December 15, 1999
Xx. Xxxxxx X. Xxxx, Xx.
#0 Xxxx Xxxxxxxx Xx.
Xxxxxxx, XX 00000
Dear Rob:
Set forth below are the terms of your employment (the "Agreement")
with Dynegy Inc. (hereinafter referred to collectively as "Dynegy" or the
"Company").
1. TITLE AND DUTIES
Your title shall be Senior Vice President, Finance, Dynegy Inc. You
shall have such duties as may be delegated from time to time by your
immediate supervisor. You will be employed at Dynegy's headquarters in
Houston, Texas. You shall devote your full time, energy and skill to the
performance of your duties for Dynegy, and will exercise due diligence and
reasonable care in the performance of such duties.
2. TERM
(a) Unless earlier terminated as provided for herein, the
term of this Agreement will be for three (3) years, beginning on the
Effective Date and ending on the third anniversary of the Effective Date
(such period, as extended pursuant to the next succeeding sentence, if
applicable, the "Term"). The Term shall automatically be extended for
additional one (1) year periods unless either the Company or you provides
written notice sixty (60) days prior to the date on which this Agreement
would otherwise be automatically extended that such party is electing not to
so extend the Term. The term "Effective Date" means the date of closing of
the proposed merger of Dynegy Inc. and Illinova Corporation pursuant to that
certain merger agreement dated as of June 14, 1999, as amended.
(b) If your employment with Dynegy is terminated due to your
voluntary resignation or by the Company for "cause", this Agreement shall
terminate immediately (except for the confidentiality, non-competition and
non-solicitation provisions of Paragraph 4 and the provisions of Paragraphs 5
and 6), and the Company shall have no further obligation to you except for
the payment of amounts due before the date of such termination. You further
agree that the benefits which you have received from the execution of this
Agreement through the date of such termination constitute sufficient
consideration for your obligations pursuant to Paragraph 4, notwithstanding
the fact that the Company has no further obligation to you except for the
payment of amounts due before the date of such termination.
Xx. Xxxxxx X. Xxxx, Xx.
December 15, 1999
Page 2
For purposes of this Agreement, you may be terminated for "cause" as
a result of (i) your refusal to implement or adhere to lawful policies or
lawful directives of the Board of Directors of Dynegy (the "Board of
Directors") or your immediate supervisor; (ii) serious misconduct, dishonesty
or disloyalty, directly related to the performance of duties for the Company
or gross negligence in the performance of your duties for the Company; (iii)
your being convicted (or entering into a plea bargain admitting or not
contesting criminal guilt) in any felony criminal proceeding; (iv) drug or
alcohol abuse; (v) continued failure to perform your duties under this
Agreement which is not cured within 10 days after written notice of such
failure is provided to you by Dynegy; or (vi) any other material breach of
this Agreement by you that is not cured within ten (10) days after written
notice of such breach is delivered to you from the Company.
(c) If your employment is terminated during the Term of this
Agreement due to resignation following "constructive termination" (as defined
below) or for any other reason other than your voluntary resignation, death,
disability, or discharge for cause, you shall receive as your sole
compensation in lieu of further payments to you pursuant to Paragraph 3 hereof
(i) a lump sum amount equal to the product of (x) 2.99 and (y) the greater of
(a) the average annual Base Salary and incentive compensation, whether payable
in cash or stock options, you were paid by the Company for the highest three
(3) calendar years preceding the calendar year in which your employment is
terminated (or such shorter period as you have actually been employed by the
Company), or (b) your Base Salary and target bonus amount for the year in
which your employment is terminated; (ii) a lump sum amount equal to the
present value, as determined by the Board of Directors in its sole and
absolute discretion, of the benefits to be provided to you in Paragraph 3(e)
of this Agreement and such other perquisites (if any) being provided to you
on the date of your termination, as if you were still employed for the
remainder of the Term of this Agreement, with regard to those benefits to be
provided to you during the Term of this Agreement, and as if you had
completed the Term of this Agreement with regard to those benefits to be
provided to you upon completion of the Term of this Agreement; (iii) any
employee stock options granted to you prior to or during the Term of this
Agreement shall become vested as of the date of resignation due to such
constructive termination or discharge not for cause, and you shall have the
right to exercise any such vested options through the end of the Term of this
Agreement or one year from the date of termination, whichever is later; and
(iv) for a period of thirty-six (36) months from the date of resignation due
to such constructive discharge or discharge due not for cause, all health and
welfare benefits the Company was maintaining for you and your family as of
the date of such resignation or discharge.
For purposes of this Agreement a "constructive termination" shall be
deemed to have occurred in the event that (i) your Base Salary as defined in
Paragraph 3(a), bonus compensation under Paragraph 3(b), target range of
annual option grants under Paragraph 3(c) or other compensation as described
in Paragraph 3(e) is reduced; (ii) a significant diminution in your
responsibilities, authority or scope of duties is effected, and such
diminution is made without your written consent (without regard to whether or
not any change is made to your title); (iii) the Company materially breaches
this Agreement or (iv) the relocation of the Company's principal executive
offices to a location, or the Company requires you to be based, outside a
fifty (50) mile radius from the city limits of Houston, Texas. Any
resignation by you as a result of
Xx. Xxxxxx X. Xxxx, Xx.
December 15, 1999
Page 3
assertion of a constructive termination shall be communicated by delivery to
the Board of Directors of the Company within thirty (30) days from the
commencement of such constructive termination by written notice setting forth
the grounds therefor, during which period the Company shall be entitled to
cure or remedy the matters set forth in such notice to your reasonable
satisfaction.
Unless you withdraw such notice prior to the expiration of such
thirty (30) day period, such resignation shall take effect upon the
expiration of thirty days from the date of the delivery of such notice. Any
other resignation by you shall be communicated by thirty days' advance
written notice.
If you die, or become disabled and cannot perform your duties, your
employment hereunder shall be terminated and: (i) you (or your estate) shall
be entitled to the Base Salary (as defined in Paragraph 3(a)) payable to you
hereunder for twelve (12) months following the month in which you die or
become disabled, plus the amount of any target bonus as described in
Paragraph 3(b) for the year of death or disability, prorated for the period
of twelve (12) months following the date of death or disability; (ii) you (or
your estate) shall receive, for a period of twenty-four (24) months from the
date of your death or disability, all health insurance and health benefits
that the Company was maintaining for you and/or your estate and for your
family as of the date of your death or disability; and (iii) any employee
stock options granted to you during the Term of this Agreement shall become
vested as of the date of your death or disability. For purposes of this
Agreement, you shall be disabled as of the first date on which you become
eligible to receive disability benefits under the Company's long-term
disability plan (or Social Security disability benefits at a time when the
Company does not maintain a long-term disability plan or such plan is not
available to you).
(d) Unless otherwise specified herein, all payments under
this Agreement shall be paid in a lump sum, less applicable withholding
taxes, within thirty (30) days following your termination.
3. COMPENSATION
(a) Each year during the Term hereof, you will be paid a base
salary of $225,000 per annum ("Base Salary"), payable in accordance with the
Company's payroll guidelines.
Increases may be made to your Base Salary at the discretion
of the Board of Directors based upon your individual performance.
(b) You shall be a participant in the Company's Incentive
Compensation Plan. As part of Dynegy's incentive compensation program, you
will have the opportunity to earn a target bonus in an amount equal to 70% of
your Base Salary and a maximum cash award in an amount equal to 140% of your
Base Salary, dependent upon certain financial or performance objectives,
determined in accordance with such program, and by the Board. To the extent
any incentive compensation in excess of the maximum cash amount referenced
above is payable under the Incentive Compensation Plan in any year to you,
the Company will pay you any such
Xx. Xxxxxx X. Xxxx, Xx.
December 15, 1999
Page 4
amounts in noncash equivalents (e.g., stock options or restricted securities
of the Company) of equal value, as determined by the Board of Directors in
its sole and absolute discretion. At your election, in lieu of paying you
all or part of such incentive compensation bonus, the Company will allow you
to direct that all or part of such incentive compensation shall be allocated
by the Company to, or expended directly for, charitable contributions of your
selection.
(c) Upon the closing of the proposed merger of Dynegy and
Illinova Corporation pursuant to that certain merger agreement dated as of
June 14, 1999, as amended (the "Dynegy/Illinova merger"), you will receive
(x) a cash bonus of $25,000, (y) stock option grants pursuant to the Company's
Long-Term Incentive Plan ("LTIP") with a value equal to 100% of your Base
Salary and (z) discounted stock option grants under the Employee Equity Option
Plan ("EEOP"; and, together with LTIP, the "Stock Option Plans") with an
in-the-money value equal to $200,000. Your EEOP options shall become 60%
vested and exercisable on the third anniversary of the Effective Date if you
are employed by the Company on such date. Each year during the Term of this
Agreement, you will be eligible to receive stock option grants in accordance
with requirements and provisions of the Company's LTIP. The current target
range for annual option grants for your position is a median of 100% and a
75th percentile of 160% of your Base Salary. You recognize that any value of
an award of "market" options under the LTIP is a projected value, which is
subject to the future performance of the Company stock, and that there is no
guarantee that the actual value of such options will achieve that value.
"Projected Value" means that at the end of the five years from the date of
grant, assuming an increase in market price of 15% per annum during the five
years, the stock option may be exercised to obtain the stated value in excess
of the exercise price. These options are subject to the vesting, forfeiture
and other terms and conditions of the respective Stock Option Plan, except as
specifically provided to the contrary in this Agreement.
(d) Upon the Effective Date, any EEOP or other options
granted to you prior to November 1, 1999 shall become vested as of the date
of closing of the Dynegy/Illinova merger.
(e) You will be entitled to participate in Dynegy's benefits
programs for senior management executives, including, without limitation,
Dynegy's deferred compensation plan for executives. In addition, the Company
may provide other perquisites as approved by the Dynegy Board of Directors,
in its sole discretion. Pursuant to the terms of Dynegy's vacation policy
you will be entitled to four (4) weeks per year of paid vacation.
4. CONFIDENTIALITY/NONCOMPETE/NONSOLICITATION
You recognize and acknowledge that:
(a) You will have access to certain information concerning
the Company that is confidential and proprietary and constitutes valuable and
unique property of the Company. You agree that you will not at any time,
either during or after your employment, disclose to others, use, copy or
permit to be copied, except pursuant to your duties on behalf of the Company
or its successors, assigns or nominees, any secret or confidential
information of the Company (whether or not developed by you) without the
prior written consent of the Board of
Xx. Xxxxxx X. Xxxx, Xx.
December 15, 1999
Page 5
Directors of the Company. The term "secret or confidential information of
the Company" (sometimes referred to herein as "Confidential Information")
shall include, without limitation, the Company's plans, strategies, potential
acquisitions, costs, prices, systems for buying, selling, and/or trading
natural gas, natural gas liquids, crude oil, coal, and electricity, client
lists, pricing policies, financial information, the names of and pertinent
information regarding suppliers, computer programs, policy or procedure
manuals, training and recruiting procedures, accounting procedures, the
status and content of the Company's contracts with its suppliers or clients,
or servicing methods and techniques at any time used, developed, or
investigated by the Company, before or during your tenure of employment to
the extent any of the foregoing are (i) not generally available to the public
and (ii) maintained as confidential by the Company. You further agree to
maintain in confidence any confidential information of third parties received
as a result of your employment and duties with the Company.
(b) At the termination of your employment you will deliver to
the Company, as determined appropriate by the Company, all correspondence,
memoranda, notes, records, client lists, computer systems, programs, or other
documents and all copies thereof made, composed or received by you, solely or
jointly with others, and which are in your possession, custody, or control at
such date and which are related in any manner to the past, present, or
anticipated business of the Company.
(c) To protect and safeguard the Company's trade secrets and
Confidential Information and also the Company's goodwill with its suppliers
and clients, for that period of time following the termination of your
employment for any reason other than pursuant to Paragraph 2(c) above (E.G.
in the event of a termination pursuant to the first paragraph of Paragraph
2(c), the non-compete obligations imposed by this Paragraph 4(c) terminate)
through the expiration of the Term or twenty-four (24) months from the date
of termination, whichever is earlier, you will not, within a 50 mile radius
of any location where the Company had an office at any time during the Term
hereof or any location where a client or supplier of the Company (which is a
material client or supplier at any time during the Term hereof) had an office
at any time during the Term hereof, without the prior written consent of the
Board of Directors of the Company, directly or indirectly, engage in or be
interested in (as owner, partner, shareholder, employee, director, agent,
consultant or otherwise), any business which is a competitor of the Company,
as hereinafter defined. For purposes of this Agreement, a "competitor of the
Company" is any entity, including without limitation a corporation, sole
proprietorship, partnership, joint venture, syndicate, trust or any other
form of organization or a parent, subsidiary or division of any of the
foregoing, which, during such period or the immediately preceding fiscal year
of such entity, was engaged in the unregulated marketing, gathering,
transportation or processing of natural gas or derivatives of natural gas or
other hydrocarbons or electricity. For purposes of this paragraph, the
following entities shall not be deemed to be competitors of the Company: (i)
a Local Distribution Company ("LDC") to the extent that any purchases or
sales by such LDC are only for consumption on its system; (ii) a natural gas
producer to the extent that such producer sells only its own production or
production of other working interest owners in xxxxx in which it owns an
interest; (iii) a natural gas pipeline company in the jurisdictional aspects
of its business, i.e., other than a nonjurisdictional marketing affiliate or
production affiliate (except as to such production affiliates own production
Xx. Xxxxxx X. Xxxx, Xx.
December 15, 1999
Page 6
as described in clause (ii) of this Paragraph 4(c)), or (iv) an integrated
regulated electric and/or gas utility as long as the utility does not engage
in the unregulated marketing of its generation or power trading other than
that related to the generation and power marketing allocated to its own
service territory. The terms of this Paragraph 4(c) shall not apply to your
present or future investments in the securities of companies listed on a
national securities exchange or traded on the over-the-counter market to the
extent such investments do not exceed one percent (1%) of the total
outstanding shares of such company.
(d) For a period of twenty-four (24) months after the
expiration or termination of your employment for whatever reason other than
pursuant to Paragraph 2(c) above or for a period of twelve months following
the termination of your employment pursuant to Paragraph 2(c) above, you
shall not solicit, raid, entice, encourage or induce any person who was an
employee of the Company at the time of your termination, or any of its
subsidiaries or affiliated companies, to become employed by any person, firm
or corporation, and you shall not approach any such employee for such purpose
or authorize or knowingly approve the taking of such actions by any other
person, firm or corporation or assist any such person, firm or corporation in
taking such action.
(e) You agree that the foregoing restrictions contain
reasonable limitations as to the time, geographical area, and scope of
activity to be restrained and that these restrictions do not impose any
greater restraint than is necessary to protect the goodwill and other
legitimate business interests of the Company, including but not limited to
the protection of Confidential Information. You also agree that the general
public shall not be harmed by enforcement of this Paragraph 4. Should any
provision in this Paragraph 4 be held unreasonably broad with respect to the
restrictions as to time, geographical area, or scope of activity to be
restrained, any such restriction shall be construed by limiting and reducing
it to the extent necessary to render it reasonable, and as so construed, such
provision shall be enforced.
Accordingly, you consent and agree that if you violate any of
the provisions of this Paragraph 4, the Company and its subsidiaries and
affiliated companies would sustain irreparable harm and, therefore, in
addition to any other remedies which the Company may have under this
Agreement or otherwise, the Company shall be entitled to an injunction from
any court of competent jurisdiction restraining you from committing or
continuing any such violation of this Paragraph. You acknowledge that
damages at law would not be an adequate remedy for violation of this
Paragraph 4, and you therefore agree that the provisions of this Paragraph 4
may be specifically enforced against you in any court of competent
jurisdiction. Nothing herein shall be construed as prohibiting the Company
from pursuing any other remedies available to the Company for such breach or
threatened breach, including the recovery of damages from you.
5. INDEMNIFICATION
If, at any time during or after the Term of this Agreement,
you are made a party to, or are threatened to be made a party in, any civil,
criminal or administrative action, suit or proceeding by reason of the fact
that you are or were a director, officer, employee, or agent of the Company,
or of any other corporation or any partnership, joint venture, trust or other
enterprise for which you served as such at the request of the Company, then
you shall be
Xx. Xxxxxx X. Xxxx, Xx.
December 15, 1999
Page 7
indemnified by the Company, to the fullest extent permitted under applicable
law, against expenses actually and reasonably incurred by you or imposed on
you in connection with, or resulting from, the defense of such action, suit
or proceeding, or in connection with, or resulting from, any appeal therein
if you acted in good faith and in a manner you reasonably believed to be in
or not opposed to the best interest of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe your
conduct was unlawful, except with respect to matters as to which it is
adjudged that you are liable to the Company or to such other corporation,
partnership, joint venture, trust or other enterprise for gross negligence or
willful misconduct in the performance of your duties. As used herein, the
term "expenses" shall include all obligations actually and reasonably
incurred by you for the payment of money, including, without limitation,
attorney's fees, judgments, awards, fines, penalties, taxes and amounts paid
in satisfaction of a judgment or in settlement of any such action, suit or
proceeding, except amounts paid to the Company or such other corporation,
partnership, joint venture, trust or other enterprise by you. The foregoing
indemnification provisions shall be in addition to any other rights to
indemnification to which you may be entitled.
6. ARBITRATION
The parties hereto may attempt to resolve any dispute
hereunder informally via mediation or other means. Otherwise, any controversy
or claim arising out of or relating to this Agreement, or any breach thereof,
shall, except as provided in Paragraph 4, be adjusted only by arbitration in
accordance with the rules of the American Arbitration Association, and
judgment upon such award rendered by the arbitrator may be entered in any
court having jurisdiction thereof. The arbitration shall be held in the city
of Houston, Texas, or such other place as may be agreed upon at the time by
the parties to the arbitration. The arbitrator(s) shall, in their award,
allocate between the parties the costs of arbitration, which shall include
reasonable attorneys' fees of the parties, as well as the arbitrators' fees
and expenses, in such proportions as the arbitrator(s) deem just; PROVIDED
HOWEVER, notwithstanding the above, in the event you are the prevailing
party, then the Company agrees to reimburse you for all such costs of
arbitration, including, but not limited to attorneys' fees and expenses
reasonably incurred by you; PROVIDED FURTHER, notwithstanding the above, in
the event the Company is the prevailing party, then the total costs of
arbitration, including but not limited to attorneys' fees reasonably incurred
by the Company and arbitrators' fees and expenses that may be allocated to
you by the arbitrator(s) shall not in any event exceed Twenty-Five Thousand
Dollars ($25,000). Notwithstanding the foregoing, you shall be entitled to
seek specific performance in a court of competent jurisdiction of your right
to be paid your full compensation until your separation from employment,
during the pendency or dispute of any controversy arising under or in
connection with this Agreement.
7. OTHER PROVISIONS
(a) THIS AGREEMENT WILL BE GOVERNED BY, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCLUDING ANY
CONFLICTS OF LAW, RULE OR PRINCIPLE THAT MIGHT OTHERWISE REFER TO THE
SUBSTANTIVE LAW OF ANOTHER JURISDICTION.
Xx. Xxxxxx X. Xxxx, Xx.
December 15, 1999
Page 8
(b) Except as otherwise indicated, this Agreement is not
assignable without the written authorization of both parties; provided that
the Company shall cause this Agreement to be assumed by any entity to which
the Company transfers substantially all of its stock or assets or to any
entity which is a successor to the Company by reorganization, incorporation,
merger or similar business combination.
(c) Except as otherwise provided herein, the provisions of
Paragraphs 4, 5 and 6 of this Agreement shall survive the termination of this
Agreement.
(d) All payments to you under this Agreement will be subject
to the withholding of all applicable employment taxes and income taxes;
provided, however, that at your request the parties hereto will use
reasonable efforts to explore alternatives to allow the Company to make
charitable contributions on behalf of the employee by redirecting a portion
of your annual bonuses to charitable organization(s) chosen by you in
accordance with Paragraph 3(b).
(e) This Agreement supersedes all previous employment
agreements, written or oral, between the Company and you. This Agreement may
be amended only by written amendment duly executed by both parties or their
legal representatives and authorized by action of the Board. Except as
otherwise specifically provided in this Agreement, no waiver by either party
hereto of any breach by the other party hereto of any condition or provision
of this Agreement to be performed by such other party shall be deemed a
waiver of a subsequent breach of such condition or provision or a waiver of a
similar or dissimilar provision or condition at the same or at any prior or
subsequent time.
(f) Any notice or other communication required or permitted
pursuant to the terms of this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
mail, first class, postage prepaid and registered with return receipt
requested, addressed to the intended recipient at his or its address set
forth below and, in the case of a notice or other communication to the
Company, directed to the attention of the Board of Directors with a copy to
the Secretary of the Company, or to such other address as the intended
recipient may have theretofore furnished to the sender in writing in
accordance herewith, except that until any notice of change of address is
received, notices shall be sent to the following addresses:
IF TO YOU: IF TO THE COMPANY:
Xxxxxx X. Xxxx Dynegy Inc.
#0 Xxxx Xxxxxxxx Xx. 0000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000 Xxxxxxx, XX 00000
Attn: Executive Vice President and
Chief Financial Officer
(g) If any one or more of the provisions or parts of a
provision contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity or
unenforceability shall not affect any other provision or part of a provision of
Xx. Xxxxxx X. Xxxx, Xx.
December 15, 1999
Page 9
this Agreement, but this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision or part of a provision had
never been contained herein and such provisions or part thereof shall be
reformed so that it would be valid, legal and enforceable to the maximum
extent permitted by law.
(h) Neither you nor the Company will make or authorize any
public statement disparaging the other in its or his business interests and
affairs. Notwithstanding the foregoing, neither party shall be (i) required
to make any statement which it or he believes to be false or inaccurate, or
(ii) restricted in connection with any litigation, arbitration or similar
proceeding or with respect to its response to any legal process. The
provisions in this Paragraph 7(h) shall survive the termination of your
employment hereunder, irrespective of the reason therefor.
(i) The waiver by the Company of breach of any provision of
this Agreement by you shall not operate or be construed as a waiver of any
subsequent breach by you. The waiver by you of a breach of any provision of
this Agreement by the Company shall not operate or be construed as a waiver
of any subsequent breach by the Company.
(j) You shall not be required to mitigate damages (or the
amount of any compensation provided under this Agreement to be paid)
following your termination of employment, by seeking employment or otherwise.
(k) If any provision of this Agreement as applied to either
party or to any circumstances shall be adjudged by a court of competent
jurisdiction to be void or unenforceable, the same shall in no way affect any
other provision of this Agreement or the validity or enforceability of this
Agreement.
(l) The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(m) This Agreement may be executed in one or more
counterparts, which shall, collectively and separately, constitute one
agreement.
(n) Notwithstanding anything to the contrary set forth in
this Agreement, the Company may cause any of its subsidiaries for which you
render services to pay or otherwise satisfy, in whole or in part, some or all
of the Company's obligations hereunder.
If the foregoing reflects your understanding of the terms of
your employment with the Company, please execute each copy of this letter in
the space provided below.
DYNEGY INC.
By:
Name: Xxxx Xxxxxx
Title: Executive Vice President and
Chief Financial Officer
Xx. Xxxxxx X. Xxxx, Xx.
December 15, 1999
Page 10
AGREED AND ACCEPTED this
____ day of December, 1999
___________________________
Xxxxxx X. Xxxx, Xx.
