EXHIBIT 10.5
DYNEGY INC.
EMPLOYEE EQUITY OPTION PLAN
[AS AMENDED THROUGH AUGUST 20, 1998]
I. PURPOSE OF THE PLAN
The DYNEGY INC. EMPLOYEE EQUITY OPTION PLAN (the "Plan") is intended to
provide a means whereby certain employees of Dynegy Inc., a Delaware corporation
(the "Company"), and its affiliates may develop a sense of proprietorship and
personal involvement in the development and financial success of the Company,
and to encourage them to remain with and devote their best efforts to the
business of the Company, thereby advancing the interests of the Company and its
shareholders. Accordingly, the Company may grant to certain employees
("Optionees") the option ("Option") to purchase shares of the common stock of
the Company ("Stock"), as hereinafter set forth. Options granted under the Plan
shall not constitute incentive stock options, within the meaning of Section
422(b) of the Internal Revenue Code of 1986, as amended (the "Code"). The Plan
as set forth herein constitutes an amendment and restatement of the Plan as
previously adopted by the Company, and shall supersede and replace in its
entirety such previously adopted plan./1/
II. ADMINISTRATION
The Plan shall be administered by a committee (the "Committee") of, and
appointed by, the Board of Directors of the Company (the "Board"), and the
Committee shall be comprised solely of two or more individuals who qualify as
(a) outside directors (within the meaning of Section 162(m) of the Code and
applicable interpretive authority thereunder), and (b) non-employee directors
(as defined in Rule 16b-3, as currently in effect or as hereinafter modified or
amended ("Rule 16b-3"), promulgated under the Securities Exchange Act of 1934,
as amended (the "1934 Act")). The Committee shall have sole authority to select
the Optionees from among those individuals eligible hereunder and to establish
the number of shares which may be issued under each Option; provided, however,
that, notwithstanding any provision in the Plan to the contrary, the maximum
number of shares that may be subject to Options granted under the Plan to an
individual Optionee during any calendar year beginning on or after January 1,
1994, may not exceed 2,217,360 (subject to adjustment after May 21, 1998, in the
same manner as provided in Paragraph IX hereof with respect to shares of Stock
subject to Options then outstanding). The limitation set forth in the preceding
sentence shall be applied in a manner that will permit compensation generated
under the Plan that is intended to constitute "performance-based" compensation
for purposes of Section 162(m) of the Code to so qualify, including, without
limitation, counting against such maximum number of shares, to the extent
required under
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/1/ The referenced amendment and restatement of the Plan was effective as of May
21, 1998. This version of the Plan reflects all amendments to the Plan
through August 20, 1998, including, without limitation, the amendments
implemented to reflect the corporate name change from "NGC Corporation" to
"Dynegy Inc."
Section 162(m) of the Code and applicable interpretive authority thereunder, any
shares subject to Options that are canceled or repriced. In selecting the
Optionees from among individuals eligible hereunder and in establishing the
number of shares that may be issued under each Option, the Committee may take
into account the nature of the services rendered by such individuals, their
present and potential contributions to the Company's success and such other
factors as the Committee in its discretion shall deem relevant. The Committee is
authorized to interpret the Plan and may from time to time adopt such rules and
regulations, consistent with the provisions of the Plan, as it may deem
advisable to carry out the Plan. All decisions made by the Committee in
selecting the Optionees and in establishing the number of shares which may be
issued under each Option shall be final.
III. ELIGIBILITY OF OPTIONEE
(a) Options may be granted only to individuals who are employees (including
officers and directors who are also employees) of the Company or any affiliate
of the Company at the time the Option is granted. Options may be granted to the
same individual on more than one occasion.
(b) For all purposes under the Plan, an affiliate of the Company shall mean
any corporation, partnership, limited liability company or partnership,
association, trust or other organization which, directly or indirectly,
controls, is controlled by, or is under common control with, the Company. For
purposes of the preceding sentence, "control" (including, with correlative
meanings, the terms "controlled by" and "under common control with"), as used
with respect to any entity or organization, shall mean the possession, directly
or indirectly, of the power (i) to vote more than 50% of the securities having
ordinary voting power for the election of directors of the controlled entity or
organization, or (ii) to direct or cause the direction of the management and
policies of the controlled entity or organization, whether through the ownership
of voting securities or by contract or otherwise.
IV. SHARES SUBJECT TO THE PLAN
The aggregate number of shares which may be issued under Options granted
under the Plan shall not exceed 14,752,755 shares of Stock, which shall include
all shares of Stock subject to, and issued under, Options granted prior to the
effective date of this amendment and restatement of the Plan. Such shares may
consist of authorized but unissued shares of Stock or previously issued shares
of Stock reacquired by the Company. Any of such shares which remain unissued
and which are not subject to outstanding Options at the termination of the Plan
shall cease to be subject to the Plan, but, until termination of the Plan, the
Company shall at all times make available a sufficient number of shares to meet
the requirements of the Plan. Should any Option hereunder expire or terminate
prior to its exercise in full, the shares theretofore subject to such Option may
again be subject to an Option granted under the Plan to the extent permitted
under Rule 16b-3, and the purchase price of Stock issued under such Option shall
be determined in accordance with the provisions of Paragraph V hereof. The
aggregate number of shares which may be issued under the Plan shall be subject
to adjustment after May 21, 1998, in the same manner as provided in Paragraph IX
hereof with respect to shares of Stock subject to Options
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then outstanding. Exercise of an Option in any manner shall result in a decrease
in the number of shares of Stock which may thereafter be available, both for
purposes of the Plan and for sale to any one individual, by the number of shares
as to which the Option is exercised.
V. OPTION PRICE
The purchase price of Stock issued under each Option shall be determined by
the Committee, but such purchase price shall not be less than $5.66 per share of
Stock except as hereinafter provided. As of May 21, 1998, Options with respect
to 4,417,492 shares of Stock are outstanding with a purchase price of $2.028 per
share of Stock and Options with respect to 136,681 shares of Stock are
outstanding with a purchase price of $2.13 per share of Stock (each such Option
is herein referred to as an "Original Option"). If any Original Option expires
or terminates prior to its exercise in full and the shares theretofore subject
to such Original Option are again made subject to an Option (the "Replacement
Option") pursuant to Paragraph IV hereof, then the purchase price of Stock
issued under such Replacement Option shall be determined by the Committee, but
such purchase price shall not be less than (a) $2.028 per share of Stock in the
case of a Replacement Option that relates to an expired or terminated Original
Option with such purchase price or (b) $2.13 per share of Stock in the case of a
Replacement Option that relates to an expired or terminated Original Option with
such purchase price. The purchase prices set forth in this Paragraph V shall be
subject to adjustment after May 21, 1998, by the Committee applying the
principles set forth in Paragraph IX hereof.
VI. OPTION AGREEMENTS; TRANSFERABILITY; WITHHOLDING
(a) Each Option shall be evidenced by a written agreement between the
Company and the Optionee ("Option Agreement") which shall contain such terms and
conditions as may be approved by the Committee and are not inconsistent with the
provisions of the Plan. The terms and conditions of the respective Option
Agreements need not be identical. In the event of a conflict or inconsistency
between the provisions of the Plan and the terms of any Option Agreement, the
provisions of the Plan shall govern and control.
(b) Each Option and all rights granted thereunder shall not be transferable
other than by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder, and shall be exercisable during the Optionee's lifetime only by the
Optionee or the Optionee's guardian or legal representative.
(c) To the extent that the exercise of an Option granted under the Plan or
the disposition of shares of Stock acquired by exercise of an Option granted
under the Plan results in compensation income to an Optionee for federal, state
or local income tax purposes, such Optionee shall pay to the Company at the time
of such exercise or disposition such amount of money as the Company may require
to meet its obligation under applicable tax laws or regulations, and, if such
Optionee fails to do so, the Company is authorized to withhold from any
remuneration then or thereafter payable to such Optionee any tax required to be
withheld by reason of such resulting compensation income. Upon an exercise by
an Optionee of an Option
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granted under the Plan, the Company is further authorized in its discretion to
satisfy any such withholding requirement out of any cash or shares of Stock
distributable to such Optionee upon such exercise.
VII. VESTING AND CANCELLATION OF OPTIONS
(a) Each Option granted under the Plan shall vest and become immediately
exercisable in accordance with the terms hereof on the fifth anniversary of the
date of grant of such Option.
(b) Subsequent to the vesting of an Option granted hereunder, the
unexercised portion thereof shall automatically and without notice terminate and
become null and void on the earliest to occur of the following:
(i) the tenth anniversary of the date of grant of such Option;
(ii) the expiration of 95 days from the date of termination of the
Optionee's employment with the Company for any reason (other than a
termination described in clauses (iii) or (iv) below); provided, that if
the Optionee shall die during such 95-day period, the time of termination
of the unexercised portion of such Option shall be determined pursuant to
clause (iii) below;
(iii) the expiration of 12 months after an Optionee's death or the
date such Optionee's employment with the Company terminates by reason of
disability (within the meaning of subparagraph (d)(ii) below); and
(iv) the termination of the Optionee's employment with the Company in
the event such termination results from the discharge for cause of such
Optionee. For purposes of the Plan, "discharge for cause" shall have the
meaning set forth in each Optionee's employment agreement with the Company.
If an Optionee does not have an employment agreement with the Company, the
term "discharge for cause" shall mean the involuntary termination of an
Optionee's employment with the Company as a result of dishonesty or similar
serious misconduct directly related to the performance of duties for the
Company which results from a willful act or omission and which is
materially injurious to the operations, financial condition or business
reputation of the Company or any of its affiliates, including but not
limited to (1) refusal to follow the instructions of the President of the
Company, the Board, or the Optionee's superior officer in the performance
of the Optionee's duties, or (2) impairment of the discharge of the
Optionee's duties due to adverse consequences resulting from becoming a
defendant in any criminal proceeding or due to drug or alcohol abuse.
(c) Any Option granted hereunder which is not vested pursuant to
subparagraph (a) above shall automatically and without notice terminate and
become null and void as hereinafter set forth:
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(i) In the event an Optionee's employment with the Company
terminates by reason of death or disability (within the meaning of
subparagraph (d)(ii) below), each Option held by such Optionee shall
immediately terminate with respect to the percentage of shares of Stock
subject to such Option as set forth below directly opposite the period
during which the death or disability of such Optionee occurs:
PERCENTAGE
DATE OF DEATH OR DISABILITY TERMINATED
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Date of Grant - 1st anniversary of 80%
date of grant - 1 day
1st Anniversary - 2nd anniversary of 60%
date of grant - 1 day
2nd Anniversary - 3rd anniversary of 40%
date of grant - 1 day
3rd Anniversary - 4th anniversary of 20%
date of grant - 1 day
4th Anniversary - 5th anniversary of 10%
date of grant - 1 day
The portion of an Option that is not terminated shall immediately vest
and shall be subject to the termination provisions of clauses (i) and (iii)
of subparagraph (b) above.
(ii) In the event an Optionee voluntarily resigns his employment with
the Company prior to attaining age 62 or is discharged for cause, all of
such Optionee's Options shall be terminated immediately upon notice of such
resignation or discharge.
(iii) In the event an Optionee voluntarily retires from employment
with the Company on or after attaining age 62 or his employment with the
Company is involuntarily terminated by the Company (or one of its
affiliates) other than pursuant to a discharge for cause, each Option held
by such Optionee shall immediately terminate with respect to the percentage
of shares of Stock subject to such Option set forth below directly opposite
the period during which such termination occurs:
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PERCENTAGE
DATE OF TERMINATION TERMINATED
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Date of Grant - 1st anniversary of 100%
date of grant - 1 day
1st Anniversary - 2nd anniversary of 80%
date of grant - 1 day
2nd Anniversary - 3rd anniversary of 60%
date of grant - 1 day
3rd Anniversary - 4th anniversary of 40%
date of grant - 1 day
4th Anniversary - 5th anniversary of 20%
date of grant - 1 day
The portion of an Option that is not terminated shall immediately vest
and shall be subject to the termination provisions of clauses (i) and (ii)
of subparagraph (b) above.
(d) For all purposes of the Plan, (i) an Optionee shall be considered
to be in the employment of the Company as long as such Optionee remains an
employee of either the Company or any affiliate of the Company, or a corporation
or any affiliate of such corporation assuming or substituting a new option for
the Option granted to such Optionee, and (ii) an Optionee shall be considered to
be disabled if such Optionee is eligible to receive disability benefits under
the Company's long-term disability plan or Social Security disability benefits
if such Optionee's employment with the Company terminates at a time when the
Company does not maintain a long-term disability plan or such plan does not
provide coverage to such Optionee.
(e) The Committee may, in its sole discretion, (i) extend the time
period during which an Option may be exercised following a termination of
employment referred to in clauses (ii), (iii) or (iv) of subparagraph (b) above,
and/or (ii) accelerate the vesting of all or any portion of an Option that would
otherwise terminate pursuant to subparagraph (c) above. Any action by the
Committee pursuant to this subparagraph (e) may vary among individual Optionees
and may vary among Options held by an individual Optionee.
VIII. TERM OF PLAN
The Plan originally became effective on May 19, 1992. This
restatement of the Plan shall be effective as provided in Paragraph I hereof./2/
Except with respect to Options then outstanding, if not sooner terminated under
the provisions of Paragraph X, the Plan shall terminate upon and no further
Options shall be granted after May 18, 2002.
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/2/ See footnote 1.
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IX. RECAPITALIZATION OR REORGANIZATION
(a) The existence of the Plan and the Options granted hereunder shall
not affect in any way the right or power of the Board or the shareholders of the
Company to make or authorize any adjustment, recapitalization, reorganization or
other change in the Company's capital structure or its business, any merger or
consolidation of the Company, any issue of debt or equity securities, the
dissolution or liquidation of the Company or any sale, lease, exchange or other
disposition of all or any part of its assets or business or any other corporate
act or proceeding.
(b) The shares with respect to which Options may be granted are shares
of Stock as presently constituted, but if, and whenever, prior to the expiration
of an Option theretofore granted, the Company shall effect a subdivision or
consolidation of shares of Stock or the payment of a stock dividend on Stock
without receipt of consideration by the Company, the number of shares of Stock
with respect to which such Option may thereafter be exercised (i) in the event
of an increase in the number of outstanding shares shall be proportionately
increased, and the purchase price per share shall be proportionately reduced,
and (ii) in the event of a reduction in the number of outstanding shares shall
be proportionately reduced, and the purchase price per share shall be
proportionately increased.
(c) If the Company recapitalizes, reclassifies its capital stock, or
otherwise changes its capital structure (a "recapitalization"), the number and
class of shares of Stock covered by an Option theretofore granted shall be
adjusted so that such Option shall thereafter cover the number and class of
shares of stock and securities to which the Optionee would have been entitled
pursuant to the terms of the recapitalization if, immediately prior to the
recapitalization, the Optionee had been the holder of record of the number of
shares of Stock then covered by such Option. If (i) the Company shall not be
the surviving entity in any merger, consolidation or other reorganization (or
survives only as a subsidiary of an entity), (ii) the Company sells, leases or
exchanges all or substantially all of its assets to any other person or entity,
(iii) the Company is to be dissolved and liquidated, (iv) any person or entity,
including a "group" as contemplated by Section 13(d)(3) of the 1934 Act,
acquires or gains ownership or control (including, without limitation, power to
vote) of more than 50% of the outstanding shares of the Company's voting stock
(based upon voting power), or (v) as a result of or in connection with a
contested election of directors, the persons who were directors of the Company
before such election shall cease to constitute a majority of the Board (each
such event is referred to herein as a "Corporate Change"), no later than (a) ten
days after the approval by the shareholders of the Company of such merger,
consolidation, reorganization, sale, lease or exchange of assets or dissolution
or such election of directors or (b) thirty days after a change of control of
the type described in Clause (iv), the Committee, acting in its sole discretion
without the consent or approval of any Optionee, shall act to effect one or more
of the following alternatives, which may vary among individual Optionees and
which may vary among Options held by any individual Optionee: (1) accelerate the
time at which Options then outstanding may be exercised so that such Options may
be exercised in full for a limited period of time on or before a specified date
(before or after such Corporate Change) fixed by the Committee, after which
specified date all unexercised Options
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and all rights of Optionees thereunder shall terminate, (2) require the
mandatory surrender to the Company by selected Optionees of some or all of the
outstanding Options held by such Optionees (irrespective of whether such Options
are then exercisable under the provisions of the Plan) as of a date, before or
after such Corporate Change, specified by the Committee, in which event the
Committee shall thereupon cancel such Options and the Company shall pay to each
Optionee an amount of cash per share equal to the excess, if any, of the amount
calculated in Subparagraph (d) below (the "Change of Control Value") of the
shares subject to such Option over the exercise price(s) under such Options for
such shares, (3) make such adjustments to Options then outstanding as the
Committee deems appropriate to reflect such Corporate Change and to keep the
holders of such Options in as nearly the same position as possible to that which
they were in prior to such Corporate Change (provided, however, that the
Committee may determine in its sole discretion that no adjustment is necessary
to Options then outstanding) or (4) provide that the number and class of shares
of Stock covered by an Option theretofore granted shall be adjusted so that such
Option shall thereafter cover the number and class of shares of stock or other
securities or property (including, without limitation, cash) to which the
Optionee would have been entitled pursuant to the terms of the agreement of
merger, consolidation or sale of assets and dissolution if, immediately prior to
such merger, consolidation or sale of assets and dissolution, the Optionee had
been the holder of record of the number of shares of Stock then covered by such
Option.
(d) For the purposes of clause (2) in Subparagraph (c) above, the
"Change of Control Value" shall equal the amount determined in clause (i), (ii)
or (iii), whichever is applicable, as follows: (i) the per share price offered
to shareholders of the Company in any such merger, consolidation,
reorganization, sale of assets or dissolution transaction, (ii) the price per
share offered to shareholders of the Company in any tender offer or exchange
offer whereby a Corporate Change takes place, or (iii) if such Corporate Change
occurs other than pursuant to a tender or exchange offer, the fair market value
per share of the shares into which such Options being surrendered are
exercisable, as determined by the Committee as of the date determined by the
Committee to be the date of cancellation and surrender of such Options. In the
event that the consideration offered to shareholders of the Company in any
transaction described in this Subparagraph (d) or Subparagraph (c) above
consists of anything other than cash, the Committee shall determine the fair
cash equivalent of the portion of the consideration offered which is other than
cash.
(e) Any adjustment provided for in Subparagraphs (b) or (c) above
shall be subject to any required shareholder action.
(f) Except as hereinbefore expressly provided, the issuance by the
Company of shares of stock of any class or securities convertible into shares of
stock of any class, for cash, property, labor or services, upon direct sale,
upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, and in any case whether or not for fair value, shall not
affect, and no adjustment by reason thereof shall be made with respect to, the
number of shares of Stock subject to Options theretofore granted or the purchase
price per share.
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X. AMENDMENT OR TERMINATION OF THE PLAN
The Board in its discretion may terminate the Plan at any time with respect
to any shares for which Options have not theretofore been granted. The Board or
the Committee shall have the right to alter or amend the Plan or any part
thereof from time to time; provided, that no change in any Option theretofore
granted may be made which would impair the rights of the Optionee without the
consent of such Optionee; and provided, further, that (i) neither the Board nor
the Committee may make any alteration or amendment which would decrease any
authority granted to the Committee hereunder in contravention of Rule 16b-3 and
(ii) neither the Board nor the Committee may make any alteration or amendment
which would materially increase the benefits accruing to participants under the
Plan, increase the aggregate number of shares which may be issued pursuant to
the provisions of the Plan, change the class of individuals eligible to receive
Options under the Plan or extend the term of the Plan, without the approval of
the shareholders of the Company.
XI. SECURITIES LAWS
(a) The Company shall not be obligated to issue any Stock pursuant to
any Option granted under the Plan at any time when the offering of the shares
covered by such Option have not been registered under the Securities Act of 1933
and such other state and federal laws, rules or regulations as the Company or
the Committee deems applicable and, in the opinion of legal counsel for the
Company, there is no exemption from the registration requirements of such laws,
rules or regulations available for the offering and sale of such shares.
(b) It is intended that the Plan and any grant of an Option made to a
person subject to Section 16 of the 1934 Act meet the requirements of Rule 16b-3
so that any transaction under the Plan involving a grant, award or other
acquisition from the Company or disposition to the Company is exempt from
Section 16(b) of the 1934 Act. If any provision of the Plan or any such Option
would result in any such transaction not being exempt from Section 16(b) of the
1934 Act, such provision or Option shall be construed or deemed amended so that
such transaction will be exempt from Section 16(b) of the 1934 Act.
XII. MISCELLANEOUS
(a) The Plan and all actions taken pursuant to the Plan shall be
governed by, and construed in accordance with, the laws of the State of Texas,
applied without regard to conflict of laws principles thereof.
(b) The invalidity or unenforceability of any one or more provisions
of the Plan shall not affect the validity or enforceability of any other
provision of the Plan, which shall remain in full force and effect.
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