EXHIBIT 4.1

ILLINOIS POWER COMPANY

TO

BNY MIDWEST TRUST COMPANY

Supplemental Indenture

DATED AS OF DECEMBER 15, 2002

TO

General Mortgage Indenture and Deed of Trust

DATED AS OF NOVEMBER 1, 1992

PARTIES       ..........................................................    1

RECITALS      ..........................................................    1

ARTICLE I.    DEFINITIONS ..............................................    3

ARTICLE II.   DESCRIPTION OF THE INITIAL BONDS .........................   27

ARTICLE III.  DESCRIPTION OF THE EXCHANGE BONDS AND THE  PRIVATE
              EXCHANGE BONDS ...........................................   34

ARTICLE IV.   ISSUE OF THE INITIAL BONDS, THE EXCHANGE BONDS AND
              THE PRIVATE EXCHANGE BONDS ...............................   39

ARTICLE V.    ADDITIONAL PROVISIONS RELATING TO THE INITIAL
              BONDS, THE EXCHANGE BONDS AND THE PRIVATE EXCHANGE
              BONDS ....................................................   47

ARTICLE VI.   AMENDMENT OF INDENTURE ...................................   82

ARTICLE VII.  THE TRUSTEE ..............................................   82

ARTICLE VIII. MISCELLANEOUS PROVISIONS .................................   82

SIGNATURES    ..........................................................   84

EXHIBIT A     ..........................................................  A-1

EXHIBIT B     ..........................................................  B-1

EXHIBIT C     ..........................................................  C-1

EXHIBIT D     ..........................................................  D-1

EXHIBIT E     ..........................................................  E-1

Supplemental Indenture dated as of December 15, 2002 ("Supplemental Indenture"), made by and between ILLINOIS POWER COMPANY, a corporation organized and existing under the laws of the State of Illinois, party of the first part, and BNY MIDWEST TRUST COMPANY, an Illinois trust company, as Trustee under the General Mortgage Indenture and Deed of Trust dated as of November 1, 1992, hereinafter mentioned, party of the second part.

R E C I T A L S

WHEREAS, the Company has heretofore executed and delivered its General Mortgage Indenture and Deed of Trust dated as of November 1, 1992, as from time to time amended (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 Mortgage Bonds of the series issued thereunder and respectively identified opposite such dates:

        Date of
Supplemental Indenture                   Identification 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
                                         (paid at maturity)

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 2003 Series

October 15, 1993                         5 5/8% Series due 2000                     Bonds of the Second 2000 Series
                                         (paid at maturity)

November 1, 1993                         Pollution Control Series M (redeemed)      Bonds of the Pollution Control
                                                                                    Series M

November 1, 1993                         Pollution Control Series N (redeemed)      Bonds of the Pollution Control
                                                                                    Series N

November 1, 1993                         Pollution Control Series O (redeemed)      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
                              (paid at maturity)

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

July 15, 1999                 Pollution Control Series V                 Bonds of the Pollution Control
                                                                         Series V

May 1, 2001                   Pollution Control Series W                 Bonds of the Pollution Control
                                                                         Series W

May 1, 2001                   Pollution Control Series X                 Bonds of the Pollution Control
                                                                         Series X;

July 1, 2002                  10 5/8% Series due 2007 (not issued)       Bonds of the 2007 Series

July 1, 2002                  10 5/8% Series due 2012 (not issued)       Bonds of the 2012 Series

and

WHEREAS a supplemental indenture with respect to the Mortgage Bonds of the 2007 Series and the Mortgage Bonds of the 2012 Series listed above was executed and filed but such Mortgage Bonds of the 2007 Series and Mortgage Bonds of the 2012 Series were never issued and a release with respect to such supplemental indenture was subsequently executed and filed; and

WHEREAS, the Company desires to create three new series of Bonds to be issued under the Indenture to be known as (i) the Mortgage Bonds, 11.50% Series due 2010 (the "Initial Bonds"), (ii) the Exchange Bonds (as defined herein) for issue only in a Registered Exchange Offer (as defined herein) pursuant to the Registration Rights Agreement (as defined herein), for a like principal amount of Initial Bonds and (iii) the Private Exchange Bonds (as defined herein) for issue only in a Private Exchange (as defined herein) pursuant to a Registration Rights Agreement for a like principal amount of Initial Bonds, the form and substance of the Initial Bonds, Exchange Bonds and Private Exchange Bonds and the terms, provisions and conditions thereof to be as set forth in the Indenture and this Supplemental Indenture; 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:

THAT the Company, in consideration of the purchase and ownership from time to time of the Mortgage 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 Mortgage Bonds as follows:

ARTICLE I.

DEFINITIONS

SECTION 1.

Set forth below are certain defined terms used in this Supplemental Indenture. Terms used in this Supplemental Indenture and

not otherwise defined in this Supplemental Indenture shall have the meanings assigned to them in the Indenture.

"Acquired Debt" means with respect to any specified Person:

(1) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Subsidiary of, such specified Person but excluding Indebtedness which is extinguished, retired or repaid in connection with such Person merging with or becoming a Subsidiary of such specified Person; and

(2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.

"Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control," as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a specified Person will be deemed to be control by the other Person; provided further that any third Person which also beneficially owns 10% or more of the Voting Stock of the other Person shall not be deemed an Affiliate of the specified Person merely because of such common ownership in the other Person. For purposes of this definition, the terms "controlling," "controlled by" and "under common control with" have correlative meanings. Notwithstanding the preceding, no Transitional Funding Trust will be deemed to be an Affiliate of the Company or any of its Restricted Subsidiaries.

"Affiliate Transaction" has the meaning assigned to it in Article V,
Section 4(f)(i) of this Supplemental Indenture.

"Agent Members" has the meaning assigned to it in Article IV, Section 3(b) of this Supplemental Indenture.

"Asset Sale" means:

(1) the sale, lease, conveyance or other disposition of any assets or rights, other than inventory, obsolete equipment or the sales or transportation of electricity or gas supply in the ordinary course of business consistent with past practices; provided that the sale, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole shall be governed by the provisions in Article V,
Section 6(a) under the caption "Repurchase at the Option of Holders---Offer to

Purchase Upon Change of Control," and Article V, Section 4(e) under the caption "Triggering Events--Merger, Consolidation or Sale of Assets" and not by Article V, Section 6(b) under the caption "Repurchase at the Option of Holders--Asset Sales" of this Supplemental Indenture; and

(2) the issuance of Equity Interests in any of the Company's Subsidiaries or the sale of Equity Interests in any of its Restricted Subsidiaries.

Notwithstanding the preceding, the following items will not be deemed to be Asset Sales:

(1) any single transaction or series of related transactions that involves assets having a fair market value of less than $1.0 million;

(2) a transfer of assets, rights or Equity Interests in a Restricted Subsidiary between or among the Company and its Restricted Subsidiaries;

(3) an issuance of Equity Interests by a Restricted Subsidiary to the Company or to another Restricted Subsidiary;

(4) a Restricted Payment or Permitted Investment that does not result in a Triggering Event described in Article V, Section 4(a) under the caption "Triggering Events--Restricted Payments";

(5) sales, transfers or other dispositions of assets, including Capital Stock of Restricted Subsidiaries, or rights for consideration at least equal to the fair market value of the assets or rights sold or disposed of, but only if the consideration received consists of Capital Stock of a Person that becomes a Restricted Subsidiary engaged in, or property or assets (other than cash, except to extent used as a bona fide means of equalizing the value of the property or assets involved in the swap transaction) of a nature or type or that are used in, a business of the Company and its Restricted Subsidiaries existing on the date of such sale or other disposition; provided, however, that any cash received by the Company shall be treated as Net Proceeds and applied as set forth in the Triggering Event described in Article V, Section 6(b) under the caption "Repurchase at the Option of Holders--Asset Sales"; provided further that the fair market value of the assets sold or disposed of is determined as provided in Article V, Section 4(a)(iii) of the Trigging Event described below under "Triggering Events--Restricted Payments".

(6) a sale, transfer or disposition of the Tilton Energy Center for consideration not less than the Company's purchase price;

(7) any sale, transfer or other disposition of cash or Cash Equivalents, Hedging Obligations or other financial instruments in the ordinary course of business;

(8) the creation or perfection of a Lien on any properties or assets (or any income or profit therefrom) of the Company or any of its Restricted Subsidiaries that is permitted by the Triggering Event described in Article V,
Section 4(c) the caption "Triggering Events--Liens";

(9) the surrender or waiver of contract rights or the settlement, release or surrender of contractual, non-contractual or other claims of any kind, in each case with Persons who are not Affiliates;

(10) the grant in the ordinary course of business of any non-exclusive license of patents, trademarks, registrations therefor and other similar intellectual property; and

(11) the sale to a Transitional Funding Trust, either directly or indirectly, of any intangible transition property established pursuant to a transitional funding order issued by the ICC.

"Asset Sale Offer" has the meaning assigned to it in Article V, Section 7(a) of this Supplemental Indenture.

"Attributable Debt" in respect of a sale and leaseback transaction means, at the time of determination, the present value of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction including any period for which such lease has been extended or may, at the option of the lessor, be extended. Such present value shall be calculated using a discount rate equal to the rate of interest implicit in such transaction, determined in accordance with GAAP.

"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors.

"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" shall be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms "Beneficially Owns" and "Beneficially Owned" have a corresponding meaning.

"Board of Directors" means:

(1) with respect to a corporation, the board of directors of the corporation;

(2) with respect to a partnership having a corporate general partner, the board of directors of the general partner of the partnership; and

(3) with respect to any other Person, the board or committee of such Person serving a similar function.

"Board Resolution" means a copy of a resolution certified by the Secretary or Assistant Secretary, or the equivalent thereof, to have been duly adopted by the Board of Directors of a Person and to be in full force and effect on the date of such certification.

"Bonds" has the meaning assigned to it in the first Recital of this Supplemental Indenture.

"Capital Lease Obligation" means, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet in accordance with GAAP.

"Capital Stock" means:

(1) in the case of a corporation, corporate stock;

(2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

(3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and

(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

"Cash Equivalents" means:

(1) United States dollars;

(2) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality of the United States government (provided that the full faith and credit of the United States is pledged in support of those securities) having maturities of not more than one year from the date of acquisition;

(3) certificates of deposit and eurodollar time deposits with maturities of 180 days or less from the date of acquisition, bankers'

acceptances with maturities not exceeding 180 days and overnight bank deposits and similar types of investments routinely offered by commercial banks, in each case, with any lender under a Credit Facility or any commercial bank having capital and surplus in excess of $500.0 million and a Thomson Bank Watch Rating of "B" or better;

(4) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above;

(5) commercial paper having one of the two highest ratings obtainable from Moody's or S&P and in each case maturing within 270 days after the date of acquisition; and

(6) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (5) of this definition.

"Change of Control" means the occurrence of any of the following:

(1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries taken as a whole to any "person" (as that term is used in Section 13(d)(3) of the Exchange Act, including any "group" with the meaning of the Exchange Act) other than to Dynegy or a Subsidiary of Dynegy;

(2) the adoption of a plan relating to the liquidation or dissolution of the Company or Dynegy;

(3) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above) becomes the Beneficial Owner, directly or indirectly, of more than 40% of the Voting Stock of the Company or Illinova or Dynegy, measured by voting power rather than number of shares; or

(4) the first day on which a majority of the members of the Board of Directors of the Company or Dynegy are not Continuing Directors.

"Change of Control Offer" has the meaning assigned to it in Article V,
Section 6(a)(i) of this Supplemental Indenture.

"Change of Control Payment" has the meaning assigned to it in Article V, Section 6(a)(i) of this Supplemental Indenture.

"Change of Control Payment Date" has the meaning assigned to it in Article V, Section 6(a)(ii) of this Supplemental Indenture.

"Commission" means the U.S. Securities and Exchange Commission or any successor agency.

"Consolidated Cash Flow" means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period plus:

(1) an amount equal to any net loss realized by such Person or any of its Subsidiaries in connection with an Asset Sale or the disposition of any securities or extinguishment of Indebtedness, to the extent such losses were deducted in computing such Consolidated Net Income; plus

(2) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; plus

(3) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income; plus

(4) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income; plus

(5) all extraordinary, unusual or non-recurring items of loss or expense to the extent not included in clause (1) above; minus

(6) non-cash items increasing such Consolidated Net Income for such period, other than the accrual of revenue in the ordinary course of business;

in each case, on a consolidated basis and determined in accordance with GAAP; provided that non-cash expenses recorded as a result of deferred energy accounting will not be added to Consolidated Net Income.

"Consolidated Net Income" means, with respect to any specified Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that:

(1) the aggregate Net Income (but not net loss in excess of such aggregate Net Income) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting will be included only to the extent of the amount of dividends or distributions paid in cash to the specified Person or a Restricted Subsidiary of the Person;

(2) the Net Income of any Restricted Subsidiary will be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, partners or members;

(3) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition will be excluded;

(4) the cumulative effect of a change in accounting principles will be excluded; and

(5) any equity in earnings or losses of Illinova or Dynegy will be excluded.

"Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the Company who:

(1) was a member of the Board of Directors on the original issue date of the Initial Bonds; or

(2) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination or election.

"Credit Facilities" means one or more debt facilities or commercial paper facilities, in each case with banks or other institutional lenders providing for revolving credit loans, term loans or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time, and includes any securities issued pursuant to the Indenture in order to secure any amounts outstanding under a credit

facility from time to time; provided that the obligation of the Company to make any payment on any such securities shall be:

(1) no greater than the amount required to be paid under such credit facility that is secured by such payment obligation;

(2) payable no earlier than such amount is required to be paid under such credit facility; and

(3) deemed to have been paid or otherwise satisfied and discharged to the extent that the Company has paid such amount under such credit facility;

provided further, that any amounts the Company is obligated to pay under such securities will not be included for purposes of determining the aggregate amount outstanding under Credit Facilities that is permitted under Article V, Section 4(b)(ii)(A) under the caption "Triggering Events--Incurrence of Indebtedness and Issuance of Preferred Stock" below.

"Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default as defined in the Indenture.

"Depository" or "DTC" means The Depository Trust Company, its nominees and their respective successors.

"Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder of the Capital Stock), or upon the happening of any event (other than as a result of an optional redemption by the issuer thereof), matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the date on which the Mortgage Bonds mature.
Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders of the Capital Stock have the right to require the Company to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale will not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company or such Restricted Subsidiary may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with the Triggering Event described in Article V, Section 4(a) under the caption "Triggering Events--Restricted Payments".

"DMG Power Purchase Agreement" means the Power Purchase Agreement between the Company and Dynegy Midwest Generation, Inc. existing on the Issue Date, as amended, restated, modified, renewed or replaced in whole or in part from time to time, provided that any such amendment,

restatement, modification, renewal or replacement shall have been approved by appropriate regulatory authorities.

"Dynegy" means Dynegy, Inc., an Illinois corporation and the parent company of Illinova and the indirect parent company of the Company.

"Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).

"Escrow Agreement" means the Escrow Agreement to be dated as of the Issue Date by and among Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representative of the several Initial Purchasers, the Trustee and the escrow agent named therein relating to the proceeds of the Tranche Two Initial Bonds.

"Event of Default" means an Event of Default as defined in the Indenture.

"Excess Proceeds" has the meaning assigned to it in Article V, Section 6(b)(iv) of this Supplemental Indenture. "Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Exchange Bonds" has the meaning assigned to it in Article III, Section 1 of this Supplemental Indenture.

"Existing Indebtedness" means all Indebtedness of the Company and its Subsidiaries (other than Indebtedness under a Credit Facility) in existence on the original issue date of the Initial Bonds and the Transitional Funding Notes Series 1998-1 issued by a Transitional Funding Trust, and any Indebtedness consisting of letters of credit for purposes of supporting the Company's obligations arising out of its sale of its electric transmission assets, not to exceed $45 million at any time outstanding.

"Fixed Charges" means, with respect to any specified Person for any period, the sum, without duplication, of:

(1) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, the interest component of all distributions made by a Transitional Funding Trust to holders of its Transitional Funding Notes, imputed interest with respect to Attributable Debt, commissions, discounts and other

fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations described in clause (1) of the definition of Hedging Obligations; plus

         (2)      the consolidated  interest of such Person and its Restricted
Subsidiaries  that was capitalized  during such period;
plus

(3) any interest expense on Indebtedness of another Person that is Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries, whether or not such Guarantee or Lien is called upon; plus

(4) all dividends, whether paid or accrued and whether or not in cash, on any series of preferred stock of such Person or any of its Restricted Subsidiaries, other than dividends on Equity Interests payable solely in Equity Interests of the Company (other than Disqualified Stock) or to the Company or a Restricted Subsidiary of the Company.

"Fixed Charge Coverage Ratio" means with respect to any specified Person for any period, the ratio of the Consolidated Cash Flow of such Person and its Restricted Subsidiaries for such period to the Fixed Charges of such Person and its Restricted Subsidiaries for such period. In the event that the specified Person or any of its Restricted Subsidiaries incurs, assumes, Guarantees, repays, repurchases or redeems any Indebtedness (other than ordinary working capital borrowings) or issues, repurchases or redeems preferred stock subsequent to the end of the period for which the Fixed Charge Coverage Ratio is being calculated and on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio will be calculated giving pro forma effect to such incurrence, assumption, Guarantee, repayment, repurchase or redemption of Indebtedness, or such issuance, repurchase or redemption of preferred stock, and the use of the proceeds therefrom as if the same had occurred at the beginning of the applicable four-quarter reference period.

In addition, for purposes of calculating the Fixed Charge Coverage Ratio:

(1) acquisitions that have been made by the specified Person or any of its Restricted Subsidiaries, including through mergers, consolidations or otherwise (including acquisitions of assets used in a Permitted Business) and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date will be given pro forma effect as if they had occurred on the first day of the four-quarter reference period, including any pro forma expense and

cost reductions that have occurred or are reasonably expected to occur, in the reasonable judgment of the chief financial officer of the Company (regardless of whether those cost savings or operating improvements could then be reflected in pro forma financial statements in accordance with Regulation S-X promulgated under the Securities Act or any other regulation or policy of the Commission related thereto);

(2) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, will be excluded; and

(3) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, will be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the specified Person or any of its Restricted Subsidiaries following the Calculation Date.

"GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the original issue date of the Initial Bonds.

"Global Bonds" has the meaning assigned to it in Article IV, Section 3(a) of this Supplemental Indenture.

"Guarantee" means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness.

"Hedging Obligations" means, with respect to any specified Person, the net obligations (not the notional amount) of such Person incurred in the normal course of business and not for speculative purposes under:

(1) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements designed to protect the Person entering into the agreement against fluctuations in interest rates with respect to Indebtedness incurred and not for purposes of speculation;

(2) foreign exchange contracts and currency protection agreements entered into with one or more financial institutions designed to protect the Person entering into the agreement against

fluctuations in currency exchange rates with respect to Indebtedness incurred and not for purposes of speculation;

(3) any commodity futures contract, commodity option or other similar agreement or arrangement designed to protect against fluctuations in the price of commodities used by that Person at the time; and

(4) other agreements or arrangements designed to protect such Person against fluctuations in interest rates or currency exchange rates.

"ICC" means the Illinois Commerce Commission.

"Illinova" means Illinova Corporation, an Illinois corporation and direct parent company of the Company.

"Indebtedness" means, with respect to any specified Person, any indebtedness of such Person, whether or not contingent:

(1) in respect of borrowed money;

(2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof other than letters of credit taken out by such Person in the ordinary course of business, to the extent not drawn);

(3) in respect of banker's acceptances;

(4) representing Capital Lease Obligations;

(5) representing the balance deferred and unpaid of the purchase price of any property, except any such balance that constitutes an accrued expense or trade payable; or

(6) representing any Hedging Obligations,

if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term "Indebtedness" includes all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by the specified Person of any indebtedness of any other Person.

The amount of any Indebtedness outstanding as of any date will be:

(1) the accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue discount; and

(2) the principal amount of the Indebtedness, together with any interest on the Indebtedness that is more than 30 days past due, in the case of any other Indebtedness.

"Indenture" has the meaning assigned to it in the first paragraph of this Supplemental Indenture.

"Initial Bonds" has the meaning assigned to it in Article II Section 1 of this Supplemental Indenture.

"Initial Purchasers" means, with respect to the Initial Bonds, the entities identified as purchasers in the Purchase Agreement.

"Institutional Accredited Investor" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.

"Investment Grade Rating" means a rating equal to or higher than Baa3 (or the equivalent) by Moody's or BBB- (or the equivalent) by S&P.

"Investments" means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans (including Guarantees or other obligations), advances or capital contributions (excluding commission, moving, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of the Company, the Company will be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Subsidiary not sold or disposed of in an amount determined as provided in Article V, Section 4(a)(iii) under the caption "Triggering Events--Restricted Payments". The acquisition by the Company or any Subsidiary of the Company of a Person that holds an Investment in a third Person will be deemed to be an Investment by the Company or such Subsidiary in such third Person in an amount equal to the fair market value of the Investment held by the acquired Person in such third Person in an amount determined as provided in Article V, Section 4(a)(iii) of the Triggering Event described below under the caption "Triggering Events--Restricted Payments".

"Issue Date" means the original issue date of the Tranche One Initial Bonds and is sometimes referred to as the "original issue date" in this Supplemental Indenture.

"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction other than a precautionary financing statement representing a lease not intended as a security agreement.

"Moody's" means Moody's Investors Service, Inc. or any successor to the rating agency business thereof.

"Mortgage Bonds" means the Mortgage Bonds, 11.50% Series due 2010 and includes, if, as and when issued, the Initial Bonds, the Exchange Bonds and the Private Exchange Bonds, as applicable.

"Net Income" means, with respect to any specified Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however:

(1) the aggregate gain (but not loss in excess of such aggregate gain), together with any related provision for taxes on such gain (but not loss in excess of such aggregate gain), realized in connection with: (a) any Asset Sale; or (b) the disposition of any securities by such Person or any of its Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Subsidiaries; and

(2) the aggregate extraordinary, unusual or non-recurring gain (but not loss in excess of such aggregate extraordinary gain), together with any related provision for taxes on such extraordinary gain (but not loss).

"Net Proceeds" means the aggregate proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale in cash or Cash Equivalents (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale, including, without limitation, legal, accounting and investment banking fees, and sales commissions, and any relocation expenses incurred as a result of the Asset Sale, taxes paid or estimated to be payable as a result of the Asset Sale, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, amounts required to be applied to the repayment of Indebtedness, secured by a Lien on the asset or assets that were the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP.

"Non-Recourse Debt" means Indebtedness:

(1) as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable as a guarantor or otherwise, or (c) constitutes the lender;

(2) no default with respect to which (including any rights that the holders of the Indebtedness may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness (other than the Mortgage Bonds) of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment of the Indebtedness to be accelerated or payable prior to its stated maturity; and

(3) as to which the lenders have been notified in writing that they shall not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries.

"Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.

"Offer Amount" has the meaning assigned to it in Article V, Section 7(b) of this Supplemental Indenture.

"Offer Period" has the meaning assigned to it in Article V, Section 7(b) of this Supplemental Indenture.

"Permitted Business" means any business that derives a majority of its revenues from the business engaged in by the Company and its Restricted Subsidiaries on the original issue date of the Mortgage Bonds and/or activities that are reasonably similar, ancillary, incidental, complementary or related to, or a reasonable extension, development or expansion of, the businesses in which the Company and its Restricted Subsidiaries are engaged on the original issue date of the Mortgage Bonds, as determined in good faith by the Board of Directors.

"Permitted Investments" means:

(1) any Investment in the Company or in a Restricted Subsidiary of the Company (excluding redemptions, purchases, acquisitions or retirements of Equity Interests of the Company);

(2) any Investment in Cash Equivalents;

(3) any Investment by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment:

(a) such Person becomes a Restricted Subsidiary of the Company; or

(b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary of the Company);

(4) any Investment made as a result of the receipt of consideration consisting of other than cash or Cash Equivalents from (a) an Asset Sale that was made pursuant to and in compliance with the provisions in Article V, Section 6(b) under the caption "Repurchase at the Option of Holders--Asset Sales" or (b) a disposition of assets not constituting an Asset Sale pursuant to clause (1) of the items deemed not to be Asset Sales under the definition of "Asset Sale";

(5) any acquisition of assets to the extent it is in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company;

(6) any Investments received in compromise of obligations of trade creditors or customers that were incurred in the ordinary course of business, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer;

(7) Hedging Obligations;

(8) payroll advances or loans in the ordinary course of business to officers and employees of the Company or any of its Restricted Subsidiaries, so long as the aggregate principal amount of such advances or loans that constitute Investments does not exceed $1.0 million at any one time outstanding;

(9) any Investments made in accordance with clause (5) of the definition of "Asset Sale" with respect to items not deemed to be Asset Sales; and

(10) other Investments in any Person that is not also a Restricted Subsidiary of the Company having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (10) since the original issue date of the Mortgage Bonds, not to exceed $5 million.

"Permitted Liens" means:

(1) Liens securing any Indebtedness under a Credit Facility that was permitted by the terms of this Supplemental Indenture to be incurred, and all Obligations and Hedging Obligations relating to such Indebtedness;

(2) Liens in favor of the Company or any Subsidiary Guarantors;

(3) Liens on property of a Person existing at the time such Person is merged with or into or consolidated with the Company or any Restricted Subsidiary of the Company; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company or the Restricted Subsidiary;

(4) Liens on property existing at the time of acquisition of the property by the Company or any Restricted Subsidiary of the Company, provided that such Liens were in existence prior to the contemplation of such acquisition;

(5) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business;

(6) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by Article V, Section 4(b)(ii)(D) under the caption "Triggering Events--Incurrence of Indebtedness and Issuance of Preferred Stock" covering only the assets acquired with such Indebtedness;

(7) Liens securing Existing Indebtedness (including the Lien of the Indenture);

(8) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded, provided that any reserve or other appropriate provision as is required in conformity with GAAP has been made therefor;

(9) Liens incurred in the ordinary course of business of the Company or any Restricted Subsidiary with respect to Indebtedness or Attributable Debt (including Hedging Obligations) that does not exceed $15.0 million at any one time outstanding;

(10) Liens to secure Indebtedness permitted by Article V, Section
4(b)(ii)(G),(M) or (N) "Triggering Events--Incurrence of Indebtedness and Issuance of Preferred Stock";

(11) Liens securing the Mortgage Bonds or any other Indebtedness issued or to be issued under the Indenture that was permitted to be incurred under the terms of Article V, Section 4(b) under the caption "Triggering Events--Incurrence of Indebtedness and Issuance of Preferred Stock");

(12) Liens securing Permitted Refinancing Indebtedness incurred to refinance Indebtedness that was previously so secured, provided that any such Lien is limited to all or part of the same property or

assets (plus improvements, accessions, proceeds or dividends or distributions in respect thereof) that secured (or, under the written arrangements under which the original Lien arose, could secure) the Indebtedness being refinanced or is in respect of property that is the security for a Permitted Lien hereunder;

(13) Liens, including pledges, rights of offset and bankers' liens, on deposit accounts, instruments, investment accounts and investment property (including cash, cash equivalents and marketable securities) from time to time maintained with or held by any financial and/or depository institutions, in each case solely to secure any and all Indebtedness or Attributable Debt Obligations now or hereafter existing of the Company or any of its Subsidiaries in connection with any deposit account, investment account or cash management service (including ACH, Fedwire, CHIPS, concentration and zero balance accounts, and controlled disbursement, lockbox or restricted accounts) now or hereafter provided by any financial and/or depository institutions to or for the benefit of the Company, any of its Subsidiaries or any special purpose entity directly or indirectly providing loans to or making receivables purchases from the Company or any of its Subsidiaries; and

(14) Liens resulting from the creation and establishment of intangible transition property pursuant to a transitional funding order issued by the ICC.

"Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries or a Transitional Funding Trust (other than intercompany Indebtedness) or issued in replacement of any such Indebtedness repaid or otherwise retired within the preceding three months; provided that:

(1) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness extended, refinanced, renewed, replaced, defeased or refunded (plus all accrued and unpaid interest on the Indebtedness and the amount of all expenses and premiums incurred in connection therewith);

(2) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; provided, however, that if such Permitted Refinancing Indebtedness is issued in exchange for or the net proceeds of which are used for the purpose of extending, refinancing, renewing, replacing, defeasing or refunding Indebtedness of a Transitional Funding Trust, such Permitted

Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity greater than the Weighted Average Life to Maturity of, the Mortgage Bonds.

(3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is contractually subordinated in right of payment to the Mortgage Bonds, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Mortgage Bonds on terms at least as favorable to the holders of Mortgage Bonds as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and

(4) if the Company is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded, then such Permitted Refinancing Indebtedness is solely the Indebtedness of the Company.

"Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity.

"Private Exchange" means the offer by the Company pursuant to the Registration Rights Agreement to the Initial Purchasers to issue and deliver to the Initial Purchasers in exchange for the Initial Bonds held by the Initial Purchasers as part of their initial distribution, a like aggregate principal amount of Private Exchange Bonds.

"Private Exchange Bonds" has the meaning specified in Article III,
Section 2 of this Supplemental Indenture.

"Purchase Agreement" means, with respect to the Initial Bonds, the Purchase Agreement dated December 17, 2002 among the Company and the Initial Purchasers, as such agreement may be amended, modified or supplemented from time to time.

"QIB" means a "qualified institutional buyer" as defined in Rule 144A.

"Rating Agencies" means S&P and Moody's, or if S&P or Moody's or both shall not make a rating on the Mortgage Bonds publicly available, a nationally recognized statistical rating agency or agencies, as the case may be, selected by the Company (as certified by a resolution of its Board of Directors) which shall be substituted for S&P or Moody's or both, as the case may be.

"Registered Exchange Offer" means the offer by the Company, pursuant to the Registration Rights Agreement, to Holders of Initial Bonds eligible to participate in the offer, to issue and deliver to

such Holders, in exchange for the Initial Bonds, a like aggregate principal amount of Exchange Bonds registered under the Securities Act.

"Registration Rights Agreement" means with respect to the Initial Bonds, the Registration Rights Agreement by and between the Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representative of the several Initial Purchasers, as such agreement may be amended, modified or supplemented from time to time.

"Restricted Global Bond" has the meaning assigned to it in Article IV,
Section 3(a) of this Supplemental Indenture.

"Restricted Investment" means an Investment other than a Permitted Investment.

"Restricted Payments" has the meaning assigned to it in Article V,
Section 4(a) of this Supplemental Indenture.

"Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary.

"Rule 144A" means Rule 144A promulgated under the Securities Act.

"Securities Act" means the Securities Act of 1933, as amended.

"Securities Custodian" means the custodian with respect to a Global Bond (as appointed by the Depository), or any successor Person thereto, and shall initially be the Trustee.

"Services and Facilities Agreement" means the Services and Facilities Agreement, dated as of June 27, 2000, among Dynegy, the Company and Illinova, as amended, restated, modified, renewed or replaced in whole or in part from time to time, provided that any such amendment, restatement, modification, renewal or replacement shall have been approved by appropriate regulatory authorities.

"Shelf Registration Statement" means the registration statement filed by the Company in connection with the offer and sale of Initial Bonds or Private Exchange Bonds pursuant to the Registration Rights Agreement.

"Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the original issue date of the Initial Bonds.

"S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., or any successor to the rating agency business thereof.

"Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which the payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and will not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof.

"Subsidiary" means, with respect to any specified Person:

(1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and

(2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof).

A Transitional Funding Trust will not be deemed to be a Subsidiary of the Company or any of its Subsidiaries notwithstanding that the financial results of such Transitional Funding Trust are consolidated with those of the Company in accordance with GAAP, except for purposes of calculating the Fixed Charge Coverage Ratio and its components (including Consolidated Net Income).

"Subsidiary Guarantee" means any Guarantee of the Mortgage Bonds to be executed by any Subsidiary of the Company pursuant to Article V, Section 4(h) under the caption "Triggering Events--Future Subsidiary Guarantees".

"Subsidiary Guarantors" means any Subsidiary of the Company that executes a Subsidiary Guarantee in accordance with the provisions of the Indenture, and their respective successors and assigns.

"Supplemental Indenture" has the meaning assigned to it in the first paragraph of this Supplemental Indenture.

"Tranche One Initial Bonds" has the meaning assigned to it in Article II, Section 1 of this Supplemental Indenture.

"Tranche Two Initial Bonds" has the meaning assigned to it in Article II, Section 1 of this Supplemental Indenture.

"Transfer Restricted Bonds" means Initial Bonds or Private Exchange Bonds that bear or are required to bear the legend set forth in Article IV,
Section 4(b).

"Transitional Funding Notes" means any debt securities issued by a Transitional Funding Trust in accordance with a transitional funding order of the ICC.

"Transitional Funding Trust" means the Illinois Power Special Purpose Trust or any future similar entity, the only assets of which are the intangible transition property which is the right to receive transition charges collected by the Company.

"Triggering Event" has the meaning assigned to it in Article V, Section 3(a) of this Supplemental Indenture.

"Unrestricted Subsidiary" means any Subsidiary of the Company that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution, but only to the extent that such Subsidiary:

(1) has no Indebtedness other than Non-Recourse Debt;

(2) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company;

(3) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results;

(4) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries; and

(5) has at least one director on its Board of Directors that is not a director or executive officer of the Company or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of the Company or any of its Restricted Subsidiaries.

Any designation of a Subsidiary of the Company of the Company as an Unrestricted Subsidiary shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officer's Certificate certifying that such designation complied with the preceding conditions and was

permitted by Article V, Section 4(a) under the caption "Triggering Events--Restricted Payments". If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it will thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary will be deemed to be incurred by a Restricted Subsidiary of the Company as of such date and, if such Indebtedness is not permitted to be incurred as of such date under Article V, Section 4(b) under the caption "Triggering Events--Incurrence of Indebtedness and Issuance of Preferred Stock", such a Triggering Event will occur.

"U.S." means the United States of America.

"Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person.

"Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing:

(1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect of the Indebtedness, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by

(2) the then outstanding principal amount of such Indebtedness.

"Wholly-Owned Subsidiary" means, with respect to any specified Person:

(1) any Subsidiary of which 100% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees of the Subsidiary is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and

(2) any Subsidiary all the general partnership interest and limited partnership interests, if any, of which are owned, directly or indirectly, by that Person or one or more other Subsidiaries of that Person (or any combination thereof).

ARTICLE II.

DESCRIPTION OF THE INITIAL BONDS

SECTION 1. The Company hereby creates a new series of Bonds to be known as the "Mortgage Bonds, 11.50% Series due 2010" (the "Initial Bonds"). The Initial 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, including the provisions of Article V of this Supplemental Indenture. References in Article V to "Mortgage Bonds" shall be deemed to include the Initial Bonds.

The Initial Bonds shall be issued in two Tranches with identical terms except as to principal amount and date of issuance. The first Tranche shall be in the aggregate principal amount of $400,000,000 which shall be issued on the Issue Date (the "Tranche One Initial Bonds"). The second Tranche shall be in the aggregate principal amount of $150,000,000, and shall be issued, subject to ICC approval, on or before January 31, 2003 (the "Tranche Two Initial Bonds").

The commencement of the first interest period for the Initial Bonds shall be December 20, 2002. All Initial Bonds shall mature on December 15, 2010, and shall bear interest at the rate of ELEVEN AND ONE-HALF PER CENT (11.50%) per annum, payable semi-annually on June 15 and December 15, in each year, commencing June 15, 2003, until the principal sum is paid in full. If such June 15 or December 15 shall be a legal holiday or a day on which banking institutions in New York, New York, are not open for business, then the interest shall be payable on the next succeeding day which shall not be (i) a legal holiday or (ii) a day on which such institutions are not open for business. The person in whose name any of the Initial 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 Initial 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 Company shall perform its obligations under the Registration Rights Agreement and shall comply in all material respects with the terms and conditions contained therein including, without limitation, the payment of additional interest (as described in Section 2.5 of the Registration Rights Agreement).

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 New York, New York, are not open for business, then the next preceding day which shall not be (i) a legal holiday or (ii) a day on which such institutions are not open for business.

SECTION 2. The Initial Bonds 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 Initial Bonds may be exchanged, upon surrender thereof, at the agency of the Company in the City of Chicago, Illinois, for one or more Initial Bonds of other authorized denominations, for the same aggregate principal amount, subject to the terms and conditions set forth in the Indenture.

The Initial 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 Trustee shall be the Bond Registrar and the Paying Agent for the Initial Bonds; provided, however, that the Company reserves the right to change the Bond Registrar and the Paying Agent.

SECTION 4. The Initial Bonds and the Trustee's Certificate of Authentication shall be substantially in the following forms respectively, and each such Initial Bond shall have annexed thereto an Assignment and an Option of Holder to Elect Purchase substantially in the forms of Exhibit D and Exhibit E hereto, respectively:

[Form of Face of Bond]

THIS BOND IS A GLOBAL BOND WITHIN THE MEANING OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. UNLESS THIS GLOBAL BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO ILLINOIS POWER COMPANY OR ITS AGENT OR AGENTS FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY GLOBAL BOND ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

TRANSFERS OF THIS GLOBAL BOND SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL BOND SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE

RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.*

[Restricted Bonds Legend]

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY OTHER STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.

THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") THAT IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH ILLINOIS POWER COMPANY (THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR TO SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES SUCH SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR
(7) UNDER THE SECURITIES ACT ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH SALE OR TRANSFER (i) PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS

COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.

ILLINOIS POWER COMPANY
(Incorporated under the laws of the State of Illinois)

INITIAL MORTGAGE BOND, 11.50% SERIES DUE 2010

No. . . . . . $550,000,000

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 Five Hundred and Fifty Million Dollars ($550,000,000) [or such amount as is indicated on the Schedule of Exchanges of Bonds attached as Exhibit
A]* on December 15, 2010, 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 December 20, 2002, payable semi-annually on June 15 and December 15 in each year, commencing June 15, 2003, at the rate of ELEVEN AND ONE-HALF PER CENT (11.50%) 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 December 15, 2002, be paid to the person in whose name this 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 Mortgage Bond are payable at the agency of the Company in the City of Chicago, Illinois. So long as any Mortgage Bonds are represented by a Global Bond, interest (other than interest payable at maturity or upon redemption) shall be paid in immediately available funds by wire transfer to the Depository for such Mortgage Bonds, on the written order of the Depository.

Payment of interest (other than interest payable in accordance with the provisions of the immediately preceding paragraph) will, subject to certain exceptions provided in the Indenture referred to herein, be made by check, mailed to the address of the person entitled thereto as such address shall appear in the security register as of the applicable record date or, at the option of the Holder, by wire transfer to an account maintained by such person with a bank located in the United States.

This 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 BNY Midwest Trust

Company, the Trustee under the Indenture, or a successor trustee thereto under the Indenture (the "Trustee").

The provisions of this 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.

Dated:  December 20, 2002                   ILLINOIS POWER COMPANY


                                            By:______________________________
                                                 Authorized Executive Officer

(Corporate Seal)

ATTEST:

[Form of Trustee's Certificate of Authentication]

This 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 December 15, 2002.

BNY MIDWEST TRUST COMPANY,
Trustee,

By: _____________________________
Authorized Signatory

[Form of Reverse of Bond]

This 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 BNY Midwest Trust Company (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 Mortgage Bond is one of a series designated as the "Mortgage Bonds, 11.50% Series due 2010" (the "Mortgage Bonds of the 2010 Series") of the Company, limited in aggregate principal amount to $550,000,000, issued under and secured by the Indenture and described in the supplemental indenture dated as of December 15, 2002 (the "Supplemental Indenture dated as of December 15, 2002"), between the Company and the Trustee, supplemental to the Indenture.

The Mortgage Bonds of the 2010 Series are subject to additional terms and conditions, including optional redemption, mandatory redemption, redemption at the option of the Holders, and certain Triggering Events, all as more fully set forth in Article V of the Supplemental Indenture dated as of December 15, 2002.

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.

In addition to the rights provided to Holders of the Mortgage Bonds of the 2010 Series under the Indenture, Holders of the Mortgage Bonds of the 2010 Series shall have all the rights set forth in the Registration Rights Agreement, as defined in the Supplemental Indenture dated as of December 15, 2002, including without limitation the right to receive additional interest as described in Section 2.5 thereof.

ARTICLE III.

DESCRIPTION OF THE EXCHANGE BONDS AND THE
PRIVATE EXCHANGE BONDS.

SECTION 1. The Company hereby creates a new series of Bonds to be known as the "Exchange Mortgage Bonds, 11.50% Series due 2010" (the "Exchange Bonds"). The terms of the Exchange Bonds shall be identical in all material respects to the terms of the Initial Bonds. The Exchange 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, including the provisions of Article V of this Supplemental Indenture. References in Article V to "Mortgage Bonds" shall be deemed to include the Exchange Bonds.

SECTION 2. The Company hereby creates a new series of Bonds to be known as the "Private Exchange Mortgage Bonds, 11.50% Series due 2010" (the "Private Exchange Bonds"). The terms of the Private Exchange Bonds shall be identical in all material respects to the terms of the Initial Bonds. The Private Exchange 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, including the provisions of Article V of this Supplemental Indenture. References in Article V to the "Mortgage Bonds" shall be deemed to include the Private Exchange Bonds.

SECTION 3. The Trustee shall be the Bond Registrar and the Paying Agent for the Exchange Bonds and the Private Exchange Bonds; provided, however, that the Company reserves the right to change the Bond Registrar and the Paying Agent.

SECTION 4. Each series of the Exchange Bonds and Private Exchange Bonds and the Trustee's Certificate of Authentication shall be substantially in the following forms (except that the Private Exchange Bonds shall contain the Restricted Bonds Legend from the Initial Bonds as set forth below, and each such Mortgage Bond shall have annexed thereto an Assignment and an Option of Holder to Elect Purchase substantially in the forms of Exhibit D and Exhibit E hereto, respectively):

[Form of Face of Bond]

THIS BOND IS A GLOBAL BOND WITHIN THE MEANING OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. UNLESS THIS GLOBAL BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO ILLINOIS POWER COMPANY OR ITS AGENT OR AGENTS FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY GLOBAL BOND ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS

MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

TRANSFERS OF THIS GLOBAL BOND SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL BOND SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.*

[Restricted Bonds Legend]

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY OTHER STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.

THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") THAT IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH ILLINOIS POWER COMPANY (THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR TO SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES SUCH SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR
(7) UNDER THE SECURITIES ACT ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE

TRUSTEE'S RIGHT PRIOR TO ANY SUCH SALE OR TRANSFER (i) PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.

ILLINOIS POWER COMPANY
(Incorporated under the laws of the State of Illinois)

[PRIVATE] EXCHANGE MORTGAGE BOND, 11.50% SERIES DUE 2010

No. . . . . . $550,000,000

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 Five Hundred and Fifty Million Dollars ($550,000,000) [or such amount as is indicated on the Schedule of Exchanges of Bonds attached as Exhibit
A]* on December 15, 2010, 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 December 20, 2002, payable semi-annually on June 15 and December 15 in each year, commencing June 15, 2003, at the rate of ELEVEN AND ONE-HALF PER CENT (11.50%) 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 December 15, 2002, be paid to the person in whose name this [Private] Exchange 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 [Private] Exchange Bond are payable at the agency of the Company in the City of Chicago, Illinois. So long as any [Private] Exchange Bonds are represented by a Global Bond, interest (other than interest payable at maturity or upon redemption) shall be paid in immediately available funds by wire transfer to the Depository for such
[Private] Exchange Bonds, on the written order of the Depository.

Payment of interest (other than interest payable in accordance with the provisions of the immediately preceding paragraph) will, subject to certain exceptions provided in the Indenture referred to herein, be made by check mailed to the address of the person entitled thereto as such address shall appear in the security register as of the applicable record date or, at the option of the Holder, by wire transfer to an account maintained by such person with a bank located in the United States.

This [Private] Exchange 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 BNY Midwest

Trust Company, the Trustee under the Indenture, or a successor trustee thereto under the Indenture (the "Trustee").

The provisions of this [Private] Exchange 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.

Dated:  ____________, 2002                   ILLINOIS POWER COMPANY


                                             By:  _____________________________
                                                   Authorized Executive Officer

(Corporate Seal)

ATTEST:

[Form of Trustee's Certificate of Authentication]

This [Private] Exchange 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 December 15, 2002.

BNY MIDWEST TRUST COMPANY,
Trustee,

By: _____________________________
Authorized Signatory

[Form of Reverse of Bond]

This [Private] Exchange 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 BNY Midwest Trust Company (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 [Private] Exchange Bond is one of a series designated as the "11.50% [Private] Exchange Bonds, 11.50% due 2010" (the "[Private] Exchange Bonds") of the Company, limited in aggregate principal amount to $550,000,000, issued under and secured by the Indenture and described in the supplemental indenture dated as of December 15, 2002 (the "Supplemental Indenture dated as of December 15, 2002"), between the Company and the Trustee, supplemental to the Indenture.

The [Private] Exchange Bonds are subject to additional terms and conditions, including optional redemption, mandatory redemption, redemption at the option of the Holders, and certain Triggering Events, all as more fully set forth in Article V of the Supplemental Indenture dated as of December 15, 2002.

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.

[In addition to the rights provided to Holders of the Private Exchange Bonds under the Indenture, Holders of the Private Exchange Bonds shall have all the rights set forth in the Registration Rights Agreement, as defined in the Supplemental Indenture, dated as of December 15, 2002, including without limitation the right to receive additional interest as described in Section 2.5 thereof.]

ARTICLE IV.

ISSUE OF THE INITIAL BONDS, THE EXCHANGE BONDS AND THE PRIVATE EXCHANGE BONDS

SECTION 1. (a) Authentication of Initial Bonds. The Company hereby exercises the right to obtain the authentication and delivery

by the Trustee on the Issue Date of (i) $375,000,000 of the Tranche One Initial Bonds on the basis of Property Additions pursuant to Section 4.03 of the Indenture, and (ii) $25,000,000 of the Tranche One Initial Bonds on the basis of Retired Bonds pursuant to Section 4.04 of the Indenture. The Company hereby exercises the right to obtain the authentication and delivery by the Trustee of the Tranche Two Initial Bonds at such time after the Issue Date and on or before January 31, 2003, as may be set forth in a Company Order in accordance with the terms of the Indenture.

(b) Authentication of Exchange Bonds and Private Exchange Bonds. The Company hereby exercises the right to obtain the authentication and delivery by the Trustee of the Exchange Bonds for issue only in a Registered Exchange Offer and the Private Exchange Bonds for issue only in a Private Exchange pursuant to the Registration Rights Agreement for a like principal amount of Initial Bonds, in each case at such time after the Issue Date as may be set forth in a Company Order in accordance with the terms of the Indenture.

(c) Maximum Amount. The aggregate principal amount of Initial Bonds, Exchange Bonds and Private Exchange Bonds outstanding at any time may not exceed $550,000,000.

SECTION 2. The Initial Bonds, the Exchange Bonds and the Private Exchange Bonds may be authenticated and delivered prior to the filing for recordation of this Supplemental Indenture.

SECTION 3. (a) Form and Dating. Initial Bonds shall be offered and sold only to QIBs in reliance on Rule 144A, and the Private Exchange Bonds shall be issued only as provided in the Registration Rights Agreement. Both Initial Bonds and Private Exchange Bonds shall be issued initially in the form of one or more permanent global bonds in definitive, fully registered form without interest coupons with the applicable global securities legend and restricted securities legend set forth in Articles II and III (each, a "Restricted Global Bond"). Each Restricted Global Bond representing Initial Bonds shall be deposited on behalf of the purchasers of the Initial Bonds represented thereby with the Trustee, at its Corporate Trust Office, as Securities Custodian (or with such other Securities Custodian as the Depository may direct), and registered in the name of the Depository or a nominee of the Depository, duly executed by the Company and authenticated by the Trustee as provided herein. Institutional Accredited Investors who are offered and sold Initial Bonds by QIBs shall receive physical delivery of certificated Initial Bonds. Exchange Bonds shall be issued in global form (with the global securities legend set forth in this Article IV). Exchange Bonds issued in global form and Restricted Global Bonds are sometimes referred to in this Supplemental Indenture as "Global Bonds." The aggregate principal amount of the Global Bonds may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depository or its nominee as hereinafter provided. Such exchanges of Global Bonds and the decrease

or increase in the principal amount of a Global Bond will be reported on a schedule (in substantially the form of Exhibit A).

The Initial Bonds, the Exchange Bonds and the Private Exchange Bonds shall be treated for all purposes under the Indenture as a single class.

(b) Book-Entry Provisions. This Section 3(b) shall apply only to a Global Bond deposited with or on behalf of the Depository.

The Company shall execute and the Trustee shall, in accordance with this Section 3(b), authenticate and deliver initially one or more Global Bonds that (a) shall be registered in the name of the Depository or the nominee of the Depository and (b) shall be delivered by the Trustee to the Depository or pursuant to the Depository's instructions or held by the Trustee as Securities Custodian.

Members of, or participants in, the Depository ("Agent Members") shall have no rights under this Supplemental Indenture with respect to any Global Bond held on their behalf by the Depository or by the Trustee as the Securities Custodian or under such Global Bond, and the Company, the Trustee and any agent of the Company or the Trustee shall be entitled to treat the Depository as the absolute owner of such Global Bond for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Agent Members, the operation of customary practices of such Depository governing the exercise of the rights of a holder of a beneficial interest in any Global Bond.

(c) Certificated Bonds. Except as provided in Section 3, Section 4 or Section 5 of this Article IV, owners of beneficial interests in Global Bonds shall not be entitled to receive physical delivery of Initial Bonds, Exchange Bonds or Private Exchange Bonds in certificated form.

SECTION 4. (a) Transfer and Exchange of Global Bonds. (i) The transfer and exchange of Global Bonds or beneficial interests therein shall be effected through the Depository, in accordance with this Supplemental Indenture (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depository therefor. A transferor of a beneficial interest in a Global Bond shall deliver to the Bond Registrar, who shall be responsible for maintaining a bond register for the registration of Bonds and registration of transfers thereof, a written order given in accordance with the Depository's procedures containing information regarding the participant account of the Depository to be credited with a beneficial interest in the Global Bond. The Bond Registrar shall, in accordance with such written order, instruct the Depository to credit to the

account of the Person specified in such written order a beneficial interest in the Global Bond and to debit from the account of the Person making the transfer and exchange the beneficial interest in the Global Bond being transferred and exchanged.

(ii) Notwithstanding any other provision of this Supplemental Indenture (other than the provisions set forth in Section 5), a Global Bond may not be transferred or exchanged as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository.

(iii) In the event that a Restricted Global Bond or an Initial Bond in certificated registered form is transferred and exchanged for an Initial Bond in certificated registered form pursuant to Section 5 prior to the consummation of a Registered Exchange Offer or the effectiveness of a Shelf Registration Statement with respect to such Initial Bonds, such Restricted Global Bond or Initial Bond in certificated registered form may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of this
Section 4 and such other procedures as may from time to time be adopted by the Company including:

(A) if such Transfer Restricted Bonds are being delivered to the Bond Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect (in substantially the form of Exhibit B hereto); or

(B) if such Transfer Restricted Bonds are being transferred to an Institutional Accredited Investor, pursuant to a private placement exemption from the registration requirements of the Securities Act, a certification to that effect from such Holder (in substantially the form of Exhibit B hereto) and a certification from the applicable transferee (in substantially the form of Exhibit C hereto) and an opinion of counsel to that effect if the Company or the Trustee so requests; or

(C) if such Transfer Restricted Bonds are being transferred in reliance on and in compliance with another exemption from the registration requirements of the Securities Act, a certification to that effect from such Holder (in substantially the form of Exhibit B hereto) and an opinion of counsel to that effect if the Company or the Trustee so requests.

(iv) In the event that an Initial Bond in certificated registered form is transferred and exchanged for a beneficial interest in a Global Bond pursuant to Section 5 prior to the consummation of a Registered Exchange Offer or the effectiveness of a Shelf Registration Statement with respect to such Initial Bonds, such Initial Bond may be exchanged only in accordance with such procedures as are substantially

consistent with the provisions of this Section 4 and such other procedures as may from time to time be adopted by the Company including:

(A) if such Transfer Restricted Bonds are being delivered to the Bond Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect (in substantially the form of Exhibit B hereto); or

(B) if such Transfer Restricted Bonds are being transferred in reliance on and in compliance with another exemption from the registration requirements of the Securities Act, a certification to that effect from such Holder (in substantially the form of Exhibit B hereto) and an opinion of counsel to that effect if the Company or the Trustee so requests.

(b) Legend.

(i) Except as permitted by the following paragraphs (ii), (iii) and (iv), each Initial Bond certificate and Private Exchange Bond evidencing a Transfer Restricted Bond shall bear a legend in substantially the following form:

[Restricted Bonds Legend]

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY OTHER STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.

THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") THAT IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH ILLINOIS POWER COMPANY (THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR TO SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES SUCH SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED

INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH SALE OR TRANSFER (i) PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.

(ii) Upon any sale or transfer of a Transfer Restricted Bond
(including any Transfer Restricted Bond represented by a Restricted Global Bond) pursuant to Rule 144, the Security Registrar shall permit the transferee thereof to exchange such Transfer Restricted Bond for a certificated Bond that does not bear the legend set forth above and rescind any restriction on the transfer of such Transfer Restricted Bond, if the transferor thereof certifies in writing to the Security Registrar that such sale or transfer was made in reliance on Rule
144 (such certification to be substantially in the form of Exhibit B hereto) and an Opinion of Counsel to that effect if the Company or the Trustee so requests.

(iii) After a transfer of any Initial Bonds or Private Exchange Bonds pursuant to and during the period of the effectiveness of a Shelf Registration Statement with respect to such Initial Bonds or Private Exchange Bonds all requirements pertaining to legends on such Initial Bonds or Private Exchange Bonds with respect to such Bonds transferred will cease to apply and the Initial Bonds or Private Exchange Bonds in global form, without restrictive transfer legends, will be available to the transferee of the Holder of such Initial Bonds or Private Exchange Bonds upon written directions to transfer such Holder's interest in the Global Bond.

(iv) Upon the consummation of a Registered Exchange Offer with respect to the Initial Bonds, Exchange Bonds in global form will be available to Holders that exchange such Initial Bonds in such Registered Exchange Offer without restrictive transfer legend; however, any (A) broker-dealer who purchased the Initial Bonds directly from the Company for resale, (B) Person participating in the Registered Exchange Offer for purposes of distributing the Exchange

Bonds or (C) Person who is an "affiliate" (as defined in Rule 144 under the Securities Act) of the Company will not be able to tender Initial Bonds in the Registered Exchange Offer. The Company shall identify to the Trustee such Holders of the Initial Bonds in a written certification signed by an officer of the Company and, absent certification from the Company to such effect, the Trustee shall assume that there are no such Holders.

(v) Upon the consummation of a Private Exchange with respect to the Initial Bonds, all requirements pertaining to such Initial Bonds issued in global form will still apply with respect to Holders of such Initial Bonds that do not exchange their Initial Bonds, and Private Exchange Bonds in global form with the Restricted Bonds Legend set forth in Articles II and III hereto will be available to Holders that exchange such Initial Bonds in such Private Exchange.

(c) Cancellation or Adjustment of Global Bond. At such time as all beneficial interests in a Global Bond have either been exchanged for certificated Bonds, redeemed, purchased or canceled, such Global Bond shall be returned to the Depository for cancellation or retained and canceled by the Trustee. At any time prior to such cancellation, if any beneficial interest in a Global Bond is exchanged for certificated Bonds, redeemed, purchased or canceled, the principal amount of Bonds represented by such Global Bond shall be reduced and an adjustment shall be made on the books and records of the Securities Custodian with respect to such Global Bond.

(d) Obligations with Respect to Transfers and Exchanges of Bonds.

(i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate certificated Bonds and Global Bonds at the Bond Registrar's request.

(ii) No service charge shall be made for any registration of transfer or exchange, except as provided in Section 3.05 of the Indenture.

(iii) The Bond Registrar shall not be required to register the transfer of or exchange of any Bond during a period of 15 business days immediately preceding the date notice is given of redemption, all in accordance with Section 3.05 of the Indenture.

(iv) Prior to the due presentation for registration of transfer of any Bond, the Company, the Trustee, the Paying Agent or the Bond Registrar may deem and treat the Person in whose name a Bond is registered as the absolute owner of such Bond for the purpose of receiving payment of principal of and interest on such Bond and for all other purposes whatsoever, whether or not such Bond is overdue, and none of the Company, the Trustee, the Paying

Agent or the Bond Registrar shall be affected by notice to the contrary.

(v) All Bonds issued upon any transfer or exchange pursuant to the terms of the Indenture shall evidence the same debt and shall be entitled to the same benefits under the Indenture as the Bonds surrendered upon such transfer or exchange.

(e) No Obligation of the Trustee.

(i) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Bond, Agent Member or other person with respect to the accuracy of the records of the Depository or its nominee or of any Agent Member, with respect to any ownership interest in the Bonds or with respect to the delivery to any Agent Member, beneficial owner or other person (other than the Depository) of any notice (including any notice of redemption) or the payment of any amount, under or with respect to such Bonds. All notices and communications to be given to the Holders and all payments to be made to Holders under the Bonds shall be given or made only to or upon the order of the registered Holders (which shall be the Depository or its nominee in the case of a Global Bond). The rights of beneficial owners in any Global Bond shall be exercised only through the Depository subject to the applicable rules and procedures of the Depository. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depository with respect to its Agent Members and any beneficial owners.

(ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Supplemental Indenture or under applicable law with respect to any transfer of any interest in any Bond (including any transfers between or among Agent Members or beneficial owners in any Global Bond) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of the Indenture.

SECTION 5. Certificated Bonds.

(a) A Global Bond deposited with the Depository or with the Trustee as Securities Custodian pursuant to Section 3 shall be transferred to the beneficial owners thereof in the form of certificated Bonds in an aggregate principal amount equal to the principal amount of such Global Bond, in exchange for such Global Bond, only if such transfer complies with this Section 5 and the conditions set forth in Section 3.05 of the Indenture.

(b) Any Global Bond that is transferable to the beneficial owners thereof pursuant to this Section shall be surrendered by the Depository to the Trustee at its Corporate Trust Office to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Bond, an equal aggregate principal amount of certificated Bonds of authorized denominations. Any portion of a Global Bond transferred pursuant to this Section shall be executed, authenticated and delivered only in denominations of $1,000 principal amount and any integral multiple thereof and registered in such names as the Depository shall direct. Any certificated Bond representing beneficial interests in an Initial Bond or Private Exchange Bond shall, except as otherwise provided by
Section 4(b) of Article IV, bear the restricted securities legend that is borne by such Bond.

(c) The Company shall promptly make available to the Trustee a reasonable supply of certificated Bonds in definitive, fully registered form without interest coupons only if: (i) DTC notifies the Company that it is unwilling or unable to continue as a Depository for the Global Bond or if at any time the Depository ceases to be a clearing agency registered under the Exchange Act, as amended, and a successor Depository is not appointed by the Company within 90 days; (ii) the Company, at its option, executes and delivers to the Trustee an order that such Bonds shall be so exchangeable and the transfer so registrable; or (iii) there shall have occurred and be continuing an Event of Default (as defined in the Indenture) or any event which after notice or lapse of time or both would be an Event of Default with respect to the Bonds.

(d) In all cases, certificated Bonds delivered in exchange for any Global Bond or beneficial interests in such Global Bond will be registered in the names, and issued in any approved denominations, requested by or on behalf of the Depository, in accordance with its customary procedures. Any certificated Bond issued in exchange for an interest in a Global Bond will bear the restricted securities legend that is borne by such Global Bond. Any such exchange will be effected through the DTC's Deposit/Withdrawal at Custodian system and an appropriate adjustment will be made in the records of the Securities Custodian to reflect a decrease in the principal amount of the relevant Global Bond.

ARTICLE V.

ADDITIONAL PROVISIONS RELATING TO THE INITIAL BONDS, THE EXCHANGE
BONDS AND THE PRIVATE EXCHANGE BONDS

SECTION 1. Optional Redemption.

(a) Optional Redemption. Except as set forth in Section 1(b) below, the Mortgage Bonds shall not be redeemable at the Company's option prior to December 15, 2006. On and after December 15, 2006,

the Company may redeem all or a part of the Mortgage Bonds upon not less than 30 nor more than 60 days' notice, at the Redemption Prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest, if any, on the Mortgage Bonds redeemed, to the applicable Redemption Date, if redeemed during the twelve-month period beginning on December 15 of the years indicated below:

Year                          Percentage

2006                          105.750%

2007                          102.875%

2008 and thereafter           100.000%

(b) Equity Claw-back. Notwithstanding the foregoing, at any time prior to December 15, 2005, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of the Mortgage Bonds at a Redemption Price of 111.50% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, with the net cash proceeds of any public or private offering of its Equity Interests (other than Disqualified Stock) or a cash contribution to the Company's equity capital, provided that (i) at least 65% of the aggregate principal amount of the Mortgage Bonds remains outstanding immediately after the occurrence of such redemption (excluding Mortgage Bonds held by the Company and its Affiliates); and (ii) any such redemption occurs within 120 days of the date of the closing of such offering or contribution.

(c) Notice of Redemption. Notices of redemption shall be mailed by first class mail at least 30 but not more than 60 days before the Redemption Date to each Holder of Mortgage Bonds to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a Redemption Date if the notice is issued in connection with a satisfaction and discharge of the Mortgage Bonds under the Indenture. Notices of redemption may not be conditional. Except as set forth herein, notices of redemption shall be made in accordance with Section 5.04 of the Indenture.

(d) Selection of Mortgage Bonds to be Redeemed. In accordance with Section 5.03 of the Indenture, the following method is provided for the selection of Mortgage Bonds to be redeemed and these procedures shall be followed by the Trustee in the event of a redemption of the Mortgage Bonds pursuant to the provisions of this Supplemental Indenture. If less than all of the Mortgage Bonds are to be redeemed at any time, the Trustee shall select Mortgage Bonds for redemption as follows:

(i) if the Mortgage Bonds are listed on any national securities exchange, in compliance with the

requirements of the principal national securities exchange on which the Mortgage Bonds are listed; or

(ii) if the Mortgage Bonds are not listed on any national securities exchange, on a pro rata basis, by lot or by such method as the Trustee deems fair and appropriate.

No Mortgage Bonds of $1,000 principal amount or less can be redeemed in part.

SECTION 2. Mandatory Redemption.

(a) Except as provided in Article V, Section 2(b) or Article V, Section 3 below, the Company is not required to make mandatory redemption or sinking fund payments with respect to the Mortgage Bonds.

(b) Upon the occurrence of the events described below in clauses (i) or
(ii) of this Article V, Section 2(b), the Company shall be required to redeem the Mortgage Bonds as soon as is permissible in accordance with the procedures of DTC, at a Redemption Price equal to 100% of the aggregate principal amount of the Mortgage Bonds plus accrued and unpaid interest, if any, on the Mortgage Bonds to the date of redemption, without further action or notice on the part of the Trustee or the Holders of the Mortgage Bonds:

(i) the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law:

(A) commences a voluntary case,

(B) consents to the entry of an order for relief against it in an involuntary case,

(C) consents to the appointment of a custodian of it or for all or substantially all of its property,

(D) makes general assignment for the benefit of its creditors, or

(E) admits in writing of its inability to pay its debts generally as they become due; or

(ii) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

(A) is for relief against the Company or any of its Subsidiaries that is a Significant Subsidiary or

any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary in an involuntary case;

(B) appoints a custodian of the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary or for all or substantially all of the property of the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; or

(C) orders the liquidation of the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary;

and the order or decree remains unstayed and in effect for 60 consecutive days.

SECTION 3. Redemption at the Option of the Holders.

(a) Upon the occurrence of any of the following events (each a "Triggering Event"):

(i) failure for 30 days to pay when due interest on the Mortgage Bonds;

(ii) failure to pay when due the principal of, or premium, if any, on the Mortgage Bonds;

(iii) the events described in Article V, Sections 4(a), 4(b)
4(c), 4(d), 4(e), 4(f), 4(g), 4(h), 4(i) or 4(j) of this Supplemental Indenture (under the headings "Triggering Events--Restricted Payments," "Triggering Events--Incurrence of Indebtedness and Issuance of Preferred Stock," "Triggering Events--Liens," "Triggering Events--Dividend and Other Payment Restrictions Affecting Subsidiaries," "Triggering Events--Merger, Consolidation or Sale of Assets," "Triggering Events--Transactions with Affiliates," "Triggering Events--Designation of Restricted and Unrestricted Subsidiaries," "Triggering Events--Future Subsidiary Guarantees," "Triggering Events--Sale and Leaseback Transactions," or "Triggering Events--Business Activities");

(iv) failure by the Company or any of its Restricted Subsidiaries for 30 days after notice from the Trustee or the Holders of at least 25% in principal amount of the Mortgage Bonds then Outstanding to comply with the provisions described in Article V, Section 4(k) or Section 6(b) of this Supplemental Indenture (under the headings "Triggering Events--Reports," and "Repurchase at the Option of Holders--Asset Sales");

(v) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries or a Transitional Funding Trust (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries or a Transitional Funding Trust) whether such Indebtedness or guarantee now exists, or is created after the original issue date of the Mortgage Bonds, if that default:

(A) is caused by a failure to pay principal of, or interest or premium, if any, on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default"); or

(B) results in the acceleration of such Indebtedness prior to its express maturity,

and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $25 million or more; or

(vi) failure by the Company or any of its Subsidiaries to pay final judgments no longer subject to appeal or for which execution of the judgment is not stayed aggregating in excess of $25 million, which judgments are not paid, discharged or stayed for a period of 60 days;

the Holders of Mortgage Bonds of at least 25% in principal amount of the Mortgage Bonds then Outstanding may deliver a notice to the Company requiring the Company to redeem the Mortgage Bonds at a Redemption Price equal to 100% of the aggregate principal amount of the Mortgage Bonds plus accrued and unpaid interest, if any, on the Mortgage Bonds to the Redemption Date. Within three days after the delivery of such notice, the Company will commence mandatory redemption of the Mortgage Bonds in accordance with the procedures of

DTC with a Redemption Date not more than 30 days after notice to the Holders of the Mortgage Bonds.

(b) The Holders of a majority in aggregate principal amount of the Mortgage Bonds then Outstanding by notice to the Company and the Trustee may on behalf of the Holders of all of the Mortgage Bonds waive any existing Triggering Event and its consequences except a continuing Triggering Event related to the payment of interest on, or the principal of, the Mortgage Bonds.

(c) In the case of any Triggering Event occurring by reason of any willful action or inaction taken or not taken by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Mortgage Bonds pursuant to the provisions of Article V, Section 1(a) of this Supplemental Indenture relating to redemption at the option of the Company, an equivalent premium shall also become and be immediately due and payable to the extent permitted by law upon the redemption of the Mortgage Bonds at the option of the Holders thereof. If a Triggering Event occurs prior to December 15, 2006, by reason of any willful action or inaction taken or not taken by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Mortgage Bonds prior to December 15, 2006, then the premium of 11.50% shall also become immediately due and payable to the extent permitted by law upon the redemption of the Mortgage Bonds at the option of the Holders thereof

(d) Upon becoming aware of any Triggering Event, the Company shall deliver to the Trustee a statement specifying such Triggering Event.

SECTION 4. Triggering Events.

(a) Restricted Payments.

(i) A Triggering Event shall occur if the Company or any of its Restricted Subsidiaries directly or indirectly:

(A) declares or pays any dividend or makes any other payment or distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) or to the direct or indirect holders of the Company's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or to the

Company or a Restricted Subsidiary of the Company);

(B) purchases, redeems or otherwise acquires or retires for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company;

(C) makes any payment on or with respect to, or purchases, redeems, defeases or otherwise acquires or retires for value any Indebtedness of the Company that is contractually subordinated in right of payment to the Mortgage Bonds, except (i) a payment of interest or principal at the Stated Maturity thereof, or (ii) a purchase, redemption, acquisition or retirement required to be made pursuant to the terms of such Indebtedness (including pursuant to an asset sale or change in control provision); or

(D) makes any Restricted Investment (all such payments and other actions set forth in these clauses (A) through (D) above being collectively referred to as "Restricted Payments"),

unless, at the time of and after giving effect to such Restricted Payment:

(1) no Default or Event of Default has occurred and is continuing or would occur as a consequence of such Restricted Payment;

(2) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Article V,
Section 4(b)(i) ("Triggering Events -- Incurrence of Indebtedness and Issuance of Preferred Stock"); and

(3) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the original issue date of the Mortgage Bonds (excluding Restricted Payments permitted by Article V, Sections
4(a)(ii)(B),

4(a)(ii)(C), 4(a)(ii)(D) and 4(a)(ii)(H)), is less than the sum, without duplication, of:

(a) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the original issue date of the Mortgage Bonds to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus

(b) 100% of the aggregate net cash proceeds received by the Company (including the fair market value of any Permitted Business or assets used or useful in a Permitted Business to the extent acquired in consideration of Equity Interests (other than Disqualified Stock) of the Company) since the original issue date of the Mortgage Bonds as a contribution to its common equity capital or from the issue or sale of Equity Interests of the Company (other than Disqualified Stock and other than sales to a Restricted Subsidiary of the Company) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of the Company that have been converted into or exchanged for such Equity Interests (other than Disqualified Stock or debt securities sold to a Restricted Subsidiary of the Company), plus

(c) to the extent that any Restricted Investment that was made after the original issue date of the Mortgage Bonds is sold for cash or otherwise liquidated or repaid for cash, the lesser of (i) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) and (ii) the initial amount of such Restricted Investment, plus

(d) to the extent that any Unrestricted Subsidiary of the Company is redesignated as a Restricted Subsidiary after the original issue date of the Mortgage Bonds, the lesser of (i) the fair market value of the Company's Investment in such Subsidiary as of the date of such redesignation and (ii) the book value (determined in accordance with GAAP) of the Company's

Investment in such Subsidiary as of the date of such redesignation.

(ii) Notwithstanding the foregoing, the following shall not constitute a Triggering Event:

(A) the payment of any dividend within 60 days after the date of declaration of the dividend, if at the date of declaration the dividend payment would have complied with the provisions of this Supplemental Indenture;

(B) the redemption, repurchase, retirement, defeasance or other acquisition of any Indebtedness of the Company that is contractually subordinated in right of payment to the Mortgage Bonds or of any Equity Interests of the Company or any direct or indirect parent of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of, Equity Interests of the Company (other than Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from Article V, Section 4(a)(i)(3)(b) above;

(C) the defeasance, redemption, repurchase or other acquisition of any Indebtedness of the Company that is contractually subordinated in right of payment to the Mortgage Bonds with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness;

(D) the payment of any distribution or dividend by a Restricted Subsidiary of the Company to the holders of its Equity Interests on a pro rata basis;

(E) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company held by any member of the Company's (or any of its Restricted Subsidiaries') management pursuant to any management equity subscription agreement, stock option agreement or similar agreement; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests may not exceed $1.5 million in any calendar year;

(F) payments to Illinova to enable Illinova to pay its reasonable fees and expenses (including but not limited to, interest on Illinova's Indebtedness) incurred in the ordinary course of business, which fees and expenses shall not be greater than the sum of (a) amounts necessary to pay interest that accrues on the principal amount of Illinova's 7.125% Senior Notes due 2004 Outstanding on the original issue date of the Mortgage Bonds, provided that at the time of payment no Triggering Event shall have occurred and Illinova shall have made all required payments on its note or notes payable to the Company, and (b) $1.0 million for any calendar year; provided that (a) any such payment complies with any regulatory restrictions then applicable to the Company and (b) the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which any such payment is made was at least 2.0 to 1;

(G) payments of dividends on shares of the Company's preferred stock Outstanding on the original issue date of the Mortgage Bonds, in an amount not to exceed $2.5 million in any calendar year;

(H) payments made pursuant to the Services and Facilities Agreement; and

(I) other Restricted Payments in an aggregate amount since the original issue date of the Mortgage Bonds not to exceed $5 million;

provided that, with respect to clauses (B), (C), (E), (F), (G), (H) and (I) above, no Default or Event of Default shall have occurred and be continuing immediately after such transaction.

(iii) The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this Triggering Event shall be determined by the Board of Directors whose resolution with respect thereto shall be delivered to the Trustee. The Board of Directors' determination must be based upon

an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if the fair market value exceeds $20 million. Not later than the date of making any Restricted Payment (excluding Restricted Payments permitted by clauses (E)-(H) above), the Company shall deliver to the Trustee an Officer's Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Article V,
Section 4(a) ("Restricted Payments") were computed, together with a copy of any fairness opinion or appraisal required under this Supplemental Indenture. The Trustee shall have no duty or responsibility to determine the accuracy or correctness of this calculation and shall be fully protected in relying on such Officer's Certificate. The Trustee shall make such fairness opinion available for inspection by Holders of Mortgage Bonds upon reasonably prior written request during regular business hours.

(iv) The provisions of this Article V, Section 4(a) ("Restricted Payments") are subject to the provisions of Article V, Section 5 ("Suspension of Triggering Events").

(b) Incurrence of Indebtedness and Issuance of Preferred Stock.

(i) A Triggering Event shall occur if:

(A) the Company or any of its Restricted Subsidiaries, directly or indirectly, creates, incurs, issues, assumes, guarantees or otherwise becomes directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt), or the Company issues any Disqualified Stock or permits any of its Restricted Subsidiaries to issue any shares of preferred stock; provided, however, that the Company may incur Indebtedness (including Acquired Debt) or issue Disqualified Stock, and its Subsidiary Guarantors may incur Indebtedness (including Acquired Debt) or issue Disqualified Stock, without the occurrence of a Triggering Event, if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been

at least 2.0 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred or Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period;

(B) the Company incurs any Indebtedness (including Permitted Debt as defined below) that is contractually subordinated in right of payment to any other Indebtedness of the Company unless such Indebtedness is also contractually subordinated in right of payment to the Mortgage Bonds on substantially identical terms; provided, however, that no Indebtedness of the Company will be deemed to be contractually subordinated in right of payment to any other Indebtedness of the Company solely by virtue of being secured on a junior basis or by virtue of being unsecured; or

(C) a Transitional Funding Trust incurs Indebtedness represented by Transitional Funding Notes issued after the original issue date of the Mortgage Bonds (a) with an aggregate principal amount in excess of $300 million or (b) for any purpose other than, directly or indirectly, to refund, refinance or replace any other Indebtedness of the Transitional Funding Trust, the Company or any of its Restricted Subsidiaries.

(ii) Notwithstanding the foregoing, the incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt") will not constitute a Triggering Event:

(A) the incurrence by the Company pursuant to this clause (A) of additional Indebtedness and letters of credit under one or more Credit Facilities (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company thereunder), in an aggregate amount up to $300 million at any time outstanding less any amounts permanently repaid under any such Credit Facility with the Net Proceeds of an Asset Sale;

(B) Existing Indebtedness;

(C) the incurrence by the Company of Indebtedness represented by the Mortgage Bonds (including the Exchange Bonds to be issued pursuant to the

Registration Rights Agreement) and the incurrence by any Subsidiary Guarantor of a Subsidiary Guarantee of those Mortgage Bonds (including the Exchange Bonds);

(D) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case, incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment used in the business of the Company or such Restricted Subsidiary, in an aggregate principal amount, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (D), not to exceed $10.0 million at any time outstanding;

(E) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness (other than intercompany Indebted-ness) that was incurred under Article V, Section 4(b)(i) or Article V, Section 4(b)(ii)(B),
(C), (E) or (L);

(F) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company or any of its Restricted Subsidiaries; provided, however, that:

(1) if the Company is the obligor on such Indebtedness, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Mortgage Bonds;

(2) if a Subsidiary Guarantor is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of such Subsidiary Guarantor's Subsidiary Guarantee, if any; and

(3) (a) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than

the Company or a Restricted Subsidiary and
(b) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (F);

(G) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations;

(H) the guarantee by the Company or any Restricted Subsidiary of Indebtedness of the Company or any Restricted Subsidiary that was permitted to be incurred by another provision of this Article V, Section 4(b) ("Incurrence of Indebtedness and Issuance of Preferred Stock");

(I) the accrual of interest, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Stock in the form of additional shares of such Disqualified Stock shall not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this Article V,
Section 4(b) ("Incurrence of Indebtedness and Issuance of Preferred Stock"); provided, in each such case, that the amount thereof is included in the Fixed Charges of the Company as accrued;

(J) Indebtedness in respect of bid, performance or surety bonds issued for the account of the Company or any Restricted Subsidiary thereof in the ordinary course of business, including guarantees or obligations of the Company or any Restricted Subsidiary thereof with respect to letters of credit supporting such bid, performance or surety obligations (in each case other than for an obligation for money borrowed);

(K) the incurrence by the Company's Unrestricted Subsidiaries of Non-Recourse Debt; provided, however, that if any such Indebtedness ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to constitute an incurrence of Indebtedness by a

Restricted Subsidiary of the Company that was not permitted by this clause (K);

(L) the incurrence by the Company of additional Indebtedness consisting of securities issued pursuant to the Indenture in respect of claims relating to the Company's obligations pursuant to agreements with gas, electric power and other energy suppliers that have been terminated as of the original issue date of the Mortgage Bonds;

(M) the incurrence by the Company or any Restricted Subsidiary of additional Indebtedness consisting of letters of credit for purposes of supporting the Company's or any Restricted Subsidiary's obligations now or hereafter owing to gas, electric power or other energy suppliers or transportation or service providers, not to exceed $25 million at any time outstanding; and

(N) the incurrence by the Company or any Restricted Subsidiary of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable), including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (N), not to exceed $25 million at any time outstanding.

(iii) For purposes of determining compliance with this Article V, Section 4(b) ("Incurrence of Indebtedness and Issuance of Preferred Stock"):

(A) in the event that an item of proposed Indebtedness, including Acquired Debt, meets the criteria of more than one of the categories of Permitted Debt described in clauses (A) through (N) above, or is entitled to be incurred pursuant under Article V, Section 4(b)(i), the Company shall be permitted to classify (or later classify or reclassify such Indebtedness, in whole or in part in its sole discretion) such item of Indebtedness in any manner that complies with this Article V, Section 4(b); and

(B) with respect to any dollar-denominated restriction on the incurrence of Indebtedness denominated in a foreign currency, the dollar-equivalent principal amount of such Indebtedness incurred pursuant thereto shall be calculated based on the relevant currency exchange rate in

effect on the date that such Indebtedness was incurred.

(iv) The provisions of this Article V, Section 4(b) ("Incurrence of Indebtedness and Issuance of Preferred Stock") are subject to the provisions of Article V, Section 5 ("Suspension of Triggering Events").

(c) Liens.

A Triggering Event shall occur if the Company, or any of its Restricted Subsidiaries, directly or indirectly, creates, incurs, assumes or otherwise causes or suffers to exist or becomes effective any Lien of any kind securing Indebtedness or Attributable Debt on any of their property or assets, now owned or hereafter acquired, except Permitted Liens.

(d) Dividend and Other Payment Restrictions Affecting Subsidiaries.

(i) A Triggering Event will occur if the Company or any of its Restricted Subsidiaries, directly or indirectly, creates or permits to exist or becomes effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to:

(A) pay dividends or make any other distributions on its Capital Stock to the Company or any of its Restricted Subsidiaries, or pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries;

(B) make loans or advances to Company or any of its Restricted Subsidiaries; or

(C) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries.

(ii) Notwithstanding the foregoing, this Article V, Section 4(d) Triggering Event shall not apply to encumbrances or restrictions existing under or by reason of:

(A) agreements governing Existing Indebtedness and Credit Facilities in effect on the original issue date of the Mortgage Bonds and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of those agreements, provided that the amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are no more

restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in those agreements on the original issue date of the Mortgage Bonds;

(B) the Indenture, this Supplemental Indenture and the Mortgage Bonds;

(C) applicable law, regulations or regulatory orders;

(D) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness or Capital Stock was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of this Supplemental Indenture to be incurred;

(E) customary non-assignment provisions in leases and other agreements entered into in the ordinary course of business;

(F) purchase money obligations for property acquired in the ordinary course of business that impose restrictions on that property of the nature described in Section 4(d)(i)(C) above;

(G) any agreement for the sale or other disposition of a Restricted Subsidiary that restricts distributions or dispositions of assets by that Restricted Subsidiary pending its sale or other disposition;

(H) Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are not more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced;

(I) Liens securing Indebtedness or Attributable Debt otherwise permitted to be incurred under the provisions of Article V, Section 4(c) ("Liens") that limit the right of the debtor to dispose of

the assets subject to such Liens, and Liens attaching to intangible transition property established in accordance with a transitional funding order issued by the ICC; and

(J) provisions with respect to the disposition or distribution of assets or property in joint venture agreements, asset sale agreements, stock sale agreements and other similar agreements entered into in the ordinary course of business.

(iii) The provisions of this Article V, Section 4(d) ("Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries") are subject to the provisions of Article V,
Section 5 ("Suspension of Certain Triggering Events").

(e) Merger, Consolidation or Sale of Assets.

(i) A Triggering Event will occur if the Company, directly or indirectly: (1) consolidates or merges with or into another Person (whether or not the Company is the surviving corporation); (2) sells, assigns, transfers, conveys or otherwise disposes of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries taken as a whole, in one or more related transactions, to another Person or (3) leases all or substantially all of its properties or assets, in one or more related transactions, to any other Person, unless:

(A) either: (1) the Company is the surviving corporation; or (2) the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, conveyance or other disposition has been made is a Person organized or existing under the laws of the United States, any state of the United States or the District of Columbia;

(B) (1) the Person formed by or surviving any such consolidation or merger (if other than the Company) or the Person to which such sale, assignment, transfer, conveyance or other disposition has been made assumes all the obligations of the Company under the Mortgage Bonds, the Indenture and the Registration Rights Agreement pursuant to agreements in form reasonably satisfactory to the Trustee; and
(2) such Person executes and delivers to the Trustee

a supplemental indenture that contains a grant, conveyance, transfer and mortgage by such Person confirming the lien of the Indenture on the property subject to such lien and subjecting to such lien all property thereafter acquired by such Person that shall constitute an improvement, extension or addition to the property subject to the lien of the Indenture or renewal, replacement or substitution of or for any part thereof and, at the election of such Person, subjecting to the lien of the Indenture such other property then owned or thereafter acquired by such Person as such Person shall specify;

(C) immediately after such transaction no Default or Event of Default exists;

(D) the Company or the Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, conveyance or other disposition has been made shall, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Article V, Section 4(b)(i) ("Incurrence of Indebtedness and Issuance of Preferred Stock"); provided, however, that this clause (D) shall be suspended during any period in which the Company and its Restricted Subsidiaries are not subject to the Suspended Triggering Events; and

(E) the Company, or the Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, conveyance or other disposition has been made, shall have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that such transaction and any supplemental indenture entered into in connection therewith comply with all of the terms of this Article V, Section 4(e) and that all conditions precedent provided for in this Article V, Section 4(e) relating to such transaction or series of transactions have been complied with.

(ii) Clauses (D) and (E) under this Article V, Section 4(e) shall not apply to a sale, assignment, transfer,

conveyance or other disposition of assets between or among the Company and any of its Restricted Subsidiaries or as a result of the creation and establishment of intangible transition property pursuant to a transition funding order issued by the ICC.

(f) Transactions with Affiliates.

(i) A Triggering Event will occur if the Company or any of its Restricted Subsidiaries makes any payment to, or sells, leases, transfers or otherwise disposes of any of its properties or assets to, or purchases any property or assets from, or enters into or makes or amends any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate or any Transitional Funding Trust (each, an "Affiliate Transaction"), unless:

(A) the Affiliate Transaction (i) is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person or (ii) has been approved by applicable regulatory authorities; and

(B) the Company delivers to the Trustee:

(1) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $10.0 million, a resolution of the Board of Directors set forth in an Officer's Certificate certifying that such Affiliate Transaction complies with Article V, Section 4(f)(i)(A) above and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors; and

(2) with respect to any Affiliate Transaction or series of related Affiliate Transactions
(i) where there is no disinterested member of the Board of Directors and the aggregate consideration is in excess of $10 million, or
(ii) involving aggregate consideration in excess of $20.0 million, an opinion as to the fairness to the Holders of Mortgage Bonds of such Affiliate Transaction from a financial point of

view issued by an accounting, appraisal or investment banking firm of national standing.

(ii) The following items shall not be deemed to be Affiliate Transactions and, therefore, shall not be deemed to be a Triggering Event pursuant to this Article V, Section 4(f):

(A) any employment agreement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business of the Company or such Restricted Subsidiary;

(B) transactions between or among the Company and/or its Restricted Subsidiaries;

(C) transactions with a Person that is an Affiliate of the Company solely because the Company owns an Equity Interest in such Person;

(D) payment of reasonable directors fees to Persons who are not otherwise Affiliates of the Company;

(E) sales of Equity Interests (other than Disqualified Stock)

to Affiliates of the Company;

(F) Permitted Investments pursuant to this Supplemental Indenture and Restricted Payments that are permitted by the provisions of Article V, Section 4(a) (under the heading "Restricted Payments");

(G) fees and compensation paid to and indemnity provided on behalf of directors, officers or employees of the Company or any Restricted Subsidiary of the Company in the ordinary course of business, including reimbursement or advancement of out of pocket expenses and provision of directors' and officers' liability insurance;

(H) transactions pursuant to any agreement in effect on the original issue date of the Mortgage Bonds as the same may be amended from time to time in any manner not materially less favorable to the Holders of the Mortgage Bonds;

(I) advances to officers, directors and employees of the Company or any Restricted Subsidiary made in the ordinary course of business of the Company and/or its Restricted Subsidiaries and in

compliance with applicable law in an aggregate amount not to exceed $1.0 million outstanding at any one time;

(J) transactions pursuant to the Services and Facilities Agreement or the DMG Power Purchase Agreement, as the same may be amended, renewed, extended, replaced or otherwise modified, provided such amendment, renewal, extension, replacement or other modification has been approved by the applicable regulatory agency;

(K) transactions respecting the renewal of the lease of the Tilton Energy Center on terms no less favorable to Illinois Power and dispositions of the leased property by Illinois Power for consideration not less than Illinois Power's purchase price of such property;

(L) purchases of natural gas supply and transportation by Illinois Power from an Affiliate, and sales of electric transmission services, natural gas supply and distribution services and electric supply and distribution services by Illinois Power to an Affiliate, in each case in the ordinary course of business in accordance with past practices so long as such purchases or sales are subject to regulatory oversight; and

(M) the sale to a Transitional Funding Trust, either directly or indirectly, of any intangible transition property established pursuant to a transitional funding order issued by the ICC.

(iii) The provisions of this Article V, Section 4(f) ("Transactions with Affiliates") are subject to the provisions of Article V, Section 5 ("Suspension of Certain Triggering Events").

(g) Designation of Restricted and Unrestricted Subsidiaries.

(i) The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not cause a Triggering Event; provided that in no event shall the business currently operated by the Company be transferred to or held by an Unrestricted Subsidiary. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate fair market value of all outstanding Investments owned by the Company and its Restricted

Subsidiaries in the Subsidiary properly designated shall be deemed to be an Investment made as of the time of the designation and shall reduce the amount available for Restricted Payments under Article V,
Section 4(a)(i) (under the heading "Restricted Payments"). That designation shall only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.

(ii) The Board of Directors may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that (1) such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and (2) such Indebtedness is permitted under Article V, Section 4(b) (under the heading "Incurrence of Indebt-edness and Issuance of Preferred Stock"), calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period; and (3) no Default or Event of Default would be in existence following such designation.

(iii) The provisions of this Article V, Section 4(g) ("Designation of Restricted and Unrestricted Subsidiaries") are subject to the provisions of Article V, Section 5 ("Suspension of Certain Triggering Events").

(h) Future Subsidiary Guarantees.

(i) A Triggering Event will occur if any Restricted Subsidiary of the Company guarantees the payment of any Indebtedness of the Company unless (1) such Restricted Subsidiary simultaneously executes and delivers to the Trustee a Subsidiary Guarantee of such Restricted Subsidiary except that with respect to a Guarantee of Indebtedness of the Company if such Indebtedness is by its express terms subordinated in right of payment to the Mortgage Bonds, any such Guarantee of such Restricted Subsidiary with respect to such Indebtedness shall be subordinated in right of payment to such Restricted Subsidiary's Subsidiary Guarantee with respect to the Mortgage Bonds substantially to the same extent as such Indebtedness is subordinated to the Mortgage Bonds; (2) such Restricted Subsidiary waives and does not in any manner whatsoever claim or take the benefit or advantage of, any rights or reimbursement, indemnity

or subrogation or any other rights against the Company or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Subsidiary Guarantee of the Mortgage Bonds; and (3) such Restricted Subsidiary delivers to the Trustee an Opinion of Counsel to the effect that (a) such Subsidiary Guarantee has been duly executed and authorized and (b) such Subsidiary Guarantee constitutes a valid, binding and enforceable obligation of such Restricted Subsidiary, except insofar as enforcement thereof may be limited by bankruptcy, insolvency or similar laws (including, without limitation, all laws relating to fraudulent transfers) and except insofar as enforcement thereof is subject to general principles of equity; provided that this Article V,
Section 4(h)(i) shall not be applicable to any Guarantee of any Restricted Subsidiary that (x) existed at the time such Person became a Restricted Subsidiary of the Company and (y) was not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary of the Company.

(ii) Notwithstanding the foregoing and the other provisions of this Supplemental Indenture, in the event a Subsidiary Guarantor is sold or disposed of (whether by merger, consolidation, the sale of its Capital Stock or the sale of all or substantially all of its assets (other than by lease) and whether or not the Subsidiary Guarantor is the surviving corporation in such transaction) to a Person which is not the Company or a Restricted Subsidiary of the Company, such Subsidiary Guarantor shall be released from its obligations under its Subsidiary Guarantee if:

(A) the sale or other disposition shall not result in a Triggering Event; and

(B) the Subsidiary Guarantor is also released or discharged from its obligations under the Guarantee which resulted in the creation of such Subsidiary Guarantee, except by or as a result of payment under such Guarantee.

(iii) A Subsidiary Guarantor shall be released from its obligations under its Subsidiary Guarantee if it is released or discharged from its obligations under the Guarantee which resulted in the creation of such Subsidiary Guarantee, except by or as a result of payment under such Guarantee.

(i) Sale and Leaseback Transactions. A Triggering Event will occur if the Company or any of its Restricted Subsidiaries enters into any sale and leaseback transaction; provided that the Company or any Restricted Subsidiary may enter into a sale and leaseback transaction if:

(A) the Company or that Restricted Subsidiary, as applicable, could have incurred Indebtedness in an amount equal to the Attributable Debt relating to such sale and leaseback transaction under the Fixed Charge Coverage Ratio test in Article V, Section 4(b)(i) (under the heading "Incurrence of Indebtedness and Issuance of Preferred Stock");

(B) the gross cash proceeds of that sale and leaseback transaction are at least equal to the fair market value, as determined in good faith by the Board of Directors and set forth in an Officer's Certificate delivered to the Trustee, of the property that is the subject of that sale and leaseback transaction; and

(C) the transfer of assets in that sale and leaseback transaction is permitted by, and the Company applies the proceeds of such transaction in compliance with, the Triggering Event described below under Article V, Section 6(b) of this Supplemental Indenture (under the heading "Asset Sales");

provided, however, that the foregoing clauses (A) and (C) shall be suspended during any period in which the Company and its Restricted Subsidiaries are not subject to the Suspended Triggering Events.

(j) Business Activities.

A Triggering Event will occur if the Company or any Restricted Subsidiaries engages in any business other than Permitted Businesses, except to such extent as would not be material to the Company and its Subsidiaries taken as a whole.

(k) Reports.

(i) Whether or not required by the Commission, so long as any Mortgage Bonds are Outstanding, the Company shall furnish to the Holders of Mortgage Bonds (unless publicly available on the Commission's EDGAR system) within the time periods specified in the Commission's rules and regulations (as if required):

(A) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the certifications that would be required by Rule 13a-14 under the Exchange Act and, with respect to the annual information only, a report on the annual financial statements by the Company's certified independent accountants; and

(B) all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports,

failing which a Triggering Event will occur 30 days after notice as specified in Article V, Section 3(a)(iv).

(ii) If the Company has designated any of its Subsidiaries as Unrestricted Subsidiaries, then the quarterly and annual financial information required by the preceding paragraph shall include a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, and in Management's Discussion and Analysis of Financial Condition and Results of Operations, of the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Company.

(iii) In addition, a Triggering Event will occur, after notice and expiration of time as specified in Article V, Section
3(a)(iv), if (1) the Company fails to file a copy of all of the information and reports referred to in clauses (i) and
(ii) above with the Commission for public availability within the time periods specified in the Commission's rules and regulations (unless the Commission shall not accept such a filing) and fails to make such information available to securities analysts and prospective investors upon request or (2) the Company fails to furnish to the Holders of Mortgage Bonds and to prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

(iv) The Company shall deliver to the Trustee annually an Officer's Certificate regarding compliance with the

Indenture as required by the Trust Indenture Act of 1939, and, upon becoming aware of any Triggering Event, the Company shall deliver to the Trustee a statement specifying such Triggering Event, failing which a Triggering Event will occur 30 days after notice as specified in Article V, Section 3(a)(iv).

(l) Asset Sales.

(i) A Triggering Event will occur, subject to notice and lapse of time, if the Company or any of its Restricted Subsidiaries consummates an Asset Sale as provided, and subject to the exceptions, in Article V,
Section 6(b) ("Repurchase at the Option of Holders -- Asset Sales"), or does not comply with the provisions respecting an Asset Sale as provided in Article V, Section 7 ("Offer to Purchase by Application of Excess Proceeds").

(ii) The provisions of this Article V, Section 4(l) ("Asset Sales") are subject to the provisions of Article V, Section 5 ("Suspension of Certain Triggering Events").

SECTION 5. Suspension of Triggering Events.

(a) During any period of time that the Mortgage Bonds have an Investment Grade Rating from both of the Rating Agencies and no Default or Event of Default has occurred and is continuing under the Indenture, the Company and its Restricted Subsidiaries shall not be subject to the following provisions of this Supplemental Indenture :

. Article V, Section 4(a) (under the heading "--Restricted Payments");

. Article V, Section 4(b) (under the heading "--Incurrence of Indebtedness and Issuance of Preferred Stock");

. Article V, Section 4(d) (under the heading "--Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries");

. Article V, Section 4(f) (under the heading "--Transactions with Affiliates");

. Article V, Section 4(g) (under the heading "--Designation of Restricted and Unrestricted Subsidiaries"); and

. Article V, Section 6(b) (under the heading "Repurchase at the Option of Holders--Asset Sales");

(collectively, the "Suspended Triggering Events"); provided, however, that the Triggering Events described under the following provisions of this Supplemental Indenture shall not be so suspended:

. Article V, Section 4(c) (under the heading "--Liens");

. Article V, Section 4(e) (under the heading "--Merger, Consolidation or Sale of Assets," except as set forth therein);

. Article V, Section 4(j) (under the heading "--Business Activities");

. Article V, Section 4(h) (under the heading "--Future Subsidiary Guarantees,");

. Article V, Section 4(i) (under the heading "--Sale and Leaseback Transactions," except as set forth therein); and

. Article V, Section 4(k) (under the heading "--Reports").

(b) If the Company and its Restricted Subsidiaries are not subject to the Suspended Triggering Events for any period of time as a result of Article V,
Section 5(a) and, subsequently, either of the Rating Agencies withdraws its ratings or downgrades the ratings assigned to the Mortgage Bonds below the Investment Grade Ratings so that the Mortgage Bonds do not have an Investment Grade Rating from both Rating Agencies, or a Default or Event of Default occurs and is continuing, the Company and its Restricted Subsidiaries shall thereafter again be subject to the Suspended Triggering Events, subject to the terms, conditions and obligations set forth in this Supplemental Indenture (each such date of reinstatement being the "Reinstatement Date"), including Article V,
Section 5(a); provided, however, that no immediate Triggering Event shall occur as a result of such reinstatement of the Suspended Triggering Events. Compliance with the Suspended Triggering Events with respect to Restricted Payments made after the Reinstatement Date shall be calculated in accordance with the terms of Article V, Section 4(a) ("Triggering Events--Restricted Payments") only for the period the Triggering Event provision had been in effect, with any Restricted Payment made during any other period being disregarded for purposes of calculating the "basket" amount in Article V, Section 4(a)(i)(3) and any credit to such basket during such period likewise being disregarded.

SECTION 6. Repurchase at the Option of Holders.

(a) Offer to Purchase Upon Change of Control.

(i) If a Change of Control occurs, each Holder of Mortgage Bonds shall have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple of $1,000) of that Holder's Mortgage Bonds pursuant to the offer described below (the "Change of Control Offer") on the terms set forth in this Supplemental Indenture. In the Change of Control Offer, the Company shall offer an amount in cash (the "Change of Control Payment") equal to 101% of the aggregate principal amount of Mortgage Bonds repurchased plus accrued and unpaid interest, if any, on the Mortgage Bonds repurchased, to Change of Control Payment Date (as defined below).

(ii) Within 30 days following any Change of Control, the Company shall mail a notice to each Holder of Mortgage Bonds stating:

(A) the description of the transaction or transactions that constitute the Change of Control, that the Change of Control Offer is being made pursuant to this Article V, Section 6(a), and that all Mortgage Bonds validly tendered and not withdrawn shall be accepted for payment;

(B) the purchase price and the purchase date, which shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date");

(C) that any Mortgage Bonds not tendered or accepted for payment shall continue to accrue interest;

(D) that, unless the Company defaults in the payment of the Change of Control Payment, all Mortgage Bonds accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date;

(E) that Holders of Mortgage Bonds electing to have any Mortgage Bonds purchased pursuant to a Change of Control Offer shall be required to surrender the Mortgage Bonds properly endorsed, with the form entitled "Option of Holder to Elect Purchase" (substantially in the form of Exhibit E) properly completed, together with other customary documents as the Company may reasonably request, to the Paying Agent at the address specified in the notice prior to the close of

business on the third Business Day preceding the Change of Control Payment Date;

(F) that Holders of Mortgage Bonds shall be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Mortgage Bonds delivered for purchase, and a statement that such Holder of Mortgage Bonds is withdrawing its election to have the Mortgage Bonds purchased; and

(G) that Holders of Mortgage Bonds whose Mortgage Bonds are being purchased only in part shall be issued new Mortgage Bonds equal in principal amount to the unpurchased portion of the Mortgage Bonds surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof.

(iii) If any of the Mortgage Bonds subject to a Change of Control Offer are in the form of a Global Bond, then the Company shall modify such notice to the extent necessary to accord with the applicable procedures of the Depositary applicable to offers to purchase.

(iv) On the Change of Control Payment Date, the Company shall, to the extent lawful:

(A) accept for payment all Mortgage Bonds or portions thereof properly tendered pursuant to the Change of Control Offer;

(B) deposit with the Paying Agent in immediately available funds an amount equal to the Change of Control Payment in respect of all Mortgage Bonds or portions thereof so tendered; and

(C) deliver or cause to be delivered to the Trustee the Mortgage Bonds so accepted together with an Officer's Certificate stating the aggregate principal amount of Mortgage Bonds or portions thereof being purchased by the Company.

The Paying Agent shall promptly mail to each Holder of Mortgage Bonds so tendered the Change of Control Payment for such Mortgage Bonds, and the Trustee shall promptly authenticate and make available for delivery to each Holder

of Mortgage Bonds a new Mortgage Bond equal in principal amount to any unpurchased portion of the Mortgage Bonds surrendered, if any; provided that each such new Mortgage Bonds shall be in a principal amount of $1,000 or an integral multiple thereof. Any Mortgage Bonds not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

(v) The Change of Control provisions described above that require the Company to make a Change of Control Offer following a Change of Control shall be applicable whether or not any other provisions of this Supplemental Indenture are applicable.

(vi) The Company shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth herein applicable to a Change of Control Offer made by the Company and purchases all Mortgage Bonds properly tendered and not withdrawn under such Change of Control Offer.

(b) Asset Sales.

(i) A Triggering Event will occur, subject to notice and lapse of time as specified in Article V, Section
3(a)(iv), if the Company or any of its Restricted Subsidiaries consummates an Asset Sale unless:

(A) The Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of the Asset Sale at least equal to the fair market value of the assets or Equity Interests issued or sold or otherwise disposed of;

(B) the fair market value is determined by the Company's Board of Directors and evidenced by a resolution of the Board of Directors set forth in an Officer's Certificate delivered to the Trustee; and

(C) at least 75% of the consideration received in the Asset Sale by the Company or such Restricted Subsidiary is in the form of cash or Cash Equivalents. For purposes of this provision, each of the following shall be deemed to be cash:

(1) any liabilities, as shown on the Company's or such Restricted Subsidiary's most recent balance sheet, of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Mortgage Bonds in right of payment) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases the Company or such Restricted Subsidiary from further liability; and

(2) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are converted by the Company or such Restricted Subsidiary into cash within 60 days of the Asset Sale, to the extent of the cash received in that conversion.

(ii) Within 365 days after the receipt of any Net Proceeds from an Asset Sale, the Company or such Restricted Subsidiary may apply those Net Proceeds at its option:

(A) to repay senior secured Indebtedness of the Company, Transitional Funding Notes or to permanently repay Indebtedness under any of the Credit Facilities;

(B) to acquire all or substantially all of the assets of, or a majority of the Voting Stock of, another Permitted Business;

(C) to make a capital expenditure; or

(D) to acquire other long-term assets that are used or useful in a Permitted Business.

(iii) Pending the final application of any Net Proceeds, the Company or such Restricted Subsidiary may temporarily reduce revolving credit borrowings or otherwise invest the Net Proceeds in any manner that is not prohibited by this Supplemental Indenture.

(iv) Any Net Proceeds from Asset Sales that are not applied or invested as provided in Article V Section 6(b)(ii) ("Offer to Purchase by Application of Excess Proceeds") above shall constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $25.0 million, the Company shall make an Asset Sale Offer pursuant to the provisions of Article V, Section

7 ("Offer to Purchase by Application of Excess Proceeds").

(v) To the extent that any Asset Sale constitutes the sale, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole, such transaction shall be governed by the provisions of Article V, Sections 6(a) and 4(e) ("Repurchase at the Option of Holders--Offer to Purchase Upon a Change of Control" and "Triggering Events--Merger, Consolidation or Sale of Assets") and not by the provisions of Article V, Section 6(b)(ii) or Article V, Section 7 ("Offer to Purchase by Application of Excess Proceeds").

SECTION 7. Offer to Purchase by Application of Excess Proceeds.

(a) In the event that, pursuant to Article V, Section 6(b)(iv) ("Repurchase at the Option of Holders--Asset Sales"), the Company shall be required to commence an Asset Sale Offer, it shall make an offer (an "Asset Sale Offer") to all Holders of Mortgage Bonds, and all holders of other Indebtedness that ranks equally in right of payment with the Mortgage Bonds containing provisions similar to those set forth in this Supplemental Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets to purchase the maximum principal amount of the Mortgage Bonds and such other Indebtedness that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer shall be equal to 100% of principal amount plus accrued and unpaid interest, if any, to the date of purchase, and shall be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use those Excess Proceeds for any purpose not otherwise prohibited by this Supplemental Indenture. If the aggregate principal amount of Mortgage Bonds tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds allocated to repurchases of the Mortgage Bonds, the Trustee shall select the Mortgage Bonds to be purchased on a pro rata basis. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. Failure to comply with the provisions respecting an Asset Sale Offer shall constitute a Triggering Event, subject to notice and lapse of time as specified in Article V, Section 3(a)(iv).

(b) Any Asset Sale Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law or the rules and regulations of DTC (the "Offer Period"). No later than five Business Days after the termination of the Offer Period (the "Purchase Date"), the Company shall purchase the principal amount of Mortgage Bonds required to be purchased pursuant to paragraph (a) above (the "Offer Amount") or, if less than the Offer Amount has been tendered,

all Mortgage Bonds validly tendered in response to the Asset Sale Offer.

(c) Upon the commencement of an Asset Sale Offer, the Company shall send, by first class mail, a notice to each of the Holders of Mortgage Bonds, with a copy to the Trustee, stating:

(i) that the Asset Sale Offer is being made pursuant to this Article V, Section 7 and Article V, Section 6(b) ("Repurchase at the Option of Holders--Asset Sales") and the length of time the Asset Sale Offer shall remain open;

(ii) the purchase price and the Purchase Date;

(iii) that any Mortgage Bonds not tendered or accepted for payment shall continue to accrue interest;

(iv) that, unless the Company defaults in making such payment, any Mortgage Bonds accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest after the Purchase Date;

(v) that Holders of Mortgage Bonds electing to have a Mortgage Bonds purchased pursuant to any Asset Sale Offer shall be required to surrender the Mortgage Bonds, with the form entitled "Option of Holder to Elect Purchase" (in substantially the form of Exhibit E) properly completed, together with other customary documents as the Company may reasonably request, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Purchase Date;

(vi) that Holders of Mortgage Bonds shall be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Purchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Mortgage Bonds delivered for purchase, and a statement that such Holder of Mortgage Bonds is withdrawing its election to have the Mortgage Bonds purchased;

(vii) that, if the aggregate principal amount of Mortgage Bonds surrendered by Holders of Mortgage Bonds exceeds the Offer Amount, the Trustee shall select the Mortgage Bonds to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Trustee so that only Mortgage Bonds in

denominations of $1,000, or integral multiples thereof, shall be purchased); and

(viii) that Holders of Mortgage Bonds whose Mortgage Bonds are being purchased only in part shall be issued new Mortgage Bonds equal in principal amount to the unpurchased portion of the Mortgage Bonds surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof.

(d) If any of the Mortgage Bonds subject to an Asset Sale Offer is in the form of a Global Note, then the Company shall modify such notice to the extent necessary to accord with the Applicable Procedures of the Depository applicable to offers to purchase.

(e) On or before the Purchase Date, the Company shall, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, the Offer Amount of Mortgage Bonds or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Mortgage Bonds tendered, and shall deliver to the Trustee an Officer's Certificate stating that such Mortgage Bonds or portions thereof were accepted for payment by the Company in accordance with the terms of this Article V,
Section 7. The Paying Agent shall promptly (but in any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder of Mortgage Bonds an amount equal to the purchase price of the Mortgage Bonds tendered by such Holder of Mortgage Bonds and accepted by the Company for purchase, and the Company shall promptly issue a new Mortgage Bonds, and the Trustee, upon written request from the Company, shall authenticate and make available for delivery such new Mortgage Bonds to such Holder of Mortgage Bonds, in a principal amount equal to any unpurchased portion of the Mortgage Bonds surrendered; provided that each such new Mortgage Bonds shall be in a principal amount of $1,000 or an integral multiple thereof. Any Mortgage Bonds not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce the results of the Asset Sale Offer on the Purchase Date.

(f) The provisions of this Article V, Section 7 ("Offer to Purchase by Application of Excess Proceeds") are subject to the provisions of Article V,
Section 5 ("Suspension of Certain Triggering Events").

SECTION 8. Offers to Purchase - General.

(a) If the Change of Control Payment Date or Purchase Date is on or after a Regular Record Date and on or before the related Interest Payment Date, any accrued and unpaid interest, if any, shall be paid to the Person in whose name a Mortgage Bond is registered at the close of business on such Regular Record Date, and no additional interest shall be payable to Holders of Mortgage Bonds who tender

Mortgage Bonds pursuant to the Change of Control Offer or the Asset Sale Offer.

(b) The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with a Change of Control Offer or an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control Offer or Asset Sale Offer provisions of this Supplemental Indenture, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the Change of Control Offer or Asset Sale Offer provisions of this Supplemental Indenture by virtue of such conflict.

ARTICLE VI.

AMENDMENT OF INDENTURE

The definition of "Tranche" in Article One, Section 1.01 of the Indenture is hereby amended by inserting "and/" immediately prior to the word "or" in the second line.

ARTICLE VII.

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 VIII.

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.

IN WITNESS WHEREOF, Illinois Power Company has caused this Supplemental 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 Supplemental Indenture to be attested by an Authorized Executive Officer as defined in the Indenture and BNY Midwest Trust Company, in evidence of its acceptance of the trust hereby created, has caused this Supplemental Indenture to be executed on its behalf by one of its Vice Presidents and its corporate seal to be hereto affixed and said seal and this Supplemental Indenture to be attested by one of its Assistant Secretaries, all as of the date first written above.

ILLINOIS POWER COMPANY

(CORPORATE SEAL)

                                 By: /s/ Peggy E. Carter
                                    --------------------------------------------
                                 Name:  Peggy E. Carter
                                 Title:  Vice President and Controller

ATTEST:


By:  /s/ Kathryn L. Patton
    ----------------------
Name:  Kathryn L. Patton
Title:  Senior Vice President, General Counsel
           and Corporate Secretary

BNY MIDWEST TRUST COMPANY,
Trustee,

                                 By: /s/ J. Bartolini
                                     -------------------------------------------
(CORPORATE SEAL)                 Name:  J. Bartolini
                                 Title:  Vice President

ATTEST:


By: /s/ D.G. Donovan
    ----------------------
Name:  D.G. Donovan
Title:  Assistant Secretary

STATE OF ILLINOIS   )
                        SS.
COUNTY OF MACON     )

BE IT REMEMBERED, that on this 17th day of December, 2002, before me, the undersigned, a Notary Public within and for the County and State aforesaid, personally came Peggy E. Carter, Vice President and Controller and Kathryn L. Patton, Senior Vice President, General Counsel and 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.

/s/ Kimberly S. Tish
--------------------------------------
Notary Public, Macon County, Illinois

STATE OF ILLINOIS     )
                          SS.
COUNTY OF COOK        )

BE IT REMEMBERED, that on this 17th day of December, 2002, before me, the undersigned, a Notary Public within and for the County and State aforesaid, personally came J. Bartolini, Vice President, and D. G. Donovan, Assistant Secretary of BNY Midwest Trust Company, an Illinois trust company, 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 Vice President and Assistant Secretary, and as the free and voluntary act of said BNY Midwest Trust 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.

/s/ A. Hernandez
------------------------------------
Notary Public, Cook County, Illinois

Return To:                                     This Instrument Was Prepared By:

ILLINOIS POWER COMPANY                         SCHIFF HARDIN & WAITE
Real Estate Dept. F-14500                      6600 Sears Tower
S. 27th Street                                 Chicago, IL 60606
Decatur, IL 62525

                                                                       Exhibit A

                                                                           Principal Amount
                            Amount of                 Amount of           of this Book-Entry          Signature of
                           decrease in               increase in            Bond following        authorized signatory
                         Principal Amount         Principal Amount           such decrease           of Trustee or
Date of Exchange     of this Book-Entry Bond   of this Book-Entry Bond      (or increase)         Securities Custodian
----------------     -----------------------   -----------------------      -------------         --------------------

Exhibit B

FORM OF CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF BONDS

Re: Mortgage Bonds, 11.50% Series due 2010 of Illinois Power Company.

This Certificate relates to $_____ principal amount of Bonds held in *______ book-entry or *______ definitive form by _____________________ (the "Transferor").

The Transferor has requested the Trustee by written order to exchange or register the transfer of a Bond or Bonds.

In connection with such request and in respect of each such Bond, the Transferor does hereby certify that the Transferor is familiar with the Indenture relating to the above-captioned Bonds and that the transfer of this Bond does not require registration under the Securities Act (as defined below) because:*

9 Such Bond is being acquired for the Transferor's own account without transfer.

9 Such Bond is being transferred to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act of 1933, as amended (the "Securities Act")), in accordance with Rule 144A under the Securities Act.

9 Such Bond is being transferred (i) pursuant to an exemption from registration in accordance with Rule 144 under the Securities Act (and based upon an opinion of counsel if the Company or the Trustee so requests) or (ii) pursuant to an effective registration statement under the Securities Act.

9 Such Bond is being transferred to an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act pursuant to a private placement exemption from the registration requirements of the Securities Act (and based upon an opinion of counsel if the Company or the Trustee so requests), together with a certification in substantially the form of Exhibit C to the Indenture, and, to the knowledge of the Transferor, such institutional accredited investor to whom such Bond is to be transferred is not an "affiliate" (as defined in Rule 144 under the Securities Act) of the Company.

9 Such Bond is being transferred in reliance on and in compliance with another exemption from the registration requirements

of the Securities Act (and based upon an opinion of counsel if the Company or the Trustee so requests).

[INSERT NAME OF TRANSFEROR]

By:__________________________________
Name:
Title:
Address:

Date: _________________________

Exhibit C

FORM OF TRANSFEREE LETTER OF REPRESENTATION
TO BE DELIVERED BY INSTITUTIONAL ACCREDITED INVESTORS

Illinois Power Company
c/o President
500 South 27th Street
Decatur, Illinois 62521-2200

Ladies and Gentlemen:

In connection with our proposed purchase of $[ ] aggregate principal amount of Mortgage Bonds, 11.50% Series due 2010 (the "Bonds") of Illinois Power Company (the "Company"):

1. We understand that the Bonds have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or under any other applicable securities laws, and may not be sold except as permitted in the following sentence. We agree on our own behalf and on behalf of any investor account for which we are purchasing the Bonds to offer, sell or otherwise transfer such Bonds prior to the date which is two years (or such shorter period of time as permitted by Rule 144(k) under the Securities Act) after the later of the date of original issue and the last date on which the Company or any affiliate of the Company was the owner of such Bonds, or any predecessor thereto
(the "Resale Restriction Termination Date") only (a) to the Company, (b) pursuant to a registration statement that has been declared effective by the Securities and Exchange Commission (the "SEC"), (c) for so long as the Bonds are eligible for resale pursuant to Rule 144A under the Securities Act, to a person we reasonably believe is a qualified institutional buyer under Rule 144A (a "QIB") that purchases for its own account or for the account of a QIB to whom notice is given that the transfer is being made in reliance on Rule 144A, (d) to an institutional "accredited investor" within the meaning of subparagraph
(a)(1), (2), (3) or (7) of Rule 501 under the Securities Act (an "Institutional Accredited Investor") that is acquiring the Bonds for its own account or for the account of another Institutional Accredited Investor for investment purposes and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the regulations of the Securities Act and any other applicable securities laws, or (e) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of our property and the property of such investor account or accounts be at all times within our or their control. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Bonds is proposed to be made pursuant to clause (d) above prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee

substantially in the form of this letter to the Trustee, which shall provide, among other things, that the transferee is an Institutional Accredited Investor and that it is acquiring such Bonds for investment purposes and not for distribution in violation of the Securities Act. We acknowledge that the Company and the Trustee reserve the right prior to any offer, sale or other transfer pursuant to clause (d) or (e) prior to the Resale Restriction Termination Date of the Bonds to require the delivery of an opinion of counsel, certifications and/or other information satisfactory to the Company and the Trustee.

2. We are an Institutional Accredited Investor purchasing for our own account or for the account of another Institutional Accredited Investor.

3. We are acquiring the Bonds purchased by us for our own account, or for one or more accounts as to each of which we exercise sole investment discretion, for investment purposes and not with a view to, or for offer or sale in connection with any distribution in violation of, the Securities Act. We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of investment in the Bonds, we invest in securities similar to the Bonds in the normal course of our business and we, and all accounts for which we are acting, are able to bear the economic risk of investment in the Bonds.

4. You are entitled to rely upon this letter and you are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.

Very truly yours,

Name of Transferee:_____________

By:_____________________________

Date:___________________________

Upon transfer the Bonds would be registered in the name of the new beneficial owner as follows:

Name:            ___________________________
Address:         ___________________________
                 ___________________________
Taxpayer ID No:  ___________________________

                                      C-2

                                                                       Exhibit D

ASSIGNMENT FORM

(Insert assignee's social security or tax I.D. number)

Date:____________________          Your Signature:______________________________
                                                  (Sign exactly as your name
                                                   appears on the face of this
                                                   Bond)

Signature Guarantee:____________________________________________________________ (Participant in a Recognized Signature Guaranty Medallion Program)

[_] Article V, Section 6(a) (Offer          [_] Article V, Section 7 (Offer to
    to Purchase Upon Change of Control)         Purchase by Application of
                                                Excess Proceeds)

If you want to elect to have only part of the Mortgage Bond purchased by the Company pursuant to Section 6(a) (Offer to Purchase Upon Change of Control) or Article V, Section 7 (Offer to Purchase by Application of Excess Proceeds) of the Supplemental Indenture, state the amount you elect to have purchased:

$_________________________

Date: __________________________

Your Signature:_________________________________________________________________ (Sign exactly as your name appears on the face of the Mortgage Bond)

Tax Identification No.:_________________________________________________________

SIGNATURE GUARANTEE:____________________________________________________________

Signatures must be guaranteed by an
"eligible guarantor institution"
meeting the requirements of the
Bond Registrar, which requirements
include membership or participation
in the Security Transfer Agent
Medallion Program ("STAMP") or such
other "signature guarantee program"
as may be determined by the Bond
Registrar in addition to, or in
substitution for, STAMP, all in
accordance with the Securities
Exchange Act of 1934, as amended.

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (the "Agreement") is made and entered into this 20th day of December, 2002, among Illinois Power Company, an Illinois corporation (the "Company"), and Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and Credit Suisse First Boston Corporation (collectively, the "Initial Purchasers").

This Agreement is made pursuant to the Purchase Agreement, dated December 17, 2002, among the Company and the Initial Purchasers (the "Purchase Agreement"), which provides for the sale by the Company to the Initial Purchasers of an aggregate of $400,000,000 aggregate principal amount of its Mortgage Bonds, 11.5% Series due 2010 (the "Initial Delivery Bonds") and $150,000,000 aggregate principal amount of its Mortgage Bonds, 11.5% Series due 2010 (the "Delayed Delivery Bonds," and, together with the Initial Delivery Bonds, the "Securities"). In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Company has agreed to provide to the Initial Purchasers and their direct and indirect transferees the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the closing under the Purchase Agreement.

In consideration of the foregoing, the parties hereto agree as follows:

1. Definitions.

As used in this Agreement, the following capitalized defined terms shall have the following meanings:

"1933 Act" shall mean the Securities Act of 1933, as amended from time to time.

"1934 Act" shall mean the Securities Exchange Act of l934, as amended from time to time.

"Closing Date" shall mean the Closing Time as defined in the Purchase Agreement.

"Company" shall have the meaning set forth in the preamble and shall also include the Company's successors.

"Depositary" shall mean The Depository Trust Company, or any other depositary appointed by the Company, provided, however, that such depositary must have an address in the Borough of Manhattan, in the City of New York.

"Exchange Offer" shall mean the exchange offer by the Company of Exchange Securities for Registrable Securities pursuant to Section 2.1 hereof.

"Exchange Offer Registration" shall mean a registration under the 1933 Act effected pursuant to Section 2.1 hereof.

"Exchange Offer Registration Statement" shall mean an exchange offer registration statement on Form S-4 (or, if applicable, on another appropriate form), and all amendments and supplements to such registration statement, including the Prospectus contained therein, all exhibits thereto and all documents incorporated by reference therein.

"Exchange Period" shall have the meaning set forth in Section 2.1 hereof.

"Exchange Securities" shall mean the mortgage bonds issued by the Company under the Mortgage containing terms identical to the Securities in all material respects (except for references to certain interest rate provisions, restrictions on transfers and restrictive legends), to be offered to Holders of Securities in exchange for Registrable Securities pursuant to the Exchange Offer.

"Holder" shall mean an Initial Purchaser, for so long as it owns any Registrable Securities, and each of its successors, assigns and direct and indirect transferees who become registered owners of Registrable Securities under the Mortgage and each Participating Broker-Dealer that holds Exchange Securities for so long as such Participating Broker-Dealer is required to deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of such Exchange Securities.

"Initial Purchaser" or "Initial Purchasers" shall have the meaning set forth in the preamble.

"Majority Holders" shall mean the Holders of a majority of the aggregate principal amount of Outstanding (as defined in the Mortgage) Registrable Securities; provided that whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company and other obligors on the Securities or any Affiliate (as defined in the Mortgage) of the Company shall be disregarded in determining whether such consent or approval was given by the Holders of such required percentage amount.

"Mortgage" shall mean the Mortgage relating to the Securities, dated as of November 1, 1992, between the Company and BNY Midwest Trust Company, as successor trustee to Harris Trust and Savings Bank, as the same may be amended, supplemented, waived or otherwise modified from time to time in accordance with the terms thereof.

"Participating Broker-Dealer" shall mean any of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse First Boston Corporation and any other broker-dealer which makes a market in the Securities and exchanges Registrable Securities in the Exchange Offer for Exchange Securities.

"Person" shall mean an individual, partnership (general or limited), corporation, limited liability company, trust or unincorporated organization, or a government or agency or political subdivision thereof.

"Private Exchange" shall have the meaning set forth in Section 2.1 hereof.

"Private Exchange Securities" shall have the meaning set forth in
Section 2.1 hereof.

"Prospectus" shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including any such prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by a Shelf Registration Statement, and by all other amendments and supplements to a prospectus, including post-effective amendments, and in each case including all material incorporated by reference therein.

"Purchase Agreement" shall have the meaning set forth in the preamble.

"Registrable Securities" shall mean the Initial Delivery Bonds, and, if issued, the Delayed Delivery Bonds, and the Private Exchange Securities; provided, however, that the Initial Delivery Bonds and, if issued, the Delayed Delivery Bonds and the Private Exchange Securities, shall cease to be Registrable Securities when (i) a Registration Statement with respect to such Securities shall have been declared effective under the 1933 Act and such Securities shall have been disposed of pursuant to such Registration Statement, (ii) such Securities have been sold to the public pursuant to Rule l44 (or any similar provision then in force, but not Rule 144(A) under the 1933 Act or are eligible to be sold to the public pursuant to Rule 144(k) under the 1933 Act, (iii) such Securities shall have ceased to be outstanding or (iv) the Exchange Offer is consummated (except in the case of Securities purchased from the Company and continued to be held by the Initial Purchasers).

"Registration Expenses" shall mean any and all expenses incident to performance of or compliance by the Company with this Agreement, including without limitation: (i) all SEC, stock exchange or National Association of Securities Dealers, Inc. (the "NASD") registration and filing fees, including, if applicable, the fees and expenses of any "qualified independent underwriter" (and its counsel) that is required to be retained by any Holder of Registrable Securities in accordance with the rules and regulations of the NASD, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws and compliance with the rules of the NASD (including reasonable fees and disbursements of one firm of legal counsel for any underwriters or Holders in connection with blue sky qualification of any of the Exchange Securities or Registrable Securities and any filings with the NASD), (iii) all expenses of any Persons in preparing or assisting in preparing, word processing, printing and distributing any Registration Statement, any Prospectus, any amendments or supplements thereto, any underwriting agreements, securities sales agreements and other documents relating to the performance of and compliance with this Agreement, (iv) all fees and expenses incurred in connection with the listing, if any, of any of the Registrable Securities on any securities exchange or exchanges, (v) all rating agency fees, (vi) the fees and disbursements of counsel for the Company and of the independent public accountants of the Company, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, (vii) the fees and expenses of the Trustee and its counsel, and any escrow agent or custodian,

(viii) the reasonable fees and expenses of the Initial Purchasers in connection with the Exchange Offer, including the reasonable fees and expenses of one firm of legal counsel to the Initial Purchasers in connection therewith, (ix) the reasonable fees and disbursements of one special counsel representing the Holders of Registrable Securities and (x) any fees and disbursements of the underwriters customarily required to be paid by issuers or sellers of securities and the fees and expenses of any special experts retained by the Company in connection with any Registration Statement, but excluding underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of Registrable Securities by a Holder.

"Registration Statement" shall mean any registration statement of the Company which covers any of the Exchange Securities or Registrable Securities pursuant to the provisions of this Agreement, and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein.

"SEC" shall mean the Securities and Exchange Commission or any successor agency or government body performing the functions currently performed by the United States Securities and Exchange Commission.

"Shelf Registration" shall mean a registration effected pursuant to
Section 2.2 hereof.

"Shelf Registration Statement" shall mean a "shelf" registration statement of the Company pursuant to the provisions of Section 2.2 of this Agreement which covers all of the Registrable Securities or all of the Private Exchange Securities on an appropriate form under Rule 415 under the 1933 Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein.

"Trustee" shall mean the trustee with respect to the Securities under the Mortgage.

2. Registration Under the 1933 Act.

2.1 Exchange Offer. The Company shall, for the benefit of the Holders, at the Company's cost, (A) prepare and file with the SEC an Exchange Offer Registration Statement on an appropriate form under the 1933 Act with respect to a proposed Exchange Offer and the issuance and delivery to the Holders, in exchange for the Registrable Securities (other than Private Exchange Securities), of a like principal amount of Exchange Securities, (B) use its commercially reasonable efforts to cause the Exchange Offer Registration Statement to be declared effective under the 1933 Act, (C) use its commercially reasonable efforts to keep the Exchange Offer Registration Statement effective until the closing of the Exchange Offer and (D) use its commercially reasonable efforts to cause the Exchange Offer to be consummated not later than 270 days after the Closing Date. The Exchange Securities will be issued under the

Mortgage. Upon the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Exchange Offer, it being the objective of such Exchange Offer to enable each Holder eligible and electing to exchange Registrable Securities for Exchange Securities (assuming that such Holder (a) is not an affiliate of the Company within the meaning of Rule 405 under the 1933 Act, (b) is not a broker-dealer tendering Registrable Securities acquired directly from the Company for its own account, (c) acquired the Exchange Securities in the ordinary course of such Holder's business and (d) has no arrangements or understandings with any Person to participate in the Exchange Offer for the purpose of distributing the Exchange Securities) to transfer such Exchange Securities from and after their receipt without any limitations or restrictions under the 1933 Act and under state securities or blue sky laws.

In connection with the Exchange Offer, the Company shall:

(a) mail as promptly as practicable to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents;

(b) keep the Exchange Offer open for acceptance for a period of not less than 30 calendar days after the date notice thereof is mailed to the Holders (or longer if required by applicable law) (such period referred to herein as the "Exchange Period");

(c) utilize the services of the Depositary for the Exchange Offer;

(d) permit Holders to withdraw tendered Registrable Securities at any time prior to 5:00 p.m. (Eastern Time), on the last business day of the Exchange Period, by sending to the institution specified in the notice, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Registrable Securities delivered for exchange, and a statement that such Holder is withdrawing such Holder's election to have such Securities exchanged;

(e) notify each Holder that any Registrable Security not tendered will remain outstanding and continue to accrue interest, but will not retain any rights under this Agreement (except in the case of the Initial Purchasers and Participating Broker-Dealers as provided herein); and

(f) otherwise comply in all respects with all applicable laws relating to the Exchange Offer.

If, prior to consummation of the Exchange Offer, the Initial Purchasers hold any Securities acquired by them and having the status of an unsold allotment in the initial distribution, the Company upon the request of any Initial Purchaser shall, simultaneously with the delivery of the Exchange Securities in the Exchange Offer, issue and deliver to such Initial Purchaser in exchange (the "Private Exchange") for the Securities held by such Initial Purchaser, a like principal amount of mortgage bonds of the Company, that are identical (except that such mortgage bonds shall bear appropriate transfer restrictions) to the Exchange Securities (the "Private Exchange Securities").

The Exchange Securities and the Private Exchange Securities shall be issued under (i) the Mortgage or (ii) a mortgage identical in all material respects to the Mortgage and which, in either case, has been qualified under the Trust Indenture Act of 1939, as amended (the "TIA"), or is exempt from such qualification and shall provide that the Exchange Securities shall not be subject to the transfer restrictions set forth in the Mortgage but that the Private Exchange Securities shall be subject to such transfer restrictions. The Mortgage or such mortgage shall provide that the Exchange Securities, the Private Exchange Securities and the Securities shall vote and consent together on all matters as one class and that none of the Exchange Securities, the Private Exchange Securities or the Securities will have the right to vote or consent as a separate class on any matter. The Private Exchange Securities shall be of the same series as and the Company shall use all commercially reasonable efforts to have the Private Exchange Securities bear the same CUSIP number as the Exchange Securities. The Company shall not have any liability under this Agreement solely as a result of such Private Exchange Securities not bearing the same CUSIP number as the Exchange Securities.

As soon as practicable after the close of the Exchange Offer and/or the Private Exchange, as the case may be, the Company shall:

(i) accept for exchange all Registrable Securities duly tendered and not validly withdrawn pursuant to the Exchange Offer in accordance with the terms of the Exchange Offer Registration Statement and the letter of transmittal which shall be an exhibit thereto;

(ii) accept for exchange all Securities properly tendered pursuant to the Private Exchange;

(iii) deliver to the Trustee for cancellation all Registrable Securities so accepted for exchange; and

(iv) cause the Trustee promptly to authenticate and deliver Exchange Securities or Private Exchange Securities, as the case may be, to each Holder of Registrable Securities so accepted for exchange in a principal amount equal to the principal amount of the Registrable Securities of such Holder so accepted for exchange.

Interest on each Exchange Security and Private Exchange Security will accrue from the last date on which interest was paid on the Registrable Securities surrendered in exchange therefor or, if no interest has been paid on the Registrable Securities, from the date of original issuance. The Exchange Offer and the Private Exchange shall not be subject to any conditions, other than (i) that the Exchange Offer or the Private Exchange, or the making of any exchange by a Holder, does not violate applicable law or any applicable interpretation of the staff of the SEC, (ii) the due tendering of Registrable Securities in accordance with the Exchange Offer and the Private Exchange, (iii) that each Holder of Registrable Securities exchanged in the Exchange Offer shall have represented that all Exchange Securities to be received by it shall be acquired in the ordinary course of its business and that at the time of the consummation of the Exchange Offer it shall have no arrangement or understanding with any person to participate in the distribution (within the meaning of the 1933 Act) of the Exchange Securities and shall have

made such other representations as may be reasonably necessary under applicable SEC rules, regulations or interpretations to render the use of Form S-4 or other appropriate form under the 1933 Act available and (iv) that no action or proceeding shall have been instituted or threatened in any court or by or before any governmental agency with respect to the Exchange Offer or the Private Exchange which, in the Company's judgment, would reasonably be expected to impair the ability of the Company to proceed with the Exchange Offer or the Private Exchange. If requested, the Company shall inform the Initial Purchasers of the names and addresses of the Holders to whom the Exchange Offer is made, and the Initial Purchasers shall have the right to contact such Holders and otherwise facilitate the tender of Registrable Securities in the Exchange Offer.

2.2 Shelf Registration. (i) If, because of any changes in law, SEC rules or regulations or applicable interpretations thereof by the staff of the SEC, the Company is not permitted to effect the Exchange Offer as contemplated by Section 2.1 hereof, (ii) if for any other reason the Exchange Offer is not consummated within 270 days after the Closing Date, (iii) upon the request of the Initial Purchasers (but only with respect to any Registrable Securities which the Initial Purchaser acquired directly from the Company) or (iv) if a Holder is not permitted by the federal securities laws or applicable interpretations thereof by the staff of the SEC to participate in the Exchange Offer or does not receive fully tradeable Exchange Securities pursuant to the Exchange Offer, then in case of each of clauses (i) through (iv) the Company shall, at its cost:

(a) As promptly as practicable, file with the SEC, and thereafter shall use its commercially reasonable efforts to cause to be declared effective as promptly as practicable but no later than 300 days after the Closing Date, a Shelf Registration Statement relating to the offer and sale of the Registrable Securities by the Holders from time to time in accordance with the methods of distribution elected by the Majority Holders participating in the Shelf Registration and set forth in such Shelf Registration Statement.

(b) Use its commercially reasonable efforts to keep the Shelf Registration Statement continuously effective in order to permit the Prospectus forming part thereof to be usable by Holders for a period of two years from the date the Shelf Registration Statement is declared effective by the SEC, or for such shorter period that will terminate when all Registrable Securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement or cease to be outstanding or otherwise to be Registrable Securities (the "Effectiveness Period"); provided, however, that the Company shall not be obligated to keep such Shelf Registration Statement effective if (A) any event occurs or facts are discovered which make any statement made in such Shelf Registration Statement or the related Prospectus untrue in any material respect or which require the making of any changes in such Shelf Registration Statement or Prospectus in order to make the statements therein not misleading; (B) the Company determines, in its reasonable judgment, upon advice of counsel, as authorized by a resolution of its Board of Directors, that the continued effectiveness and usability of such Shelf Registration Statement would
(x) require the disclosure of material information, which the Company has a bona fide business reason for preserving as confidential, or (y) interfere with any financing, acquisition, corporate reorganization or other material transaction involving the Company or any of its subsidiaries, and provided, further, that the failure to keep such Shelf Registration Statement effective and usable for offers and sales of Registrable

Securities for any of the foregoing reasons shall occur no more than twice in any 12-month period and shall last no longer than 45 days in any 12-month period whereafter Additional Interest (as defined in Section 2.5) shall become payable in accordance with Section 2.5, and (B) the Company thereafter complies as promptly as practicable with the requirements of Section 3(k) hereof, if applicable. Any such period during which the Company is excused from keeping the Shelf Registration Statement effective and usable for offers and sales of Registrable Securities is referred to herein as a "Suspension Period"; a Suspension Period shall commence on and include the date that the Company gives prompt notice to the Holders that the Shelf Registration Statement is no longer effective or the prospectus included therein is no longer usable for offers and sales of Registrable Securities as a result of the application of the proviso (which contains clauses (A) and (B)) of the foregoing sentence and shall end on the earlier to occur of (1) the date on which each seller of Registrable Securities covered by the Shelf Registration Statement either receives the copies of the supplemented or amended prospectus contemplated by Section 3(k) hereof or is advised in writing by the Company as promptly as practicable following its determination that use of the prospectus may be resumed and (2) the expiration of 45 days in any 12-month period during which one or more Suspension Periods has been in effect. The Company shall extend the Effectiveness Period (or the period during which Participating Broker-Dealers are entitled to use the prospectus included in the Exchange Offer Registration Statement in connection with the resale of the Exchange Securities, as the case may be) by the number of days during either such period from and including the date of the giving of such notice to and including the date which is the earlier to occur as described in the preceding sentence.

(c) Notwithstanding any other provisions hereof, use its commercially reasonable efforts to ensure that (i) any Shelf Registration Statement and any amendment thereto and any Prospectus forming part thereof and any supplement thereto complies in all material respects with the 1933 Act and the rules and regulations thereunder, (ii) any Shelf Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any Prospectus forming part of any Shelf Registration Statement, and any supplement to such Prospectus (as amended or supplemented from time to time), does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements, in light of the circumstances under which they were made, not misleading.

The Company shall not permit any securities other than Registrable Securities to be included in the Shelf Registration Statement. The Company further agrees, if necessary, to supplement or amend the Shelf Registration Statement, as required by Section 3(b) below, and to furnish to the Holders of Registrable Securities copies of any such supplement or amendment promptly after its being used or filed with the SEC.

2.3 Expenses. The Company shall pay all Registration Expenses in connection with the registration pursuant to Section 2.1 or 2.2. Each Holder shall pay all underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder's Registrable Securities pursuant to the Shelf Registration Statement.

2.4 Effectiveness. (a) The Company will be deemed not have used its commercially reasonable efforts to cause the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, to become, or to remain, effective during the requisite period if the Company voluntarily takes any action that would, or omits to take any action which omission would, result in any such Registration Statement not being declared effective or in the Holders of Registrable Securities covered thereby not being able to exchange or offer and sell such Registrable Securities during that period as and to the extent contemplated hereby, unless such action is required by applicable law.

(b) An Exchange Offer Registration Statement pursuant to Section 2.1 hereof or a Shelf Registration Statement pursuant to Section 2.2 hereof will not be deemed to have become effective unless it has been declared effective by the SEC; provided, however, that if, after it has been declared effective, the offering of Registrable Securities pursuant to an Exchange Offer Registration Statement or a Shelf Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, such Registration Statement will be deemed not to have become effective during the period of such interference, until the offering of Registrable Securities pursuant to such Registration Statement may legally resume.

2.5 Interest. The Mortgage executed in connection with the Securities will provide that in the event that either (a) the Exchange Offer is not consummated on or prior to the 270th calendar day after the Closing Date, (b) a Shelf Registration Statement, if required, is not declared effective on or prior to the 300th calendar day after the Closing Date, or (c) after the Shelf Registration Statement has been filed and declared effective, the Shelf Registration Statement is unusable by the Holders for any reason (including without limitation any of the reasons described in clauses (A) or (B) of Section 2.2(b)) during the Effectiveness Period, and the aggregate number of days in any consecutive twelve-month period for which the Shelf Registration Statement shall not be usable exceeds 45 days in the aggregate (each such event referred to in clauses (a) through (c) above, a "Registration Default"), the interest rate borne by the Securities shall be increased ("Additional Interest") by one-quarter of one percent per annum upon the occurrence of a Registration Default, which rate will increase by one quarter of one percent each quarterly period that such Additional Interest continues to accrue under any such circumstance, provided that the maximum aggregate increase in the interest rate will in no event exceed one percent 1% per annum. Additional Interest shall be computed based on the actual number of days elapsed in each quarterly period in which a Registration Default Exists. Following the cure of all Registration Defaults the accrual of Additional Interest will cease and the interest rate will revert to the original rate.

The Company shall notify the Trustee within three business days after each and every date on which an event occurs in respect of which Additional Interest is required to be paid (an "Event Date"). Additional Interest shall be paid by depositing with the Trustee, in trust, for the benefit of the Holders of Registrable Securities, on or before the applicable semiannual interest payment date, immediately available funds in sums sufficient to pay the Additional Interest then due. The Additional Interest due shall be payable on each interest payment date to the record Holder of Securities entitled to receive the interest payment to be paid on such date as set forth in the Mortgage. Each obligation to pay Additional Interest shall be deemed to accrue from and including the day following the applicable Event Date.

3. Registration Procedures.

In connection with the obligations of the Company with respect to Registration Statements pursuant to Sections 2.1 and 2.2 hereof, the Company shall:

(a) prepare and file with the SEC a Registration Statement on the appropriate form under the 1933 Act, which form (i) shall be selected by the Company, (ii) shall, in the case of a Shelf Registration, be available for the sale of the Registrable Securities by the selling Holders thereof, (iii) shall comply as to form in all material respects with the requirements of the applicable form and include or incorporate by reference all financial statements required by the SEC to be filed therewith or incorporated by reference therein, and (iv) shall comply in all material respects with the requirements of Regulation S-T under the 1933 Act, and use its commercially reasonable efforts to cause such Registration Statement to become effective and remain effective in accordance with Section 2 hereof;

(b) prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary under applicable law to keep such Registration Statement effective for the applicable period; and cause each Prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provision then in force) under the 1933 Act and comply with the provisions of the 1933 Act, the 1934 Act and the rules and regulations thereunder applicable to them with respect to the disposition of all securities covered by each Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the selling Holders thereof (including sales by any Participating Broker-Dealer);

(c) in the case of a Shelf Registration, (i) notify each Holder of Registrable Securities, at least five business days prior to filing, that a Shelf Registration Statement with respect to the Registrable Securities is being filed and advising such Holders that the distribution of Registrable Securities will be made in accordance with the method selected by the Majority Holders participating in the Shelf Registration; (ii) furnish to each Holder of Registrable Securities and to each underwriter of an underwritten offering of Registrable Securities, if any, without charge, as many copies of each Prospectus, including each preliminary Prospectus, and any amendment or supplement thereto and such other documents as such Holder or underwriter may reasonably request, including financial statements and schedules and, if the Holder so requests, all exhibits in order to facilitate the public sale or other disposition of the Registrable Securities; and (iii) hereby consent to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders of Registrable Securities in connection with the offering and sale of the Registrable Securities covered by the Prospectus or any amendment or supplement thereto;

(d) use its commercially reasonable efforts to register or qualify the Registrable Securities under all applicable state securities or "blue sky" laws of such jurisdictions as any Holder of Registrable Securities covered by a Registration Statement and each underwriter of an underwritten offering of Registrable Securities shall reasonably request by the time the applicable Registration Statement is declared effective by the SEC, and do any and all other acts and things which may be reasonably necessary or advisable to enable each such Holder and underwriter to consummate the disposition in each such jurisdiction of such

Registrable Securities owned by such Holder; provided, however, that the Company shall not be required to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), or (ii) take any action which would subject it to general service of process or taxation in any such jurisdiction where it is not then so subject;

(e) notify promptly each Holder of Registrable Securities under a Shelf Registration or any Participating Broker-Dealer who has notified the Company that it is utilizing the Exchange Offer Registration Statement as provided in paragraph (f) below and, if requested by such Holder or Participating Broker-Dealer, confirm such advice in writing promptly (i) when a Registration Statement has become effective and when any post-effective amendments and supplements thereto become effective, (ii) of any request by the SEC or any state securities authority for post-effective amendments and supplements to a Registration Statement and Prospectus or for additional information after the Registration Statement has become effective, (iii) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose,
(iv) in the case of a Shelf Registration, if, between the effective date of a Registration Statement and the closing of any sale of Registrable Securities covered thereby, the representations and warranties of the Company contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to the offering cease to be true and correct in all material respects, (v) if at any time when a Prospectus is required to be delivered under the Securities Act, that such Registration Statement, Prospectus, prospectus amendment or supplement or post-effective amendment does not conform in all material respects to the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the SEC thereunder, (vi) of the happening of any event or the discovery of any facts during the period a Shelf Registration Statement is effective which makes any statement made in such Registration Statement or the related Prospectus untrue in any material respect or which requires the making of any changes in such Registration Statement or Prospectus in order to make the statements therein not misleading, (vii) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities or the Exchange Securities, as the case may be, for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose and (viii) of any determination by the Company that a post-effective amendment to such Registration Statement would be appropriate;

(f) (A) in the case of the Exchange Offer Registration Statement (i) include in the Exchange Offer Registration Statement a section entitled "Plan of Distribution" which section shall be reasonably acceptable to Merrill Lynch on behalf of the Participating Broker-Dealers, and which shall contain a summary statement of the positions taken or policies made by the staff of the SEC with respect to the potential "underwriter" status of any broker-dealer that holds Registrable Securities acquired for its own account as a result of market-making activities or other trading activities and that will be the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange Securities to be received by such broker-dealer in the Exchange Offer, whether such positions or policies have been publicly disseminated by the staff of the SEC or such positions or policies, in the reasonable judgment of Merrill Lynch on behalf of the Participating Broker-Dealers and its counsel, represent the prevailing views of the staff of the SEC, including a statement that any such broker-dealer who receives Exchange Securities for

Registrable Securities pursuant to the Exchange Offer may be deemed a statutory underwriter and must deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of such Exchange Securities, (ii) include in the Exchange Offer Registration Statement a Prospectus for use in any resales by any Participating Broker-Dealer, (iii) keep such Exchange Offer Registration Statement effective for a period of up to 180 days after the last date Registrable Securities are accepted in the Exchange Offer (as such period may be extended pursuant to the third to last paragraph of Section 3 of this Agreement), if requested by the Initial Purchasers or by one or more Participating Broker-Dealers, (iv) furnish to each Participating Broker-Dealer who has delivered to the Company the notice referred to in Section 3(e), without charge, as many copies of each Prospectus included in the Exchange Offer Registration Statement, including any preliminary prospectus, and any amendment or supplement thereto, as such Participating Broker-Dealer may reasonably request, (v) hereby consent to the use of the Prospectus forming part of the Exchange Offer Registration Statement or any amendment or supplement thereto, by any Person subject to the prospectus delivery requirements of the SEC, including all Participating Broker-Dealers, in connection with the sale or transfer of the Exchange Securities covered by the Prospectus or any amendment or supplement thereto, and (vi) include in the transmittal letter or similar documentation to be executed by an exchange offeree in order to participate in the Exchange Offer
(x) the following provision:

"If the exchange offeree is a broker-dealer holding Registrable Securities acquired for its own account as a result of market-making activities or other trading activities, it will deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of Exchange Securities received in respect of such Registrable Securities pursuant to the Exchange Offer;" and

(y) a statement to the effect that by a broker-dealer making the acknowledgment described in clause (x) and by delivering a Prospectus in connection with the exchange of Registrable Securities, the broker-dealer will not be deemed to admit that it is an underwriter within the meaning of the 1933 Act; and

(B) in the case of any Exchange Offer Registration Statement, the Company agrees to deliver to the Initial Purchasers, upon their request, on behalf of the Participating Broker-Dealers upon the effectiveness of the Exchange Offer Registration Statement (i) an opinion of counsel or opinions of counsel substantially in the form attached hereto as Exhibit A, (ii) officers' certificates substantially in the form customarily delivered in a public offering of mortgage bonds and agrees to use its reasonable efforts to deliver a comfort letter or comfort letters in customary form to the extent permitted by Statement on Auditing Standards No. 72 of the American Institute of Certified Public Accountants (or if such a comfort letter is not permitted, an agreed upon procedures letter in customary form) from the Company's independent certified public accountants (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements are, or are required to be, included in the Registration Statement) at least as broad in scope and coverage as the comfort letter or comfort letters delivered to the Initial Purchasers in connection with the initial sale of the Securities to the Initial Purchasers;

(g) (i) in the case of an Exchange Offer, furnish counsel for the Initial Purchasers and (ii) in the case of a Shelf Registration, furnish counsel for the Holders of Registrable Securities copies of any comment letters received from the SEC or any other request by the SEC or any state securities authority for amendments or supplements to a Registration Statement and Prospectus or for additional information;

(h) use its commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement at the earliest possible moment;

(i) in the case of a Shelf Registration, furnish, upon request, to each Holder of Registrable Securities, and each underwriter, if any, without charge, at least one conformed copy of each Registration Statement and any post-effective amendment thereto, including financial statements and schedules (without documents incorporated therein by reference and all exhibits thereto, unless requested);

(j) in the case of a Shelf Registration, cooperate with the selling Holders of Registrable Securities to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends; and enable such Registrable Securities to be in such denominations (consistent with the provisions of the Mortgage) and registered in such names as the selling Holders or the underwriters, if any, may reasonably request at least three business days prior to the closing of any sale of Registrable Securities;

(k) in the case of a Shelf Registration, upon the occurrence of any event or the discovery of any facts, each as contemplated by Sections 3(e)(vi) and 3(e)(vii) hereof, as promptly as practicable after the occurrence of such an event, use its commercially reasonable efforts to prepare a supplement or post-effective amendment to the Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities or Participating Broker-Dealers, such Prospectus will not contain at the time of such delivery any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or will remain so qualified. At such time as such public disclosure is otherwise made or the Company determines that such disclosure is not necessary, in each case to correct any misstatement of a material fact or to include any omitted material fact, the Company agrees promptly to notify each Holder of such determination and to furnish each Holder such number of copies of the Prospectus as amended or supplemented, as such Holder may reasonably request;

(l) in the case of a Shelf Registration, a reasonable time prior to the filing of any Registration Statement, any Prospectus, any amendment to a Registration Statement or amendment or supplement to a Prospectus after initial filing of a Registration Statement, provide copies of such document to the Initial Purchasers on behalf of such Holders; and make representatives of the Company as shall be reasonably requested by the Majority Holders of Registrable Securities who have been identified to the Company, or the Initial Purchasers on behalf of such Holders, available for discussion of such document;

(m) obtain a CUSIP number for all Exchange Securities, Private Exchange Securities or Registrable Securities, as the case may be, not later than the effective date of a Registration Statement, and provide the Trustee with printed certificates for the Exchange Securities, Private Exchange Securities or the Registrable Securities, as the case may be, in a form eligible for deposit with the Depositary;

(n) use their commercially reasonable efforts to obtain the consent or approval of each governmental agency or authority, whether federal, state or local, which may be required to effect the Exchange Offer Registration, the Exchange Offer or the Shelf Registration, as the case may be, or the offering or sale in connection therewith or to enable the Holders to offer, or to consummate the disposition of, their Registrable Securities or Participating Broker-Dealers to offer and sell Exchange Securities;

(o) (i) cause the Mortgage to be qualified under the TIA in connection with the registration of the Exchange Securities or Registrable Securities, as the case may be, (ii) cooperate with the Trustee and the Holders to effect such changes to the Mortgage as may be required for the Mortgage to be so qualified in accordance with the terms of the TIA and (iii) execute, and use its commercially reasonable efforts to cause the Trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable the Mortgage to be so qualified in a timely manner;

(p) in the case of a Shelf Registration, if requested by any Holder of Registrable Securities covered by a Shelf Registration Statement, promptly incorporate in a prospectus supplement or post-effective amendment such information with respect to such Holder as such Holder reasonably requests to be included therein; and make all required filings of such prospectus supplement or such post-effective amendment promptly after the Company has received notification of the matters to be incorporated in such filing;

(q) in the case of a Shelf Registration, enter into agreements (including underwriting agreements) and take all other customary and appropriate actions in order to expedite or facilitate the disposition of such Registrable Securities and in such connection whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration:

(i) make such representations and warranties to the Holders of such Registrable Securities and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in similar underwritten offerings as may be reasonably requested by them;

(ii) obtain opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriters, if any, and the Holders of a majority in principal amount of the Registrable Securities being sold) addressed to each selling Holder and the underwriters, if any, covering the matters customarily covered in opinions requested in sales of securities or underwritten offerings and such other matters as may be reasonably requested by such Holders and underwriters;

(iii) if requested by the managing underwriters, use its reasonable efforts to obtain "cold comfort" letters and updates thereof from the Company's independent certified public accountants, and an officer's certificate from the chief accounting officer of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements are, or are required to be, included in the Registration Statement) addressed to the underwriters, if any, and use reasonable efforts to have such letter and certificate addressed to the selling Holders of Registrable Securities (to the extent consistent with Statement on Auditing Standards No. 72 of the American Institute of Certified Public Accounts), such letters and certificate to be in customary form and covering matters of the type customarily covered in "cold comfort" letters to underwriters in connection with similar underwritten offerings;

(iv) if requested by the Majority Holders, enter into a securities sales agreement with the Holders and an agent of the Holders providing for, among other things, the appointment of such agent for the selling Holders for the purpose of soliciting purchases of Registrable Securities, which agreement shall be in form, substance and scope customary for similar offerings;

(v) if an underwriting agreement is entered into, cause the same to set forth indemnification provisions and procedures substantially equivalent to the indemnification provisions and procedures set forth in
Section 4 hereof with respect to the underwriters and all other parties to be indemnified pursuant to said Section or, at the request of any underwriters, in the form customarily provided to such underwriters in similar types of transactions; and

(vi) deliver such documents and certificates as may be reasonably requested and as are customarily delivered in similar offerings to the Holders of a majority in principal amount of the Registrable Securities being sold and the managing underwriters, if any.

The above shall be done at each pricing and closing under any underwriting or similar agreement as and to the extent required thereunder;

(r) in the case of a Shelf Registration or if a Prospectus is required to be delivered by any Participating Broker-Dealer in the case of an Exchange Offer, make available for inspection by representatives of the Holders of the Registrable Securities, any underwriters participating in any disposition pursuant to a Shelf Registration Statement, any Participating Broker-Dealer and any counsel or accountant retained by any of the foregoing, all financial and other records, pertinent corporate documents and properties of the Company reasonably requested by any such persons, and cause the respective officers, directors, employees and any other agents of the Company to supply all information reasonably requested by any such representative, underwriter, special counsel or accountant in connection with a Registration Statement, and make such representatives of the Company available for discussion of such documents as shall be reasonably requested by the Initial Purchasers;

(s) (i) in the case of an Exchange Offer Registration Statement, a reasonable time prior to the filing of any Exchange Offer Registration Statement, any Prospectus forming a part thereof, any amendment to an Exchange Offer Registration Statement or amendment or supplement to such Prospectus, provide copies of such document to the Initial Purchasers and to one firm of legal counsel to the Holders of Registrable Securities and make such changes in any such document prior to the filing thereof as the Initial Purchasers or such counsel to the Holders of Registrable Securities may reasonably request and, except as otherwise required by applicable law, not file any such document in a form to which the Initial Purchasers on behalf of the Holders of Registrable Securities and one firm of legal counsel to the Holders of Registrable Securities shall not have previously been advised and furnished a copy of or to which the Initial Purchasers on behalf of the Holders of Registrable Securities or such counsel to the Holders of Registrable Securities shall reasonably object, and make the representatives of the Company available for discussion of such documents as shall be reasonably requested by the Initial Purchasers; and

(ii) in the case of a Shelf Registration, a reasonable time prior to filing any Shelf Registration Statement, any Prospectus forming a part thereof, any amendment to such Shelf Registration Statement, provide copies of such document to the Holders of Registrable Securities who have been identified to the Company, to the Initial Purchasers, to one firm of legal counsel for the Holders and to the underwriter or underwriters of an underwritten offering of Registrable Securities, if any, make such changes in any such document prior to the filing thereof as the Initial Purchasers, such counsel to the Holders or the underwriter or underwriters reasonably request and not file any such document in a form to which the Majority Holders who have been identified to the Company, the Initial Purchasers on behalf of the Holders of Registrable Securities, counsel for the Holders of Registrable Securities or any underwriter shall not have previously been advised and furnished a copy of or to which the Majority Holders who have been identified to the Company, the Initial Purchasers of behalf of the Holders of Registrable Securities, counsel to the Holders of Registrable Securities or any underwriter shall reasonably object, and make the representatives of the Company available for discussion of such document as shall be reasonably requested by the Majority Holders of Registrable Securities who have been identified to the Company, the Initial Purchasers on behalf of such Holders, counsel for the Holders of Registrable Securities or any underwriter.

(t) in the case of a Shelf Registration, use its commercially reasonable efforts to cause all Registrable Securities to be listed on any securities exchange on which similar mortgage bonds issued by the Company are then listed if requested by the Majority Holders, or if requested by the underwriter or underwriters of an underwritten offering of Registrable Securities, if any;

(u) in the case of a Shelf Registration, use its commercially reasonable efforts to cause the Registrable Securities to be rated by the appropriate rating agencies, if so requested by the Majority Holders, or if requested by the underwriter or underwriters of an underwritten offering of Registrable Securities, if any;

(v) otherwise comply with all applicable rules and regulations of the SEC and make available to its security holders, as soon as reasonably practicable, an earnings statement covering at least 12 months which shall satisfy the provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder;

(w) cooperate and assist in any filings required to be made with the NASD and, in the case of a Shelf Registration, in the performance of any due diligence investigation by any underwriter and its counsel (including any "qualified independent underwriter" that is required to be retained in accordance with the rules and regulations of the NASD); and

(x) upon consummation of an Exchange Offer or a Private Exchange, obtain a customary opinion of counsel to the Company addressed to the Trustee for the benefit of all Holders of Registrable Securities participating in the Exchange Offer or Private Exchange, and which includes an opinion that (i) the Company has duly authorized, executed and delivered the Exchange Securities and/or Private Exchange Securities, as applicable, and the related supplemental indenture, and (ii) each of the Exchange Securities and related supplemental indenture constitute a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its respective terms (with customary exceptions).

In the case of a Shelf Registration Statement, the Company may (as a condition to such Holder's participation in the Shelf Registration) require each Holder of Registrable Securities to furnish to the Company such information regarding the Holder and the proposed distribution by such Holder of such Registrable Securities as the Company may from time to time reasonably request in writing.

In the case of a Shelf Registration Statement, each Holder agrees that, upon receipt of any notice from the Company of the happening of any event or the discovery of any facts, each of the kind described in Section 3(e)(vi) hereof, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to a Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(k) hereof, and, if so directed by the Company, such Holder will deliver to the Company (at its expense) all copies in such Holder's possession, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice.

If the Company shall give any such notice to suspend the disposition of Registrable Securities pursuant to a Registration Statement, the Company shall extend the period during which the Registration Statement shall be maintained effective pursuant to this Agreement by the number of days during the period from and including the date of the giving of such notice to and including the date when the Holders shall have received copies of the supplemented or amended Prospectus necessary to resume such dispositions. The Company may give any such notice only twice during any 365-day period and each such suspension shall not extend for a period of more than 45 days.

In the event that the Company fails to effect the Exchange Offer or file any Shelf Registration Statement and maintain the effectiveness of any Shelf Registration Statement as

provided herein, the Company shall not file any Registration Statement with respect to any securities (within the meaning of Section 2(1) of the 1933 Act) of the Company other than Registrable Securities.

If any of the Registrable Securities covered by any Shelf Registration Statement are to be sold in an underwritten offering, the underwriter or underwriters and manager or managers that will manage such offering will be selected by the Majority Holders of such Registrable Securities included in such offering and shall be acceptable to the Company. No Holder of Registrable Securities may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's Registrable Securities on the basis provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements.

4. Indemnification; Contribution.

(a) Indemnification of the Initial Purchasers and the Holders. The Company agrees to indemnify and hold harmless the Initial Purchasers, each Holder, each Participating Broker-Dealer, each Person who participates as an underwriter (any such Person being an "Underwriter") and each Person, if any, who controls any Holder or Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act as follows:

(i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment or supplement thereto) pursuant to which Exchange Securities or Registrable Securities were registered under the 1933 Act, including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading, or arising out of any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;

(ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 4(d) below) any such settlement is effected with the written consent of the Company; and

(iii) against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by any indemnified party), reasonably incurred in investigating, preparing or defending against any litigation, or any

investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) above;

provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission (i) made in reliance upon and in conformity with written information furnished to the Company by the Holder or Underwriter expressly for use in a Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto) or (ii) if the Person asserting any such loss, liability, claim, damage or expense was not sent or given a copy of the final Prospectus (or any amendment or supplement thereto) (in each case exclusive of the documents from which information is incorporated by reference) at or prior to the written confirmation of the sale of such Registrable Securities to such Person (other than as a result of the failure by the Company to comply with its obligations under Section 3(c) hereof) and the untrue statement contained in or omitted from the Prospectus delivered to such Person was subsequently corrected in the final Prospectus (or any amendment or supplement thereto).

(b) Indemnification of the Company. Each Holder severally, but not jointly, agrees to indemnify and hold harmless the Company, the Initial Purchasers, each Underwriter and the other selling Holders, and each of their respective directors and officers, and each Person, if any, who controls the Company, the Initial Purchasers, any Underwriter or any other selling Holder within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, against any and all loss, liability, claim, damage and expense described in the indemnity contained in Section 4(a) hereof, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in any Registration Statement (or any amendment thereto) or any Prospectus included therein (or any amendment or supplement thereto) in reliance upon and in conformity with written information with respect to such Holder furnished to the Company by such Holder expressly for use in such Registration Statement (or any amendment thereto) or such Prospectus (or any amendment or supplement thereto); provided, however, that no such Holder shall be liable for any claims hereunder in excess of the amount of net proceeds received by such Holder from the sale of Registrable Securities pursuant to such Registration Statement.

(c) Notices and Procedures. Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action or proceeding commenced against it in respect of which indemnity may be sought hereunder, but failure so to notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. If any such proceeding shall be brought or asserted against an indemnified party and it shall have notified the indemnifying party thereof, the indemnifying party shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others entitled to indemnification pursuant to this Section 4 that the indemnifying party may designate in such proceeding and shall pay the fees and expenses of such counsel related to such proceeding. An indemnifying party may participate at its own expense in the defense of such

action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying party or parties be liable for the fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 4 (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.

If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 4(a)(ii) effected without its written consent if
(i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement.

(d) Contribution. If the indemnification provided for in this Section 4 is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company from the offering of the Securities and the Exchange Securities, on the one hand, and by the Holders from receiving Securities or Exchange Securities registered under the Securities Act, on the other hand, or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Holders and the Initial Purchasers on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations.

The relative fault of the Company on the one hand and the Holders and the Initial Purchasers on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company, the Holders or the Initial Purchasers and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

(e) Limitation on Liability. The Company, the Holders and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 4 were determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 4. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 4 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 4, no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Securities sold by it were offered exceeds the amount of any damages which such Initial Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

(f) Non-Exclusive Remedies. The remedies provided for in this Section 4 are not exclusive and shall not limit any rights or remedies that may otherwise be available to any indemnified party at law or in equity.

(g) Survival. The indemnity and contribution provisions contained in this
Section 4 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of the Initial Purchasers or any other Holder, their respective affiliates or any Person controlling any Initial Purchaser or any other Holder, or by or on behalf of the Company, their respective affiliates or the officers or directors of or any Person controlling the Company, (iii) acceptance of any of the Exchange Securities and (iv) any sale of Registrable Securities pursuant to a Shelf Registration Statement.

For purposes of this Section 4, each Person, if any, who controls an Initial Purchaser or Holder within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act shall have the same rights to contribution as such Initial Purchaser or Holder, and each director of the Company, and each Person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company. The Initial Purchasers' respective obligations to contribute pursuant to this Section 4 are several in proportion to the principal amount of Securities set forth opposite their respective names in Schedule A to the Purchase Agreement and not joint.

5. Miscellaneous.

5.1 Rule 144 and Rule 144A. For so long as the Company is subject to the reporting requirements of Section 13 or 15 of the 1934 Act, the Company covenants that it will file the reports required to be filed by it under the 1933 Act and Section 13(a) or 15(d) of the 1934 Act and the rules and regulations adopted by the SEC thereunder. If the Company ceases to be so required to file such reports, the Company covenants that it will upon the request of any Holder of Registrable Securities (a) make publicly available such information as is necessary to

permit sales pursuant to Rule 144 under the 1933 Act, (b) deliver such information to a prospective purchaser as is necessary to permit sales pursuant to Rule 144A under the 1933 Act and it will take such further action as any Holder of Registrable Securities may reasonably request, and (c) take such further action that is reasonable in the circumstances, in each case, to the extent required from time to time to enable such Holder to sell its Registrable Securities without registration under the 1933 Act within the limitation of the exemptions provided by (i) Rule 144 under the 1933 Act, as such Rule may be amended from time to time, (ii) Rule 144A under the 1933 Act, as such Rule may be amended from time to time, or (iii) any similar rules or regulations hereafter adopted by the SEC. Upon the request of any Holder of Registrable Securities, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements.

5.2 No Inconsistent Agreements. The Company has not entered into and the Company will not after the date of this Agreement enter into any agreement which is inconsistent with the rights granted to the Holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not and will not for the term of this Agreement in any way conflict with the rights granted to the holders of the Company's other issued and outstanding securities under any such agreements.

5.3 Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Company has obtained the written consent of Holders of at least a majority in aggregate principal amount of the outstanding Registrable Securities affected by such amendment, modification, supplement, waiver or departure.

5.4 Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery (a) if to a Holder, at the most current address given by such Holder to the Company by means of a notice given in accordance with the provisions of this Section 5.4, which address initially is the address set forth in the Purchase Agreement with respect to the Initial Purchasers; and (b) if to the Company, initially at the Company's address set forth in the Purchase Agreement, and thereafter at such other address of which notice is given in accordance with the provisions of this
Section 5.4.

All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; two business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next business day if timely delivered to an air courier guaranteeing overnight delivery.

Copies of all such notices, demands, or other communications shall be concurrently delivered by the person giving the same to the Trustee under the Mortgage, at the address specified in such Mortgage.

5.5 Successor and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without

limitation and without the need for an express assignment, subsequent Holders; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms of the Purchase Agreement or the Mortgage. If any transferee of any Holder shall acquire Registrable Securities, in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities such person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement, including the restrictions on resale set forth in this Agreement and, if applicable, the Purchase Agreement, and such person shall be entitled to receive the benefits hereof.

5.6 Third Party Beneficiaries. The Initial Purchasers (even if the Initial Purchasers are not Holders of Registrable Securities) shall be third party beneficiaries to the agreements made hereunder between the Company, on the one hand, and the Holders, on the other hand, and shall have the right to enforce such agreements directly to the extent they deem such enforcement necessary or advisable to protect their rights or the rights of Holders hereunder. Each Holder of Registrable Securities shall be a third party beneficiary to the agreements made hereunder between the Company, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights hereunder.

5.7 Specific Enforcement. Without limiting the remedies available to the Initial Purchasers and the Holders, the Company acknowledges that any failure by the Company to comply with its obligations under Sections 2.1 through 2.4 hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it would not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Company's obligations under Sections 2.1 through 2.4 hereof.

5.8 Restriction on Resales. Until the expiration of two years after the original issuance of the Securities, the Company will not, and will cause their "affiliates" (as such term is defined in Rule 144(a)(1) under the 1933 Act) not to, resell any Securities which are "restricted securities" (as such term is defined under Rule 144(a)(3) under the 1933 Act) that have been reacquired by any of them and shall immediately upon any purchase of any such Securities submit such Securities to the Trustee for cancellation.

5.9 Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

5.10 Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

5.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE

STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.

5.12 Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

ILLINOIS POWER COMPANY

By: /s/ Larry F. Altenbaumer
   --------------------------------------
      Name: Larry F. Altenbaumer
      Title: President and
             Chief Executive Officer

Confirmed and accepted as of
the date first above written:

MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED

By:  /s/ Keith L. Horn
    -------------------------------------------
    Name: Keith L. Horn
    Title: Managing Director

CREDIT SUISSE FIRST BOSTON CORPORATION

By:   /s/ Jamie Welch
     -------------------------------------------
     Name: Jamie Welch
     Title: Managing Director

Exhibit A

Form of Opinion of Counsel

Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Credit Suisse First Boston Corporation
c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated
4 World Financial Center, 7th Floor
New York, New York 10080

Ladies and Gentlemen:

We have acted as counsel for Illinois Power Company, an Illinois corporation (the "Company"), in connection with the sale by the Company to the Initial Purchasers (as defined below) of $550,000,000 aggregate principal amount of Mortgage Bonds, 11.5% Series due 2010 of the Company (the "Securities") pursuant to the Purchase Agreement dated December 17, 2002 (the "Purchase Agreement") among the Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse First Boston Corporation (collectively, the "Initial Purchasers") and the filing by the Company of an Exchange Offer Registration Statement (the "Registration Statement") in connection with an Exchange Offer to be effected pursuant to the Registration Rights Agreement (the "Registration Rights Agreement"), dated December 20, 2002 between the Company and the Initial Purchasers. This opinion is furnished to you pursuant to Section 3(f)(B) of the Registration Rights Agreement. Unless otherwise defined herein, capitalized terms used in this opinion that are defined in the Registration Rights Agreement are used herein as so defined.

We have examined such documents, records and matters of law as we have deemed necessary for purposes of this opinion. In rendering this opinion, as to all matters of fact relevant to this opinion, we have assumed the completeness and accuracy of, and are relying solely upon, the representations and warranties of the Company set forth in the Purchase Agreement and the statements set forth in certificates of public officials and officers of the Company, without making any independent investigation or inquiry with respect to the completeness or accuracy of such representations, warranties or statements, other than a review of the certificate of incorporation, by-laws and relevant minute books of the Company.

Based on and subject to the foregoing, we are of the opinion that:

1. The Exchange Offer Registration Statement and the Prospectus (other than the financial statements, notes or schedules thereto and other financial data and supplemental schedules included or incorporated by reference therein or omitted therefrom and the Form T-1, as to which such counsel need express no opinion), comply as to form in all material respects with the requirements of the 1933 Act and the applicable rules and regulations promulgated under the 1933 Act.

2. We have participated in the preparation of the Registration Statement and the Prospectus and in the course thereof have had discussions with representatives of the Underwriters, officers and other representatives of the Company and PriceWaterhouseCoopers LLP, the Company's independent public accountants, during which the contents of the Registration Statement and the Prospectus were discussed. We have not, however, independently verified and are not passing upon, and do not assume any responsibility for, the accuracy, completeness or fairness of the statements contained in the Registration Statement and the Prospectus. Based on our participation as described above, nothing has come to our attention that would lead us to believe that the Registration Statement (except for financial statements and schedules and other financial data included therein as to which we make no statement) contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus or any amendment or supplement thereto (except for financial statements and schedules and other financial data included therein, as to which we make no statement), at the time the Prospectus was issued, at the time any such amended or supplemented Prospectus was issued or at the Closing Time, included or includes an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

This opinion is being furnished to you solely for your benefit in connection with the transactions contemplated by the Registration Rights Agreement, and may not be used for any other purpose or relied upon by any person other than you. Except with our prior written consent, the opinions herein expressed are not to be used, circulated, quoted or otherwise referred to in connection with any transactions other than those contemplated by the Registration Rights Agreement by or to any other person.

Very truly yours,