refiling
of an application initially denied without prejudice shall also have been
denied) or shall have been granted but such Approval contains conditions that
would have a material adverse effect on the business, assets, operations or
condition (financial or otherwise) of Seller or its Affiliates; or (ii) the
receipt of the IRS rulings or opinions of counsel, which is a condition to
Closing as set forth in Section 7.2(l), shall not have been satisfied or waived
by Seller on or before May 30, 2000.
(e) This Agreement may be terminated by Buyer if there has been a violation
or breach by Seller of any covenant, representation or warranty contained in
this Agreement which has resulted in a Material Adverse Effect and such
violation or breach is not cured by the earlier of the Closing Date or the date
thirty (30) days after receipt by Seller of written notice specifying
particularly such violation or breach, and such violation or breach has not been
waived by Buyer.
(f) This Agreement may be terminated by Seller if there has been a material
violation or breach by Buyer of any covenant, representation or warranty
contained in this Agreement and such violation or breach is not cured by the
earlier of the Closing Date or the date thirty (30) days after receipt by Buyer
of written notice specifying particularly such violation or breach, and such
violation or breach has not been waived by Seller.
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(g) This Agreement may be terminated by Buyer or Seller in accordance with
the provisions of Sections 6.11(b) or (c).
9.2 Procedure and Effect of No-Default Termination. In the event of
termination of this Agreement by either or both of the Parties pursuant to this
Article 9, written notice thereof shall forthwith be given by the terminating
Party to the other Party, whereupon, if this Agreement is terminated pursuant to
any of Sections 9.1(a) through (d) and 9.1(g), the liabilities of the Parties
hereunder will terminate, except as otherwise expressly provided in this
Agreement, and thereafter neither Party shall have any recourse against the
other by reason of this Agreement.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Amendment and Modification. Subject to applicable law, this Agreement
may be amended, modified or supplemented only by written agreement of Seller and
Buyer.
10.2 Waiver of Compliance; Consents. Except as otherwise provided in this
Agreement, any failure of any of the Parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the Party entitled to
the benefits thereof only by a written instrument signed by the Party granting
such waiver, but such waiver of such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent failure to comply therewith.
10.3 Survival of Representations, Warranties, Covenants and Obligations.
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(b) The covenants and obligations of Seller and Buyer set forth in this
Agreement, including, without limitation, the indemnification obligations of the
Parties under Article VIII hereof, shall survive the Closing indefinitely
(unless a shorter period is specified herein), and the Parties shall be entitled
to the full performance thereof by the other Parties hereto without limitation
as to time or amount (except as otherwise specifically set forth herein).
10.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by facsimile
transmission, or mailed by overnight courier or registered or certified mail
(return receipt requested), postage prepaid, to the recipient Party at its
address (or at such other address or facsimile number for a Party as shall be
specified by like notice; provided however, that notices of a change of address
shall be effective only upon receipt thereof):
(a) If to Seller, to:
Illinois Power Company
500 South 27th Street
Decatur, IL 62521
Fax No.: 217-362-7417
Attention: David W. Butts
Senior Vice President
with a copy to:
Troutman Sanders LLP
1300 "I" Street, N.W.
Suite 500 East
Washington, D.C. 20004
Fax No.: 404-962-6731
Attention: Kevin C. Fitzgerald, Esquire
237
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(b) if to Buyer, to:
AmerGen Energy Company, LLC
2301 Market Street
P.O. Box 8699
Philadelphia, PA 19101
Fax No.: 610-640-7566
Attention: Dickinson M. Smith, Chief Executive Officer
with a copy to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Fax No.: 215-963-5299
Attention: Howard L. Meyers, Esq.
10.5 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the Parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by either Party
hereto, including by operation of law, without the prior written consent of the
other Party, such consent not to be unreasonably withheld, nor is this Agreement
intended to confer upon any other Person except the Parties hereto any rights,
interests, obligations or remedies hereunder. No provision of this Agreement
shall create any third party beneficiary rights in any employee or former
employee of Seller (including any beneficiary or dependent thereof) in respect
of continued employment or resumed employment, and no provision of this
Agreement shall create any rights in any such Persons in respect of any benefits
that may be provided, directly or indirectly, under any employee benefit plan or
arrangement except as expressly provided for thereunder. Notwithstanding the
foregoing, but subject to all applicable legal requirements, and provided it
does not materially adversely affect any regulatory approvals required under
this Agreement, (a) Buyer or its permitted assignee may assign, transfer, pledge
or otherwise dispose of (absolutely or as security) its rights and interests
hereunder to a trustee, lending institution or other party for the purposes of
leasing, financing or refinancing the Purchased Assets, including such an
assignment, transfer or other disposition upon or pursuant to the exercise of
remedies with respect to such leasing, financing or refinancing, or by way of
assignments, transfers, pledges, or other dispositions in lieu thereof, (b)
Buyer or its permitted assignee may assign, transfer, pledge or otherwise
dispose of (absolutely or as security) its rights and interests hereunder to a
wholly-owned subsidiary of Buyer (provided that the assignee agrees to be bound
by the terms and conditions hereof), and (c) Buyer or its permitted assignee may
238
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assign, transfer, pledge or otherwise dispose of its rights and interests to
cause Seller to perform in accordance with the provisions of Section 6.12 hereof
in connection with any subsequent disposition by Buyer of the Purchased Assets;
provided, however, that no such assignment shall relieve or discharge Buyer from
any of its obligations hereunder. Seller agrees, at Buyer's expense, to execute
and deliver such documents as may be reasonably necessary to accomplish any such
assignment, transfer, pledge or other disposition of rights and interests
hereunder so long as Seller's rights under this Agreement are not thereby
altered, amended, diminished or otherwise impaired.
10.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the State of Illinois (without giving effect to
conflict of law principles) as to all matters, including, without limitation,
matters of validity, construction, effect, performance and remedies. THE PARTIES
HERETO AGREE THAT VENUE IN ANY AND ALL ACTIONS AND PROCEEDINGS RELATED TO THE
SUBJECT MATTER OF THIS AGREEMENT SHALL BE IN THE STATE AND FEDERAL COURTS IN AND
FOR COOK COUNTY, ILLINOIS, WHICH COURTS SHALL HAVE EXCLUSIVE JURISDICTION FOR
SUCH PURPOSE, AND THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE
JURISDICTION OF SUCH COURTS AND IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING. SERVICE OF PROCESS
MAY BE MADE IN ANY MANNER RECOGNIZED BY SUCH COURTS. EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM
ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
10.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.8 Interpretation. The articles, section and schedule headings contained
in this Agreement are solely for the purpose of reference, are not part of the
agreement of the Parties and shall not in any way affect the meaning or
interpretation of this Agreement.
10.9 Schedules and Exhibits. Except as otherwise provided in this
Agreement, all Exhibits and Schedules referred to herein are intended to be and
hereby are specifically made a part of this Agreement.
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10.10 Entire Agreement. This Agreement, the Confidentiality Agreement and
the Ancillary Agreements, including the Exhibits, Schedules, documents,
certificates and instruments referred to herein or therein, embody the entire
agreement and understanding of the Parties hereto in respect of the transactions
contemplated by this Agreement and supersedes all prior agreements and
understandings between the Parties (other than the Confidentiality Agreement,
the Management Agreement and the Leased Employee Agreement) with respect to such
transactions. There are no restrictions, promises, representations, warranties,
covenants or undertakings, other than those expressly set forth or referred to
herein or therein. It is expressly acknowledged and agreed that there are no
restrictions, promises, representations, warranties, covenants or undertakings
contained in any material made available to Buyer pursuant to the terms of the
Confidentiality Agreement. This Agreement supersedes all prior agreements and
understandings between the Parties (including, without limitation, the Interim
Agreement) other than the Confidentiality Agreement with respect to such
transactions, the Management Agreement and the Leased Employee Agreement.
10.11 Bulk Sales Laws. Buyer acknowledges that, notwithstanding anything in
this Agreement to the contrary, Seller will not comply with the provision of the
bulk sales laws of any jurisdiction in connection with the transactions
contemplated by this Agreement. Buyer hereby waives compliance by Seller with
the provisions of the bulk sales laws of all applicable jurisdictions.
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REDACTED AREAS IN THIS DOCUMENT CONTAIN CONFIDENTIAL MATERIAL WITHHELD
FROM PUBLIC DISCLOSURE PURSUANT TO 220 ILCS 5/4-404 AND 5-108.
IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be
signed by their respective duly authorized officers as of the date first above
written.
ILLINOIS POWER COMPANY AMERGEN ENERGY COMPANY, L.L.C.
By:__________________________ By:____________________________
Name: Name:
Title: Title:
241
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<TABLE>
<CAPTION>
Exhibit 12.1
ILLINOVA CORPORATION
STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO
FIXED CHARGES
Twelve Six
Months Ended Months Ended
June June
(Thousands of Dollars)
1999 1999 ** 1999
--------------------------- ------------
Earnings Available for Fixed Charges:
<S> <C> <C> <C>
Net Income (Loss) ($1,313,448) ($1,313,448) $35,627
Add:
Income Taxes:
Current (25,335) (25,335) (6,582)
Deferred - Net 62,629 62,629 44,071
Allocated income taxes (18,754) (18,754) (14,798)
Investment tax credit - deferred (5,539) (5,539) (729)
Income tax effect of CPS impairment (1,014,047) (1,014,047) -
Equity (Earnings) Loss in Subs (17,473) (17,473) -
Interest on long-term debt 123,030 123,030 63,375
Amortization of debt expense and
premium-net, and other interest charges 40,348 40,348 26,512
One-third of all rentals (Estimated to be
representative of the interest component) 3,790 3,790 1,749
Interest on in-core fuel 5,223 5,223 3,274
CPS Impairment - 2,341,185 -
----------- ---------- --------
Earnings (loss) available for fixed charges ($2,159,576) $181,609 $149,086
=========== ========== ========
Fixed charges:
Interest on long-term debt $123,030 $123,030 $63,375
Amortization of debt expense and
premium-net, and other interest charges 48,922 48,922 29,184
One-third of all rentals (Estimated to be
representative of the interest component) 3,790 3,790 1,749
Preferred stock dividend requirements 32,455 32,455 16,066
----------- ---------- --------
Total Fixed Charges $208,197 $208,197 $110,374
=========== ========== ========
Ratio of earnings to fixed charges - * - 1.35
=========== ========== ========
* Earnings are inadequate to cover fixed charges. Additional earnings (thousands) $2,367,773 are required to attain a
one-to-one ratio of Earnings to Fixed Charges.
** Supplemental ratio of earnings to fixed charges presented to exclude write-off related to Clinton Impairment.
Additional earnings (thousands) of $26,588 are required to attain a one-to-one ratio of Earnings to Fixed Charges.
242
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</TABLE>
<TABLE>
<CAPTION>
Exhibit 12.2
ILLINOIS POWER COMPANY
STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO
FIXED CHARGES
Twelve Six
Months Ended Months Ended
June June
(Thousands of Dollars) 1999 1999 ** 1999
--------------------------- -------
Earnings Available for Fixed Charges:
<S> <C> <C> <C>
Net Income (Loss) ($1,302,648) ($1,302,648) $43,049
Add:
Income Taxes:
Current (25,335) (25,335) (6,582)
Deferred - Net 62,629 62,629 44,071
Allocated income taxes (10,617) (10,617) (8,962)
Investment tax credit - deferred (5,539) (5,539) (729)
Income tax effect of CPS impairment (1,014,047) (1,014,047) -
Interest on long-term debt 112,484 112,484 58,250
Amortization of debt expense and
premium-net, and other interest charges 38,744 38,744 25,379
One-third of all rentals (Estimated to be
representative of the interest component) 3,790 3,790 1,749
Interest on in-core fuel 5,223 5,223 3,274
CPS Impairment - 2,341,185 -
------------ ----------- ---------
Earnings (loss) available for fixed charges ($2,135,316) $205,869 $159,499
============ =========== =========
Fixed charges:
Interest on long-term debt $112,484 $112,484 $58,250
Amortization of debt expense and
premium-net, and other interest charges 47,319 47,319 28,050
One-third of all rentals (Estimated to be
representative of the interest component) 3,790 3,790 1,749
Preferred stock dividend requirement 31,714 31,714 15,325
------------ ----------- ---------
Total Fixed Charges $195,307 $195,307 $103,374
============ =========== =========
Ratio of earnings to fixed charges - * 1.05 1.54
============ =========== =========
* Earnings are inadequate to cover fixed charges. Additional earnings (thousands) of $2,330,623 are
required to attain a one-to-one ratio of Earnings to Fixed Charges.
** Supplemental ratio of earnings to fixed charges presented to exclude write-off related to Clinton Impairment.
243
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet, income statement, 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
<SUBSIDIARY>
<NUMBER> 0
<NAME> 0
<MULTIPLIER> 1,000,000
<CURRENCY> default
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Jun-30-1999
<EXCHANGE-RATE> 1
<BOOK-VALUE> Per-Book
<TOTAL-NET-UTILITY-PLANT> 4537
<OTHER-PROPERTY-AND-INVEST> 266
<TOTAL-CURRENT-ASSETS> 556
<TOTAL-DEFERRED-CHARGES> 1096
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 6455
<COMMON> 1170
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> (15)
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1155
194
50
<LONG-TERM-DEBT-NET> 2084
<SHORT-TERM-NOTES> 122
<LONG-TERM-NOTES-PAYABLE> 175
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 272
0
<CAPITAL-LEASE-OBLIGATIONS> 53
<LEASES-CURRENT> 16
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2334
<TOT-CAPITALIZATION-AND-LIAB> 6455
<GROSS-OPERATING-REVENUE> 1028
<INCOME-TAX-EXPENSE> 22
<OTHER-OPERATING-EXPENSES> 904
<TOTAL-OPERATING-EXPENSES> 904
<OPERATING-INCOME-LOSS> 124
<OTHER-INCOME-NET> 20
<INCOME-BEFORE-INTEREST-EXPEN> 144
<TOTAL-INTEREST-EXPENSE> 96
<NET-INCOME> 26
0
<EARNINGS-AVAILABLE-FOR-COMM> 26
<COMMON-STOCK-DIVIDENDS> 43
<TOTAL-INTEREST-ON-BONDS> 60
<CASH-FLOW-OPERATIONS> 42
<EPS-BASIC> .38
<EPS-DILUTED> .38
</TABLE>
