PERFORMANCE AWARD AGREEMENT
THIS PERFORMANCE AWARD
AGREEMENT (this “Agreement”) is made as of the ___th day of March, 2010, between
DYNEGY INC., a Delaware corporation (“Dynegy”), and all of its Affiliates
(collectively, the “Company”), and Xxxxx X. Xxxxxxxxxx (“Employee”). A
copy of the Dynegy Inc. _________ Long Term Incentive Plan (the “Plan”) is
annexed to this Agreement and shall be deemed a part of this Agreement as if
fully set forth herein. Unless the context otherwise requires, all terms
that are not defined herein but which are defined in the Plan shall have the
same meaning given to them in the Plan when used herein.
1.
The
Grant. The Compensation and Human Resources Committee of the
Board of Directors (the “Committee”) granted to Employee on March ___, 2010
(“Effective Date”), a Performance Award of _________ performance units, each of
which has a designated value of $100 and represents the right to receive an
amount payable in the form of cash or shares of Dynegy’s Class A Common Stock (a
“Share” or “Shares”), as determined in the discretion of the Committee.
Employee acknowledges receipt of a copy of the Plan, and agrees that this
Performance Award shall be subject to all of the terms and provisions of the
Plan, including future amendments thereto, if any, pursuant to the terms
thereof, and to all of the terms and conditions of this Agreement.
If it is subsequently determined by the
Committee, in its sole discretion, that the terms and conditions of this
Agreement and/or the Plan are not compliant with Code Section 409A, or any
Treasury regulations or Internal Revenue Service guidance promulgated
thereunder, this Agreement and/or the Plan may be amended
accordingly.
2.
Performance Period and
Performance Goals. Subject to the provisions of Section 5 of
this Agreement, the performance period for purposes of determining whether the
Performance Award will be paid shall be March ___, 2010 through March ___, 2013
for the two-thirds of the Performance Award that is based on stock-price
performance (with the final payout to be based on average stock-price
performance for February 2013) and shall be January 1, 2010 through December 31,
2012 for the one-third of the Performance Award that is based on accumulated
Adjusted EBITDA (collectively, the “Performance Period”). The performance
goals for purposes of determining whether, and the extent to which, the
Performance Award will be paid are set forth in Exhibit 1 to
this Agreement, which Exhibit is made a part of this Agreement.
Notwithstanding the foregoing, for awards that are not designated as Qualified
Performance-Based Awards, the Committee shall have discretion to adjust the
performance goals to reflect actions undertaken in the best interest of the
Company and its shareholders, including, but not limited to, strategic
transactions affecting the performance goals as well as recapitalizations,
reorganizations, mergers, consolidations, split-ups, split-offs, spin-offs,
exchanges or other relevant changes in capitalization or structure of the
Company, and for awards that are designated as Qualified
Performance-Based Awards, the Committee may disregard or offset the effect of
any “Extraordinary Items” in determining the attainment of performance
goals. For this purpose, “Extraordinary Items” means extraordinary,
unusual and/or non-recurring items, including but not limited to, (a)
restructuring or restructuring-related charges, (b) gains or losses on the
disposition of a business or major asset, (c) changes in business conditions,
regulatory, tax or accounting regulations or laws, (d) resolution and/or
settlement of litigation and other legal proceedings or (e) the effect of a
merger or acquisition.
3.
Payment.
Subject to the provisions of Sections 4 and 5 of this Agreement, after the
Performance Period, the Performance Award shall be paid as soon as practicable
after the Committee determines whether and to what extent the performance goals
have been achieved for the Performance Period in accordance with the terms set
forth in Exhibit 1 to
this Agreement; provided, however, that any such payment shall be made no later than March 15,
2013.
4.
Termination.
The Performance Award and the Employee’s right to receive any cash or Shares
hereunder will automatically and without notice terminate and become null and
void upon Employee’s termination of employment with the Company prior to the
Performance Award payment date, except that:
(a)
if Employee’s termination of employment is by reason
of:
(1)
death, or
(2)
Involuntary Termination (as defined in the Dynegy Inc. Executive
Severance Pay Plan, as amended and restated effective January 1, 2008),
or
(3)
a Change in Control Termination occurring in connection with, but
in no event earlier than sixty (60) days prior to, a Change in Control,
or
(b)
if Employee is determined to be disabled (as defined in the
Company’s long term disability program or the plan in which Employee is a
participant or, if Employee does not participate in any such plan, as defined in
the Dynegy Inc. Long Term Disability Plan, as amended, or the successor plan
thereto),
Employee shall
be treated as if he or she had been continuously employed by the Company through
the Performance Award payment date. In such case, Employee or Employee’s
legal representative, or the person, if any, who acquired the Performance Award
by bequest or inheritance or by reason of the death of Employee, shall be
entitled to receive any payment with respect to the Performance Award in
accordance with this Agreement; provided, however, that if Employee’s
termination of employment is for the reason described in Sections 4(a)(2), any
such payment shall be prorated by multiplying the payment by a fraction, the
numerator of which shall be the number of calendar days that elapsed between the
date of Employee’s termination and the Effective Date and the denominator of
which shall be 1,080 but in no case shall such fraction be greater than one
(1).
For purposes of this Agreement,
the term “Cause” shall mean, and hence arise as a result of, as determined by
the Committee in its sole discretion, the Employee’s (A) refusal to implement or
adhere to lawful policies or lawful directives of the Board; (B) engaging in
conduct which is materially injurious (monetarily or otherwise) to the Company
(including, without limitation, misuse of the Company’s funds or other
property); (C) misconduct or dishonesty directly related to the performance of
the Employee’s duties for the Company or gross negligence in the performance of
the Employee’s duties for the Company; (D) conviction (or entering into a plea
bargain admitting criminal guilt) in any criminal proceeding involving a felony
or a crime of moral turpitude; (E) drug or alcohol abuse; or (F) continued
failure to perform Employee’s duties which is not cured within 10 days after
written notice is provided to Employee by the Company. In addition, the
term “Change in Control Termination” shall mean Employee’s employment is
terminated by the Company (or a successor thereto) without Cause, or by Employee
following: (A) a significant diminution in Employee’s responsibilities,
authority or duties; (B) a material reduction in Employee’s base salary; or (C)
relocation of Employee’s position outside the Houston, Texas metropolitan area,
all as determined by the Committee in its sole discretion.
5.
Change In
Control. In the event a “Change in Control” (as defined below)
occurs during the Performance Period, provided the ending Share price, as
determined in accordance with this Section 5, would entitle Employee to receive
a Performance Award based upon the performance goals set forth in Exhibit 1 to
this Agreement, Employee shall receive a payment with respect to the Performance
Award, which shall be determined by using either, as applicable (i) the agreed
price per Share received by the shareholders of Dynegy as a result of the Change
in Control transaction, or if there is no agreed price per Share, then (ii) the
average closing Share price for the twenty (20) consecutive trading days
immediately preceding the effective date of the Change in Control, as the ending
Share price for the Performance Period. Such payment, if any, shall be
made regardless of whether Employee’s employment with the Company is terminated
(other than For Cause) on or after the effective date of such Change in Control,
and shall be made in the form of cash to Employee as soon as administratively
feasible but no later than the later of December 31 of the calendar year in
which the Change in Control occurs or the 15th day of the third
month following the effective date of the Change in Control. The
Performance Period shall end as of the effective date of a Change in Control,
and any Performance Award payments hereunder shall only be made in accordance
with this Section 5.
If the
amount paid in settlement of the Performance Award pursuant to the preceding
paragraph is zero, then, notwithstanding any other provision of the Performance
Award, Employee shall receive a payment equal to 100% of the amount that would
have been paid had the Performance Period ended on the date of the Change in
Control and the Target set out on Exhibit I of the Performance Award had been
achieved. Such payment shall be made in the form of cash to Employee as
soon as administratively feasible but no later than the later of December 31 of
the calendar year in which the Change in Control occurs or the 15th day of the
third month following the effective date of the Change in Control.
Notwithstanding anything in this Agreement to the contrary, in the event
of a Change in Control during the Performance Period, Employee shall
receive a minimum payment equal to 100% of each $100 performance unit
covered by this Performance Award.
For purposes of this Agreement,
“Change in Control” shall mean the occurrence of any of the following events:
(1) a merger of Dynegy with another entity, a consolidation involving Dynegy, or
the sale of all or substantially all of the assets or equity interests of Dynegy
to another entity if, in any such case, (A) the holders of equity securities of
Dynegy immediately prior to such event do not beneficially own immediately after
such event equity securities of the resulting entity entitled to fifty-one
percent (51%) or more of the votes then eligible to be cast in the election of
directors (or comparable governing body) of the resulting entity in
substantially the same proportions that they owned the equity securities of
Dynegy immediately prior to such event or (B) the persons who were members of
the Board immediately prior to such event do not constitute at least a majority
of the board of directors of the resulting entity immediately after such event;
(2) a circumstance where any person or entity, including a “group” as
contemplated by Section 13(d)(3) of the Exchange Act, acquires or gains
ownership or control (including, without limitation, power to vote) of fifty
percent (50%) or more of the combined voting power of the outstanding securities
of, (A) if Dynegy has not engaged in a merger or consolidation, Dynegy, or (B)
if Dynegy has engaged in a merger or consolidation, the resulting entity; or (3)
circumstances where, as a result of or in connection with, a contested election
of directors, the persons who were members of the Board immediately before such
election shall cease to constitute a majority of the Board. For purposes
of the “Change in Control” definition, (A) “resulting entity” in the context of
an event that is a merger, consolidation or sale of all or substantially all of
the subject assets or equity interests shall mean the surviving entity (or
acquiring entity in the case of an asset or equity interest sale), unless the
surviving entity (or acquiring entity in the case of an asset sale) is a
subsidiary of another entity and the holders of common stock of Dynegy receive
capital stock of such other entity in such transaction or event, in which event
the resulting entity shall be such other entity, and (B) subsequent to the
consummation of a merger or consolidation that does not constitute a Change in
Control, the term “Dynegy” shall refer to the resulting entity and the term
“Board” shall refer to the board of directors (or comparable governing body) of
the resulting entity.
6.
Status of
Stock. Employee agrees that any Shares distributed pursuant
to this Agreement will not be sold or otherwise disposed of in any manner which
would constitute a violation of any applicable federal or state securities
laws. Employee also agrees that (i) the certificates representing the
Shares may bear such legend or legends as the Committee in its sole discretion
deems appropriate in order to assure compliance with applicable securities laws
and (ii) the Company may refuse to register the transfer of the Shares on the
stock transfer records of the Company, and may give related instructions to its
transfer agent, if any, to stop registration of such transfer, if such proposed
transfer would in the opinion of counsel satisfactory to the Company constitute
a violation of any applicable securities law.
7.
Employment
Relationship. For purposes of this Agreement, Employee shall
be considered to be in the employment of the Company as long as Employee remains
an employee of the Company or an Affiliate (as such term is defined in the
Plan). Nothing in the adoption of the Plan or the grant of the Performance
Award thereunder pursuant to this Agreement shall confer upon Employee the right
to continued employment by the Company or affect in any way the right of the
Company to terminate such employment at any time. Unless otherwise
provided in a written employment agreement or by applicable law, Employee’s
employment by the Company shall be on an at-will basis, and the employment
relationship may be terminated at any time by either Employee or the Company for
any reason whatsoever, with or without cause. Any question as to whether
and when there has been a termination of such employment, and the cause of such
termination, shall be determined by the Committee in its sole discretion, and
its determination shall be final and binding on all parties.
8.
Withholding of
Tax. To the extent that payment of the Performance Award
results in compensation income to Employee for federal or state income tax
purposes, the Company is authorized to withhold from any cash or Shares
distributable to the Employee under this Agreement) then or thereafter payable
to Employee any tax required to be withheld by reason of such resulting
compensation income.
9.
Miscellaneous.
(a)
This grant is subject to all the terms, conditions, limitations and
restrictions contained in the Plan. In the event of any conflict or
inconsistency between the terms hereof and the terms of the Plan, the terms of
the Plan shall be controlling. In the event of any conflict or
inconsistency between the terms hereof and the terms of the Dynegy Inc.
Executive Severance Pay Plan, including any amendments or supplements thereto,
or the Dynegy Inc. Severance Pay Plan, including any amendments or supplements
thereto, the terms hereof shall be controlling.
(b)
Any notices or other communications provided for in this Agreement
shall be sufficient if in writing. In the case of Employee, such notices or
communications shall be effectively delivered when hand delivered to Employee at
his or her principal place of employment or when sent by registered or certified
mail to Employee at the last address Employee has filed with the Company. In the
case of the Company, such notices or communications shall be effectively
delivered when sent by registered or certified mail to the Company at its
principal executive offices.
(c)
Employee shall be presumed to have agreed to and accepted the terms
of this Agreement unless he or she submits a written objection to the Committee
or the undersigned officer within 30 days after the Effective Date.
IN WITNESS
WHEREOF, the Company has caused this Agreement to be duly executed by an
officer thereunto duly authorized as of the date first above
written.
By: /s/ J.
Xxxxx
Xxxxxxxx
Name: J. Xxxxx Xxxxxxxx
Title: General Counsel & EVP,
Administration
Performance Unit Award
Summary
For 2010 Long
Term Incentive grants made to those at the Managing Director and above level,
the Compensation and Human Resources Committee decided to base two-thirds of the
performance unit awards on long-term stock price performance and one-third of
the performance units awards on accumulated Adjusted EBITDA, each over a three
year period. The Committee believes these metrics provide a simple,
transparent and meaningful measure of Dynegy’s performance relative to its
long-term goal of creating value for stockholders. The material terms of
the performance units are summarized below:
- Denominated in $100 units, which are payable in the form of cash or stock, at the Compensation and Human Resources Committee’s discretion;
- With respect to two-thirds of the award, payment (if any) will be made in accordance with Section 3 of the Agreement based on Dynegy’s three-year stock price performance;
·
Starting
share price is the average closing price of Dynegy’s Class A common stock for
the month February 2010 ($_____);
·
Ending share price will be the average closing price of Dynegy’s
Class A common stock during the month of February 2013;
·
Awards are payable at threshold, target, and maximum levels as
illustrated in the table below;
and
Stock
Price Performance Goals for Performance Period
(March 3, 2010 — March 3, 2013)
|
|
|
Threshold
|
Target
|
Maximum
|
|
Performance
Goals
|
Achieved Share Price*
|
$2.50
|
$4.00
|
$6.00
|
|
Payment
Levels**
|
% of each $100 Performance Unit
|
0%
|
100%
|
200%
|
*Achieved
Share Price shall be the ending Share price equal to the average closing Share
price for the month of February 2013 or, if applicable, the ending Share price
determined in accordance with Section 5 of the Agreement in the event of a
Change in Control.
**Payment
levels will be based upon the actual Achieved Share Price and will be
interpolated between Achieved Share Price goals.
- With respect to one-third of the award, payment (if any) will be made in accordance with Section 3 of the Agreement based on Dynegy’s Adjusted EBITDA over the three year award period. The starting date for this period shall be January 1, 2010 and the end date shall be December 31, 2012.
·
For purposes of this Agreement, the term Adjusted EBITDA shall be
determined based on the “Adjusted EBITDA” public guidance construction disclosed
to the investing community;
·
Awards are payable at threshold, target, and maximum levels as
illustrated in the table below; and
Adjusted Performance Goals for Performance Period
(January 1, 2010 — December 31, 2012)
|
|
Threshold
|
Target
|
Maximum
|
|
Adjusted
EBITDA+
|
$1.4 billion
|
$1.6 billion
|
$2.0 billion
|
|
Payment
Levels++
|
0%
|
100%
|
200%
|
+
Calculated based on Adjusted EBITDA as determined for the fiscal years ending
December 31, 2010, December 31, 2011 and December 31, 2012.
++Payment
levels will be based upon the Adjusted EBITDA and will be interpolated between
Adjusted EBITDA goals.
