Document:

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                                                                  Exhibit 10.79

[LOGO]
THE HANOVER COMPANY
12001 North Houston Rosslyn
Houston, Texas 77086
P.O. Box 690349
Houston, Texas 77269
Tel: (281) 447-8787
Fax: (281) 405-6283

                                      August 19, 2002

Mr. Chad Deaton
13914 I. O. Court
Willis, TX 77318

Dear Chad:

This letter summarizes Hanover Compressor Company's offer of employment to you
to serve as the Company's President and Chief Executive Officer ("President and
CEO") in Hanover's corporate office in Houston, Texas. In this role, you will
report to the Company's board of directors. You will be appointed to the
Company's board of directors to serve until the next annual shareholders'
meeting, at which time you will be nominated for election to the board of
directors. I am confident that your employment at Hanover will prove to be
mutually rewarding and offer you the career opportunity that you seek.

As Hanover's President and CEO, your compensation and other terms and conditions
of employment will be set by the Company's board of directors. Initial
compensation for this position is as follows.

Base Salary:
                           $540,000.00 annual base salary for the remainder of
                           2002, on a pro-rata basis, and for 2003 ($20,769.23
                           per pay period for 26 pay periods per full year).

Bonus
Opportunity:
                           0 - 100% of annual base salary to be paid annually
                           based upon personal performance as well as Company
                           performance, and as determined by the Company's board
                           of directors.

Stock Option
Program:
                           As of the date hereof, the Company is granting to you
                           non-qualified stock options to purchase 200,000
                           shares of Company common stock at a price per share
                           equal to the NYSE closing market price on the date
                           hereof, and otherwise under the provisions of the
                           applicable Company stock option plan and agreement.
                           You and the Company will promptly sign and enter an
                           option

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August 19, 2002
Page 2

                           agreement to evidence your option grant. In addition,
                           provided that you remain continually employed by the
                           Company in a role substantially similar to that
                           described herein, you will be given the full
                           opportunity to participate in the stock, incentive,
                           retirement and other plans offered to the most senior
                           officers of the Company.

Severance:
                           The Company will make an immediate lump sum severance
                           payment to you equal to three times your annual base
                           salary which was in effect immediately before the
                           "Change of Control", if within the first twelve
                           months following a "Change of Control" of the
                           Company, (ii) you terminate your employment with the
                           Company for "Good Reason" or (ii) the Company
                           terminates your employment without "Cause".
                           Otherwise, the Company will make a severance payment
                           to you equal to one times your annual base salary,
                           payable in 24 equal monthly installments, if the
                           Company terminates your employment without "Cause" at
                           any time other than the first twelve month period
                           immediately following a "Change of Control". In
                           either of these circumstances, the Company shall also
                           reimburse you for your COBRA premiums, paid to
                           continue your current health benefits, for a period
                           of up to eighteen months.

                           Please note, however, that this agreement will not
                           obligate the Company to make any severance payment to
                           you in the event that (i) you resign or voluntarily
                           terminate your employment with the Company for any
                           reason, other than "Good Reason" within the first
                           twelve months following a "Change of Control", (ii)
                           your employment ends due to your death or inability
                           to perform the essential requirements of the job,
                           with or without reasonable accommodation, due to
                           disability, or (iii) you are terminated for "Cause".
                           Additionally, in the event that the Company
                           subsequently implements employment contracts for its
                           executive managers that contain Change of
                           Control-related severance provisions more favorable
                           to managers than that described above, you will be
                           offered similar protections.

                           These commitments regarding your severance are
                           contingent upon, and are in consideration for your
                           continued compliance with your post-termination
                           obligations, including the Cooperation, Confidential
                           Information and Non-competition and Non-solicitation
                           provisions, which are addressed below.

                           For purposes of this letter agreement, the terms
                           "Change of Control" and "Cause" will have the same
                           definition as used in the Company's 2001 Equity
                           Incentive Plan and are incorporated herein by
                           reference. Moreover, voluntary termination of
                           employment for

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August 19, 2002
Page 3

                           "Good Reason" shall be defined as any situation
                           within the first twelve months following a "Change in
                           Control" of the Company in which your termination of
                           employment with the Company (i) promptly follows a
                           material reduction of your duties and
                           responsibilities or a permanent change in your duties
                           and responsibilities which are materially
                           inconsistent with the type of duties and
                           responsibilities then in effect or your title, (ii)
                           promptly follows a reduction in your annual base
                           salary (without regard to bonus compensation, if any)
                           or a reduction in your annual bonus opportunity as
                           set forth in this letter (it is acknowledged that a
                           reduction in the actual amount of your bonus from
                           year to year as a result of the criteria addressed
                           above will not be considered a reduction in bonus
                           opportunity), (iii) promptly follows a material
                           reduction in your employee benefits (without regard
                           to bonus compensation, if any) if such reduction
                           results in you receiving benefits which are, in the
                           aggregate, materially less than the benefits received
                           by other comparable employees of the Company
                           generally, (iv) promptly follows a material failure
                           by the Company to comply with the terms of this
                           letter or to pay any compensation when due, but only
                           after you provide notice to the Company of such
                           failure and the Company has reasonable opportunity to
                           cure, (v) promptly follows a relocation of your
                           principal work location outside the Houston, Texas,
                           metropolitan area, or (vi) the Board otherwise
                           determines that a voluntary termination by you is for
                           "Good Reason" under the circumstances then
                           prevailing.

Benefits & Vacation:
                           As a full time employee, you will also be eligible to
                           participate in the various benefit programs offered
                           by the Company. Other than in the case of the
                           Company's 401(k) plan described below, you will
                           participate in these programs starting the first day
                           of the month of your employment start date. Pursuant
                           to Company and ERISA guidelines, your eligibility for
                           participating in the Company's 401(k) plan will occur
                           on the 1st of the month following six months of
                           service with the Company; provided, however, you may
                           immediately roll any of your existing 401(k) plan
                           accounts into the Company's plan in compliance with
                           the terms of the Company's plan and policies. You
                           will be entitled to up to four weeks of vacation per
                           year.

Cooperation:
                           We ask that you agree to act at all times in a manner
                           consistent with the interests of Hanover Compressor
                           Company and it affiliated entities with respect to
                           our shareholders, customers, employees, agents, and
                           lenders. Neither you nor the Company will

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August 19, 2002
Page 4

                           defame or disparage each other. You further agree
                           that should your employment end, you will provide
                           reasonable cooperation to the Company in response to
                           reasonable requests made by the Company for
                           information or assistance, including but not limited
                           to, participating upon reasonable notice in
                           conferences and meetings, providing documents or
                           information, aiding in the analysis of documents, or
                           complying with any other reasonable requests by the
                           Company including execution of any agreements that
                           are reasonably necessary.

Confidential
Information:
                           During your employment you will be given access to
                           information relating to the business and affairs of
                           Hanover Compressor Company and its affiliated
                           entities, including, without limitation, trade
                           secrets, designs, technology, processes, data,
                           techniques, inventions (whether patentable or not),
                           works of authorship, formulas, business and
                           development plans, customer lists, software programs
                           and subroutines, source and object code, algorithms,
                           terms of compensation and personnel assessments of
                           employees, information regarding the Company's
                           facilities, processes, operating procedures,
                           financial data, purchasing practices, marketing,
                           management procedures, books and records, employee or
                           personnel data, contractual arrangements or
                           proposals, properties and business affairs of the
                           Hanover entities, as well as the Company's business
                           plans and budgets, information concerning the
                           Company's actual or anticipated business, research or
                           development, and may receive information in
                           confidence by or for any of the Hanover entities from
                           any other person (collectively "Confidential
                           Information"). We ask that you agree that you will
                           not, at any time, directly or indirectly, for any
                           reason whatsoever, with or without cause, except in
                           the appropriate course of Company business or unless
                           pursuant to a lawful subpoena, disclose or
                           disseminate any Confidential Information to any
                           person or entity, nor will you use any Confidential
                           Information in competing with Hanover Compressor
                           Company or its affiliated entities in any manner. It
                           is expressly understood that the Confidential
                           Information covered by this paragraph includes only
                           information that is confidential or proprietary
                           information of one or more of the Hanover entities
                           and therefore does not include information which is
                           generally available to the public.

Non-competition
and Non-solicitation:
                           We also request that you agree that in exchange for
                           your compensation and other consideration, as well as
                           the Company's

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August 19, 2002
Page 5

                           providing you access to its Confidential Information,
                           for a two (2) year period following your termination
                           from employment with the Company for any reason, you
                           will not directly or indirectly on behalf of yourself
                           or any other person(s), company, partnership,
                           corporation, or business of whatever nature compete
                           with the Company or its affiliated entities, which
                           includes your promise not to: (i) engage in, carry
                           on, or have a financial interest in (in any capacity
                           whatsoever, including, without limitation, as an
                           officer, director, shareholder, owner, partner,
                           joint venturer, manager, advisor, employee,
                           independent contractor or consultant) any entity
                           that competes with the business of Hanover
                           Compressor Company or its affiliated entities; (ii)
                           induce or attempt to influence any employee, agent,
                           consultant or independent contractor of Hanover
                           Compressor Company or its affiliated entities to
                           terminate work or employment with the Company, or
                           otherwise adversely interfere with or affect the
                           business relationship between them; or (iii) divert,
                           take, solicit and/or accept the business of any
                           entity that is or has been a customer of Hanover
                           Compressor Company or its affiliated entities, or
                           any potential customer of Hanover Compressor Company
                           or affiliated entities. This agreement shall apply
                           regardless of whether your employment terminates
                           under circumstances which entitle you to receive the
                           severance payments described above. If you breach the
                           foregoing covenants, the Company shall be no longer
                           obligated to provide you severance payments or
                           continued reimbursement for health care benefits;
                           however, this shall not prohibit the Company in any
                           way from pursuing or obtaining other or additional
                           remedies at law or at equity. These non-competition
                           and non-solicitation provisions will control over
                           any other non-competition or related agreements in
                           the Company's plans and policies, including the stock
                           option agreement and/or plan.

Injunctive Relief:
                           Please also agree that the covenants set forth herein
                           pertaining to Cooperation, Confidential Information
                           and Non-competition and Non-solicitation impose a
                           reasonable restraint in light of the activities and
                           business of the Company. Because of the difficulty of
                           measuring economic loss to the Company as a result of
                           the breach of any of these covenants and because of
                           the immediate and irreparable damage that could be
                           caused to the Company for which it would have no
                           other adequate remedy, in the event of an alleged
                           breach any of these covenants, the covenants may be
                           enforced by the Company by injunctions, restraining
                           orders, and other equitable actions.

Start Date:

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August 19, 2002
Page 6

                           Your employment with the Company will start on August
                           19, 2002.

Dispute
Resolution:
                           Any controversy or claim arising out of or relating
                           to your employment, separation from, and/or
                           affiliation with the Company, except for those
                           pertaining to the Cooperation, Confidential
                           Information, and Non-competition and Non-solicitation
                           provisions above, shall be resolved by arbitration in
                           accordance with the Employment Dispute Resolution
                           Rules of the American Arbitration Association, and
                           judgment upon the award rendered by the arbitrator
                           may be entered in any court having jurisdiction. In
                           reaching his or her decision, the arbitrator shall
                           have no authority to change or modify any provision
                           of this Agreement.
Choice of
Law:
                           This Agreement is made and shall be enforced pursuant
                           to the laws of the State of Texas in Houston.

Entire Agreement:
                           This letter contains the entire agreement between you
                           and the Company concerning the subject matter hereof
                           and supersedes any prior or contemporaneous
                           agreements between you and the Company, and cannot be
                           changed, modified, or amended without a written
                           agreement signed by the Company and you.

Successors and
Assigns:
                           This agreement shall be binding upon you, your heirs,
                           successors, and assigns and the Company and its
                           successors and assigns. The Company may assign its
                           rights, duties and obligations under this agreement.
                           However, your rights, duties and obligations are
                           personal and therefore shall not be transferred or
                           assigned by you to another.

Please promptly provide Hanover with the required documentation to complete the
INS I-9 Form. Also, please undertake your drug screen as soon as possible;
successful completion of a drug screen is required for employment.

Your acceptance of this offer can be confirmed by signing the acceptance below
and returning a copy to my attention.

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August 19, 2002
Page 7

Again, we are extremely confident that your employment as Hanover's President
and CEO will represent a very significant addition to the Company and an
excellent opportunity for both you and the Company. We are very pleased to
extend this offer to you. We look forward to welcoming you.

Sincerely,

Hanover Compressor Company

By:    /s/ Victor E. Grijalva
       ----------------------------
       Name: Victor E. Grijalva
       Title: Chairman of the Board

Accepted:  /s/ Chad Deaton           Date:  August 19, 2002
           -------------------------
           Chad Deaton<PAGE>

                                                                    Exhibit 10.1

                               September 16, 2002

Mr. R. Blake Young
5301 Jessamine
Bellaire, TX 77401

Dear Blake:

     Set forth below are the terms of your employment with Dynegy Inc.
(hereinafter referred to as the "Company").

     1. Title and Duties

     Your title shall be Executive Vice President of Technology and
Administration. You will report to the President or Chief Executive Officer.
Your duties will include such lawful duties as may be delegated from time to
time by the President or Chief Executive Officer. You shall devote your full
time, energy and skill to the performance of your duties for the Company, and
will exercise due diligence and reasonable care in the performance of such
duties. You will be employed at the Company's headquarters in Houston, Texas.

     2. Term

     (a) Unless earlier terminated as provided for herein, the term of this
Agreement will be for two (2) years, beginning on the Effective Date and ending
on the second anniversary of the Effective Date (such period, and any extension
thereof pursuant to the next succeeding sentence, the "Term"). At the time the
Term would otherwise expire, the Term shall automatically be extended for an
additional one (1) year period unless either the Company or you provide written
notice not less than sixty (60) days prior to the date on which this Agreement
would otherwise be automatically extended that such party is electing not to so
extend the Term. The term "Effective Date" means September 16, 2002.

     (b) If your employment with Dynegy is terminated for "cause" or terminates
due to your voluntary resignation (other than pursuant to a voluntary
resignation resulting from a "constructive termination" as set forth in
Paragraph 2(d)), Dynegy shall have no further obligation to you except for the
payment of amounts due before the date of such termination. You further agree
that the benefits which you have received from the execution of this Agreement
through the date of such termination constitute sufficient consideration for
your obligations pursuant to Paragraph 4, notwithstanding the fact that the
Company has no further obligation to you except for the payment of amounts due
before the date of such termination.

     For purposes of this Agreement, you may be terminated for "cause" as a
result of (i) refusal to implement or adhere to lawful policies or lawful
directives of the Board of Directors or the President or Chief Executive
Officer; (ii) engaging in conduct which is materially injurious (monetarily or
otherwise) to the Company or any of its affiliates (including, without
limitation, misuse of the Company's or an affiliate's funds or other property);
(iii) misconduct or dishonesty directly related to the performance of your
duties for the Company or gross negligence in the

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performance of your duties for the Company; (iv) conviction (or entering into a
plea bargain admitting criminal guilt) in any criminal proceeding involving a
felony or a crime of moral turpitude; (v) drug or alcohol abuse; (vi) continued
failure to perform your duties under this Agreement which is not cured within 10
days after written notice is provided to you by the Company; or (vii) any other
material breach of this Agreement by you which is not cured within 10 days after
written notice is provided to you by the Company.

     (c) If your employment is terminated during the Term by the Company without
cause or by you due to a resignation following "constructive termination" (as
defined below), you shall receive the severance pay and other benefits for which
you are eligible under the Dynegy Inc. Executive Severance Pay Plan (effective
November 1, 2001) (the "Plan") in lieu of the payments and benefits described in
Paragraph 3 hereof, plus a cash lump sum payment equal to any unpaid portion of
the Retention Bonuses described in Paragraph 3(h). In addition to any severance
pay and other benefits for which you are eligible under the Plan, you shall
receive (i) a lump sum amount equal to the value of the 401(k) Plan matching
contribution and Portable Retirement Plan benefit you otherwise would have
received through the end of the Term of this Agreement; and (ii) any employee
stock options granted to you prior to or during the term of this Agreement shall
become vested as of your employment termination date, and you shall have the
right to exercise any such vested options through the end of the Term of this
Agreement, but in no event later than the original term of the option.

     For purposes of this Agreement a "constructive termination" shall be deemed
to have occurred in the event that (i) your Base Salary as defined in Paragraph
3(a) is reduced; or (ii) the Company materially breaches this Agreement; or
(iii) your position is relocated outside of the Houston, Texas metropolitan
area. Any resignation by you as a result of assertion of a constructive
termination shall be communicated by delivery to the Chief Executive Officer of
the Company within thirty (30) days from the commencement of such constructive
termination by written notice setting forth the grounds therefore, during which
period the Company shall be entitled to cure or remedy the matters set forth in
such notice to your reasonable satisfaction. Unless you withdraw such notice
prior to the expiration of this thirty (30) day period, such resignation shall
take effect upon the expiration of thirty (30) days from the date of the
delivery of the notice. Any other voluntary resignation by you shall be
communicated by thirty (30) days' advance written notice delivery to the Chief
Executive Officer of the Company.

     (d) If your employment is terminated by the Company without cause, or by
you following a significant diminution in your responsibilities, authority or
scope of duties, a reduction in your Base Salary, relocation of your position
outside the Houston, Texas metropolitan area or a material breach of this
Agreement by the Company, and such termination occurs within one year after (i)
the effective date of a "change in control" (as defined below) or (ii) after the
execution by the Company of an agreement, the consummation of which will
constitute a "change in control," and before the effective date of a "change in
control" or cancellation of such agreement, then you shall receive the following
items as your sole compensation in lieu of the payments and benefits described
in Paragraph 3 hereof: (i) a lump sum amount equal to 2.99 times the greater of
(a) your average annual Base Salary and annual cash bonus amount pursuant to the
Company's Incentive Compensation Plan as described in Paragraph 3(b) for the
three calendar years immediately prior to the calendar year of your employment
termination date or (b) your Base Salary and target annual cash bonus amount
under

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the Company's Incentive Compensation Plan as described in Paragraph 3(b) for the
year in which your employment is terminated; (ii) a lump sum amount equal to the
value of the 401(k) Plan matching contribution and Portable Retirement Plan
benefit you otherwise would have received through the end of the Term of this
Agreement; (iii) a lump sum payment equal to any unpaid portion of the Retention
Bonuses described in Paragraph 3(h); (iv) for a period of thirty-six (36) months
from your employment termination date, all medical, dental and vision benefits
the Company was maintaining for you and your family as of your employment
termination date; and (v) any employee stock options granted to you prior to or
during the Term of this Agreement shall become vested as of your employment
termination date, and you shall have the right to exercise any such vested
options through the end of the Term of this Agreement, but no event later than
the original term of the option. The continued medical, dental and vision
benefits referenced herein are contingent upon the Company and your payment of
its and your respective portion of the premium required for each such benefit.

     For purposes of this Agreement, "change in control" shall mean (1) 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, (2) the
dissolution or liquidation of the Company, (3) when 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 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 (4) 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, (i) "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 (ii) 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.

     (e) If you die, or become disabled and cannot perform your duties, your
employment hereunder shall be terminated and you (or your estate) shall receive:
(i) your Base Salary for twelve (12) months following the month in which your
employment is terminated, and

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(ii) for a period of twelve (12) months from the date your employment is
terminated, all medical, dental and vision benefits that the Company was
maintaining for you and/or your family as of the date your employment is
terminated. In addition, any employee stock options granted to you prior to or
during the term of this Agreement shall become vested as of the date of the
termination of your employment due to death or disability, and you (or your
estate) shall have the right to exercise any such vested options for a period of
twelve (12) months from the date your employment is terminated. For purposes of
this Agreement, you shall be disabled as of the first date on which you become
eligible to receive disability benefits under the Company's long-term disability
plan (or Social Security disability benefits at a time when the Company does not
maintain a long-term disability plan or such plan is not available to you).

     (f) Any termination of your employment after the expiration of the Term of
this Agreement shall be subject to the Company's practices and procedures,
including severance and other employee benefit plans.

     Unless otherwise specified herein, all payments under this Agreement shall
be paid in a lump sum, less applicable withholding taxes, within thirty (30)
days following your termination.

     3. Compensation

     (a) During the term of this Agreement, you will be paid a base annual
salary of $325,000, payable in accordance with the Company's payroll guidelines.
Your salary will be reviewed each year and may be increased, but not decreased,
in such amounts as may be determined by the Company. Increases may be made to
your Base Salary at the discretion of the Board of Directors based upon your
individual performance. There is no guarantee of a salary increase at any time.

     (b) You shall participate in the Company's Incentive Compensation Plan. The
target bonus for your position is 100% of your base annual salary, dependent
upon certain financial or performance objectives, determined in accordance with
such program, and by the Board. Your bonus compensation can be within a range of
50% to 200% of your annual base salary. Incentive awards are paid to eligible
employees based on overall company, business unit, and individual performance
with emphasis placed on competitive market reward levels and with
differentiation made for stronger performers. Award ranges are subject to change
based on market competitive norms. In the sole discretion of the Board,
incentive awards in excess of the 200% target bonus range may be made in
non-cash equivalents including, but not limited to, grants of options to
purchase shares of Class A Common Stock of the Company or grants of restricted
shares of Class A Common Stock of the Company. There is no guarantee of a bonus
payment at any time. You must be an active employee on payroll on the date the
awards are distributed to receive an award.

     (c) During the term of this Agreement, you will also be eligible to receive
an annual stock option award of Class A Common Stock of the Company, with a
value equal to a target range of 225% to 275% of your base annual salary. Such
option grants will be made dependent upon certain financial or performance
objectives, determined in accordance with such program, and by the Board. Option
grant ranges are subject to change based on market competitive norms, and the
Company may award options below the target range referenced

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above in its sole discretion. There is no guarantee of a grant of options at any
time. Award ranges are subject to change based on market competitive norms. Any
options granted to you will have an exercise price equal to the highest closing
price reported on the NYSE for Class A Common Stock of the Company on the date
of grant in accordance with the requirements and provisions of the Company's
currently applicable option grant program. Any options granted during the term
of this Agreement are subject to the vesting, forfeiture and other terms and
conditions of the option grant program under which they were granted. You
recognize that any value of an award of "market" options is a projected value,
which is subject to the future performance of the Company stock, and that there
is no guarantee that the actual value of such options will achieve that value.
The valuation method to determine the actual number of stock options to be
granted will be the Black-Scholes valuation of the option on the date of grant,
as approved by the Options Committee of the Board of Directors of the Company.

     (d) You shall be eligible to participate in such other plans and receive
such other perquisites as the Board of Directors of the Company in its sole
discretion determines, including, but not limited to, four (4) weeks of paid
vacation per annum.

     (e) On the Effective Date, the Company shall pay to you $822,011.00 as a
signing bonus for the execution of this Agreement.

     (f) On the Effective Date, you agree to repay to the Company $512,011.33,
which is the full amount of principal and interest outstanding on the loan
provided to you by the Company in order to participate in the Company's December
2001 private placement.

     (g) You agree to repay the Company all amounts that you owe under the
Short-Term Executive Stock Purchase Loan Program of Dynegy Inc. in accordance
with the terms of that program.

     (h) On each of September 16, 2003 and September 15, 2004, if Employee is
still employed the by Company, Company shall pay to Employee a Retention Bonus
of $155,000.00.

     4. Confidentiality, Non-Competition and Non-Solicitation.

     You recognize and acknowledge that:

     (a) You will have access to certain information concerning the Company that
is confidential and proprietary and constitutes valuable and unique property of
the Company. You agree that you will not at any time, either during or after
your employment, disclose to others, use, copy or permit to be copied, except
pursuant to your duties on behalf of the Company or its successors, assigns or
nominees, any secret or confidential information of the Company (whether or not
developed by you) without the prior written consent of the Board of Directors of
the Company. The term "secret or confidential information of the Company"
(sometimes referred to herein as "Confidential Information") shall include,
without limitation, the Company's plans; strategies; potential acquisitions;
costs; prices; systems for buying, selling, and/or trading natural gas, natural
gas liquids, crude oil, coal, electricity, bandwidth and communications
services; client lists; pricing policies; financial information; the names of
and pertinent information regarding suppliers; computer programs; policy or
procedure manuals;

                                       5

<PAGE>

training and recruiting procedures; accounting procedures; the status and
content of the Company's contracts with its suppliers or clients; or servicing
methods and techniques at any time used, developed, or investigated by the
Company; before or during your tenure of employment to the extent any of the
foregoing are (i) not generally available to the public and (ii) maintained as
confidential by the Company. You further agree to maintain in confidence any
confidential information of third parties received as a result of your
employment and duties with the Company.

     (b) At the termination of your employment you will deliver to the Company,
as determined appropriate by the Company, all correspondence, memoranda, notes,
records, client lists, computer systems, programs, or other documents and all
copies thereof made, composed or received by you, solely or jointly with others,
and which are in your possession, custody, or control at such date and which are
related in any manner to the past, present, or anticipated business of the
Company.

     (c) To protect and safeguard the Company's trade secrets and Confidential
Information and also the Company's goodwill with its suppliers and clients, for
a period of six (6) months following the termination of your employment for any
reason you will not, within a 50 mile radius of the Company's principal office,
without the prior written consent of the Board of Directors of the Company,
directly or indirectly, engage in (as owner, partner, shareholder, employee,
director, agent, consultant or otherwise) any business which is a competitor of
the Company, as hereinafter defined. The restrictions contained in the preceding
paragraph shall not apply in the event the Company repudiates this Agreement or
if you have not received all compensation for which you are eligible in
Paragraph 3 herein. For purposes of this Agreement, a "competitor of the
Company" is any entity, including without limitation a corporation, sole
proprietorship, partnership, joint venture, syndicate, trust or any other form
of organization or a parent, subsidiary or division of any of the foregoing,
which, during such period or the immediately preceding fiscal year of such
entity, was engaged in the unregulated marketing, gathering, transportation or
processing of natural gas or derivatives of natural gas or other hydrocarbons or
electricity. For purposes of this paragraph, the following entities shall not be
deemed to be competitors of the Company: (i) a Local Distribution Company; (ii)
a company which is predominantly an oil or natural gas producer; (iii) a natural
gas pipeline company in the jurisdictional aspects of its business, or (iv) an
integrated regulated electric and/or gas utility, as long as the utility does
not engage in the unregulated marketing of its generation or power trading other
than that related to the generation and power marketing allocated to its own
service areas. The terms of this Paragraph 4(c) shall not apply to your present
or future investments in the securities of companies listed on a national
securities exchange or traded on the over-the-counter market to the extent such
investments do not exceed one percent (1%) of the total outstanding shares of
such company.

     (d) For a period of two (2) years after the expiration or termination of
your employment for whatever reason, you shall not, either on your own behalf or
on behalf of your new employer (either directly or indirectly via a corporate
recruiter or headhunter) induce or otherwise entice any employee of the Company
to leave the Company, nor shall you attempt to hire any of the Company's
employees.

                                       6

<PAGE>

     (e) You agree that the foregoing restrictions contain reasonable
limitations as to the time, geographical area, and scope of activity to be
restrained and that these restrictions do not impose any greater restraint than
is necessary to protect the goodwill and other legitimate business interests of
the Company, including but not limited to the protection of Confidential
Information. You also agree that the general public shall not be harmed by
enforcement of this Paragraph 4. Should any provision in this Paragraph 4 be
held unreasonably broad with respect to the restrictions as to time,
geographical area, or scope of activity to be restrained, any such restriction
shall be construed by limiting and reducing it to the extent necessary to render
it reasonable, and as so construed, such provision shall be enforced.

     Accordingly, you consent and agree that if you violate any of the
provisions of this Paragraph 4, the Company and its subsidiaries and affiliated
companies would sustain irreparable harm and, therefore, in addition to any
other remedies which the Company may have under this Agreement or otherwise, the
Company shall be entitled to an injunction from any court of competent
jurisdiction restraining you from committing or continuing any such violation of
this Paragraph. You acknowledge that damages at law would not be an adequate
remedy for violation of this Paragraph 4, and you therefore agree that the
provisions of this Paragraph 4 may be specifically enforced against you in any
court of competent jurisdiction. Nothing herein shall be construed as
prohibiting the Company from pursuing any other remedies available to the
Company for such breach or threatened breach, including the recovery of damages
from you.

     5. Arbitration

     The parties hereto may attempt to resolve any dispute hereunder informally
via mediation or other means. Otherwise, any controversy or claim arising out of
or relating to this Agreement, or any breach thereof, shall, except as provided
in Paragraph 4, be adjusted only by arbitration in accordance with the rules of
the American Arbitration Association, and judgment upon such award rendered by
the arbitrator may be entered in any court having jurisdiction thereof. The
arbitration shall be held in the City of Houston, Texas, or such other place as
may be agreed upon at the time by the parties to the arbitration. The
arbitrator(s) shall, in their award, allocate between the parties the costs of
arbitration, which shall include reasonable attorneys' fees of the parties, as
well as the arbitrator's fees and expenses, in such proportions as the
arbitrator deems just.

     6. Indemnification

     If, at any time during or after the Term of this Agreement, you are made a
party to, or are threatened to be made a party in, any civil, criminal or
administrative action, suit or proceeding by reason of the fact that you are or
were a director, officer, employee, or agent of the Company, or of any other
corporation or any partnership, joint venture, trust or other enterprise for
which you served as such at the request of the Company, then you shall be
indemnified by the Company, to the fullest extent permitted under applicable
law, against expenses actually and reasonably incurred by you or imposed on you
in connection with, or resulting from, the defense of such action, suit or
proceeding, or in connection with, or resulting from, any appeal therein if you
acted in good faith and in a manner you reasonably believed to be in or not
opposed to the best interests of the Company, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe your conduct was
unlawful, except with

                                       7

<PAGE>

respect to matters as to which it is adjudged that you are liable to the Company
or to any other corporation, partnership, joint venture, trust, enterprise or
third party individual for gross negligence or willful misconduct in the
performance of your duties. As used herein, the term "expenses" shall include
all obligations actually and reasonably incurred by you for the payment of
money, including, without limitation, attorneys' fees, judgments, awards, fines,
penalties and amounts paid in satisfaction of a judgment or in settlement of any
such action, suit or proceeding, except amounts paid to the Company or such
other corporation, partnership, joint venture, trust or other enterprise by you.
The foregoing indemnification provisions shall be in addition to any other
rights to indemnification to which you may be entitled.

     7. Other Provisions

     (a) THIS AGREEMENT WILL BE GOVERNED BY, CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCLUDING ANY CONFLICTS OF LAW,
RULE OR PRINCIPLE THAT MIGHT OTHERWISE REFER TO THE SUBSTANTIVE LAW OF ANOTHER
JURISDICTION.

     (b) Except as otherwise indicated, this Agreement is not assignable without
the written authorization of both parties; except that the Company may assign
this Agreement to any entity to which the Company transfers substantially all of
its assets or to any entity which is a successor to the Company by
reorganization, incorporation, merger or similar business combination.

     (c) Except as otherwise provided herein, the provisions of Paragraphs 4, 5,
6 and 7 of this Agreement shall survive the termination of this Agreement.

     (d) This Agreement supersedes all previous employment agreements, whether
written or oral, between the Company and you, including, without limitation, the
employment agreement between you and the Company dated December 15, 1999. This
Agreement may be amended only by written amendment duly executed by both parties
and their legal representatives and authorized by action of the Board. Except as
otherwise specifically provided in this Agreement, no waiver by either party
hereto of any breach by the other party hereto of any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of a
subsequent breach of such condition or provision or a waiver of a similar or
dissimilar provision or condition at the same or at any prior or subsequent
time.

     (e) Any notice or other communication required or permitted pursuant to the
terms of this Agreement shall be in writing and shall be deemed to have been
duly given when hand delivered or mailed by United States mail, first class,
postage prepaid and registered with return receipt requested, addressed to the
intended recipient at his or its address set forth below and, in the case of a
notice or other communication to the Company, directed to the attention of the
Board of Directors with a copy to the Secretary of the Company, or to such other
address as the intended recipient may have theretofore furnished to the sender
in writing in accordance herewith, except that until any notice of change of
address is received, notices shall be sent to the following addresses:

                                       8

<PAGE>

           If to you:                         If to the Company:

           R. Blake Young                     Chief Executive Officer
           5301 Jessamine                     Dynegy Inc.
           Bellaire, Texas 77401              1000 Louisiana, Suite 5800
                                              Houston, TX  77002

     (f) If any one or more of the provisions or parts of a provision contained
in this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity or unenforceability shall not
affect any other provision or part of a provision of this Agreement, but this
Agreement shall be reformed and construed as if such invalid or illegal or
unenforceable provision or part of a provision had never been contained herein
and such provisions or part thereof shall be reformed so that it would be valid,
legal and enforceable to the maximum extent permitted by law.

     (g) You shall not be required to mitigate damages (or the amount of any
compensation provided under this Agreement to be paid) following your
termination of employment, by seeking employment or otherwise.

     (h) Neither you nor the Company will make or authorize any public statement
disparaging the other in its or his business interests and affairs.
Notwithstanding the foregoing, neither party shall be (i) required to make any
statement which it or he believes to be false or inaccurate, or (ii) restricted
in connection with any litigation, arbitration or similar proceeding or with
respect to its response to any legal process.

     (i) The waiver by the Company of breach of any provision of this Agreement
by you shall not operate or be construed as a waiver of any subsequent breach by
you. The waiver by you of a breach of any provision of this Agreement by the
Company shall not operate or be construed as a waiver of any subsequent breach
by the Company.

     (j) The section headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.

     (k) This Agreement may be executed in one or more counterparts, which
shall, collectively and separately, constitute one agreement.

     (l) Notwithstanding anything to the contrary set forth in this Agreement,
the Company may cause any of its subsidiaries for which you render services to
pay or otherwise satisfy, in whole or in part, some or all of the Company's
obligations hereunder.

                                       9

<PAGE>

     If the foregoing reflects your understanding of the terms of your
employment with the Company, please execute each copy of this letter in the
space provided below.

                                   DYNEGY INC.

                                   By: /s/ Dan Dienstbier
                                       -----------------------------------------
                                       Dan Dienstbier
                                       Chief Executive Officer

AGREED AND ACCEPTED this 16th day of September 2002.

/s/ R. Blake Young
---------------------------------
R. Blake Young

                                       10

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