SETTLEMENT AGREEMENT
Charles E. Bayless (the "Employee") and Illinova Corporation (the
"Company") have entered into a "Retention Agreement" dated August 13, 1998. For
greater certainty as to certain compensation, payments, and benefits which may
be provided under the Retention Agreement, and to address certain transition
issues relating to the merger of the Company and Dynegy Inc. (or an affiliate),
the parties to the Retention Agreement wish to enter into this Agreement.
Accordingly, the Employee and the Company agree that, effective December 22,
1999 (the "Effective Date"), the provisions set forth in this Settlement
Agreement will apply:
1. BENEFITS SCHEDULE. By execution of this Settlement Agreement, the
Employee agrees that the revisions described in Supplement A (the "Benefits
Schedule") which is attached to and forms a part of this Settlement Agreement
shall apply. (For purposes of this Settlement Agreement, the term "Settlement
Agreement" shall include the Benefits Schedule.) The Employee acknowledges that
the amounts payable to the Employee under this Settlement Agreement, and under
the Retention Agreement as modified by this Settlement Agreement, are in excess
of the amounts which would have been payable to the Employee under the Retention
Agreement absent modification by this Settlement Agreement.
2. ACCELERATION AUTHORIZED. The Employee authorizes the Company to
accelerate, into calendar year 1999, payments that may otherwise have been
payable after 1999 under Company compensation arrangements, including, without
limitation, the Illinova Executive Incentive Compensation Plan, Illinova Long
Term Incentive Compensation Plan, and the Illinova Corporation Supplemental
Pension Plan applicable to the Employee (the "Supplemental Plan"), but not
including the Company's health, life, or disability plans (which would not be
accelerated), in accordance with determinations made by the Company. In
addition, the Company may, in its sole discretion, accelerate severance payments
that may otherwise be due to the Employee upon termination of employment under
any agreement with the Company or any plan or arrangement maintained by the
Company. The Company may, in its discretion, limit the amount accelerated on
behalf of the Employee to the extent it determines that the acceleration would
result in payments that would not be tax deductible by reason of section 162(m)
of the Internal Revenue Code (relating to the $1 million limit on deductible
compensation). If any payment otherwise due (or which may become due) to the
Employee in a later year under the Retention Agreement, this Settlement
Agreement, or any other Company compensation arrangement is accelerated into
1999 under this Settlement Agreement, there shall be a corresponding reduction
in the Company's obligation to make payments to the Employee under that
agreement or arrangement in the later year. As soon as practicable after such
acceleration occurs, the Company will provide the Employee with a schedule of
the amount of the acceleration and the specific compensation, benefits, and
payments that were canceled as a result of the acceleration. Any obligation that
is accelerated under any agreement or arrangement will be subject to a present
value
adjustment, and any obligation that is accelerated under the Supplemental
Plan will be subject to an actuarial adjustment to reflect such acceleration.
3. RESTRICTIONS ON ACCELERATION. If approved by the Board of Directors
of the Company, the Company will endeavor to accelerate amounts into calendar
year 1999 so that the Employee's benefits will not be reduced in accordance with
the provisions of section 9 of the Retention Agreement, to the extent that the
Company determines that such amounts would otherwise become due to the Employee
in a later year. However, the Company and the Employee agree that the provisions
of section 9 of the Retention Agreement shall continue to apply, notwithstanding
the provisions of this Settlement Agreement.
4. GOOD REASON. The Employee acknowledges that (i) entering into this
Settlement Agreement does not constitute a change in compensation, perquisites,
or benefits, does not constitute a cessation of the Employee being employed in
the same or a comparable position (as described in section 2(a)(ii)(C) of the
Retention Agreement), and does not otherwise constitute a basis for "Good
Reason" under the Retention Agreement (as in effect both prior to and after
amendment by this Settlement Agreement), and (ii) the amendment of the Retention
Agreement by this Settlement Agreement constitutes an amendment of the Retention
Agreement that reflects the mutual written agreement of the parties to the
Retention Agreement, and the Employee hereby waives any and all rights to assert
the contrary.
5. AFFILIATES. For purposes of this Settlement Agreement, the term
"Affiliate" shall mean any "affiliate" of the Company as that term is defined in
Rule 12b-2 under the Securities Exchange Act of 1934.
6. OTHER COMPENSATION. Except for the covenants and agreements set
forth in this Settlement Agreement, the Employee has received and will receive
no additional compensation or any other type of remuneration from the Company in
consideration of the elections and waivers made pursuant to this Settlement
Agreement. Notwithstanding any provision of this Settlement Agreement or the
Retention Agreement to the contrary, the benefits payable to the Employee under
this Settlement Agreement shall be in lieu of, and not in addition to, any
benefits to which the Employee might otherwise be entitled under any other
severance plan or arrangement maintained by the Company. The acceleration of
compensation under sections 2 and 3 will be disregarded for purposes of the
Illinois Power Company Retirement Income Plan for Salaried Employees, the
Supplemental Plan, and all other plans and arrangements, and will not increase
the Employee's benefits under any such plan or arrangement. The Employee
acknowledges that he or she will have no control over what the Company may do
with the amounts, if any, waived pursuant to this Settlement Agreement.
7. TAX RETURNS. The Employee agrees to employ PricewaterhouseCoopers to
prepare his or her personal income tax returns for calendar years 1999 and 2000.
The Company will reimburse the Employee for the cost of such preparation.
8. RIGHT OF REVOCATION. Except as otherwise provided in this section 8,
this Settlement Agreement will become irrevocable on the Effective Date. If the
Company does not accelerate in accordance with sections 2 and 3, then, for a
period of 14 days following the date written notice is provided to the Employee
(by mailing to the Employee's last residence address indicated in the Company's
records) of the Company's determination not to accelerate, the Employee shall be
entitled to revoke this Settlement Agreement by filing, prior to the 15th day
following provision by the Company of such written notice a written revocation
signed by the Employee stating "I revoke my acceptance of the Settlement
Agreement that became effective December 22, 1999."
Charles E. Bayless
/s/ Charles E. Bayless
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Date: December 22, 1999
Supplement A
BENEFITS SCHEDULE
This Benefits Schedule is attached to and is a part of the Settlement
Agreement between Charles E. Bayless (the "Employee") and Illinova Corporation
(the "Company") dated December 22, 1999, and sets forth certain rights to
compensation, benefits, and payments under the Retention Agreement between the
Employee and the Company dated August 13, 1998 (the "Retention Agreement"). The
Employee and the Company agree that the provisions set forth in this Benefits
Schedule will apply:
A-1. CHANGE IN CONTROL BENEFITS. The following shall be substituted for the
portion of section 1 of the Retention Agreement that precedes section
1(a) of that agreement:
"CHANGE IN CONTROL BENEFITS. If a Termination Event occurs, then the
provisions of paragraphs (a), (b), (c), (d), and (e) shall apply:"
A-2. WELFARE BENEFITS. The following shall be substituted for section 1(d)
of the Retention Agreement:
"(d) WELFARE BENEFITS. The Employee and his dependents shall be
eligible for coverage under the health (including medical and dental)
plan, life insurance plan, and disability plan (if any) provided to
full-time employees of Illinois Power Company (or its successor) from
time to time, subject to the same requirements and limitations as are
applicable to full-time employees (including, without
limitation, any requirement for employee contributions to pay premiums
for such coverage). Eligibility for each of such health coverage, life
insurance coverage, and disability coverage, respectively, shall
continue until the earliest of:
(i) The first day the Employee becomes eligible for health
coverage, life insurance coverage, or disability coverage,
respectively, under a plan or arrangement of the Employee's
new employer.
(ii) The three-year anniversary of the Employee's Termination
Event.
(iii) The date the Employee attains age 65.
Medical coverage provided under this section 1(d) shall be counted
towards the Company's obligation to provide coverage under the
provisions of section 4980B of the Internal Revenue Code and section
601 of the Employee Retirement Income Security Act (sometimes referred
to as "COBRA coverage").
The Employee and his or her dependents, if any, shall be eligible to
participate in any benefit plans of the Company which provide health
and life or similar benefits coverage as are then extended to employees
of the Company electing early retirement at age 55 on the same terms
and subject to the same conditions as are applicable to such employees;
provided that such coverage shall not be furnished if the Employee
waives coverage by giving written notice of waiver to the Company.
Nothing in the Settlement Agreement (including this Benefits Schedule)
shall be construed to limit the right which the Company otherwise has
to amend or termination any health, life or other plan covering the
Company's employees (or their dependents).
A-3. GRANT OF STOCK. By action of the Board of Directors of the Company on
December 9, 1998, the Employee was granted the right to receive 6,000
shares of the Company's common stock ("Stock") subject to certain
conditions. It is agreed by the parties that the distributions provided
under this section A-3 are in full settlement of the Employee's rights
under that grant.
(a) The Company granted to the Employee 4,000 shares of the Company's
common stock ("Stock") on December 9, 1999. These 4,000 shares of Stock
shall be delivered to the Employee as soon as practicable on or after
that date.
(b) The Employee was granted 2,000 shares of Stock on December 9, 1998
granted to the Employee at the December 9, 1998 Board of Directors
meeting, with delivery of such shares to be made in the future. Since
that date, stock units representing the 2,000 shares have been credited
to a book account maintained by the Company. As of each dividend record
date for the Stock following December 9, 1998 and prior to December 9,
1999, the account has been credited with additional stock units
(including fractional stock units) equal to (i) the amount of
the dividend that would be payable with respect to the number of
shares of Stock equal to the number of stock units credited to the
account on the dividend record date; divided by (ii) the fair
market value of a share of Stock on the date of payment of the
dividend.
(c) As soon as practicable after December 9, 1999, the Company will
distribute to the Employee the sum of 4,000 shares granted in
accordance with paragraph (a) above, and the number of shares equal to
the number of share units that, as of December 9, 1999, are credited to
the account described in paragraph (b) next above, and the Employee
shall be fully vested in all such shares as of December 9, 1999.
A-4. LONG-TERM INCENTIVE PAYMENT. If (i) the Employee is employed through
December 31, 1999; (ii) the Employee's employment is terminated prior
to that date by the Company without Good Cause (as defined in the
Retention Agreement); or (iii) the Employee resigns as an employee of
the Company and becomes a consultant to the Company in accordance with
section A-6, then the Company shall provide the Employee with an award
for each of the three performance periods currently in effect (January
1, 1999 through December 31, 1999; January 1, 1999 through December 31,
2000; and January 1, 1999 through December 31, 2001). The determination
of the performance for the periods will be determined near the end of
1999, and will be equal to the performance figures available as of the
date of such determination, with such performance deemed to have
continued through the end of the performance periods, as determined by
the Compensation Committee of the Board of Directors of the Company.
The amount of the benefit payable under this section A-4 to the
Employee for each of these performance periods shall be equal to the
amount that would be payable on such performance for the entire period,
but subject to a pro-rata reduction to reflect the portion of the
performance period after December 31, 1999, in accordance with the
following schedule:
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For the Performance Period: The following percent of the total award that is
determined to be payable by the Company for the
Performance Period shall be:
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January 1, 1999 through December 31, 1999 100%
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January 1, 1999 through December 31, 2000 50%
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January 1, 1999 through December 31, 2001 33%
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Except as provided in this section A-4, the Employee shall not be
entitled to any amounts with respect to the Long-Term Incentive Plan
for any period.
A-5. COMPENSATION CESSATION. Except as otherwise specifically provided in
this Settlement Agreement, or the provisions of Retention Agreement
(excluding
section 1(d) as in effect prior to amendment by this Settlement
Agreement), the Employee shall not be eligible for any compensation
or benefits for periods after the Employee's date of termination.
Except as otherwise provided in section A-6, nothing in this
Settlement Agreement or the Retention Agreement shall be construed
to give the Employee any right to be reemployed or otherwise
retained by the Company or an Affiliate after such termination of
employment. However, the Employee, if reemployed, shall be eligible
for such compensation and benefits, and shall be eligible for
participation in such benefit plans and arrangements, with respect
to any such reemployment as may be agreed upon by the Employee and
the employer, and shall be subject to the terms that may be
applicable to the Employee under any such plan or arrangement.
A-6. CONSULTING. The Company and the Employee agree to enter into a
consulting relationship subject to the following:
(a) The Employee agrees that, at the request of the Company, he will
resign as an officer and employee of the Company, and after the
effective date of such resignation (which will be determined by the
Company), he will serve in the role of a consultant to the Company with
respect to transition issues relating to the merger of the Company and
Dynegy Inc. or an affiliate.
(b) The Employee shall provide such consulting services during the
period (the "Consulting Period") specified by the Company, provided
that the period may not end prior to the day following the occurrence
of a Change in Control (as defined in the Retention Agreement), and may
not extend beyond January 31, 2000 without the consent of the Employee.
During the Consulting Period, the Employee shall be required to provide
up to 80 hours of consulting services (as requested by the President of
the Company), shall be entitled to payment of $10,000 (regardless of
the number of hours of service provided during the period), and shall
also be reimbursed for his expenses incurred in connection with his
responsibilities for the Company. During the period he serves as a
consultant, the Employee shall not be treated as an employee of the
Company, and, except as provided in this paragraph (b), he shall not be
entitled to receive compensation or benefits provided to the Company's
employees.
(c) It is understood by the parties that the arrangement described in
this section A-6 is expected to facilitate the transition and provide
other material benefits to the Company, but is not intended to
adversely affect the Employee's rights to the separation benefits to
which he would otherwise be entitled. Accordingly, for purposes of the
following, the Employee's employment with the Company shall not be
deemed to have terminated during the period in which he is engaged as a
consultant to the Company in accordance with this section A-6, but such
employment will be deemed to have been terminated by the Company
without Good Cause on the date he ceases to be so engaged as a
consultant to the Company:
(i) The Employee's right to receive Change in Control Benefits
under section 1 of the Retention Agreement, including, without
limitation, the determination of the date of a Termination
Event. However, the Employee waives any and all rights to
assert the existence of "Good Reason" pursuant to 2(a)(ii)(A)
(relating to salary reduction), 2(a)(ii)(B) (relating to
reduction of vacation, fringe benefits, or perquisites), or
2(a)(ii)(C) (relating to retaining a comparable position) with
respect to his resignation as an officer and employee and
acceptance of his role as a consultant, and with respect to
the circumstances of his serving as a consultant. If the
Employee serves as a consultant to the Company, then, when he
ceases to serve as a consultant and becomes entitled to Change
in Control Benefits in accordance with section 1(a) of the
Retention Agreement, and notwithstanding the terms of the
Retention Agreement with respect to the determination of such
amount, his "latest bonus" as described in section 1(a)(II) of
the Retention Agreement shall be deemed to be $431,250.00.
(ii) The Employee's rights and obligations under the terms of the
promissory note and tax letter. For purposes of this paragraph
(ii), the term "promissory note" shall mean the promissory
note dated August 13, 1998 with respect to the borrowing of
$500,000 by the Employee from the Company, and the term "tax
letter" shall mean the letter from the Company to the Employee
dated August 13, 1998 providing for the tax gross-up with
respect to the forgiveness of interest under the promissory
note.
(iii) The Employee's right to receive benefits under the
Supplemental Pension Plan, including, without limitation, the
Employee's right to receive the Accrued Vested Benefit under
the Supplemental Pension Plan in accordance with section 1(c)
of the Retention Agreement. If the Employee serves as a
consultant to the Company, then, when he becomes entitled to
benefits in accordance under the Supplemental Pension Plan,
and notwithstanding the terms of the plan with respect to the
determination of such amount, the amount of the Employee's
Final Average Earnings shall be $804,542.00
(iv) The Employee's right to hold, vest in, and exercise any stock options
granted to him by the Company. These options shall expire January 30, 2005. To
the extent not already vested, stock options shall vest in accordance with
Section Three of the Non-Qualified Stock Option Agreement between the Company
and the Employee dated June 24, 1998. Upon the merger among Dynegy Inc., the
Company, and their affiliates, the right to purchase shares of the Company under
such options shall be replaced with the right to purchase a corresponding number
of shares of Dynegy Inc. (based on the exchange rate for other holders of
options to purchase shares of Stock of the Company). The portion of the options
to purchase Stock of the Company that have been granted to
the Employee which provide for exercisability upon the attainment of a $35
per share and $40 per share of the Company's Stock shall, upon consummation
of the merger among Dynegy Inc., the Company, and their affiliates, be
replaced respectively with a $35 per share and $40 per share price level
requirement based on the shares of Dynegy Inc.