Edgar Filing: DYNEGY INC /IL/

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[X] Preliminary Proxy Statement

[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))

[_] Definitive Proxy Statement

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12

DYNEGY INC.
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(Name of Registrant as Specified In Its Charter)

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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

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pursuant to Exchange Act Rule 0-11 (set forth the amount on which
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[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
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[LOGO] Dynegy

April 23, 2001

To Our Shareholders:

On behalf of the Board of Directors of Dynegy, I am pleased to invite you
to attend our 2001 Annual Meeting of Shareholders. As indicated in the attached
notice, the meeting will be held at The Petroleum Club, 800 Bell Avenue, Suite
4300, Houston, Texas, 77002 on Friday May 18, 2001, at 10:00 a.m., local time.
At the meeting, in addition to acting on the matters described in the attached
proxy statement, there will be an opportunity to discuss other matters of
interest to you as a shareholder.

Please date, sign and mail the enclosed proxy card in the envelope
provided, even if you plan to attend the meeting in person. You also may vote
your shares through the internet or by telephone, as described in the enclosed
proxy statement. I look forward to seeing you in Houston.

Sincerely,

Chuck Watson
Chairman of the Board and Chief Executive Officer

[LOGO]
Dynegy

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FRIDAY, MAY 18, 2001

To our Shareholders:

NOTICE IS HEREBY GIVEN, that the 2001 Annual Meeting of Shareholders of
Dynegy Inc., an Illinois corporation, will be held on Friday, May 18, 2001 at
10:00 a.m., local time, at The Petroleum Club, 800 Bell Avenue, Suite 4300,
Houston, Texas 77002, for the following purposes:

1. To elect eleven Class A common stock directors and three Class B
common stock directors to serve until the 2002 Annual Meeting of
Shareholders;

2. To consider and act upon a proposal to amend and restate Dynegy's
Articles of Incorporation to incorporate all previously approved
amendments to Dynegy's Articles of Incorporation, to clarify that
the description of Series A Convertible Preferred Stock previously
established by resolution of the Board is deleted, to eliminate out-
dated information and to make other minor stylistic, conforming and
clarifying alterations;

3. To consider and act upon a proposal to ratify the Board of
Directors' appointment of Arthur Andersen LLP as Dynegy's
independent auditors for the fiscal year ending December 31, 2001;
and

4. To consider and act upon any other matters that may properly come
before such meeting or any adjournment(s) or postponement(s)
thereof.

The close of business on March 30, 2001 has been fixed as the record date
for the determination of shareholders entitled to receive notice of and to vote
at the annual meeting or any adjournment(s) or postponement(s) thereof.

You are cordially invited to attend the annual meeting. WHETHER OR NOT YOU
PLAN TO ATTEND THE ANNUAL MEETING, WE ASK THAT YOU SIGN AND RETURN THE ENCLOSED
PROXY AS PROMPTLY AS POSSIBLE. A SELF-ADDRESSED, POST-PAID ENVELOPE IS ENCLOSED
FOR YOUR CONVENIENCE. ALTERNATIVELY, YOU MAY VOTE YOUR SHARES VIA TELEPHONE OR
THE INTERNET AS DETAILED ON THE ENCLOSED PROXY.

By Order of the Board of Directors,

Kenneth E. Randolph
General Counsel and Secretary
April 23, 2001

DYNEGY INC.
1000 Louisiana, Suite 5800
Houston, Texas 77002
(713) 507-6400
___________________________

PROXY STATEMENT
___________________________

GENERAL INFORMATION

The enclosed proxy is solicited by and on behalf of the Board of Directors
of Dynegy for use at the annual meeting to be held on Friday, May 18, 2001 at
10:00 a.m., local time, at The Petroleum Club, 800 Bell Avenue, Suite 4300,
Houston, Texas 77002, or at any adjournment(s) or postponement(s) thereof. This
Proxy Statement, the Notice of Annual Meeting, the proxy card, and Dynegy's
Annual Report to Shareholders for the year ended December 31, 2000, including
financial statements, will be first sent or given to Dynegy's shareholders on or
about April 23, 2001. The Annual Report does not constitute a part of the proxy
soliciting material.

Quorum and Vote Required

The presence of the votes of a majority of the shares of Dynegy's Class A
common stock, no par value per share, and Class B common stock, no par value per
share, counted together, represented in person or by proxy at the annual meeting
and entitled to vote on a matter, will constitute a quorum for consideration of
that matter at the meeting. Abstentions and broker non-votes are counted in
determining the number of shares present at the meeting. A "broker non-vote"
occurs if a broker or other nominee who holds shares in "street" name for
customers who are beneficial owners of those shares does not have
discretionary authority and has not received instructions with respect to a
particular item from the customer. Broker non-votes do not count toward the
determination of a quorum.

Election of Directors. In accordance with Dynegy's Articles of
Incorporation, the holders of Class A common stock are entitled to elect eleven
directors and the holders of Class B common stock are entitled to elect three
directors. The affirmative vote of a majority of the votes of shares of Class A
common stock represented in person or by proxy and entitled to vote is required
to elect a director. Under Illinois law and Dynegy's Articles of Incorporation
and Bylaws, abstentions would have the effect of votes against the election of
directors. Under Illinois law and Dynegy's Articles of Incorporation, holders of
Class A common stock (but not Class B common stock) are entitled to cumulate
their votes in the election of the Class A directors.

All holders of Class A common stock will be entitled to eleven votes (the
number of Class A common stock directors to be elected) for each of their shares
for candidates nominated to serve as directors. Holders of Class A common stock
may cast their votes equally for all candidates or may cast all of their votes
for any one candidate whose name has been placed in nomination prior to the
voting, or distribute their votes among two or more candidates in such
proportion as they desire.

Amendment and Restatement of Articles of Incorporation. Under Dynegy's
Articles of Incorporation, the holders of Class A common stock and Class B
common stock are entitled to vote together as a single class on the proposal to
amend and restate the Articles of Incorporation. The holders of Class A common
stock and Class B common stock are entitled to one vote for each share. The
affirmative vote of the holders of not less than two-thirds of the Class A
common stock and the Class B common stock, entitled to vote is required to
approve the proposal to amend and restate Dynegy's Articles of Incorporation.
Abstentions and broker non-votes would have the same legal effect as a vote
against this proposal.

Ratification of Independent Auditors. Under Dynegy's Articles of
Incorporation, the holders of Class A common stock and Class B common stock are
entitled to vote together as a single class on the ratification of auditors. The
holders of Class A common stock and Class B common stock are entitled to one
vote for each share. A majority of the votes of the shares of Class A common
stock and Class B common stock, represented in person or by proxy, and entitled
to vote is required to ratify the selection of auditors. Under Illinois law, an
abstention would have the same legal effect as a vote against this proposal, but
a broker non-vote would not be counted for purposes of determining shares
represented in person or by proxy on the matter.

No Appraisal Rights

Under Illinois law, no holder of Class A common stock or Class B common
stock has appraisal rights in connection with any proposal to be acted upon at
the annual meeting.

Record Date and Outstanding Shares

The Board of Directors has fixed the close of business on March 30, 2001,
as the record date for determining holders of outstanding shares of Class A
common stock and Class B common stock entitled to notice of and to vote at the
annual meeting or any adjournment(s) or postponement(s) thereof. As of the
record date, there were outstanding 239,036,975 shares of Class A common stock,
and 86,499,914 shares of Class B common stock, respectively. Class A common
stock and Class B common stock are the only classes of outstanding securities of
Dynegy entitled to notice of and to vote at the annual meeting.

Solicitation of Proxies

The cost of soliciting proxies will be borne by Dynegy. Proxies may be
solicited by mail, telecopy, telegraph or telex, or by directors, officers or
employees of Dynegy, in person or by telephone. Dynegy has retained Mellon
Investor Services LLC to assist in the solicitation of proxies for a fee of
$8,500. Dynegy will reimburse brokerage houses and other custodians, nominees
and fiduciaries for their reasonable out-of-pocket expenses for forwarding
solicitation material to the beneficial owners of common stock.

Questions concerning the proposals to be acted upon at the annual meeting
should be directed to Dynegy's Secretary at (713) 507-6400. Additional copies of
this Proxy Statement or the proxy card may be obtained from Dynegy's Investor
Relations Department at Dynegy's principal executive office. The mailing address
of Dynegy's principal executive office is 1000 Louisiana, Suite 5800, Houston,
Texas 77002.

Revocation of Proxies

The enclosed proxy, even though executed and returned, may be revoked at
any time prior to the voting of the proxy by (i) the execution and submission of
a revised proxy (including an Internet or telephone vote), (ii) written notice
to the Secretary of Dynegy, or (iii) voting in person at the annual meeting. In
the absence of such revocation, shares represented by proxies will be voted at
the annual meeting.

Voting by Telephone or Internet

Shareholders of record can simplify their voting and reduce Dynegy's cost
by voting their shares via telephone or the Internet. The telephone and Internet
voting procedures are designed to authenticate shareholders' identities, allow
shareholders to vote their shares and to confirm that their instructions have
been properly recorded. If a shareholder's shares are held in the name of a bank
or broker, the availability of telephone and Internet voting will depend upon
the voting processes of the bank or broker. Accordingly, shareholders should
follow the voting instructions on the form they receive from their bank or
broker. If you choose cumulative voting for Directors you MAY NOT use Internet
or telephone voting, you MUST vote by returning this proxy card in the envelope
provided.

Shareholders who elect to vote via the Internet may incur
telecommunications and Internet access charges and other costs for which they
are solely responsible. The Internet and telephone voting facilities for
shareholders of record will close at 4:00 p.m., eastern standard time, on
evening before the annual meeting.

Voting by Mail

Shareholders who elect to vote by mail are asked to date, sign and return
the enclosed proxy card using the postage paid envelope provided. The persons
named as proxies on the proxy card were designated by the Board of Directors.
Any proxy given pursuant to such solicitation and received prior to the annual
meeting will be voted as specified in such proxy. Unless otherwise instructed or
unless authority to vote is withheld, proxies will be voted FOR

the election of the nominees to the Board of Directors, FOR the proposal to
amend and restate Dynegy's Articles of Incorporation, FOR ratification of the
appointment of Arthur Andersen LLP, and in accordance with the judgment of the
persons named in the proxy on such other matters as may properly come before
such meeting or any adjournment(s) or postponement(s) thereof.

Form 10-K

Shareholders may obtain, without charge, a copy of Dynegy's 2000 Annual
Report on Form 10-K as filed with the Securities and Exchange Commission. For
copies, please contact Dynegy's Investor Relations Department at Dynegy's
principal executive office address: Dynegy Inc., 1000 Louisiana, Suite 5800,
Houston, Texas 77002. The Form 10-K is also available to the public at the
Commission's website at www.sec.gov.

DATED: April 23, 2001

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information regarding beneficial
ownership of the capital stock of Dynegy as of March 30, 2001, by (i) each
person who is known by Dynegy to own beneficially 5% or more of Dynegy's Class A
common stock or Class B common stock, (ii) each director or nominee for director
of Dynegy, (iii) each executive officer of Dynegy named in the Summary
Compensation Table, and (iv) all directors, nominees for director and executive
officers of Dynegy as a group. Share amounts and percentages shown for each
individual or group in the table are adjusted to give effect to the exercise of
all options and warrants exercisable by such individual or group within 60 days
of March 30, 2001.

Percent of Class A
Number of Shares/(1)/ Common Stock/(2)/
--------------------- -----------------
Class A Class B
Common Stock Common Stock
------------ ------------

Chevron Corporation /(3)/
Chevron USA Inc. -- 86,517,914 26.6/(3)/
575 Market Street
San Francisco, CA 94104

Fidelity Management & Research 16,703,190 -- 7.0
Company/(4)/
82 Devonshire
Boston, MA 02109

C.L. Watson /(5)/ 12,329,803 -- 5.1

Stephen W. Bergstrom /(6)/ 2,892,229 -- 1.2

Kenneth E. Randolph /(7)/ 1,854,717 -- *

R. Blake Young/(8)/ 26,217 -- *

Robert D. Doty, Jr./(9)/ 322,163 -- *

Charles E. Bayless/(10)/ 448,300 -- *

Daniel L. Dienstbier/(11)/ 25,172 -- *

Patricia M. Eckert/(12)/ 100 -- *

Jerry L. Johnson -- -- *

C. Steven McMillan /(11)/ 11,347 -- *

Robert M. Powers /(11)/ 25,700 -- *

Sheli Z. Rosenberg /(11)/ 13,608 -- *

Joe J. Stewart /(11)/ 11,394 -- *

J. Otis Winters /(11)/ 23,710 -- *

Darald W. Callahan -- -- *
R. H. Matzke -- -- *
George L. Kirkland -- -- *
Michael D. Capellas -- -- *
H. John Riley -- -- *
Executive Officers, Directors, and 18,004,460 -- 7.4
Nominees for Director as a Group
(19 persons) /(5)//(6)//(7)//(8)//(9)/
/(10)//(11)/

________________________________

* Less than 1%.

(1) Unless otherwise noted, each of the persons has sole voting and investment
power with respect to the shares reported.

(2) Based upon 239,036,975 shares of Class A common stock and 86,499,914 shares
of Class B common stock outstanding at March 30, 2001.

(3) The shares are held of record by Chevron USA Inc. Chevron Corporation
beneficially owns 100% of the capital stock of Chevron USA. Consequently,
Chevron Corporation may be deemed to beneficially own all of the shares of
Class B common stock owned of record by Chevron USA. Includes 18,000 shares
of Class B common stock issuable upon the exercise of options attributable
to the services of the three Chevron designees on Dynegy's Board of
Directors granted in favor of Chevron that are exercisable within 60 days
of March 30, 2001. Each share of Class B common stock may in certain
circumstances be converted into Class A common stock. Percent of Class A
common stock beneficially owned assumes conversion of Class B common stock
for purposes of computing Chevron's beneficial ownership only.

(4) According to its Form 13G/A for the year ended December 31, 2000. Advisor
subsidiaries of Fidelity Management & Research Company have sole voting
power for 3,948,602 shares and sole power to dispose or direct the
disposition of 16,703,190 shares.

(5) Includes 8,524,816 shares held of record by one or more partnerships, of
which Mr. Watson and his wife are the sole shareholders of the corporate
general partner and of which Mr. Watson (individually), his wife and
certain trusts (the "Trusts"), of which Mr. Watson or his wife are the sole
trustees, and a corporation, of which Mr. Watson and the Trusts are the
sole shareholders, are the sole limited partners (the "Family Limited
Partnership"). Mr. Watson may be deemed to beneficially own all of the
shares of Class A common stock held by the Family Limited Partnership.
Mr. Watson may be deemed to beneficially own all of the shares of Class A
common stock held by the Trusts. The number of shares also includes
3,824,987 shares of Class A common stock issuable upon the exercise of
employee stock options held by Mr. Watson that are exercisable within 60
days of March 30, 2001. The number of shares does not include approximately
6,332 shares of Class A common stock held by the Trustee of the Dynegy Inc.
Profit Sharing/401(k) Savings Plan (the "401(k) Plan") as of February 28,
2001, for the account of Mr. Watson. Participants in the 401(k) Plan have
no voting or investment power with respect to such shares until their
distribution to such participants upon termination of their employment. In
addition, Mr. Watson may elect to take cash in lieu of shares of Class A
common stock held in his 4 01(k) Plan account upon termination of his
employment.

(6) Includes 601,174 shares of Class A common stock that are owned by trusts
established by Mr. Bergstrom. Mr. Bergstrom's father is the sole trustee of
such trusts. Mr. Bergstrom disclaims beneficial ownership of all of the
shares of Class A common stock held by such trusts. Also includes 824,691
shares of Class A common stock issuable upon the exercise of employee stock
options held by Mr. Bergstrom that are exercisable within 60 days of March
30, 2001. The number of shares does not include approximately 6,033 shares
of Class A common stock held by the Trustee of Dynegy's 401(k) Plan as of
February 28, 2001 for the account of Mr. Bergstrom. Participants in the
401(k) Plan have no voting or investment power with respect to such shares
until their distribution to such participants upon termination of their
employment. In addition, Mr. Bergstrom may elect to take cash in lieu of
shares of Class A common stock held in his 401(k) Plan account upon
termination of his employment.

(7) Includes 257,745 shares of Class A common stock issuable upon the exercise
of employee stock options held by Mr. Randolph that are exercisable within
60 days of March 30, 2001. The number of shares does not include
approximately 5,988 shares of Class A common stock held by the Trustee of
Dynegy's 401(k) Plan as of February 28, 2001 for the account of Mr.
Randolph. Participants in the 401(k) Plan have no voting or investment
power with respect to such shares until their distribution to such
participants upon termination of their employment. In addition, Mr.
Randolph may elect to take cash in lieu of shares of Class A common stock
held in his 401(k) Plan account upon termination of his employment.

(8) Includes 22,077 shares of Class A common stock issuable upon the exercise
of employee stock options held by Mr. Young that are exercisable within 60
days of March 30, 2001. The number of shares does not include approximately
1,947 of Class A common stock held by the Trustee of the 401(k) Plan as of
February 28, 2001, for the account of Mr. Young. Participants in the 401(k)
Plan have no voting or investment power with respect to such shares until
their distribution to such participants upon termination of their
employment. In addition, Mr. Young may elect to take cash in lieu of shares
of Class A common stock held in his 401(k) Plan account upon termination of
his employment.

(9) Includes 293,448 shares of Class A common stock issuable upon the exercise
of employee stock options held by Mr. Doty that are exercisable within 60
days of March 30, 2001. The number of shares does not include approximately
5,747 shares of Class A common stock held by the Trustee of Dynegy's 401(k)
Plan as of February 28, 2001 for the account of Mr. Doty. Participants in
the 401(k) Plan have no voting or investment power with respect to such
shares until their distribution to such participants upon termination of
their employment. In addition, Mr. Doty may elect to take cash in lieu of
shares of Class A common stock held in his 401(k) Plan account upon
termination of his employment.

(10) Includes 429,400 shares of Class A common stock issuable upon the exercise
of employee stock options held by Mr. Bayless that are exercisable within
60 days of March 30, 2001. Also includes 6,000 shares of Class A common
stock issuable upon the exercise of director stock options held by Mr.
Bayless that are exercisable within 60 days of March 30, 2001.

(11) Includes 6000 shares of Class A common stock issuable upon the exercise of
director stock options held by each of Messrs. Dienstbier, McMillan,
Powers, Stewart and Winters, and by Ms. Rosenberg, that are exercisable
within 60 days of March 30, 2001. Does not include certain stock units held
by Messrs. McMillan, Powers or Stewart, or held by Ms. Rosenberg through
the Dynegy Deferred Compensation Plan for Certain Directors. Participants
in the Director Deferred Compensation Plan receive cash equal to the number
of stock units in their account times the last sales price of the Class A
common stock on the last business day of the month preceding the
termination of their service as a Director of Dynegy.

(12) Shares held of record by defined benefit plan.

PROPOSAL 1
ELECTION OF DIRECTORS

Eleven Class A common stock directors are to be elected at the annual
meeting by the shareholders of Class A common stock. The affirmative vote of a
majority of the votes of shares of Class A common stock represented in person or
by proxy and entitled to vote is required to elect a director. Under Illinois
law and Dynegy's Articles of Incorporation and Bylaws, abstentions would have
the effect of votes against the election of directors. Under Illinois law and
Dynegy's Articles of Incorporation, holders of Class A common stock are entitled
to cumulate their votes in the election of the Class A directors.

Unless otherwise instructed or unless authority to vote is withheld, the
enclosed proxy will be voted FOR the election of the nominees listed below
equally or cumulatively as the proxies may determine. Although the Board of
Directors does not contemplate that any of the nominees will be unable to serve,
if such a situation arises prior to the annual meeting, the persons appointed in
the enclosed proxy will vote for the election of such other person(s) as may be
nominated by the Board of Directors.

Under Dynegy's Articles of Incorporation, Chevron, the sole holder of Class
B common stock, is entitled to nominate and vote as a single class for three
nominees to the Board of Directors.

Nine of the eleven nominees for Class A common stock director and each of
the three nominees for Class B common stock director is currently a director of
Dynegy. Messrs. McMillan and Powers will not be standing for re-election as
Class A common stock directors. The following table sets forth information
regarding the names, ages and principal occupations of the current directors and
nominees for director, other directorships held by them in certain companies
and, if applicable, the length of their continuous service as a director of
Dynegy.

Principal Occupation
Directors and Nominees and Directorships Age as of 3/30/01 Director Since
---------------------- ----------------- ------------------ --------------
Class A Common Stock Directors

C.L. Watson Chairman of the Board and Chief Executive 51 1995
Officer of Dynegy; Director of Baker Hughes
Incorporated

Stephen W. Bergstrom President and Chief Operating Officer of 43 1995
Dynegy

Charles E. Bayless Retired Chairman and Chief Executive Officer 58 2000
of Illinova Corporation and Illinois Power,
Director of Trigen Energy Corporation

Daniel L. Dienstbier Private Investments, Director of Northern 60 1995
Border Pipeline Company

Patricia M. Eckert Consultant, Director of American Ecology 53 2000

Jerry L. Johnson Executive Vice President of Safeguard 53 2000
Scientifics, Inc., Director of OAO Technology
Solutions and PAC - West Telecomm, Inc.

C. Steven McMillan * Chief Executive Officer of Sara Lee 55 2000
Corporation, Director of Pharmacia Corporation
and Monsanto Company

Robert M. Powers * Retired President of A.E. Staley 69 2000
Manufacturing Company

Sheli Z. Rosenberg Vice Chairman of Equity Group Investments, 59 2000
Inc.; Director of Anixter International,
Inc.; Capital Trust, CVS Corporation, Equity
Office Properties Trust, Equity Residential
Properties Trust and Manufactured Home
Communities, Inc. and Cendant Corporation

Joe J. Stewart Retired President of BWX Technologies, Inc.; 63 2000
Retired President and Chief Operating Officer
of The Babcock and Wilcox Company; and
Retired Executive Vice President of McDermott
International, Inc.

J. Otis Winters Chairman, PWS Group, Inc.; Director of AMFM 68 1993
Inc., Panja Corporation, Triton Energy
Corporation and Walden Residential
Properties, Inc.

Class A Common Stock Director Nominees

Michael D. Capellas Chairman and Chief Executive Officer of 46 N/A
Compaq Computer Corporation

H. John Riley Jr. Chairman, President and Chief Executive 60 N/A
Officer of Cooper Industries, Inc., Director
of The Allstate Corporation and Baker Hughes
Incorporated

* Messrs. McMillan and Powers will not stand for reelection at the Annual
Meeting.

Class B Common Stock Directors

Darald W. Callahan Executive Vice President of Chevron 58 1996
Corporation

Richard H. Matzke Vice Chairman of the Board of Directors of 64 2000
Chevron Corporation

George L. Kirkland President of Chevron U.S.A. Production Company 50 2000

In addition to the principal occupations and directorships of the directors
described above, the named nominees were engaged or are engaged (as applicable)
in the past five years in the principal occupations set forth below.

C.L. Watson is the Chairman and Chief Executive Officer of Dynegy. He joined
Dynegy as President in 1985 and became Chairman and Chief Executive Officer in
1989. Prior to his employment with Dynegy, he served as Director of Gas Sales
for the Western United States for Conoco Inc. Mr. Watson serves on the Board of
Directors of Baker Hughes Incorporated.

Stephen W. Bergstrom, President and Chief Operating Officer of Dynegy, is
responsible for the day-to-day execution of Dynegy's strategy across its
operating business units. He is also a member of Dynegy's Board of Directors.
Mr. Bergstrom was formerly President and Chief Operating Officer of Dynegy
Marketing and Trade and Executive Vice President of Dynegy. After joining Dynegy
in 1986 as Vice President of Gas Supply, Mr. Bergstrom was promoted to Senior
Vice President of Gas Marketing and Supply in 1987. Prior to joining Dynegy, Mr.
Bergstrom was Vice President of Gas Supply for Enron Gas Marketing.

Charles E. Bayless served as Chairman of Illinova and Illinois Power from
August 1998 until his retirement in December 1999. Mr. Bayless served as Chief
Executive Officer of Illinova and President of Illinois Power from July 1998
until September 1999. He was Chairman, President and Chief Executive Officer of
Tucson Electric Power from 1992 to 1998. Mr. Bayless served as a Director of
Illinova from 1998 until the closing of the merger with Dynegy in February 2000.

Daniel L. Dienstbier has over thirty years of experience in the oil and gas
industry. He served as President and Chief Operating Officer of American Oil &
Gas Corp. from October 1993 through July 1994, President and Chief Operating
Officer of Arkla, Inc. from July 1992 through October 1993, and President of
Jule, Inc., a private company involved in energy consulting and joint venture
investments in the pipeline, gathering and exploration and production
industries, from February 1991 through June 1992. Prior thereto, Mr. Dienstbier
served as President and Chief Executive Officer of Dyco Petroleum Corp., and
Executive Vice President of Diversified Energy from February 1989 through
February 1991. In addition, he served as President of the Gas Pipeline Group of
Enron Corp. from July 1985 through July 1988. Mr. Dienstbier also serves as a
Director and as a member of the Audit Committee of Northern Border Pipeline
Company. In the past, Mr. Dienstbier has served as a member on the Board of

Directors of several public companies, including American Oil & Gas Corp.,
Arkla, Inc., Enron Corp., Lariat Petroleum Incorporated and Midwest Resources.

Patricia M. Eckert is a consultant to the telecommunications and utilities
industries, providing regulatory advisory and business development services. Ms.
Eckert is a former President of the California Public Utilities Commission and
served as a Commissioner from 1989 through 1994. Ms. Eckert also is a Director
of American Ecology Corp. and serves on the advisory board of Enertech Capital
Partners.

Jerry L. Johnson has served as Executive Vice President of Safeguard
Scientifics, Inc. since March 1999. He is currently the head of Safeguard's e-
communications division. Mr. Johnson joined Safeguard in 1995 as Senior Vice
President, Operations. Prior to joining Safeguard, Mr. Johnson was a
telecommunications executive, having spent nearly 20 years with the Bell System
and US West.

C. Steven McMillan serves as Chief Executive Officer and Director of Sara Lee
Corporation, Chicago, Illinois, a global packaged food and consumer products
company. He was promoted to this position in 2000. Prior to that, Mr. McMillan
was President and Chief Operating Officer from 1997 to 2000 and was Executive
Vice President from 1993 to 1997. Mr. McMillan served as a Director of Illinova
from 1996 until the closing of the merger with Dynegy in February 2000. He also
is a Director of Pharmacia Corporation and Monsanto Company.

Robert M. Powers served as President and Chief Executive Officer of A.E.
Staley Manufacturing Company in Decatur, Illinois, a processor of grain oil
seeds, from 1980 until his retirement in December 1988. Mr. Powers served as a
Director of Illinova from 1984 until the closing of the merger with Dynegy in
February 2000.

Sheli Z. Rosenberg has served as Vice Chairman since 2000 and has served as
Chief Executive Officer since 1999, President and Chief Executive Officer since
1994 and General Counsel 1980 to 1994 of Equity Group Investments, LLC, Chicago,
Illinois, a privately held business conglomerate holding controlling interests
in seven publicly traded corporations involved in basic manufacturing, radio
stations, retail, insurance and real estate. Ms. Rosenberg served as a Director
of Illinova from 1997 until the closing of the merger with Dynegy in February
2000. She also is a Director of Anixter International, Inc., Capital Trust, CVS
Corporation, Equity Office Properties Trust, Equity Residential Properties Trust
and Manufactured Home Communities, Inc. and Cendant Corporation.

Joe J. Stewart served as President of BWX Technologies, Inc., Lynchburg,
Virginia, and Executive Vice President of McDermott International, Inc., New
Orleans, Louisiana, a diversified energy and environmental equipment and
services company, from 1995 until his retirement in 1998. He was President and
Chief Operating Officer of The Babcock & Wilcox Company and Executive Vice
President of McDermott International, Inc., from 1993 to 1995 and Executive Vice
President of the Power Generation Group of The Babcock and Wilcox Company from
1987 to 1993. Mr. Stewart served as a Director of Illinova from 1998 until the
closing of the merger with Dynegy in February 2000.

J. Otis Winters is a co-founder and Chairman of The PWS Group, Inc. (formerly
known as Pate, Winters & Stone, Inc.), a consulting firm, and has served in such
position since 1990. Mr. Winters was formerly Executive Vice President and
Director of the Williams Companies, and Executive Vice President and Director of
the First National Bank of Tulsa. Mr. Winters also serves as a Director of AMFM
Inc., an operator of radio stations, Panja Corporation, a manufacturer of
control devices, Triton Energy Corporation, an international oil and gas
exploration company, and Walden Residential Properties, Inc., an apartment REIT.

Michael D. Capellas has served as Chairman and Chief Executive Officer of
Compaq Computer Corp. since September 2000. He was named President and Chief
Executive Officer of Compaq in July 1999 and was named Chief Operating Officer
in June 1999. Mr. Capellas joined Compaq in August 1998 as Senior Vice
President, Information Management, and Chief Information Officer. Prior to
joining Compaq, Mr. Capellas was Senior Vice President and General Manger of the
global energy business of Oracle Corporation from 1997 through 1998, and
Director of Supply Chain Management for SAP America from 1996 through 1997. From
1981 through 1996, Mr. Capellas held several management positions at
Schlumberger Limited, including serving as head of worldwide information
services.

H. John Riley serves as Chairman, President and Chief Executive Officer of
Cooper Industries, Inc. He was named President and Chief Operating Officer in
1992, Chief Executive Officer in 1995 and Chairman in 1996. Mr. Riley also
serves as a Director of The Allstate Corporation and Baker Hughes Incorporated.

Darald W. Callahan was named Executive Vice President of Chevron Corporation
in August 2001. He was named President of Chevron Chemical Co. LLC, a subsidiary
of Chevron, in February 1999. He served as Senior Vice President of Chevron
Chemical from October 1991 through January 1999. Mr. Callahan has been employed
by Chevron Corporation and its affiliates since 1964.

Richard H. Matzke was elected as one of two Vice Chairmen of the Board of
Directors of Chevron Corporation in January 2000. He was elected a member of
Chevron's Board of Directors in March 1997. From November 1989 through December
1999, Mr. Matzke served as President of Chevron Overseas Petroleum Inc., where
he was responsible for directing Chevron's oil exploration and production
activities outside of North America. Mr. Matzke has been employed by Chevron
Corporation and its predecessors and affiliates since 1961. He is chairman of
the Board of Directors of the United States-Kazakhstan Business Association; a
member of the United States-Russia Business Council, and the Business Council
for International Understanding and Vice Chairman of the United States-
Azerbaijan Chamber of Commerce. He serves on the board of trustees of The Africa
America Institute, and the Advisory Board of the Center of Strategic and
International Studies (CSIS). He also is a member of the Council on Foreign
Relations, the American Institute of Professional Geologists, the American
Association of Petroleum Geologists, the World Affairs Council of Northern
California and the Commonwealth Club of California.

George L. Kirkland was elected President of Chevron U.S.A. Production Co. and
a Vice President of Chevron Corporation in January 2000. From November 1996
through December 1999, Mr. Kirkland served as Chairman and Managing Director of
Chevron Nigeria Ltd., where he was responsible for all Chevron operations in
Nigeria. Mr. Kirkland has been employed by Chevron Corporation and its
predecessors and affiliates since 1974.

The Board of Directors recommends that shareholders vote "FOR" the election
of the nominees to the Board of Directors.

Directors' Meetings and Committees of the Board of Directors

The merger of Dynegy and Illinova Corporation (the "Dynegy/Illinova Merger")
was consummated on February 1, 2000. During January 2000, the former Dynegy
Board of Directors' Compensation Committee and Options Committee each met one
time with regard to merger related issues. After consummation of the
Dynegy/Illinova Merger, the new Dynegy Board of Directors held nine meetings.
Each director attended at least 75% of the aggregate of the total number of
meetings of the Board of Directors (held during the period for which he or she
has been a director) and the total number of meetings held by all committees of
the Board on which he or she served (during the periods that he or she served).
Following the Dynegy/Illinova Merger, the Board of Directors of Dynegy had the
following committees:

Executive Committee. The Executive Committee, which is currently comprised of
Messrs. Watson, Callahan, Dienstbier, Johnson, McMillan, Rosenberg and Winters,
met four times during 2000. The Executive Committee has been delegated the
authority to approve any actions that the Board of Directors could approve,
except to the extent restricted by law, Dynegy's Articles of Incorporation or
Dynegy's Bylaws. This committee also is responsible for maintaining an effective
working relationship between the Board of Directors and management of Dynegy.

Nominations Committee. The Nominations Committee, which is currently
comprised of Messrs. McMillan, Dienstbier and Winters and Ms. Rosenberg, met two
times during 2000. The Nominations Committee is responsible for nominating the
Class A common stock directors.

Audit Committee. The Audit Committee, which is currently comprised of Messrs.
Winters, Johnson, McMillan, Powers and Stewart, met seven times during 2000.
Each of the members of the Audit Committee is independent as independence is
defined by Section 303.01(B) of the New York Stock Exchange rules. The Audit
Committee is responsible for meeting with the independent auditors, internal
auditors and senior executives of Dynegy to review and inquire into matters
affecting the financial reporting of Dynegy and recommending to the Board of
Directors the auditors to be recommended for appointment at the annual
shareholders meeting.

Finance Committee. The Finance Committee, which is currently comprised of Ms.
Rosenberg and Messrs. Johnson, Kirkland, McMillan and Winters, met five times
during 2000. The Finance Committee is responsible for meeting with management of
Dynegy to review the financing plans and objectives of Dynegy, Dynegy's annual
Securities and Exchange Act filings and all prospectuses and other offering
memoranda of Dynegy.

Compensation Committee. The Compensation Committee, which is currently
comprised of Messrs. Dienstbier, Bayless and Callahan, and Ms. Eckert, met seven
times during 2000. The Compensation Committee reviews recommendations for the
appointment of persons to senior executive positions; reviews and approves
corporate compensation and benefits strategy; reviews and approves terms of
employment and compensation for senior executives; and is responsible for the
proper and orderly administration of Dynegy's retirement and savings plan (other
than matters relating to the funding and investment of the plan's trust funds).
This committee is also responsible for setting the compensation of the Board of
Directors.

Options Committee. The Options Committee, which is currently comprised of Ms.
Eckert and Messrs. Bayless and Dienstbier, met four times during 2000. The
Options Committee is responsible for recommending awards under Dynegy's stock
option and long-term incentive plan.

Risk and Environment Committee. The Risk and Environment Committee, which is
currently comprised of Messrs. Stewart, Bayless, Bergstrom and Matzke and Ms.
Eckert, met three times during 2000. The Risk and Environment Committee is
responsible for overseeing Dynegy's environmental and occupational health and
safety practices.

Compensation of Directors

Following the Dynegy/Illinova Merger, each non-employee director of Dynegy
was paid an annual retainer of $25,000 per year, $30,000 per year for Committee
Chairpersons, plus $1,500 per board or committee meeting attended. In addition,
each director is entitled to reimbursement for his or her reasonable out-of-
pocket expenses incurred in connection with travel to and from, and attendance
at, meetings of the Dynegy Board of Directors or committees thereof. During
2000, each non-employee director also had the option to receive shares of common
stock, in lieu of cash, in payment of their annual retainer and meeting fees
pursuant to the terms of the Dynegy Inc. Non-Employee Director Compensation
Plan. Each director of Dynegy, other than Messrs. Watson and Bergstrom, is a
non-employee director for purposes of such plan. During 2000, the annual
retainer and meeting fees payable to Chevron employee representatives on the
Dynegy Board of Directors were paid directly to Chevron. Each non-employee
director also had the option to defer any cash they received in payment of their
annual retainer and meeting fees pursuant to the terms of the Dynegy Deferred
Compensation Plan for Certain Directors.

All non-employee directors of Dynegy are entitled to receive options to
purchase 6,000 shares of Class A common stock with an exercise price equal to
the market value of such stock on the day of their election at the annual
meeting or appointment to the Board of Directors. The annual award of 6,000
options (18,000 options in the aggregate) attributable to the services of the
three Chevron designees on the Board of Directors is granted in favor of
Chevron. Chevron receives options to purchase shares of Class B common stock.
Dynegy intends to make annual option grants a part of its non-employee director
compensation package.

In January 2001, Dynegy's Board of Directors approved certain changes to
Dynegy's director compensation package. The annual retainer was increased from
$25,000 to $30,000 with 50% payable in Dynegy common stock and the remaining 50%
payable in either stock or cash at the election of the Directors. Directors who
are employees of Dynegy or employees of Chevron will no longer be paid for their
services. The Board also adopted a guideline pursuant to which all Directors
would be required to own Dynegy common stock with a minimum value of two times
their annual retainer within two years of their appointment to the Board.

Certain Transactions and Other Matters

For a description of certain transactions with management and others, certain
business relationships, indebtedness of management and compliance with Section
16(a) of the Securities Exchange Act of Securities Exchange Act of 1934, see "-
Executive Compensation - Employment Agreements," "Certain Relationships and
Related Transactions," "Indebtedness of Management" and "Section 16(a)
Beneficial Ownership Reporting Compliance."

EXECUTIVE COMPENSATION

The following table sets forth certain information regarding the
compensation earned by the individual who serves as Dynegy's Chief Executive
Officer and the four most highly compensated executive officers of Dynegy at the
end of 2000 (the "Named Executive Officers") in combined salary and bonus earned
in 2000, as well as amounts earned by or awarded to such individuals for
services rendered in all capacities to Dynegy and its subsidiaries during 1999
and 1998.

SUMMARY COMPENSATION TABLE

Long Term
Compensation
Awards
----------------------
Annual Compensation Shares
-------------------------------------------------------
Fiscal Cash Other Annual Underlying All Other
Name and Position Year Salary Bonus/(1)/ Compensation/(2)/ Stock Options/(3)/ Compensation/(4)/
----------------- --- ------ ---------- ---------------- --------------------- -----------------

Charles L. Watson
Chairman of the Board and 2000 $1,527,500 $4,632,814 -- 681,924 $26,000
Chief Executive Officer of 1999 $1,029,501 $4,300,000 -- 1,151,617 $24,000
Dynegy Inc. 1998 $ 999,000 $ 604,000 -- 147,030 $20,000

Stephen W. Bergstrom 2000 $ 865,580 $2,628,962 -- 450,000 $25,500
President and Chief 1999 $ 652,080 $1,770,000 -- 713,253 $24,000
Operating Officer of 1998 $ 600,000 $ 600,000 -- 204,462 $20,000
Dynegy Inc.

Kenneth E. Randolph 2000 $ 356,417 $ 525,000 -- 61,463 $27,427
General Counsel and 1999 $ 271,630 $ 420,000 -- 148,024 $31,000
Secretary of Dynegy Inc. 1998 $ 263,758 $ 175,000 -- 73,824 $25,000

R. Blake Young 2000 $ 270,000 $ 490,000 -- 60,000 $28,646
Senior Vice President and 1999 $ 216,666 $ 220,000 -- 126,936 $26,000
Chief Information Officer of 1998 $ 37,180 --- -- 40,754 $ 4,647
Dynegy Inc.

Robert D. Doty, Jr. 2000 $ 253,125 $ 493,000 -- 60,000 $28,573
Senior Vice President and 1999 $ 199,349 $ 163,950 -- 81,376 $26,000
Chief Financial Officer of 1998 $ 172,628 $ 64,400 -- 117,651 $20,000
Dynegy Inc.

/(1)/ During 2000, each of the Named Executive Officers was party to an
employment agreement with Dynegy Marketing and Trade. Bonus awards for
2000, 1999 and 1998, which were paid in 2001, 2000 and 1999,
respectively, were determined under the terms of Dynegy's Incentive
Compensation Plan, subject to the minimum guaranteed bonus provisions of
such employment agreements. See "-Employment Agreements." The bonus shown
for 2000 for Mr. Watson includes a payment of $500,000 in February 2001
relating to the Dynegy/Illinova Merger, as discussed below. The bonus
shown for 1999 for Mr. Watson includes Mr. Watson's 1999 bonus award of
$2,300,000 and $2,000,000 of an additional $2,500,000 discretionary bonus
awarded in recognition of Mr. Watson's efforts in connection with the
Dynegy/Illinova Merger. The $2,000,000 was paid in February 2000 as an
additional bonus award for 1999 and the remaining $500,000 was paid in
February 2001. As Mr. Young joined Dynegy in November 1998, he was not
eligible to receive a bonus under the terms of the Incentive Compensation
Plan.

/(2)/ Includes "Perquisites and Other Personal Benefits" if value is greater
than the lesser of $50,000 or 10% of reported salary and bonus. No Named
Executive Officer received perquisites that exceeded the threshold
amount.

/(3)/ Includes awards of options that were granted 1/19/01 based on 2000
performance. See "-Employment Agreements."

(4) During 2000, 1999 and 1998, respectively, Messrs. Watson, Bergstrom,
Randolph, Young and Doty received Company contributions to their
respective savings plan accounts of $26,000, $25,500, $27,428,
$28,646 and $28,573, respectively; $24,000, $24,000, $26,000, $26,000
and $26,000, respectively; and $20,000, $20,000, $20,000, $4,284 and
$20,000, respectively. In 1999 and 1998, life insurance premiums of
$5,000 were paid on behalf of Mr. Randolph.

Stock Option Grants

The following table sets forth certain information with respect
to stock option grants made to the Named Executive Officers during 2000 or
related to 2000 performance under the Dynegy Inc. 2000 Long Term Incentive
Plan. No stock appreciation rights were granted during 2000. Effective with
the Dynegy/Illinova Merger, all stock option grants are made under the
Dynegy Inc. 2000 Long Term Incentive Plan.

Individual Grants/(1)/
----------------------------------------------------------------
Number of Potential Realizable Value at
Securities % Total Assumed Annual Rate of Stock
Underlying Granted to Exercise Price Appreciation for Option
Options Employees in Price Expiration -----------------------------
Name Granted Fiscal 2000 $/Share Date Term/(2)/
---- --------- ------------- ------- -------- --------
5% 10%
-- ---

Charles L. Watson 681,924 9.8% $47.19 01/19/11 $20,237,875 $51,286.622

Stephen W. Bergstrom 450,000 6.5% $47.19 01/19/11 $13,354,892 $33,843,918

Kenneth E. Randolph 61,463 0.9% $47.19 01/19/11 $ 1,824,071 $ 4,622,553

R. Blake Young 60,000 0.9% $47.19 01/19/11 $ 1,780,652 $ 4,512,522

Robert D. Doty, Jr. 60,000 0.9% $47.19 01/19/11 $ 1,780,652 $ 4,512,522

_________________________

/(1)/ Each of the Named Executive Officers is entitled to receive certain
annual market value stock option grants during the term of their
respective employment agreements. See "-Employment Agreements".
Option awards based on 2000 performance were granted January 19,
2001.

/(2)/ The dollar amounts under these columns represent the potential
realizable value of each grant of options assuming that the market
price of common stock appreciates in value from the date of grant at
the 5% and 10% annual rates prescribed by the SEC and therefore are
not intended to forecast possible future appreciation, if any, of the
price of common stock.

Option Exercises and Year-End Value Table

The following table sets forth for the Named Executive Officers,
information regarding options held by them at December 31, 2000.

Number of Shares
Underlying Unexercised Value of Unexercised
Shares Stock Options or Equity In-the-Money Stock
Acquired on Options at 12/31/00 Options at 12/31/00/(1)/
Exercise of Value ----------------------- --------------------------
Name Options Realized Exercisable Unexercisable Uxercisable Unexercisable
---- ------- -------- ----------- ------------- ----------- -------------

Charles L. Watson -- -- 3,824,987 1,152,679 $197,454,815 $50,295,432

Stephen W. Bergstrom -- -- 824,691 791,563 $ 40,981,727 $37,551,744

Kenneth E. Randolph -- -- 257,745 161,476 $ 11,749,686 $ 7,318,705

R. Blake Young 40,754 $1,831,948 22,077 104,859 $ 870,717 $ 4,895,703

Robert D. Doty, Jr. 40,000 $2,120,760 293,448 61,509 $ 14,403,309 $ 2,755,836

_____________________________

/(1)/ Value based on the closing price of $56.06 on the New York Stock
Exchange - Composite Tape for Dynegy Class A common stock on December 29,
2000. Does not include options granted on January 19, 2001 relating to
2000 performance. Number of shares underlying options have been adjusted
to reflect the .69 Dynegy/Illinova merger conversion ratio and the Dynegy
2-for-1 stock split effected in August 2000.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires Dynegy's executive officers and directors, and persons who own more
than 10% of a registered class of Dynegy's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and the New York Stock Exchange. Executive officers, directors and greater than
10% shareholders are required by SEC regulations to furnish Dynegy with copies
of all Section 16(a) forms they file. Based solely upon review of the copies of
such forms furnished to Dynegy, or upon written representations that no Form 5's
were required, Dynegy believes that all persons subject to these reporting
requirements filed the required reports on a timely basis.

Indebtedness of Management

No director, executive officer, nominee for election as a director or 5%
shareholder was indebted to Dynegy for an amount exceeding $60,000 during 2000.

Employment Agreements

C.L. Watson Employment Agreement. Mr. Watson's 2000 compensation was
determined under the terms of a three-year employment agreement between Dynegy
Marketing and Trade and Mr. Watson, pursuant to which Mr. Watson serves as
Chairman and Chief Executive Officer of Dynegy. Mr. Watson's employment
agreement entitles him to a base salary of $1,500,000, subject to increase at
the discretion of the Board of Directors, and the annual opportunity to earn
additional bonus amounts, dependent upon certain financial or performance
objectives, as a participant in the Incentive Compensation Plan. Mr. Watson's
current base salary is $1,560,000. The employment agreement also provides that
Mr. Watson is entitled to receive stock option grants each year during the term
of the agreement. On January 19, 2001, Mr. Watson was awarded a grant of
options to purchase 681,924 shares of common stock with an exercise price of
$47.19 per share. Under the terms of the employment agreement all options
granted to Mr. Watson prior to November 1, 1999 became fully vested as of
February 1, 2000. The employment agreement also contains non-compete provisions
in the event of Mr. Watson's termination of employment.

Stephen W. Bergstrom Employment Agreement. Mr. Bergstrom's 2000
compensation was determined under the terms of a four-year employment agreement
between Dynegy Marketing and Trade and Mr. Bergstrom, pursuant to which Mr.
Bergstrom serves as President and Chief Operating Officer of Dynegy. Mr.
Bergstrom's employment agreement entitles him to a base salary of $850,000,
subject to increase at the discretion of the Board of Directors, and the annual
opportunity to earn additional bonus amounts, dependent upon certain financial
or performance objectives, as a participant in the Incentive Compensation Plan.
Mr. Bergstrom's current base salary is $884,000. Under the terms of the
employment agreement, all options granted to Mr. Bergstrom prior to November 1,
1999 became fully vested as of February 1, 2000. The employment agreement also
provides that Mr. Bergstrom is entitled to receive stock option grants each year
during the term of the agreement. On January 19, 2001, Mr. Bergstrom was
awarded a grant of options to purchase 450,000 shares of common stock with an
exercise price of $47.19 per share. The employment agreement also contains non-
compete provisions in the event of Mr. Bergstrom's termination of employment.

Kenneth E. Randolph Employment Agreement. Mr. Randolph's 2000 compensation
was determined under the terms of a two-year employment agreement between Dynegy
Marketing and Trade and Mr. Randolph, pursuant to which Mr. Randolph serves as
General Counsel and Secretary of Dynegy. Mr. Randolph's employment agreement
entitles him to a base salary of $350,000, subject to increase at the discretion
of the Board of Directors, and the annual opportunity to earn additional bonus
amounts, dependent upon certain financial or performance objectives, as a
participant in the Incentive Compensation Plan. Mr. Randolph's current base
salary is $364,000. Under the terms of his employment agreement, all options
granted to Mr. Randolph prior to November 1, 1999 became fully vested as of
February 1, 2000. The employment agreement also provides that Mr. Randolph is
entitled to receive stock option grants each year during the term of the
agreement. On January 19, 2001, Mr. Randolph was awarded a grant of options to
purchase 61,463 shares of common stock with an exercise price of $47.19 per
share. The employment agreement contains non-compete provisions in the event of
Mr. Randolph's termination of employment.

R. Blake Young Employment Agreement Mr. Young's 2000 compensation was
determined under the terms of a three-year employment agreement between Dynegy
Marketing and Trade and Mr. Young, pursuant to which Mr. Young serves as Senior
Vice President and Chief Information Officer of Dynegy. Mr. Young's employment
agreement entitles him to a base salary of $270,000, subject to increase at the
discretion of the Board of Directors, and the annual opportunity to earn
additional bonus amounts, dependent upon certain financial or performance
objectives, as a participant in the Incentive Compensation Plan. Mr. Young's
current base salary is $290,000. Under the terms of his employment agreement,
all options granted to Mr. Young prior to November 1, 1999 became fully vested
as of February 1, 2000. The employment agreement also provides that Mr. Young is
entitled to receive stock option grants each year during the term of the
agreement. On January 19, 2001, Mr. Young was awarded a grant of options to
purchase 60,000 shares of common stock with an exercise price of $47.19 per
share. The employment agreement contains non-compete provisions in the event of
Mr. Young's termination of employment.

Robert D. Doty, Jr. Mr. Doty's 2000 compensation was determined under the
terms of a two-year employment agreement between Dynegy Marketing and Trade and
Mr. Doty, pursuant to which Mr. Doty serves as Senior Vice President and Chief
Financial Officer of Dynegy. Mr. Doty's employment agreement entitles him to a
base salary of $225,000, subject to increase at the discretion of the Board of
Directors, and the annual opportunity to earn additional bonus amounts,
dependent upon certain financial or performance objectives, as a participant in
the Incentive Compensation Plan. Mr. Doty's current base salary is $310,000.
Under the terms of his employment agreement, all options granted to Mr. Doty
prior to November 1, 1999 became fully vested as of February 1, 2000. The
employment agreement also provides that Mr. Doty is entitled to receive stock
option grants each year during the term of the agreement. On January 19, 2001,
Mr. Doty was awarded a grant of options to purchase 60,000 shares of common
stock with an exercise price of $47.19 per share. The employment agreement
contains non-compete provisions in the event of Mr. Doty's termination of
employment.

Certain Relationships and Related Transactions

Compensation Committee/Options Committee Interlocks and Insider
Participation. The Compensation Committee and the Options Committee of the
Dynegy Board of Directors made decisions regarding compensation for executive
officers in 2000. The base compensation, bonus amounts and stock option grants
for 2000 for each of Messrs. Watson, Bergstrom, Randolph, Young and Doty were
established pursuant to the terms of their respective employment agreements.
For further information, see "-Employment Agreements."

Following the completion of the Dynegy/Illinova Merger on February 1, 2000
and from time to time during the remainder of 2000, the Dynegy Compensation
Committee has been comprised of the following directors: Messrs. Dienstbier,
Adorjan (until November 2000), Bayless, Callahan and Ms. Eckert. The Options
Committee has been comprised of Messrs. Adorjan (until November 2000), Bayless,
Dienstbier and Ms. Eckert. None of the members of either the Compensation
Committee nor the Options Committee has ever been an officer or employee of
Dynegy. Mr. Callahan serves as President of Chevron Chemical Co. LLC. Dynegy
has engaged in various transactions with Chevron and its respective affiliates,
as described below.

Business Relationships with Chevron; Chevron's Other Businesses. Various
business relationships between Chevron and Dynegy, together with Chevron's
operations as a major vertically integrated energy company, may present
conflicts of interest as Chevron and Dynegy each pursue business opportunities.

Ancillary Agreements and Strategic Alliances Contemplated by the Chevron
Combination. In connection with the August 1997 business combination with
Chevron (the "Chevron Combination"), Dynegy and Chevron, or affiliates thereof,
entered into certain supply, sales and service agreements pursuant to which,
among other things, Dynegy has (i) the obligation to purchase and the right to
market substantially all natural gas and natural gas liquids produced or
controlled by Chevron in the United States (except Alaska) and to supply natural
gas and natural gas liquids feedstock to Chevron refineries and Chevron Chemical
plants in the United States, (ii) the right to participate in existing and
future opportunities to provide electricity to United States facilities of
Chevron and Chevron Chemical, as well as to purchase or market excess
electricity generated by such facilities, and (iii) the right to process
substantially all of Chevron's processable natural gas in those geographic areas
where it is economically feasible for Dynegy to provide such service. During
2000, Dynegy purchased $3.1 billion of natural gas, natural gas liquids and
crude oil produced or controlled by Chevron, and sold $1.4 billion of natural
gas, natural gas liquids and crude oil to Chevron refineries and Chevron
Chemical plants in the United States.

In 1996, Dynegy and Chevron formed Venice Gas Processing Company, a Texas
limited partnership. Venice Gas was formed for the purpose of owning and
operating the Venice Complex, located in Plaquemines Parish, Louisiana. In
1997, Venice Gas reorganized as a limited liability company changing its name to
Venice Energy Services Company, L.L.C. In September 1997, Venice Energy members
agreed to expand ownership in Venice Energy to include an affiliate of Shell
Midstream Enterprises, a subsidiary of Shell Oil Company effective September 1,
1997, in exchange for Shell's commitment of certain offshore reserves to Venice

Energy. In 1998, ownership in Venice Energy was again expanded to include Koch
Energy Services Company, in exchange for their contribution of the cryogenic
processing unit. At December 31, 1999, Dynegy's interest in Venice Energy
approximated 22.9 percent. Dynegy operates the facility and has commercial
responsibility for product distribution and sales.

Other Chevron Business. Chevron Corporation, the parent company of
Chevron, is a major vertically integrated oil and gas company, and is the sixth
largest oil and gas company (by revenues) in the world. Chevron Corporation,
through its subsidiaries, affiliates and joint ventures, is involved in
exploration and production of oil and gas, gas gathering, gas and NGL
transportation and storage, refining and distribution (wholesale and retail).

Accordingly, Chevron's Corporation's present operation and its pursuit of
additional gas services opportunities overlap with Dynegy's operations and
strategy. There are no contractual limits on Chevron Corporation's ability to
compete with Dynegy. Accordingly, conflicts of interest may arise between
Chevron Corporation, and its affiliates, and Dynegy as they each pursue natural
gas services business opportunities. These conflicts may be resolved in favor
of Chevron Corporation.

In connection with the merger, Dynegy and Chevron entered into a
shareholders agreement which allows the Chevron-designated Class B common stock
Directors to block certain corporate transactions. Chevron is Dynegy's largest
shareholder and currently owns approximately 27 percent of the voting securities
of Dynegy.

Brokerage Commissions. Caldwell Nyberg Interests, Inc. ("CNI") assisted
Cushman & Wakefield, Inc. ("Cushman & Wakefield") as a cooperating broker in
securing the Company's office headquarters lease in 1996. C. L. Watson,
Chairman of the Board and Chief Executive Officer of the Company, owns a 50%
passive investment interest in CNI. In 2000, CNI's successor, Caldwell Watson
Real Estate Group ("CWREG"), was paid a commission as a participating broker in
the amount of $104,680.

Audit Committee Report

Dynegy's Board of Directors has established an Audit Committee of
independent directors, which operates under a written charter adopted by the
Board of Directors. A copy of the charter is attached to this proxy statement
as Appendix B. Dynegy's management is responsible for Dynegy's internal
controls and the financial statements in accordance with generally accepted
auditing standards and to issue a report on the financial statements. Under the
Audit Committee's charter, the primary function of the Audit Committee is to
assist the Board of Directors in fulfilling its oversight responsibilities as to
these processes. The Audit Committee's functions also include the selection and
evaluation of the independent auditors, the review, in conjunction with the
independent auditors, of the plans and scope of the audit engagement and a
review with the independent auditors of their objectivity and independence.

In connection with the preparation of the audited financial statements
included in Dynegy's Annual Report on Form 10-K for the year ended December 31,
2000:

. The Audit Committee reviewed and discussed the audited financial
statements with management of the Company.

. The Audit Committee discussed with the independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61 and
Statement on Auditing Standards No. 90. In general, these auditing
standards require the auditors to communicate to the Audit Committee
certain matters that are incidental to the audit, such as any initiation
of or changes to significant accounting policies, management judgments,
accounting estimates and audit adjustments, disagreements with
management and the auditors' judgment about the quality of Dynegy's
accounting principles.

. The Audit Committee received from the independent auditors written
disclosures regarding their independence required by Independence
Standards Board Standard No. 1 and discussed with the auditors their
independence. In general, Independence Standards Board Standard No. 1
requires the auditors to disclose to the Audit Committee any
relationship between the auditors and its related entities and Dynegy
that in the auditor's professional judgment may reasonably be thought to
bear on independence.

Based on the review and discussions noted above, the Audit Committee
recommended to the Board of Directors that the audited consolidated financial
statements for the year ended December 31, 2000 be included in Dynegy's Annual
Report on Form 10-K filed with the Securities and Exchange Commission.

This report is submitted by the members of the Audit Committee of the Board
of Directors:

J. Otis Winters (Chairman)
C. Steven McMillan
Robert M. Powers
Joe J. Stewart
Jerry L. Johnson

Independent Auditors

The Audit Committee of the Board of Directors has approved the selection of
Arthur Andersen LLP as independent auditors to examine Dynegy's accounts for the
year ending December 31, 2001. Representatives of Arthur Andersen LLP are
expected to be present at the meeting to be available to respond to appropriate
questions.

Set forth below is a summary of certain fees paid to Arthur Andersen LLP
for services in 2000 and for the 2000 audit. In determining the independence of
Arthur Andersen LLP, the Audit Committee considered whether the provision of
non-audit services is compatible with maintaining Arthur Andersen LLP's
independence.

Audit Fees. The total fees, including reimbursement of expenses, Dynegy
paid Arthur Andersen LLP for professional services rendered for the audit of the
annual financial statements for the year ended December 31, 2000, and the
reviews of the financial statements included in our Forms 10-Q for the first
three quarters in 2000, were $3,198,500.

All Other Fees. The total fees, including reimbursement of expenses,
Dynegy paid Arthur Andersen LLP for professional services rendered in 2000 other
than for audit services were $4,119,500. During 2000, Arthur Anderson did not
furnish financial information systems design and implementation services to
Dynegy.

Compensation Committee Report on Executive Compensation

The Compensation Committee/Options Committee. The Compensation Committee
of the Board of Directors is responsible for developing Dynegy's executive
compensation philosophy. It is the duty of the Compensation Committee to
administer the philosophy and its relationship with the compensation paid to the
Chief Executive Officer and each of the other executive officers. The 2000
Compensation Committee was chaired by Daniel L. Dienstbier, an independent
director, and was comprised of four members, including the Chairman. During 2000
following the Dynegy/Illinova Merger, the Compensation Committee met seven
times.

Prior to the completion of the merger with Illinova on February 1, 2000,
the Options Committee of the Board of Directors was responsible for approving
awards under

. the Dynegy Employee Equity Option Plan;

. the Dynegy Amended and Restated 1991 Stock Option Plan;

. the Dynegy U.K. Stock Option Plan; and

. the Dynegy 1999 Long-Term Incentive Plan.

Upon completion of the merger with Illinova, all prior option plans were
terminated and the Options Committee thereafter approved awards under the Dynegy
2000 Long Term Incentive Plan. During 2000 following the Dynegy/Illinova Merger,
the Options Committee met four times. During 2000 following the Dynegy/Illinova
Merger, the Options Committee was comprised of J. Joe Adorjan, Chairman until
November 2000, Daniel L. Dienstbier, Chairman after November 2000, Charles E.
Bayless, and, beginning in November 2000 when she replaced Mr. Adorjan as a
member, Patricia M. Eckert.

The executive compensation philosophy at Dynegy is to reward the
executive's performance in a way that creates long-term shareholder value.
Dynegy's executive compensation program was designed to help Dynegy attract,
motivate and retain the executive resources that it needs in order to maximize
its return to shareholders. Dynegy's goal is to

provide its executives with a total compensation package that - at expected
levels of performance - is above average compared with those provided to
executives who hold comparable positions or have similar qualifications in other
similarly situated organizations. Salary increases, annual incentive awards and
long-term incentive grants are reviewed annually to ensure consistency with
Dynegy's total compensation philosophy. Dynegy also seeks to encourage employee
participation in stock ownership, thereby aligning employees' interests with
those of shareholders and providing an incentive to increase shareholder value.
To achieve this goal, Dynegy makes extensive use of stock option awards to
executives, managers and key employees. Employee stock ownership is also
accomplished through Dynegy stock contributions to the 401(k) Plan.

The Compensation Committee primarily compares Dynegy's executive
compensation program to other national energy merchants of comparable size. The
Compensation Committee also consults from time to time with outside consultants
experienced in executive compensation, and Dynegy has access to and utilizes an
extensive nationwide database that tracks pay trends for a broad industry index
in which Dynegy competes for executives and senior management.

During 2000, Dynegy's executive compensation program consisted of three
main components: (1) base salary; (2) potential for an annual incentive award
based on overall company performance as well as individual performance; and (3)
the opportunity to earn stock-based incentives, which are intended to encourage
the achievement of superior results over time and to align executive officer and
shareholder interests. The second and third elements constitute the "at risk"
portion of the compensation program.

Base Salary. All decisions regarding base salary are made based upon
individual performance as measured against pre-established individual objectives
and competitive practices as measured by periodic compensation surveys. Base
salaries are targeted at competitive levels when compared to an industry group
that includes peer group companies, including those reflected in the performance
graph, and general industry companies similar in size to Dynegy.

Annual Incentive Awards. During 2000, Dynegy's mechanism for awarding
annual bonuses to its executive officers was the Dynegy Inc. Incentive
Compensation Plan for 2000. The Incentive Compensation Plan is used to provide
incentive payments to all non-union salaried employees of Dynegy. The basis for
the payment of annual bonuses under the Incentive Compensation Plan is a
combination of attaining certain corporate and/or business unit performance
goals recommended and approved by the Board of Directors (i.e., earnings per
share, net income, cash-flow, return on capital employed) and personal
performance.

In 2000, Dynegy's financial results exceeded certain performance
thresholds. An incentive fund was created which was consistent with Dynegy's pay
for performance philosophy.

Long Term Incentive Compensation. Prior to the completion of the
Dynegy/Illinova Merger on February 1, 2000, Dynegy administered four stock
option plans, the Employee Equity Option Plan, the Amended and Restated 1991
Stock Option Plan, the U.K. Stock Option Plan and the 1999 Long Term Incentive
Plan, for certain key employees, including executive officers. Following the
completion of the Dynegy/Illinova Merger, these four option plans were replaced
by the 2000 Long Term Incentive Plan. As such, Dynegy's long term incentive
compensation is based upon the grants of market value stock option awards
pursuant to the 2000 Long Term Incentive Plan. Such awards are consistent with
the stock option awards made by similarly situated companies in Dynegy's
industry who are aggressive in the use of stock option awards as a means of long
term compensation. During 2000, the Options Committee was responsible for
approving stock option awards. Stock option grants were awarded to all
executive officers of Dynegy during 2000.

Compensation of Chief Executive Officer; Employment Agreement. Effective
upon the closing of the merger with Illinova on February 1, 2000, Dynegy
Marketing and Trade entered into a new three-year employment agreement with Mr.
Watson, pursuant to which Mr. Watson serves as Chairman and Chief Executive
Officer of Dynegy. Mr. Watson's new employment agreement entitles him to a base
salary of $1,500,000, subject to increase at the discretion of the Board of
Directors, and the annual opportunity to earn additional bonus amounts,
dependent upon certain financial or performance objectives, as a participant in
the Incentive Compensation Plan. Under the terms of the new employment agreement
all options granted to Mr. Watson prior to November 1, 1999 became fully vested
as of February 1, 2000. The employment agreement also contains non-compete
provisions in the event of Mr. Watson's termination of employment.

In determining Mr. Watson's base salary adjustment and annual incentive
award for 2000, the Compensation Committee considered Mr. Watson's efforts in
executing Dynegy's long-term business strategy and the financial performance of
Dynegy.

After consideration of these criteria and 2000 corporate performance, the
Compensation Committee approved an annual incentive award of $4,132,814 for Mr.
Watson. Mr. Watson also received a payment of $500,000 in February 2001 that
was approved by the Board in November 2000. In addition, Mr. Watson's base
salary was increased to $1,560,000. Under the terms of his employment
agreement, Mr. Watson is also entitled to receive, at a minimum each year during
the term of his agreement, stock option grants under the Dynegy 2000 Long Term
Incentive Plan with a target range of the 75/th/ percentile of 375% of his base
salary. In January 2001, Mr. Watson received a grant of 681,924 options with an
exercise price of $47.19 per share.

Compliance with Internal Revenue Code Section 162(m). Section 162(m) of the
Internal Revenue Code, enacted in 1993, generally disallows a tax deduction to
public companies for certain compensation over $1,000,000 paid to Dynegy's Chief
Executive Officer and four other most highly compensated executive officers, as
reported in this Proxy Statement. Excluded from the limitation is compensation
that is "performance based." For compensation to be performance based, it must
meet certain criteria, including being based on predetermined objective
standards approved by shareholders. Dynegy does not believe that Section 162(m)
applies to its corporate structure. However, in general, Dynegy believes that
compensation relating to options granted under its market value stock option
plan should be excluded from the $1,000,000 limitation. Compensation relating to
Dynegy's Incentive Compensation Plan does

not currently qualify for exclusion from limitation, given the discretion that
is provided to the Compensation Committee under such plans in determining the
actual amount of such awards. The Committee believes that maintaining the
discretion to evaluate the performance of Dynegy's management is an important
part of its responsibilities and inures to the benefit of Dynegy's shareholders.
The Compensation Committee, however, will continue to take into account the
potential application of Section 162(m) with respect to incentive compensation
awards and other compensation decisions made by it in the future.

All amounts paid or accrued during fiscal year 2000 under the above-
described plans and programs are included in the preceding tables. The
individuals who served as members of the Compensation Committee during 2000 are
listed below. No member of the Dynegy Compensation Committee or Options
Committee was an officer or employee of Dynegy or any of its subsidiaries during
2000.

Compensation Committee

Daniel L. Dienstbier, Chairman
Joe Adorjan (until November 2000)
Charles E. Bayless
Darald W. Callahan
Patricia M. Eckert (beginning in November 2000)

Options Committee

Daniel L. Dienstbier, Chairman
Joe Adorjan (member and Chairman until November 2000)
Charles E. Bayless
Patricia M. Eckert

Shareholder Return Performance Presentation

The performance graph shown on the following page was prepared by Standard
& Poor's Compustat, a division of McGraw-Hill, Inc., using data from the
Standard & Poor's Compustat Database for use in this Proxy Statement. As
required by applicable rules of the SEC, the graph was prepared based upon the
following assumptions:

1. One hundred dollars ($100) was invested in Dynegy common stock,
the S&P 500 and the Peer Group (as defined below) on December 31, 1995.

2. The returns of each component company in the Peer Group are
weighed based on the market capitalization of such company at the beginning
of the measurement period.

3. Dividends are reinvested on the ex-dividend dates.

Dynegy's Peer Group for fiscal year-ended December 31, 2000 (the "New Peer
Group") is comprised of a weighted index of eight energy services companies: The
AES Corp., Calpine Corporation, Duke Energy Corp., El Paso Corporation, Enron
Corp., Reliant Energy Incorporated, The Williams Companies, Inc. and Mirant
Corp.; seven utilities: Ameren, Allete Company, Dominion Resources Inc., Nstar
Company, Southern Company, Inc., Vectren and WPS Resources Corp.; and two
midstream gas and natural gas liquids companies: Mitchell Energy & Development
Corporation and Western Gas Resources Inc. The results were weighted 70% energy
services group, 15% utilities group and 15% midstream group to acknowledge
Dynegy's continued evolution from a producer and a marketer of natural gas and
natural gas liquids to an energy services company with an expanding presence in
the BTU convergence market. Dynegy's previous peer group was comprised of a
weighted index of seven energy services companies: AES Corporation, Calpine
Corporation, Duke Energy Corp., Enron Corp., Pacific Gas & Electric Company,
Reliant Energy Incorporated and Southern Co.; seven utilities: Allegheny Energy
Inc., American Electric Power Corporation, Cinergy Corporation. Commonwealth
Edison Corp., Dayton Power & Light Company, FirstEnergy Corp. and NiSource Inc.;
and two midstream gas and natural gas liquids companies: Mitchell Energy &
Development Corporation and Western Gas Resources Inc. The results were weighted
65% energy services group, 20% utilities group and 15% midstream group to
acknowledge Dynegy's evolution from a producer and a marketer of natural gas and
natural gas liquids to an energy services company with an expanding presence in
the BTU convergence market. The companies included in the New Peer Group differ
somewhat from Dynegy's previous peer group because such companies are more
representative of various peers that are compared to Dynegy in terms of
performance on an equity basis and because of certain industry consolidations.

[GRAPH]

TOTAL SHAREHOLDER RETURNS
-------------------------
(Dividends Reinvested)

ANNUAL RETURN PERCENTAGE
Years Ending

Company Name/Index Dec. 96 Dec. 97 Dec. 98 Dec. 99 Dec. 2000
-----------------------------------------------------------------------------------

Dynegy Inc. 162.80 -24.52 -37.27 122.86 220.20
S&P 500 Index 22.96 33.36 28.58 21.04 -9.10
New Peer Group 14.78 28.85 7.06 23.57 89.08
Old Peer Group 5.68 27.67 4.59 12.86 85.89

INDEXED RETURNS
Years Ending

Dec. '95
Company Name/Index Base Period Dec. 96 Dec. 97 Dec. 98 Dec. 99 Dec. 2000
-----------------------------------------------------------------------------------
Dynegy Inc. 100 262.80 198.36 124.45 235.69 888.07
S&P 500 Index 100 122.96 163.98 210.85 351.12 231.98
New Peer Group 100 114.78 147.89 158.33 200.99 369.94
Old Peer Group 100 105.68 134.93 141.11 130.01 296.04

PROPOSAL 2
AMENDMENT AND RESTATEMENT OF ARTICLES OF INCORPORATION

Since the formation of Dynegy, the Company's Articles of Incorporation
have been amended a number of times to change the corporate name, to increase
the number of authorized shares and to set forth provisions relating to the
Class A common stock and the Class B common stock. In addition, the Board of
Directors established the Series A Convertible Preferred Stock by resolution as
permitted by the Articles of Incorporation and applicable law. The Board of
Directors has determined that it is in the best interests of Dynegy and its
shareholders to amend and restate Dynegy's Articles of Incorporation to
consolidate the various amendments to the Articles of Incorporation, to
eliminate the designation of relative rights and preferences of Series A
convertible preferred stock previously established by resolution of the Board of
Directors, to eliminate any outdated information and to make other minor
stylistic, definitional, conforming and clarifying drafting alterations in a
single document. Specifically, the proposed amendment will capitalize defined
terms, delete duplicate definitions, renumber sections in a consistent manner
for the restated document, update the name and address of the registered agent
and correct typographical and grammatical errors. This proposed amendment and
restatement of the Articles of Incorporation is not intended to change any of
your existing rights as a shareholder.

The affirmative vote of the holders of not less than two-thirds of the
Class A common stock and the Class B common stock entitled to vote, voting
together as a single class, is required to approve the proposed amendment and
restatement of the Articles of Incorporation. Abstentions and broker non-votes
would have the same legal effect as a vote against the proposal. Although the
Articles of Incorporation provide that the Series A convertible preferred stock
votes together with the Class A common stock and Class B common stock as a
single class on such a proposal, no shares of the Series A convertible preferred
stock are currently outstanding and eligible to so vote.

The Board of Directors believes the proposed amendment and restatement
of the Articles of Incorporation, in the form attached to this Proxy Statement
as Appendix A, is in the best interests of Dynegy and recommends that
shareholders vote "FOR" the Amended and Restated Articles of Incorporation.

PROPOSAL 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

The Board of Directors has appointed the firm of Arthur Andersen LLP
as independent auditors of Dynegy for the fiscal year ending December 31, 2001
and recommends ratification by the shareholders of such appointment. Such
ratification requires the affirmative vote of a majority of the shares of Class
A common stock and Class B common stock, voting together as a single class,
present or represented by proxy and entitled to vote at the annual meeting.
Under Illinois law, an abstention would have the same legal effect as a vote
against this proposal, but a broker non-vote would not be counted for purposes
of determining shares represented in person or by proxy on the matter. The
persons named in the accompanying proxy intend to vote for ratification of such
appointment unless instructed otherwise on the proxy.

In the event the appointment is not ratified, the Board of Directors
will consider the appointment of other independent auditors. The Board of
Directors may terminate the appointment of Arthur Andersen LLP as Dynegy's
independent auditors without the approval of the shareholders of Dynegy whenever
the Board of Directors deems such termination necessary or appropriate. A
representative of Arthur Andersen LLP is expected to attend the annual meeting
and will be available to respond to appropriate questions.

The Board of Directors recommends that shareholders vote "FOR"
ratification of the appointment of Arthur Andersen LLP as independent auditors.

SHAREHOLDER PROPOSALS

Any shareholder who wishes to submit a proposal for inclusion in the
proxy material and for presentation at Dynegy's 2002 Annual Meeting of
Shareholders must forward such proposal to the Secretary of Dynegy at the
address indicated on the first page of this Proxy Statement so that the
Secretary receives it no later than December 24, 2001.

OTHER MATTERS

The Board of Directors does not know of any other matters that are to
be presented for action at the annual meeting. However, if any other matters
properly come before the annual meeting or any adjournment(s) or postponement(s)
thereof, it is intended that the enclosed proxy will be voted in accordance with
the judgment of the persons named in the proxy.

By Order of the Board of Directors,

Kenneth E. Randolph
General Counsel and Secretary
April 23, 2001

APPENDIX A

AMENDED AND RESTATED

ARTICLES OF INCORPORATION

DYNEGY INC.

ARTICLE 1

The name of the corporation is Dynegy Inc. (the "Corporation").

The Corporation was incorporated on June 11, 1999 under the name Energy
Convergence Holding Company. The Corporation's name was amended from Energy
Convergence Holding Company to Dynegy Inc. on January 4, 2000.

ARTICLE 2

Registered Agent CT Corporation System
Registered Office: c/o CT Corporation System
208 S. LaSalle St.
Chicago, IL 60604
Cook County

ARTICLE 3

Purpose or purposes for which the corporation is organized:

To transact any or all lawful businesses for which a corporation may be
incorporated under the Business Corporation Act of 1983, as amended from time to
time.

ARTICLE 4

Paragraph 1: Authorized Shares
-----------

Class Par Value Per Share Number of Authorized Shares
----- ------------------- ---------------------------

Class A Common No Par Value 900,000,000
Class B Common No Par Value 360,000,000
Preferred No Par Value 70,000,000

A-1

Paragraph 2: The preferences, qualifications, limitations, restrictions
-----------
and special or relative rights in respect of the shares of each class are:

A. General
-------

All holders of Class A Common Stock (as defined) shall be entitled to
cumulative voting rights, as that term is used in Section 7.40 of the Illinois
Business Corporation Act of 1983, as amended from time to time (the "IBCA"), in
any election of directors. Holders of Class B Common Stock (as defined) shall
not be entitled to cumulative voting rights.

B. Provisions Relating to Preferred Stock
--------------------------------------

(1) The total number of shares of preferred stock that the Corporation
shall have authority to issue is 70,000,000, no par value per share (the
"Preferred Stock").

(2) Authority is hereby expressly vested in the Board of Directors (the
"Board") to divide, and to provide for the issue from time to time of, the
Preferred Stock in series and to fix and determine as to each such series:

(a) the designation of, and the number of shares to be issuable
in, such series;

(b) the dividend rate for the shares for such series;

(d) the amount payable upon each of such shares in the event of
involuntary dissolution of the Corporation;

(e) the amount payable upon each of such shares in the event of
voluntary dissolution of the Corporation;

(f) sinking fund provisions, if any, for the redemption or purchase
of such shares (the term "sinking fund," as used herein, including any
analogous fund, however designated);

(g) if such shares are to be issued with the privilege of conversion
into shares of the Common Stock or other securities, the terms and
conditions on which such shares may be so converted; and

(h) the voting rights or the grant of special voting rights, provided
that the voting rights of such Preferred Stock are no greater in proportion
than to the economic interest of such Shares.

In all other respects the shares of Preferred Stock of all series shall be
identical. Holders of Preferred Stock shall have no preemptive rights.

A-2

Additional series of Preferred Stock may be issued pursuant to designation
by resolution of the Board of Directors and such series may have preferences
which are junior to, parri passu with or superior to an outstanding series of
Preferred Stock set forth in these articles of incorporation or created by
designation without any vote of such outstanding series of Preferred Stock
unless the designation or terms of the outstanding series of Preferred Stock
expressly provides otherwise.

So long as any shares of any series of the Preferred Stock established by
resolution of the Board of Directors shall be outstanding, such resolution shall
not be amended so as to affect any of the preferences or other rights of the
holders of the shares of such series without the affirmative vote or the written
consent of the holders of at least a majority of the shares of such series
outstanding at the time or as of a record date fixed by the Board of Directors,
but such resolution may be so amended with such vote or consent.

[The Series A Convertible Preferred Stock, no par value per share,
consisting of 6,697,776 shares, previously established and designated by
resolution of the Board of Directors of the Corporation on January 31, 2000, of
which no shares remain currently outstanding, is deleted as of the date of
filing of these Amended and Restated Articles of Incorporation.]

C. Provisions Relating to Common Stock
-----------------------------------

(1) The total number of shares of common stock that the Corporation shall
have authority to issue is 1,260,000,000 of which (i) 900,000,000 shares shall
be shares of Class A Common Stock, no par value per share (the "Class A Common
Stock"), and (ii) 360,000,000 shares shall be shares of Class B Common Stock, no
par value per share (the "Class B Common Stock," and together with the Class A
Common Stock, the "Common Stock").

(2) Holders of the Common Stock shall have no preemptive rights. Except as
contemplated by Article 4, Paragraph 2C., each outstanding share of Common Stock
------------------------
shall entitle the holder thereof to one vote (and not more than one vote) on
each matter submitted to a vote at a meeting of holders of Common Stock.

(3) The following is a statement of the relative powers, preferences and
participating, optional or other special rights, and the qualifications,
limitations and restrictions of the Class A Common Stock and Class B Common
Stock:

(a) Class A Common Stock and Class B Common Stock

Except as otherwise set forth in this Article 4, Paragraph 2C.,
------------------------
the relative powers, preferences and participating, optional or other
special rights, and the qualifications, limitations or restrictions of
the Class A Common Stock and Class B Common Stock shall be identical
in all respects.

(b) Dividends

Subject to the rights of the holders of Preferred Stock, and
subject to any other provisions of these Articles, holders of Common
Stock shall be entitled to

A-3

receive such dividends and other distributions in cash, stock of any
corporation (other than Common Stock) or property of the Corporation
as may be declared thereon by the Board of Directors from time to time
out of assets or funds of the Corporation legally available therefor
and shall share equally on a per share basis in all such dividends and
other distributions. In the case of dividends or other distributions
payable in Common Stock, including distributions pursuant to stock
splits or divisions of Common Stock, only shares of Class A Common
Stock shall be paid or distributed with respect to Class A Common
Stock and only shares of Class B Common Stock shall be paid or
distributed with respect to Class B Common Stock. The number of shares
of Class A Common Stock and Class B Common Stock so distributed on
each share shall be equal in number. Neither the shares of Class A
Common nor the shares of Class B Common Stock may be reclassified,
subdivided or combined unless such reclassification, subdivision or
combination occurs simultaneously and in the same proportion for each
class.

(i) Except as may be otherwise required by law or by the
provisions of this Article 4, Paragraph 2C.(3)(c), the holders of the
------------------------------
Class B Common Stock shall vote together with the holders of the Class
A Common Stock as a single class on every matter coming before any
meeting of the shareholders or otherwise to be acted upon by the
shareholders, subject to any voting rights which may be granted to
holders of any other class or series of Preferred Stock. So long as
any Class B Common Stock is outstanding, the Corporation shall not (x)
without the affirmative vote of 66 2/3% of the shares of Class A and
Class B Common Stock outstanding, voting as a single class, effect any
mergers, consolidations, reorganizations, or sales of assets requiring
shareholder approval under the IBCA or disposition of all or
substantially all of the Corporation's assets, or (y) without the
affirmative vote of 66 2/3% of the shares of Class B Common Stock
outstanding, voting as a separate class, and the affirmative vote of a
majority of the shares of Class A and Class B Common Stock, voting as
a single class, (1) amend any provision of this Article 4, Paragraph
--------------------
2C.(3)(c)(i) relating to the Common Stock or (2) (unless such
------------
amendment shall be approved by a majority of the Class B directors
present at the meeting where such amendment is considered and a
majority of the Directors then in office) amend Section 7 of Article
III or Article X of the Corporation's By-laws.

(ii) The Board of Directors of the Corporation shall consist of
at least twelve members and no more than fifteen members as
established from time to time by resolution of the Board of Directors,
except that such numbers are subject to automatic adjustment as
necessary, under those circumstances and during those time periods
that holders of any other class or series of the Corporation's
outstanding Preferred Stock have rights to elect members of the Board
of Directors (the "Preferred Stock Directors"), as set forth in these
Articles of Incorporation or in the resolution of the Board of
Directors establishing and designating such series and fixing and
determining the relative rights and

A-4

preferences thereof. So long as any shares of Class B Common Stock are
outstanding, the holders of the Class B Common Stock, as such holders,
shall be entitled to vote as a separate class for the election of
three directors of the Corporation (the "Class B Directors") and the
holders of the Class A Common Stock shall be entitled to vote as a
separate class for the remaining directors of the Corporation (the
"Class A Directors"), excluding Preferred Stock Directors, if any. At
such time as no Class B Common Stock is outstanding, the term of all
Class B Directors shall immediately end.

(iii) For purposes of electing Class B Directors, the Board of
Directors will nominate such individuals as may be specified by a
majority vote of the then existing Class B Directors or, if there are
no Class B Directors, by holders of a majority of the Class B Common
Stock. The remaining directors will be nominated in accordance with
the Corporation's Bylaws.

(iv) At any meeting having as a purpose the election of
directors by holders of the Common Stock, the presence, in person or
by proxy, of the holders of a majority of the shares of the relevant
class or classes of Common Stock then outstanding shall be required
and be sufficient to constitute a quorum of such class or classes for
the election of any director by such holders. Each director shall be
elected by the vote or written consent required under the IBCA of the
holders of such class or classes. At any such meeting or adjournment
thereof, (i) the absence of a quorum of such holders of an applicable
class of Common Stock shall not prevent the election of the directors
to be elected by the holders of shares other than such class of Common
Stock, and (ii) in the absence of such quorum (either of holders of
such class of Common Stock or of shares other than such class of
Common Stock, or both), a majority of the holders, present in person
or by proxy, of the class or classes of stock which lack a quorum
shall have power to adjourn the meeting for the election of directors
which they are entitled to elect, from time to time, without notice
other than announcement at the meeting, until a quorum shall be
present.

(v) Any vacancy in the office of a class of director may be
filled by the remaining directors of such class, unless such vacancy
occurred because of the removal (with or without cause) of a director,
in which event such vacancy shall be filled by the affirmative vote of
the holders of a majority of the outstanding shares of the applicable
class of Common Stock. Any or all of the directors may be removed,
with or without cause, by vote or by written consent in each case in
accordance with Section 8.35 of the IBCA by the holders of the
applicable class of Common Stock and not otherwise. Any director
elected to fill a vacancy shall serve the same remaining term as that
of his or her predecessor, subject, however, to prior death,
resignation, retirement, disqualification, or removal from office.

(vi) Without the affirmative vote of the holders of at least
66 2/3% of the outstanding shares of the Class B Common Stock or the
written consent of such holders of the Class B Common Stock, the
Corporation may not effect any

A-5

change in the rights, privileges or preferences of the Class B Common
Stock. This provision shall not be applicable to any amendment to the
Articles of Incorporation or adoption of resolutions of the Board of
Directors which establishes or designates one or more classes or
series of Preferred Stock in accordance with Article 4, Paragraph
--------------------
2B.(2).
------

(vii) With respect to actions by the holders of Class B Common
Stock upon those matters on which such holders are entitled to vote as
a separate class, such actions may be taken without a shareholders
meeting by the written consent of holders of the Class B Common Stock
who would be entitled to vote at a meeting those shares having voting
power to cast not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all
shares of Class B Common Stock entitled to vote were present and
voted. Notice shall be given in accordance with the applicable
provisions of the IBCA of the taking of corporate action without a
meeting by less than unanimous written consent to those holders of
Class B Common Stock on the record date whose shares were not
represented on the written consent.

(d) Transfer

(i) If any person holding shares of Class B Common Stock of
record (a "Class B Holder") purports to transfer such shares of Class
B Common Stock, whether by sale, assignment, gift, bequest or
otherwise, except to a Permitted Transferee, such transfer shall be
deemed to constitute a request by the Class B Holder for conversion of
such shares and shall result in such shares being converted into Class
A Common Stock as provided by Article 4, Paragraph 2C.(3)(e).
------------------------------

(ii) In the case of a Class B Holder acquiring record and
beneficial ownership of the shares of Class B Common Stock in question
upon initial issuance by the Corporation (an "Original Holder"), a
"Permitted Transferee" shall mean any Affiliate (as defined below) of
such Original Holder.

In the case of a Class B Holder which is a Permitted Transferee
of an Original Holder, a "Permitted Transferee" shall mean:

(y) any Original Holder, or

(z) any Permitted Transferee of any Original Holder.

For this paragraph and Article 4, Paragraph 2C.(3)(e),
------------------------------
"Affiliate" means any corporation, partnership, limited liability
company or other entity (each, a "Person") that directly, or
indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, another Person, and
includes any Person acting in concert with another Person.

A-6

(iii) With respect to a Class B Holder which holds shares by
virtue of its status as an Affiliate, the subsequent loss of Affiliate
status shall, unless within 15 days thereafter all shares of Class B
Common Stock held by such Class B Holder are transferred to an
Original Holder or a Permitted Transferee of an Original Holder,
result in the automatic conversion of all of its shares of Class B
Common Stock into shares of Class A Common Stock, and stock
certificates formerly representing such shares of Class B Common Stock
shall thereupon and thereafter be deemed to represent shares of Class
A Common Stock as provided by Article 4, Paragraph 2C.(3)(e).
------------------------------

(iv) Any transfer of shares of Class B Common Stock not
permitted hereunder shall result in the conversion of the transferee's
shares of Class B Common Stock into shares of Class A Common Stock as
provided by Article 4, Paragraph 2C.(3)(e), effective as of the date
------------------------------
on which certificates representing such shares are presented for
transfer on the books of the Corporation or on such earlier date that
the Corporation receives notice of such attempted transfer. The
Corporation may, in connection with preparing a list of stockholders
entitled to vote at any meeting of stockholders, or as a condition to
the transfer or the registration of shares of Class B Common Stock on
the Corporation's books, require the furnishing of such affidavits or
other proof as it deems necessary to establish that the person is the
beneficial owner of shares of Class B Common Stock or is a Permitted
Transferee.

(v) Shares of Class B Common Stock shall be registered in the
names of the beneficial owners thereof and not in "street" or
"nominee" name. For this purpose, a "beneficial owner" of any shares
of Class B Common Stock shall mean a person who, or any entity which,
possesses the powers, either singly or jointly, to direct the voting
or disposition of such shares. Certificates for shares of Class B
Common Stock shall bear a legend referencing the restrictions on
transfer imposed by this Article 4, Paragraph 2C.(3)(d).
------------------------------

(e) Conversion

(i) Each share of Class B Common Stock shall be converted at
such time, in such manner and upon such terms and conditions as
provided herein into one fully paid and non-assessable share of Class
A Common Stock.

(ii) Each share of Class B Common Stock shall automatically
convert into a share of Class A Common Stock upon the earlier to occur
of (x) the holders of all Class B Common Stock ceasing to own in the
aggregate 15% of the issued and outstanding Common Stock, and (y) as
provided in Article 4, Paragraph 2C.(3)(d). Upon automatic conversion
------------------------------
of shares of Class B Common Stock, the Corporation shall reflect such
conversion, and the issuance of Class A Common Stock in connection
therewith on its books and records for all purposes even if
certificates reflecting such converted shares of Class B Common Stock
are not surrendered to the Corporation or its transfer agent. All
shares of Class B

A-7

Common Stock, upon conversion thereof into Class A Common Stock, shall
retain their designation as Class B Common Stock and shall have the
status of authorized and unissued shares of Class B Common Stock;
provided that if all shares of Class B Common Stock outstanding are
converted into shares of Class A Common Stock, then all authorized but
unissued shares or treasury shares of Class B Common Stock shall
automatically convert into authorized but unissued or treasury shares
of Class A Common Stock, as the case may be, and no further shares of
Class B Common Stock shall exist. Except as specifically contemplated
under this Article 4, Paragraph 2C.(3)(e), shares of Class B Common
------------------------------
Stock may not be converted into Class A Common Stock.

(iii) Each share of Class A Common Stock owned (within the
meaning of Article 4, Paragraph 2C.(3)(d)) by Chevron U.S.A. Inc., a
------------------------------
Pennsylvania corporation ("Chevron") or its Affiliates shall
simultaneous with acquiring such ownership automatically be converted
into one fully paid and non-assessable share of Class B Common Stock;
provided, however, that for purposes of any shares of Class B Common
Stock so issued, only Chevron will be deemed to be the Original Holder
thereof for purposes of the provisions of Article 4, Paragraph
--------------------
2C.(3)(d), and provided, further, that this provision shall not apply
---------
with respect to shares of Class A Common Stock issued upon conversion
of all Class B Common Stock in accordance with the first sentence of
Article 4, Paragraph 2C.(3)(e)(ii)(x), or any shares of Class A Common
-------------------------------------
Stock owned by Chevron or its Affiliates, after such conversion shall
have occurred. Upon automatic conversion of shares of Class A Common
Stock, the Corporation shall reflect such conversion and the issuance
of Class B Common Stock in connection therewith on its books and
records for all purposes even if certificates reflecting such
converted shares of Class A Common Stock are not surrendered to the
Corporation for transfer. All shares of Class B Common Stock shall be
subject to the restrictions and provisions contained in the
Corporation's Articles of Incorporation. All shares of Class A Common
Stock, upon conversion thereof into Class B Common Stock, shall retain
their designation as Class A Common Stock and shall have the status of
authorized and unissued shares of Class A Common Stock.

(iv) Nothing herein shall prevent the Original Holder (or any
Permitted Transferee) of the Class B Common Stock and the Corporation
from executing an agreement allowing the Original Holder (or any
Permitted Transferee), at its option, to convert the Class B Common
Stock into Class A Common Stock, nor the conversion of any Class B
Common Stock pursuant to such agreement.

(v) The Corporation will, as soon as practicable after such
deposit of a certificate or certificates for Common Stock to be
converted in accordance with this Article 4, Paragraph 2C.(3)(e),
------------------------------
issue and deliver at the office of the Corporation or of its transfer
agent to the person for whose account such Common Stock was so
surrendered, a certificate or certificates for the number of full
shares of Common Stock into which the shares represented by the
surrendered certificate

A-8

are converted. If surrendered certificates for Common Stock are
converted only in part, the Corporation will issue and deliver to the
holder, without charge therefor, a new certificate or certificates
representing the aggregate of the unconverted shares of such class of
Common Stock. The failure of the holder to deliver to the Corporation
certificates representing shares of a class of Common Stock converted
in accordance with this Article 4, Paragraph 2C.(3)(e), shall in no
------------------------------
way affect the automatic conversion of such shares.

(vi) The issuance of certificates for shares of a class of
Common Stock upon conversion of shares of the other class of Common
Stock shall be made without charge for any issue, stamp or other
similar tax in respect of such issuance; provided, however, if any
such certificate is to be issued in a name other than that of the
holder of the share or shares of the class of Common Stock converted,
the person or persons requesting the issuance thereof shall pay to the
Corporation the amount of any tax which may be payable in respect of
any transfer involved in such issuance or shall establish to the
satisfaction of the Corporation that such tax has been paid.

(vii) The Corporation shall at all times reserve and keep
available, solely for the purpose of issuance upon conversion of the
outstanding shares of Class B Common Stock, such number of shares of
Class A Common Stock as shall be issuable upon the conversion of all
such outstanding shares, provided that nothing contained herein shall
be construed to preclude the Corporation from satisfying the
obligations in respect of the conversion of the outstanding shares of
Class B Common Stock by delivery of shares of Class A Common Stock
which are held in the treasury of the Corporation. The Corporation
shall take all such corporate and other actions as from time to time
may be necessary to insure that all shares of Class A Common Stock
issuable upon conversion of shares of Class B Common Stock upon issue
will be duly and validly authorized and issued, fully paid and
nonassessable and free of any preemptive or similar rights. In order
that the Corporation may issue shares of Class A Common Stock upon
conversion of the Class B Common Stock, the Corporation will endeavor
to comply with all applicable Federal and state securities laws and
will endeavor to list such shares to be issued upon conversion on such
securities exchange on which the Class A Common Stock is then listed.

(viii) The Corporation shall at all times reserve and keep
available, solely for the purpose of issuance upon conversion of the
outstanding shares of Class A Common Stock a number of shares of Class
B Common Stock equal to 40% of the number of outstanding shares of
Class A Common Stock, provided that nothing contained herein shall be
construed to preclude the Corporation from satisfying the obligations
in respect of the conversion of the outstanding shares of Class A
Common Stock by delivery of shares of Class B Common Stock which are
held in the treasury of the Corporation. The Corporation shall take
all such corporate and other actions as from time to time may be
necessary to insure that all shares of Class B Common Stock issuable
upon conversion of shares of

A-9

Class A Common Stock upon issue will be duly and validly authorized
and issued, fully paid and nonassessable and free of any preemptive or
similar rights. In order that the Corporation may issue shares of
Class B Common Stock upon conversion of the Class A Common Stock, the
Corporation will endeavor to comply with all applicable Federal and
state securities laws.

(f) Except as may otherwise be required by law and for the equitable
rights and remedies which may otherwise be available to holders of Common
Stock, the shares of Common Stock shall not have any designations,
preferences, limitations or relative rights, other than those specifically
set forth in these Articles of Incorporation.

(g) The headings of the various subdivisions of this Section are for
convenience of reference only and shall not affect the interpretation of
any of the provisions of this Section.

ARTICLE 5

[This Article 5 intentionally left blank.]

ARTICLE 6
(as of June 11, 1999)

(a) It is estimated that the value of all property to be owned by the
Corporation for the following year wherever located will be: $3,436,819,466

(b) It is estimated that the value the property to be located within
the State of Illinois during the following year will be: $ 0

(c) It is estimated that the gross amount of business that will be
transacted by the Corporation during the following year will be: $ 0

(d) It is estimated that the gross amount of business that will be
transacted from places of business in the State of Illinois during
the following year will be: $ 0

A-10

ARTICLE 7

Paragraph 1:
-----------

A. Right to Indemnification.
------------------------

A director of the Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its shareholders, (ii) for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law, (iii) under Section 8.65 of the IBCA, or (iv) for any
transaction from which the director derived an improper personal benefit. If the
IBCA is amended to authorize corporate action further eliminating or limiting
the personal liability of Directors, then the liability of a director or the
Corporation shall be eliminated or limited to the full extent permitted under
the IBCA, as so amended. Any repeal or modification of this Article 7, Paragraph
--------------------
1 by the shareholders of the Corporation shall not adversely affect any right or
-
protection of a director of the Corporation existing at the time of such repeal
or modification.

The Corporation shall indemnify any person who was or is a party, or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director or officer of the Corporation, or is or was
serving at the request of the Corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding, if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to be the best interests of the
Corporation, and, with respect to any criminal action or proceeding, has no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to be the best interests of the
Corporation, or, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.

B. Suit by Corporation or Shareholder
----------------------------------

The Corporation shall indemnify any person who was or is a party, or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding by or in the right of the Corporation to procure a judgment
in its favor by reason of the fact that he is or was a director or officer of
the Corporation, or is or was serving at the request of the Corporation as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action, suit or proceeding, if he acted in good

A-11

faith and in a manner he reasonably believed to be in, or not opposed to the
best interests of the Corporation, and except that no indemnification shall be
made with respect to any claim, issue or matter as to which such person has been
finally adjudged to have been liable to the Corporation, unless, and only to the
extent that the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability, but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as the court shall deem proper.

C. Director Discretion
-------------------

Any indemnification under Article 7, Paragraphs 1A. and B. (unless ordered
--------------------------------
by a court) shall be made only as authorized in the specific case, upon a
determination that indemnification of the director or officer is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Article 7, Paragraphs 1A. and B. Such determination shall be made (1) by the
--------------------------------
board of directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (2) if such a quorum is
not obtainable (or, even if obtainable, a quorum of disinterested directors so
directs) by independent legal counsel in a written opinion, or (3) by the
shareholders. In any event, to the extent that a director or officer of the
Corporation has been successful, on the merits or otherwise, in the defense of
any action, suit or proceeding referred to in Article 7, Paragraphs 1A. and B.
--------------------------------
or in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including reasonable attorneys' fees) actually and reasonably
incurred by him in connection therewith.

D. Advancement of Expenses
-----------------------

(1) Reasonable expenses incurred in defending a civil or criminal action,
suit or proceeding shall be paid by the Corporation in advance of the final
deposition of such action, suit or proceeding, upon receipt of (i) a statement
signed by such director or officer to the effect that such director or officer
acted in good faith and in a manner which he believed to be in, or not opposed
to the best interests of the Corporation and (ii) an undertaking by or on behalf
of the director or officer to repay such amount, if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article.

(2) The board of directors may, by separate resolution adopted under and
referring to this Article of the by-laws, provide for securing the payment of
authorized advances by the creation of escrow accounts, the establishment of
letters of credit or such other means as the board deems appropriate and with
such restrictions, limitations and qualifications with respect thereto as the
board deems appropriate in the circumstances.

E. Non-Exclusivity of Rights and Contractual Nature
------------------------------------------------

(1) The indemnification and advancement of expenses provided by or granted
under other subsections of this Article shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under any by-law, agreement, vote of shareholders or
disinterested directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office and
shall continue

A-12

as to a person who has ceased to be a director or officer and shall inure to the
benefit of the heirs, executors and administrators of such a person.

(2) The provisions of this Article 7, Paragraph 1 shall be deemed to be a
----------------------
contract between the Corporation and each director and officer who serves in
such capacity at anytime while this Article 7, Paragraph 1 is in effect and any
----------------------
indemnification provided under Article 7, Paragraph 1 to a person shall continue
----------------------
after such person ceases to be an officer, director, agent or employee of the
Corporation as to all facts, circumstances and events occurring while such
person was such officer, director, agent or employee, and shall not be decreased
or diminished in scope without such person's consent, regardless of their repeal
or modification of this Article or any repeal or modification of the Illinois
Business Corporation Act or any other applicable law. If the scope of indemnity
provided by this Article 7, Paragraph 1 or any replacement article, or pursuant
----------------------
to the Illinois Business Corporation Act or any modification or replacement
thereof is increased, then such person shall be entitled to such increased
indemnification as is in existence at the time indemnity is provided to such
person, it being the intent, subject to Article 7, Paragraph 1K., to indemnify
------------------------
persons under this Article 7, Paragraph 1 to the fullest extent permitted by
----------------------
law.

F. Insurance
---------

The Corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the Corporation, or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article.

G. Report to Shareholders
----------------------

The Corporation shall report in writing to shareholders any indemnity or
advanced expenses paid to a director, officer, employee or agent with or before
the notice of the next shareholders' meeting.

H. Right of Claimant to Bring Suit
-------------------------------

Subject to Article 7, Paragraph 1K., if a claim under this Article is not
------------------------
promptly paid by the Corporation after a written claim has been received by the
Corporation or if expenses pursuant to Section 4 of this Article have not been
---------
promptly advanced after a written request for such advancement accompanied by
the statement and undertaking required by Article 7, Paragraph 1D. of this
------------------------
Article has been received by the Corporation, the director or officer may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim or the advancement of expenses. If successful, in whole or in part,
in such suit, such director or officer shall also be entitled to be paid the
reasonable expense thereof, including attorneys' fees. It shall be a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the

A-13

required undertaking has been tendered to the Corporation) that the director or
officer has not met the standards of conduct which make it permissible under the
Illinois Business Corporation Act for the Corporation to indemnify the director
or officer for the amount claimed, but the burden of proving such defense shall
be on the Corporation. Neither the failure of the Corporation (including its
board of directors, independent legal counsel, or its shareholders) to have made
a determination, if required, prior to the commencement of such action that
indemnification of the director or officer is proper in the circumstances
because he or she has met the applicable standard of conduct required under the
Illinois Business Corporation Act, nor an actual determination by the
Corporation (including its board of directors, independent legal counsel, or its
shareholders) that the director or officer had not met such applicable standard
of conduct, shall be a defense to the action or create a presumption that the
director or officer had not met the applicable standard of conduct.

I. Definition of "Corporation"
---------------------------

For purposes of this Article 7, references to the "Corporation" shall
---------
include, in addition to the surviving corporation, any merging corporation
(including any corporation having merged with a merging corporation) absorbed in
a merger which, if its separate existence had continued, would have had the
power and authority to indemnify its directors, officers and employees or
agents, so that any person who was a director or officer of such merging
corporation, or was serving at the request of such merging corporation as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, shall stand in the same position under the provisions of this
Article with respect to the surviving corporation as such person would have with
respect to such merging corporation if its separate existence had continued.

J. Employee Benefit Plans
----------------------

For purposes of this Article 7, references to "other enterprises" shall
---------
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; references
to "serving at the request of the Corporation" shall include any service as a
director, officer, employee or agent of the Corporation which imposes duties on,
or involves services by such director, officer, employee, or agent with respect
to an employee benefit plan, its participants, or beneficiaries; and references
to "officers" shall include elected and appointed officers. A person who acted
in good faith and in a manner he reasonably believed to be in the best interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interest of the
Corporation" as referred to in this Article.

K. Reimbursement
-------------

Anything herein to the contrary notwithstanding, if the Corporation
purchases insurance in accordance with Article 7, Paragraph 1F., the Corporation
------------------------
shall not be required to, but may (if the board of directors so determines in
accordance with this Article 7, Paragraph 1) reimburse any party instituting any
----------------------
action, suit or proceeding if a result of the institution thereof is the denial
of or limitation of payment of losses under such insurance when such losses
would have been paid thereunder if a non-insured third party had instituted such
action, suit or proceeding.

A-14

L. Severability
------------

If any portion of this Article shall be invalidated or held to be
unenforceable on any ground by any court of competent jurisdiction, the decision
of which shall not have been reversed on appeal, such invalidity or
unenforceability shall not affect the other provisions hereof, and this Article
shall be construed in all respects as if such invalid or unenforceable
provisions had been omitted therefrom.

Paragraph 2:
-----------

Without the consent of the holders of eighty-five percent (85%) of the
outstanding Common Stock, voting as a single class, the Corporation may (and may
permit any subsidiary of the Corporation over which it has control to) sell the
following products:

(1) crude oil;

(2) other products usually and normally refined as petroleum products from
crude oils; and

(3) natural gas liquids or liquefied petroleum gases;

irrespective of where such sales or products are made, only when the seller has
no actual knowledge that the sale is not for consumption or resale in one or
more of the following areas:

(a) the United States or any of its territories or possessions;

(b) any country wholly located in the Western Hemisphere and/or
Europe or surrounded by the Mediterranean Sea;

(d) any country whose territory is contained within the territories
constituting as of the date hereof the countries known as Algeria, Angola,
Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Congo, Cote
D'Ivoire, Equatorial Guinea, Gabon, Gambia, Ghana, Greenland, Guinea,
Guinea Bissau, Iceland, Liberia, Libya, Mali, Mauritania, Mongolia,
Morocco, Niger, Nigeria, Rio Muni, Senegal, Sierra Leone, Togo, Tunisia,
Turkey, Western Sahara and/or Zaire;

(e) Antarctica; and

(f) international waters;

unless (x) otherwise permitted by the terms of that certain Scope of Business
Agreement, dated May 22, 1996, between the Corporation and Chevron, as the same
may from time to time be amended in accordance with the terms thereof, or (y)
such Scope of Business Agreement is terminated pursuant to its terms, upon which
termination the provisions of this Article 7,
----------

A-15

Paragraph 2 shall be of no further force and effect. A copy of such Scope of
-----------
Business Agreement, as the same may be amended, shall be available for
inspection by any shareholder of the Corporation at the principal offices of the
Corporation. Except as indicated above or as may otherwise be provided in these
Articles of Incorporation or by Illinois law, shareholders shall have no right
to approve specific business activities of the Corporation, and the above
provisions shall not otherwise affect corporate powers and purposes as stated in
Article 3.
---------

[End of Amended and Restated Articles of Incorporation of Dynegy Inc.]

A-16

APPENDIX B

DYNEGY INC.

AUDIT COMMITTEE CHARTER

May 2000

I. PURPOSE

Pursuant to Article IV of the Bylaws of Dynegy Inc. (the "Corporation"), a
committee of the directors to be known as the "Audit Committee"
(hereinafter referred to as the "Committee") is hereby established. The
primary function of the Committee is to assist the Board of Directors in
fulfilling its oversight responsibilities related to corporate accounting,
financial reporting practices, quality and integrity of financial reports
as well as legal compliance and business ethics. Key components of
fulfilling this charge include:

. Facilitating and maintaining an open avenue of communication among the
Board of Directors, Audit Committee, Senior Management, the
independent accountants, the internal audit staff and the ethics and
business conduct staff.

. Serving as an independent and objective party to monitor the
Corporation's financial reporting process and internal control system.

. Reviewing and appraising the work of the independent accountants.

. Providing direction to and oversight of the Internal Audit function
and the Ethics and Business Conduct function.

II. ORGANIZATION/COMPOSITION

The Committee will be comprised of three or more directors to be determined
by the Board, each of whom shall be independent directors as defined by the
New York Stock Exchange, or other exchange(s) on which the Corporation is
listed. The members will be free from any financial, family and other
material personal relationships that, in the opinion of the Board or Audit
Committee members, would interfere with the exercise of their independence
from management and the Corporation. All members of the committee will have
a working familiarity with basic finance and accounting practices and at
least one member must have accounting or related financial management
expertise.

III. MEETINGS

The Committee will meet at least four times annually. Additional meetings
may occur as circumstances dictate. The meetings will focus primarily on
audit/financial issues and ethics and business conduct issues. The
Committee will request legal updates from the

B-1

General Counsel and/or outside legal resources as they determine the need
exists. The Committee chairman should meet with the Ethics and Business
Conduct Vice President and/or Internal Audit Vice President prior to the
scheduled committee meetings to finalize the meeting agenda and overview
issues to be discussed. The Committee members will have sole discretion in
determining the meeting attendees and agenda.

IV. RESPONSIBILITIES AND DUTIES

The Committee believes its policies and procedures should remain flexible
in order to best react to changing conditions and provide reasonable
assurance to the Board that the accounting and reporting practices of the
Corporation are in accordance with all applicable requirements and an
effective legal compliance and business ethics program exists.

The Committee will fulfill their duties and responsibilities as follows:

A. General
. Adopt a formal written charter that is approved by the full Board of
Directors that specifies scope of responsibility, process, membership,
etc. The charter will be reviewed and updated as necessary, but at
least annually.
. Maintain minutes or other records of meetings and activities.
. Report on Committee activities and actions to the Board, including
Board recommendations the Committee may deem appropriate.
. As part of executing the responsibility to foster open communication,
the Committee will meet in separate executive sessions without members
of senior management present with each of the following groups:
Independent Accountants and Vice President - Internal Audit, to
discuss matters that the Committee or any of these groups believe
should be discussed privately.
. Conduct or authorize investigations into any matters within the
Committee's scope of responsibilities. The Committee shall be
empowered to retain independent counsel, independent accountants, or
others to assist it in the conduct of any investigation, subject to
the approval of the Board of Directors.

B. External/Independent Accountants
. Recommend to the Board the selection of the independent accountants,
considering independence and effectiveness. Annually, the Committee
will ensure a formal statement delineating the scope of services and
all relationships between such accountants and the Corporation is
received from the independent accountants. The Committee will discuss
with the independent accountants all significant relationships such
accountants have with the Corporation to ensure the accountants'
independence.
. Approve any replacement of the independent accountants.

B-2

. Consult with independent accountants out of management's presence
about internal controls and the fairness of, and quality of
disclosures in, the Corporation's financial statements. Meet with the
independent accountants and financial management of the corporation to
review the scope of the proposed external audit for the current year.
The external audit engagement shall include a requirement that the
independent accountants inform the Committee of any significant
changes in the independent accountants' original audit plan and that
the independent accountants conduct a SAS 71 Interim Financial Review
prior to the company's filing of each quarterly report to shareholders
(Form 10-Q).
. Review the coordination of internal and external audit procedures to
promote an effective use of resources and ensure adequate and non-
redundant audit work is performed.
. Instruct the independent accountants that the Board of Directors is
the accountant's client and that the independent accountant is
ultimately accountable to the Board of Directors.

C. Internal Audit
. Review and approve the annual internal audit plan in relation to the
identified risks the Corporation faces, as well as any periodic
changes to such plan.
. Review at least annually the qualifications of internal audit staff as
well as the number and use of internal audit staff.
. Inquire of the Vice President - Internal Audit regarding the adequacy
and effectiveness of accounting and financial controls and request
recommendations for improvements. Review the quality and objectivity
of the internal audit function of the Corporation, including its
independence, authority and reporting relationship to management and
the Board of Directors.
. Review a summary of findings and completed internal audits, adequacy
and appropriateness of management's responses thereto, and a progress
report on executing the approved internal audit plan.
. Inquire of the Vice President - Internal Audit regarding any
difficulties encountered in the course of their audits, including any
restrictions on the scope of their work or access to required
information.

D. Financial Statements/Internal Controls
. Review annual financial statements with management and the independent
accountants to determine that both groups are satisfied with the
disclosure and content in the financial statements, including the
nature and extent of any significant changes in accounting principles.
. Consider independent accountants' judgements regarding the quality and
appropriateness of the Corporation's financial statements.
. Make inquiries of management and independent accountants concerning
the adequacy of the company's system of internal controls including
computerized information system controls and security.
. Related findings and recommendations of the independent accountants
and Internal Audit together with management's responses.

B-3

. Advise financial management and the independent accountants that they
are expected to provide a timely analysis of significant financial
reporting issues and practices that affect the Corporation.
. Advise financial management and the independent accountants to discuss
with the Committee the quality, not just the acceptability, of
accounting principles and financial disclosure practices used or
proposed to be adopted by the Corporation, prior to the filing of a
Form 10-Q or Form 10-K and, if practicable, prior to the release of
quarter or annual earnings.

E. Ethics and Business Conduct
. Provide oversight to the business ethics and compliance program.
. Require management to report on procedures that provide assurance that
the Corporation's mission, values, and code of conduct are properly
communicated to all employees on an annual basis.
. Review the programs and policies of the Corporation designed by
management to assure compliance with applicable laws and regulations
and monitor the results of the compliance efforts.
. Review and approve potential conflicts of interest between or among
affiliate shareholders, management and the company.
. Review, at least annually, trading limits and risk management policy
and procedures and recommend changes, if necessary, to the Board.

F. Establish Trading Limits & Policy

G. Legal
. Meet with corporation's general counsel to review any legal matters
that may have a significant impact on the Corporation's overall
financial statements.

H. While the Audit Committee has the responsibility and power set forth
in this charter, it is not the duty of the Audit Committee to plan or
conduct audits or to determine that the company's financial statements
are complete and accurate and are in accordance with generally
accepted accounting principles. This is the responsibility of
management and/or the independent auditors.

B-4

PROXY - CLASS A COMMON STOCK

DYNEGY INC.
1000 LOUISIANA, SUITE 5800 HOUSTON, TX 77002

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF DYNEGY INC.

The undersigned hereby appoints C.L. Watson, Kenneth E. Randolph and Robert D.
Doty, Jr., and each of them, as proxies, each with the power to appoint his
substitute, and hereby authorizes each of them to represent and to vote, as
designated on the reverse side, all the shares of Class A Common Stock of Dynegy
Inc. held of record by the undersigned on March 30, 2001 at the Annual Meeting
of Shareholders to be held at The Petroleum Club, 800 Bell Avenue, Suite 4300,
Houston, TX 77002 at 10:00 A.M. on Friday May 18, 2001, or any adjournment
thereof.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2 AND 3. THE INDIVIDUALS NAMED ABOVE ARE AUTHORIZED TO
VOTE IN THEIR DISCRETION ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE
MEETING.

(CONTINUED ON REVERSE SIDE)

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* FOLD AND DETACH HERE *

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3. Please mark [X]
your votes as
indicated in
this example

1. Election of Directors
Insert your vote for nominees named below in the designated space provided. Directors may be elected by cumulative voting. If you
choose cumulative voting for Directors you MAY NOT use internet or telephone voting, you MUST vote by returning this proxy card in
the envelope provided. Vote the number of shares owned or controlled by you multiplied by eleven. This number of shares may be cast
for any one nominee or may be distributed between nominees as you wish. Shareholders may withhold authority to vote for any nominee
by entering zero in the space following the nominee's name.

FOR all nominees WITHHOLD Nominees - Class A common stock Votes
listed to the right, cumulative AUTHORITY 1. C.L. Watson _____________________
votes to be divided equally for all eleven nominees 2. Stephen W. Bergstrom _____________________
between the nominees listed to the right 3. Michael D. Capellas _____________________
[ ] [ ] 4. Charles E. Bayless _____________________
5. Daniel L. Dienstbier _____________________
6. Patricia M. Eckert _____________________
7. Jerry L. Johnson _____________________
Note: The total number of votes you cast in the election 8. H. John Riley, Jr. _____________________
of the directors should not exceed the number of shares 9. Sheli Z. Rosenberg _____________________
shown above times eleven. 10. Joe J. Stewart _____________________
11. J. Otis Winters _____________________

2. Proposal to amend and restate FOR AGAINST ABSTAIN
Dynegy's Articles of Incorporation. [ ] [ ] [ ]

3. Proposal to ratify the appointment of Arthur [ ] [ ] [ ]
Andersen LLP as independent auditors for the
Company for the fiscal year ending
December 31, 2001.

4. In their discretion, the proxies are authorized to vote upon such other business as may properly
come before the meeting or any adjournment thereof.

Yes
I PLAN TO ATTEND THE MEETING [ ]
Yes
IN THE FUTURE, WOULD YOU CONSENT TO ACCESSING YOUR ANNUAL REPORT AND PROXY [ ]
STATEMENT ELECTRONICALLY VIA THE INTERNET?

SIGNATURE __________________________________ SIGNATURE______________________________________ DATE_______________________
NOTE: PLEASE SIGN AS NAME APPEARS HEREON. JOINT OWNERS SHOULD EACH SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE
OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH.

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* FOLD AND DETACH HERE *

VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK

YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES
IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.

INTERNET TELEPHONE MAIL
HTTP://WWW.PROXYVOTING.COM/DYN 1-800-840-1208
Use the Internet to vote your proxy. Use any touch-tone telephone to vote Mark, sign and date
Have your proxy card in hand when you your proxy. Have your proxy card in hand your proxy card
access the web site. You will be OR when you call. You will be prompted to OR and
prompted to enter your control number, enter your control number, located in the return it in
located in the box below, to create box below, and then follow the directions the enclosed postage-paid
and submit an electronic ballot. given. envelope.

IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE, YOU DO
NOT NEED TO MAIL BACK YOUR PROXY CARD.

IF YOU CHOOSE CUMULATIVE VOTING FOR DIRECTORS YOU MAY NOT USE INTERNET OR TELEPHONE VOTING, YOU MUST VOTE BY RETURNING THIS PROXY
CARD IN THE ENVELOPE PROVIDED.

PROXY - CLASS B COMMON STOCK

DYNEGY INC.
1000 LOUISIANA, SUITE 5800 HOUSTON, TX 77002

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF DYNEGY INC.

The undersigned hereby appoints C.L. Watson, Kenneth E. Randolph and Robert D.
Doty, Jr., and each of them, as proxies, each with the power to appoint his
substitute, and hereby authorizes each of them to represent and to vote, as
designated on the reverse side, all the shares of Class B Common Stock of Dynegy
Inc. held of record by the undersigned on March 30, 2001 at the Annual Meeting
of Shareholders to be held at The Petroleum Club, 800 Bell Avenue, Suite 4300,
Houston, TX 77002 at 10:00 A.M. on Friday May 18, 2001, or any adjournment
thereof.

(CONTINUED ON REVERSE SIDE)

--------------------------------------------------------------------------------
* FOLD AND DETACH HERE *

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3. Please mark [X]
your votes as
indicated in
this example

1. Election of Directors

WITHHOLD Nominees - Class B common stock
AUTHORITY (Instructions to withhold authority for any individual
FOR all nominees for all nominees nominee, strike a line through the nominees name below)
listed to the right. listed to the right 1. Darald W. Callahan
[ ] [ ] 2. R.H. Matzke
3. George L. Kirkland

2. Proposal to amend and restate FOR AGAINST ABSTAIN
Dynegy's Articles of Incorporation. [ ] [ ] [ ]

3. Proposal to ratify the appointment of Arthur [ ] [ ] [ ]
Andersen LLP as independent auditors for the
Company for the fiscal year ending
December 31, 2001.

4. In their discretion, the proxies are authorized to vote upon such other business as may properly
come before the meeting or any adjournment thereof.

Yes
I PLAN TO ATTEND THE MEETING [ ]

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* FOLD AND DETACH HERE *