Exhibit 10.36

DYNEGY INC.

INCENTIVE COMPENSATION PLAN

(As Amended and Restated Effective January 1, 2006)

I. PURPOSE OF PLAN

The Compensation and Human Resources Committee (the “Committee”) of the Board of
Directors of Dynegy Inc., an Illinois corporation (the “Company”), adopted the
Dynegy Inc. Incentive Compensation Plan (the “Plan”) effective January 1, 2003
to provide a method for rewarding employees for achieving the Company’s
performance goals and assuring that they have a financial stake in the success
of the Company’s overall performance. The Committee adopted this version of the
Plan, as amended and restated effective January 1, 2006, to reflect the
Company’s current organizational structure and operations.

The Plan, as amended herein, supersedes any short-term annual bonus program
sponsored by the Company or its Affiliates.

II. DEFINITIONS AND CONSTRUCTION

2.1 Definitions. Where the following words and phrases are used in the Plan,
they shall have the respective meanings set forth below, unless the context
clearly indicates to the contrary:

(a) “Actively Employed” or “Active Employment” means an Eligible Employee
actively performing all of the usual and customary duties of his employment on
his regular work schedule at a Company or Affiliate business location or other
location to which Company or Affiliate business requires him to travel.
Notwithstanding the foregoing, an Eligible Employee on paid leave of absence for
any reason, long-term disability, or military leave shall be deemed to be
“Actively Employed” or in “Active Employment” for purposes of the Plan.

(b) “Affiliate” means 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.

(c) “Award” means, with respect to each Participant for a Performance Period,
such Participant’s opportunity to earn a Payment Amount for such Performance
Period upon the satisfaction of the terms and conditions of the Plan and subject
to the sole discretion of the Committee.

(d) “Base Amount” means, with respect to each Participant for a Performance
Period, the total base earnings including overtime (but excluding bonuses,
project completion, retention-related payments, or other payments not related to
base earnings) paid or payable in cash by the Company and the Affiliates to or
for the benefit of the Participant for services rendered or labor

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performed during the period beginning on the first day of such Performance
Period (or, if later, the effective date of the Participant’s participation in
the Plan) and ending on the earlier of (i) the date upon which a Change in
Control occurs or (ii) the last day of such Performance Period. Base Amount may
be adjusted by the Committee in its sole discretion.

(e) “Board” means the Board of Directors of the Company.

(f) “Bonus Pool” means a pool to be funded by the Company and the Affiliates in
an amount determined by the Committee in its sole discretion.

(g) “Business Unit” means the business divisions of the Company as determined by
the Committee in its sole discretion.

(h) “CEO” means the Chief Executive Officer of the Company.

(i) “Change in Control” means (i) a merger of the Company with another entity, a
consolidation involving the Company, or the sale of all or substantially all of
the assets of the Company to another entity if, in any such case, (A) the
holders of equity securities of the Company immediately prior to such
transaction or event do not beneficially own immediately after such transaction
or event equity securities of the resulting entity entitled to 60% or more of
the votes then eligible to be cast in the election of directors generally (or
comparable governing body) of the resulting entity in substantially the same
proportions that they owned the equity securities of the Company immediately
prior to such transaction or event or (B) the persons who were members of the
Board immediately prior to such transaction or event shall not constitute at
least a majority of the board of directors of the resulting entity immediately
after such transaction or event, (ii) the dissolution or liquidation of the
Company; (iii) when any person or entity, including a “group” as contemplated by
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, acquires or
gains ownership or control (including, without limitation, the power to vote) of
more than 20% (which percentage shall be increased to 40% in the case of
ownership or control by ChevronTexaco Corporation or a “group” of which
ChevronTexaco Corporation is a part) of the combined voting power of the
outstanding securities of (A) if the Company has not engaged in a merger or
consolidation, the Company, or (B) if the Company has engaged in a merger or
consolidation, the resulting entity, or (iv) 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 preceding sentence, (1) “resulting entity” in the
context of a transaction or event that is a merger, consolidation or sale of all
or substantially all assets shall mean the surviving entity (or acquiring entity
in the case of an asset 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 the Company receive capital stock of such other entity in
such transaction or event, in which event the resulting entity shall be such
other entity, and (2) subsequent to the consummation of a merger or
consolidation that does not constitute a Change in Control, the term “Company”
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.

 

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(j) “Change in Control Severance Plan” means the First Supplemental Plan to the
Dynegy Inc. Severance Pay Plan, as amended, and the Second Supplement to the
Dynegy Inc. Executive Severance Pay Plan, as amended.

(k) “Committee” means the Compensation and Human Resources Committee of the
Board unless and until the Board designates another committee of the Board to
serve as the Committee.

(l) “Company” means Dynegy Inc., an Illinois corporation.

(m) “Company Stock” means the Class A common stock, no par value per share, of
the Company.

(n) “Effective Date” means January 1, 2006, as to this amendment and restatement
of the Plan.

(o) “Eligible Employee” means each individual who is employed in the United
States by the Company or an Affiliate and whose terms and conditions of
employment are not governed by a collective bargaining agreement, unless such
agreement provides for his coverage under the Plan. Plan eligibility is
contingent upon acceptable individual performance as determined by the
Committee.

(p) “Participant” means an Eligible Employee who has an opportunity to receive
an Award under the Plan pursuant to Article IV.

(q) “Payment Amount” means an amount equal to such Participant’s Base Amount
multiplied by a percentage determined by the Committee in its sole discretion
and communicated to each Participant. Such percentage may vary among individual
Participants.

(r) “Payment Date” means the date payments, if any, under the Plan for a
Performance Period are paid to Participants by the Company or its Affiliates.

(s) “Performance Period” means each twelve-month period commencing on the first
day of January.

(t) “Plan” means this Dynegy Inc. Incentive Compensation Plan, as amended from
time to time.

2.2 Number, Gender, Headings, and Periods of Time. Wherever appropriate herein,
words used in the singular shall be considered to include the plural, and words
used in the plural shall be considered to include the singular. The masculine
gender, where appearing in the Plan, shall be deemed to include the feminine
gender. The headings of Articles and Sections herein are included solely for
convenience. If there is any conflict between such headings and the text of the
Plan, the text shall control. All references to Articles and Sections are to
this Plan unless otherwise indicated. Any reference in the Plan to a period or
number of days, weeks, months, or years shall mean, respectively, calendar days,
calendar weeks, calendar months, or calendar years unless expressly provided
otherwise.

 

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III. ADMINISTRATION

3.1 Administration by the Committee. The Plan shall be administered by the
Committee.

3.2 Powers of the Committee. Subject to Section 3.4, the Committee shall
supervise the administration and enforcement of the Plan according to the terms
and provisions hereof and shall have the sole discretionary authority and all of
the powers necessary to accomplish these purposes. The Committee shall have all
of the powers specified for it under the Plan, including, without limitation,
the power, right, or authority: (a) to designate an Eligible Employee as a
Participant at any time, (b) from time to time to establish rules and procedures
for the administration of the Plan, which are not inconsistent with the
provisions of the Plan, and any such rules and procedures shall be effective as
if included in the Plan, (c) to construe in its discretion all terms,
provisions, conditions, and limitations of the Plan and any Award, (d) to
correct any defect or to supply any omission or to reconcile any inconsistency
that may appear in the Plan in such manner and to such extent as the Committee
shall deem appropriate, and (e) to make all other determinations necessary or
advisable for the administration of the Plan. The Committee may correct any
defect or supply any omission or reconcile any inconsistency in the Plan or in
any Award in the manner and to the extent it shall deem expedient to carry it
into effect.

3.3 Committee Decisions Conclusive; Standard of Care. Subject to Section 3.4,
the Committee shall, in its sole discretion exercised in good faith (which, for
purposes of this Section 3.3, shall mean the application of reasonable business
judgment), make all decisions and determinations and take all actions necessary
in connection with the administration of the Plan. All such decisions,
determinations, and actions by the Committee shall be final, binding, and
conclusive upon all persons. The Committee shall not be liable for any action or
determination taken or made in good faith or upon reliance in good faith on the
records of the Company or information presented to the Committee by the
Company’s officers, employees, or other persons (including the Company’s outside
auditors) as to matters the Committee reasonably believes are within such other
person’s professional or expert competence. If a Participant disagrees with any
decision, determination, or action made or taken by the Committee, then the
dispute will be limited to whether the Committee has satisfied its duty to make
such decision or determination or take such action in good faith. No liability
whatsoever shall attach to or be incurred by any past, present or future
stockholders, officers or directors, as such, of the Company or any of its
Affiliates, under or by reason of the Plan or the administration thereof, and
each Participant, in consideration of receiving benefits and participating
hereunder, expressly waives and releases any and all claims relating to any such
liability.

3.4 Delegation of Powers and Duties. At any time and from time to time, the
Committee may appoint subcommittees, individuals, or any other agents as it
deems advisable and may delegate to any of such appointees any or all of the
powers and duties of the Committee under the Plan. The provisions of Section 3.3
shall apply with respect to any such appointee in the same manner as such
provisions apply to the Committee.

 

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IV. PARTICIPATION

Each individual who is an Eligible Employee at any time during a Performance
Period shall automatically be a Participant and shall have an opportunity to
receive an Award with respect to such Performance Period unless otherwise
determined by the Committee in its sole discretion.

V. PERFORMANCE MEASURES

At the end of a Performance Period, the Committee and the CEO will review the
Company’s performance goals for such Performance Period and the extent to which
such goals have been satisfied. The performance goals of the Company may
include: (a) the price of a share of Common Stock, (b) the earnings per share of
Company Stock derived from all or a portion of the Company’s business, (c) the
return on stockholder’s equity achieved by the Company, (d) the total
stockholder’s return achieved by the Company, (e) the free cash flow derived
from all or a portion of the Company’s business, (f) the return on capital
employed by the Company or any Business Unit, (g) the sales of the Company or
any portion of its business, (h) the net income (before or after taxes) of the
Company or any portion of its business, (i) the earnings before or after
interest, taxes, depreciation, and/or amortization of the Company or any portion
of its business, (j) the Company’s liquidity, (k) any other performance goals as
determined by the Committee in its sole discretion, including performance goals
relating solely to a Business Unit or a functional area of the Company, such as
economic value added, reduction in operating expenses or increased safety
performance, or (l) a combination of any of the foregoing.

After considering the extent to which the performance goals of the Company have
been satisfied, the CEO shall make a recommendation to the Committee of the
amount that should be allocated to the Bonus Pool for the Performance Period;
provided, however, that the Committee, in its sole discretion, shall make the
final determination of the appropriate amount to be contributed to the Bonus
Pool for the Performance Period, if any, and the Company and its Affiliates
shall contribute the amount approved by the Committee to the Bonus Pool.

VI. AWARD PAYMENTS

6.1 Determinations by the Committee. The CEO (or such other officer as may be
designated by the Committee or the CEO) shall review the individual
accomplishments of each Participant employed by the Company or an Affiliate and
determine to what extent each Participant contributed to the attainment of the
performance goals of the Company. The CEO (or such other officer) shall then
determine a Payment Amount, if any, to be paid to each Participant (except the
CEO, President and the Executive Vice-Presidents of the Company and its
Affiliates) and make a recommendation to the Committee. The Committee shall
review the recommendations of the CEO (or such other officer) and determine, in
the Committee’s sole discretion and based on any factors it deems appropriate,
the Payment Amount, if any, to be paid to Participants. The Payment Amount to be
paid to each Participant who is the CEO, the President or an Executive
Vice-President of the Company or any Affiliate shall be determined by the
Committee in its sole discretion, based on recommendations from the CEO and any
other factors the Committee deems appropriate.

 

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6.2 Eligibility for Payment of Awards. Each Participant who is Actively Employed
by the Company or an Affiliate on the Payment Date shall be entitled to the
Payment Amount applicable to such Participant’s Award for such Performance
Period. A Participant who is employed, but not Actively Employed, by the Company
or an Affiliate on the Payment Date shall be entitled to the Payment Amount
applicable to such Participant’s Award for such Performance Period provided such
Participant resumes Active Employment on or before the September 1 next
following the Performance Period and continues such Active Employment for at
least thirty (30) consecutive days thereafter. If a Participant’s employment
with the Company and its Affiliates terminates for any reason whatsoever prior
to the Payment Date, then such Participant shall not be entitled to receive any
payment under the Plan for such Performance Period; provided however, that the
Committee may, in its sole discretion, make an exception regarding such
terminated Participant’s entitlement to a Payment Amount. The Payment Date for
Payment Amounts pursuant to the first sentence hereof shall occur as soon as
administratively feasible after the Committee’s determination of the Payment
Amount due each Participant under the Plan, but no later than the March 15 next
following the Performance Period and the payment of a Payment Amount pursuant to
the second sentence hereof shall occur as soon as administratively feasible
after the Participant becomes entitled to such Payment Amount.

6.3 Change in Control. Upon the occurrence of a Change in Control prior to the
Payment Date with respect to an Award pursuant to Section 6.2 for a Performance
Period, the following provisions shall apply:

(a) With respect to each Participant who is entitled to receive severance
benefits under a Change in Control Severance Plan, such Participant shall not be
entitled to receive any Awards under the Plan; and

(b) With respect to each Participant who is not entitled to receive severance
benefits under a Change in Control Severance Plan and who is Actively Employed
by the Company or its Affiliates on the day immediately prior to the Change in
Control, the provisions of Sections 6.1 and 6.2 shall cease to apply and the
Company or its Affiliates shall pay a Payment Amount (as determined in the sole
discretion of the Committee) for such Performance Period to such Participant;
provided, however, that the Committee may determine in its sole discretion that
one or more Participants shall not receive any such Payment Amount.
Notwithstanding the foregoing, the Committee may, in its sole discretion, make
exceptions regarding the entitlement to Payment Amounts for Participants who are
employed, but not Actively Employed, by the Company or its Affiliates on the day
immediately prior to a Change in Control and for Participants whose employment
with the Company and its Affiliates terminates for any reason whatsoever prior
to a Change in Control. The Payment Amount under this Section 6.3 shall be paid
to each Participant at the time determined by the Committee, but no later than
the March 15 next following the calendar year in which such Change in Control
occurs.

6.4 Form of Payment of Awards. All Payment Amounts may be paid in cash, Company
Stock, or a combination thereof, as determined by the Committee. All payments
shall be made in a lump sum. Notwithstanding the foregoing, if the Committee
determines that shareholder approval of this amendment and restatement of the
Plan is necessary or desirable under applicable law and/or the rules of any
national or regional securities exchange on which the Company Stock has been
listed in order to make payments in shares of Company Stock, then no payments
shall be made in Company Stock prior to the date such shareholder approval is
obtained by the Company.

 

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VII. TERMINATION AND AMENDMENT OF PLAN

The Committee may amend the Plan at any time and from time to time. The
Committee may at any time terminate the Plan (in its entirety or as it applies
to one or more specified Affiliates). The Committee shall remain in existence
after the termination of the Plan for the period determined necessary by the
Committee to facilitate the termination of the Plan, and all provisions of the
Plan that are necessary, in the opinion of the Committee, for equitable
operation of the Plan during such period shall remain in force.

VIII. MISCELLANEOUS PROVISIONS

8.1 No Effect on Employment Relationship. For all purposes of the Plan, a
Participant shall be considered to be in the employment of the Company as long
as he or she remains employed on a full-time basis by the Company or any
Affiliate. Without limiting the scope of the preceding sentence, it is expressly
provided that a Participant shall be considered to have terminated employment
with the Company at the time of the termination of the “Affiliate” status under
the Plan of the entity or other organization that employs the Participant.
Nothing in the adoption of the Plan, the grant of Awards, or the payment of
amounts under the Plan shall confer on any person the right to continued
employment by the Company or any Affiliate or affect in any way the right of the
Company (or an Affiliate, if applicable) to terminate such employment at any
time. Unless otherwise provided in a written employment agreement, the
employment of each Participant shall be on an at-will basis, and the employment
relationship may be terminated at any time by either the Participant or the
Participant’s employer for any reason whatsoever, with or without cause. Any
question as to whether and when there has been a termination of a Participant’s
employment for purposes of the Plan, and the reason for such termination, shall
be determined solely by and in the discretion of the Committee, and its
determination shall be final, binding, and conclusive on all parties.

8.2 Prohibition Against Assignment or Encumbrance. No Award or other right,
title, interest, or benefit hereunder shall ever be assignable or transferable,
or liable for, or charged with any of the torts or obligations of a Participant
or any person claiming under a Participant, or be subject to seizure by any
creditor of a Participant or any person claiming under a Participant. No
Participant or any person claiming under a Participant shall have the power to
anticipate or dispose of any Award or other right, title, interest, or benefit
hereunder in any manner until the same shall have actually been distributed free
and clear of the terms of the Plan. Payments with respect to an Award shall be
payable only to the Participant (or (a) in the event of a disability that
renders such Participant incapable of conducting his or her own affairs, any
payment due under the Plan to such Participant shall be made to his or her duly
appointed legal representative and (b) in the event of the death of a
Participant, any payment due under the Plan to such Participant shall be made to
his or her estate). The provisions of the Plan shall be binding on all
successors and permitted assigns of a Participant, including without limitation
the estate of such Participant and the executor, administrator or trustee of
such estate, or any receiver or trustee in bankruptcy or representative of the
Participant’s creditors.

 

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8.3 Unfunded, Unsecured Plan. The Plan shall constitute an unfunded, unsecured
obligation of the Company to make payments of incentive compensation to certain
individuals from its general assets in accordance with the Plan. Each Award
granted under the Plan merely constitutes a mechanism for measuring such
incentive compensation and does not constitute a property right or interest in
the Company, any Affiliate, or any of their assets. Neither the establishment of
the Plan, the granting of Awards, nor any other action taken in connection with
the Plan shall be deemed to create an escrow or trust fund of any kind.

8.4 No Rights of Participant. No Participant shall have any security or other
interest in any assets of the Company or any Affiliate or in the stock of the
Company as a result of participation in the Plan. Participants and all persons
claiming under Participants shall rely solely on the unsecured promise of the
Company set forth herein, and nothing in the Plan or an Award shall be construed
to give a Participant or anyone claiming under a Participant any right, title,
interest, or claim in or to any specific asset, fund, entity, reserve, account,
or property of any kind whatsoever owned by the Company or any Affiliate or in
which the Company or any Affiliate may have an interest now or in the future;
but each Participant shall have the right to enforce any claim hereunder in the
same manner as a general creditor. Neither the establishment of the Plan nor
participation hereunder shall create any right in any Participant to make any
decision, or provide input with respect to any decision, relating to the
business of the Company or any Affiliate.

8.5 Tax Withholding. The Company and the Affiliates shall deduct and withhold,
or cause to be withheld, from a Participant’s payment made under the Plan, or
from any other payment to such Participant, an amount necessary to satisfy any
and all tax withholding obligations arising under applicable local, state,
federal, or foreign laws associated with such payment. The Company and the
Affiliates may take any other action as may, in their opinion, be necessary to
satisfy all obligations for the payment and withholding of such taxes.

8.6 No Effect on Other Compensation Arrangements. Except as provided in Article
I of the Plan, nothing contained in the Plan or any Participant’s Award shall
prevent the Company or any Affiliate from adopting or continuing in effect other
or additional compensation arrangements affecting any Participant and nothing in
the Plan shall be construed to affect the provisions of any other compensation
plan or program maintained by the Company or any Affiliate.

8.7 Affiliates. The Company may require any Affiliate employing a Participant to
assume and guarantee the Company’s obligations hereunder to such Participant,
either at all times or solely in the event that such Affiliate ceases to be an
Affiliate.

8.8 Governing Law. The Plan shall be construed in accordance with the laws of
the State of Texas.

 

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IN WITNESS WHEREOF, the undersigned officer of the Company acting pursuant to
authority granted to him by the Committee has executed this instrument as of the
8th day of February, 2006, effective as of the Effective Date.

 

DYNEGY INC. By:   

/s/ J. Kevin Blodgett

Name:    J. Kevin Blodgett Title:    EVP, Administration

 

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