Exhibit 10.14

AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT

OF

DLS POWER HOLDINGS, LLC

(A DELAWARE LIMITED LIABILITY COMPANY)

DATED AS OF APRIL 2, 2007

* * * * * * * * * *

THE MEMBERSHIP INTERESTS REPRESENTED BY THIS LIMITED LIABILITY COMPANY AGREEMENT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER
ANY STATE SECURITIES ACTS OR OTHER SIMILAR STATUTES IN RELIANCE UPON EXEMPTIONS
UNDER THOSE ACTS. THE SALE OR OTHER DISPOSITION OF THE MEMBERSHIP INTERESTS IS
PROHIBITED UNLESS SUCH SALE OR DISPOSITION IS MADE IN COMPLIANCE WITH ALL SUCH
APPLICABLE ACTS, OR UNLESS AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT AND UNDER ANY APPLICABLE STATE SECURITIES LAWS IS AVAILABLE IN CONNECTION
WITH SUCH TRANSFER. ADDITIONAL RESTRICTIONS ON TRANSFER OF THE MEMBERSHIP
INTERESTS ARE SET FORTH IN THIS AGREEMENT. BY ACQUIRING ITS MEMBERSHIP INTEREST
IN THE COMPANY, EACH MEMBER REPRESENTS THAT IT HAS ACQUIRED ITS MEMBERSHIP
INTEREST FOR INVESTMENT AND THAT IT WILL NOT SELL OR OTHERWISE DISPOSE OF THE
MEMBERSHIP INTEREST WITHOUT REGISTRATION OR OTHER COMPLIANCE WITH THE AFORESAID
ACTS AND THE RULES AND REGULATIONS THEREUNDER, UNLESS AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND UNDER ANY APPLICABLE STATE SECURITIES
LAWS IS AVAILABLE IN CONNECTION WITH THE TRANSFER, AND THE REQUIREMENTS OF THIS
AGREEMENT.

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LIMITED LIABILITY COMPANY AGREEMENT

OF

DLS Power Holdings, LLC

TABLE OF CONTENTS

 

           Page

ARTICLE 1 DEFINITIONS; CONSTRUCTION

   2

Section 1.1

   Construction    2

Section 1.2

   Definitions    2

ARTICLE 2 FORMATION

   10

Section 2.1

   Formation    10

Section 2.2

   Term    10

Section 2.3

   Merger    10

Section 2.4

   No State Law Partnership    10

ARTICLE 3 NAME; PLACE OF BUSINESS; REGISTERED OFFICE AND AGENT

   10

Section 3.1

   Name    10

Section 3.2

   Assumed Names    10

Section 3.3

   Registered Office; Registered Agent    10

ARTICLE 4 PURPOSES

   11

ARTICLE 5 MEMBERS

   11

Section 5.1

   Members    11

Section 5.2

   Capital Contributions    11

Section 5.3

   Admission of Additional Members    15

Section 5.4

   Return of Capital Contributions    15

Section 5.5

   Interest    15

Section 5.6

   Loans From Members    15

ARTICLE 6 REPRESENTATIONS AND WARRANTIES

   15

Section 6.1

   Representations and Warranties    15

ARTICLE 7 CAPITAL ACCOUNTS, ALLOCATIONS AND DISTRIBUTIONS

   16

Section 7.1

   Capital Accounts    16

Section 7.2

   Distributions    18

Section 7.3

   Allocations of Profit and Loss    18

Section 7.4

   Tax Allocations    19

Section 7.5

   Limitations on Loss Allocation    19

Section 7.6

   Nonrecourse Deductions    19

Section 7.7

   Minimum Gain Chargeback    19

Section 7.8

   Partner Nonrecourse Deductions    20

Section 7.9

   Partner Nonrecourse Debt Minimum Gain Chargeback    20

Section 7.10

   Qualified Income Offset    20

Section 7.11

   Curative Allocations    20

 

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Section 7.12

   Interest in Company Profits    21

Section 7.13

   Adjustments of Book Value    21

Section 7.14

   Section 754 Adjustment    21

Section 7.15

   Varying Interests    21

ARTICLE 8 OWNERSHIP OF COMPANY PROPERTY

   22

ARTICLE 9 FISCAL MATTERS, BOOKS AND RECORDS

   22

Section 9.1

   Bank Accounts; Investments; Borrowing    22

Section 9.2

   Books and Records of Account    22

Section 9.3

   Tax Returns and Information    22

Section 9.4

   Delivery of Financial Statements to Members    22

Section 9.5

   Audits    23

Section 9.6

   Fiscal Year    23

Section 9.7

   Tax Elections    23

Section 9.8

   Tax Matters Partner    23

Section 9.9

   Classification    23

ARTICLE 10 MANAGEMENT OF THE COMPANY

   23

Section 10.1

   Managers    23

Section 10.2

   Number and Election    24

Section 10.3

   Resignation and Removal    24

Section 10.4

   Vacancies    24

Section 10.5

   Compensation    24

Section 10.6

   Powers of the Board    24

Section 10.7

   Project Sub Agreement    25

Section 10.8

   Officers    25

Section 10.9

   Other Matters Regarding the Managers    25

Section 10.10

   Development Principles    26

ARTICLE 11 RIGHTS, POWERS AND OBLIGATIONS OF MEMBERS

   26

Section 11.1

   Action by Members    26

Section 11.2

   Liability to Third Parties    27

Section 11.3

   Outside Activities    27

ARTICLE 12 TRANSFER OF INTERESTS; CHANGE IN CONTROL

   27

Section 12.1

   General Rule    27

Section 12.2

   Transferees    27

Section 12.3

   No Preemptive Rights    28

Section 12.4

   Change in Parent Control    28

ARTICLE 13 MATTERS REGARDING THE PROJECT SUBS

   31

Section 13.1

   Project Subs    31

Section 13.2

   Governance Dispute Buy-Sell Option for Project Subs    31

Section 13.3

   Right of First Offer Option for Project Subs    33

Section 13.4

   Dynegy Purchase Option for Dynegy Expansion Projects    34

 

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Section 13.5

   LSP Member Governance Dispute Option Concerning Dynegy Expansion Projects   
36

Section 13.6

   Discontinuing Member    37

Section 13.7

   Project Sub Transfers Contemplated by Financing Plan    38

ARTICLE 14 DISSOLUTION AND WINDING UP

   38

Section 14.1

   Dissolution    38

Section 14.2

   Liquidation    39

Section 14.3

   Deficit Capital Accounts    39

ARTICLE 15 INDEMNIFICATION AND INSURANCE

   40

Section 15.1

   Indemnification and Advance of Expenses    40

Section 15.2

   Insurance    41

Section 15.3

   Limit on Liability of Members    41

ARTICLE 16 DISPUTE RESOLUTION

   41

Section 16.1

   Direct Negotiation    41

Section 16.2

   Annual Plan/Capital Contribution/Financing Plan Dispute    41

Section 16.3

   Other Rights and Remedies    42

Section 16.4.

   Mandatory Binding Arbitration for Arbitrable Disputes    42

ARTICLE 17 MISCELLANEOUS PROVISIONS

   44

Section 17.1

   Notices    44

Section 17.2

   Governing Law; Venue; Submission to Jurisdiction    44

Section 17.3

   Successors and Assigns    45

Section 17.4

   Amendments    45

Section 17.5

   Counterparts    45

Section 17.6

   Execution in Writing    45

Section 17.7

   Offset    45

Section 17.8

   Effect of Waiver or Consent    45

Section 17.9

   Further Assurances    45

Section 17.10

   Waiver of Certain Rights    45

Section 17.11

   Notice to Members of Provisions of this Agreement    45

Section 17.12

   Entire Agreement    45

 

Exhibit A:

   Members and Capital Contributions   

Exhibit B:

   Existing Developments   

Exhibit C:

   Project Subs and Development Projects   

Exhibit D:

   Development Principles   

Exhibit E:

   Term Sheet   

 

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AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT

OF

DLS Power Holdings, LLC

This Amended and Restated Limited Liability Company Agreement of DLS Power
Holdings, LLC, a Delaware limited liability company (the “Company”), dated
effective as of April 2, 2007 (the “Effective Date”), is entered into by the
undersigned Members of the Company whose names are listed on Exhibit A to this
Agreement.

RECITALS

WHEREAS, pursuant to a limited liability company agreement dated as of March 26,
2007 (the “Existing LLC Agreement”), LS Power Associates, L.P., a Delaware
limited partnership (together with its successors and permitted assigns, “LSP
Member”), previously formed the Company and contributed to the Company 100% of
the membership interests it owned (the “Existing Membership Interests”) in the
entities listed on Exhibit C (the “Existing SPVs”), in exchange for 100% of the
Interests of the Company;

WHEREAS, in connection with the transactions contemplated by the Plan of Merger,
Contribution and Sale Agreement dated as of September 14, 2006 (the “Merger
Agreement”), by and among Dynegy Inc. (formerly named Dynegy Acquisition, Inc.),
a Delaware corporation (“Dynegy”), Falcon Merger Sub Co., an Illinois
corporation and a wholly owned subsidiary of Dynegy, LSP Member, LSP Gen
Investors, LP, a Delaware limited partnership, LS Power Equity Partners PIE I,
LP, a Delaware limited partnership, LS Power Equity Partners, L.P., and Dynegy
Inc., an Illinois corporation, LSP Member has contributed 50% of the Interests
of the Company to Dynegy;

WHEREAS, as a result of such transactions, as of the Effective Time (as defined
in the Merger Agreement, Dynegy and LSP Member each owns 50% of the Interests of
the Company, and the Company owns 100% of the Interests of the Existing SPVs;

WHEREAS, immediately after the Effective Time, Dynegy owns certain rights and
interests in or in respect of the Existing Developments described in Part II and
Part III of Exhibit B (the “Existing Dynegy Non-SPV Developments”);

WHEREAS, immediately after the Effective Time, LSP Member owns certain rights
and interests in or in respect of the Existing Developments described in Part
I-B of Exhibit B (the “Existing LSP Non-SPV Developments”);

WHEREAS, the Members desire to develop projects through subsidiaries of the
Company during the term of the Company and pursuant to the terms of this
Agreement; and

WHEREAS, the Members desire to set forth, inter alia, the terms and conditions
of their agreements and understandings concerning their respective undertakings
as well as to regulate the operation and management of the Company and their
investment therein by amending and restating the Existing LLC Agreement.

 

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NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Members hereby agree that the Existing LLC Agreement is hereby amended and
restated in its entirety to read as follows:

ARTICLE 1

DEFINITIONS; CONSTRUCTION

Section 1.1 Construction. Any reference to any federal, state, provincial, local
or foreign law will be deemed also to refer to such law as amended and all rules
and regulations promulgated thereunder, unless the context requires otherwise.
Any reference to any contract or agreement (including schedules, exhibits and
other attachments thereto), including this Agreement, will be deemed also to
refer to such agreement as amended, restated or otherwise modified, unless the
context requires otherwise. The words “include,” “includes,” and “including”
will be deemed to be followed by “without limitation.” Pronouns in masculine,
feminine and neuter genders will be construed to include any other gender, and
words in the singular form will be construed to include the plural and vice
versa, unless the context requires otherwise. The words “this Agreement,”
“herein,” “hereof,” “hereby,” “hereunder” and words of similar import refer to
this Agreement as a whole and not to any particular subdivision unless expressly
so limited. Where this Agreement states that a Party “will” or “shall” perform
in some manner or otherwise act or omit to act, it means that such Party is
legally obligated to do so in accordance with this Agreement. The captions,
titles and headings included in this Agreement are for convenience only and do
not affect this Agreement’s construction or interpretation. Any reference to an
Article, Section or Schedule in this Agreement shall refer to an Article or
Section of, or Schedule to, this Agreement, unless the context otherwise
requires.

Section 1.2 Definitions. The capitalized terms used in this Agreement shall,
unless the context otherwise requires, have the meanings specified in this
Section 1.2.

“Acceptance Period” is defined in Section 13.3(a).

“Accepted Future Development” means any power project development that is an
“Accepted Future Development” under the Devco LLC Agreement.

“Adjusted Capital Account” means a Capital Account determined and maintained for
each Member throughout the term of the Company, the balance of which shall be
equal to such Member’s Capital Account balance, modified as follows:

(a) increased by the amount, if any, of such Member’s share of the Minimum Gain
of the Company as determined under Treas. Reg. §1.704-2(g)(1);

(b) increased by the amount, if any, of such Member’s share of the Minimum Gain
attributable to Partner Nonrecourse Debt of the Company pursuant to Treas. Reg.
§1.704-2(i)(5);

(c) decreased by the amount, if any, of cash that is reasonably expected to be
distributed to such Member, but only to the extent that the amount thereof
exceeds any offsetting increase to such Member’s Capital Account that is
reasonably expected to occur during (or prior to) the tax year during which such
distributions are reasonably expected to be made (as determined under Treas.
Reg. §1.704-1(b)(2)(ii)(d)(6));

 

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(d) decreased by the amount, if any, of loss and deduction that is reasonably
expected to be allocated to such Member pursuant to section 704(e)(2) or section
706(d) of the Code, Treas. Reg. §1.751-1(b)(2)(ii) or Treas. Reg.
§1.704-1(b)(2)(iv)(k); and

(e) increased by the amount, if any, that the Member is required to contribute
to the Company under this Agreement.

“Affiliate” means, with respect to any relevant Person, any other Person that
directly or indirectly, through one or more intermediaries, Controls, is
Controlled by, or is under common Control with, the relevant Person; provided,
however, that for purposes of this Agreement (a) none of Dynegy or any of its
subsidiaries shall be deemed an Affiliate of any Shareholder (as defined in the
Shareholder Agreement) and (b) none of the Class B Directors (as defined in the
Shareholder Agreement) shall be deemed an Affiliate of Dynegy or any of its
subsidiaries.

“Agreement” means this Limited Liability Company Agreement.

“Annual Plan” means, with respect to any Development Project owned by a Project
Sub, the annual project development plan relating to such Development Project,
including a development spending plan and schedule, and an operations budget
(including planned development spending and revenues from project maturation),
which plan shall be determined (i) by Devco in accordance with the Devco LLC
Agreement during the term of the Project Sub Agreement and (ii) thereafter by
the Board.

“Answer” is defined in Section 16.4(b).

“Arbitrable Dispute” means any Dispute that involves solely the determination of
value or money damages (other than a determination of Fair Market Value) and
does not involve the application or interpretation of the law or the
interpretation of provisions of this Agreement.

“Bankruptcy” of a Person means the occurrence of any of the events described in
section 18-304(1) or (2) of the Delaware Act with respect to such Person.

“Board” means the Managers collectively.

“Book Depreciation” means, for each fiscal year (or other period for which Book
Depreciation must be computed), the depreciation, amortization or other cost
recovery deduction allowable for federal income tax purposes with respect to an
asset, except that, if the Book Value of an asset differs from its adjusted tax
basis at the beginning of the year, Book Depreciation will be an amount which
bears the same ratio to Book Value at the beginning of the year as the federal
income tax depreciation, amortization or other cost recovery deduction for the
year bears to the beginning adjusted tax basis; provided, however, that if the
adjusted tax basis of the asset at the beginning of the year is zero, Book
Depreciation will be determined by the Members using any reasonable method.

 

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“Book Value” means with respect to any asset, the adjusted basis of the asset
for federal income tax purposes, adjusted as provided in Section 7.13.

“Business Day” means Monday through Friday of each week, except that a legal
holiday recognized as such by the government of the United States of America or
the States of Texas or New York shall not be regarded as a Business Day.

“Capital Account” means an account maintained for each Member pursuant to
Section 7.1.

“Capital Contributions” means the total amount of cash and other property
contributed to the Company by a Member.

“Certificate” means the Certificate of Formation of the Company, initially filed
with the Secretary of State of Delaware on March 26, 2006, as amended, restated,
supplemented and otherwise modified from time to time.

“Change in Control” means, with respect to any Member, the transfer of equity
interests issued by such Member, or the transfer (whether by a direct
assignment, a sale of all or substantially all of the assets of any Person that
Controls such Member or any merger, consolidation, conversion, share exchange,
or similar statutory reorganization of any such Person) of equity interests of
any Person that Controls such Member, resulting in a change in the Person that
ultimately Controls such Member; provided, however, that a Change in Parent
Control shall not be a Change in Control.

“Change in Parent Control” means: (a) with respect to Dynegy, any Person or
“group” (within the meaning of Rules 13d-3 and 13d-5 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934), other than (i) a
trustee or other fiduciary holding securities under an employee benefit plan of
Dynegy or of any subsidiary of Dynegy, (ii) ChevronTexaco and its Affiliates, or
(iii) LSP Member and its Affiliates, shall have acquired beneficial ownership
(within the meaning of Rules 13d-3 and 13d-5 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934), directly or indirectly,
of securities of Dynegy (or other securities convertible into such securities)
representing 40% or more of the combined voting power of all securities of
Dynegy entitled to vote in the election of directors, other than securities
having such power only by reason of the happening of a contingency; and (b) with
respect to LSP Member, the transfer (whether by a direct assignment, a sale of
all or substantially all of the assets of any Person that Controls LSP Member or
any merger, consolidation, conversion, share exchange, or similar statutory
reorganization of any such Person) of equity interests of any Person that
Controls LSP Member, resulting in a change in the Person that ultimately
Controls LSP Member.

“Change in Parent Control Member” is defined in Section 12.4(a).

“Change in Parent Control Notice” is defined in Section 12.4(a).

“Claimant” is defined in Section 16.4(b).

“Code” means the Internal Revenue Code of 1986.

 

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“Company” is defined in the introductory paragraph.

“Continuing Member” is defined in Section 13.6.

“Control” (or variations thereof) means, when used with respect to a Person or
Persons, (a) in the case of a corporation, general partnership or limited
liability company, possession, directly or indirectly, of more than 50% of the
outstanding voting power of such entity, (b) in the case of a limited
partnership, the ownership by such Person or Persons, directly or indirectly, of
more than 50% of the general partner interest in such limited partnership,
(c) in the case of a trust (i) such Person serving as the sole trustee of such
trust or, in the case of multiple trustees, the possession by such Person or
Persons, directly or indirectly, of more than 50% of the voting power of all
trustees of such trust, or (ii) such Person or Persons constituting 50% of more
in interest of the primary beneficiaries of such trust.

“Curative Allocations” means allocations pursuant to Section 7.11 of items of
income and loss as determined for purposes of maintaining the Capital Accounts.

“Damages” means all damages, liabilities, payments, amounts paid in settlement,
obligations, fines, penalties, costs, expenses (including reasonable fees and
expenses of outside attorneys, accountants and other professional advisors and
of expert witnesses and other costs (including the allocable portion of the
indemnitee’s internal costs) of investigation, preparation and litigation in
connection with any dispute) of any kind or nature whatsoever.

“Default Interest Rate” means the lower of (a) the highest rate permitted by
applicable law or (b) (i) on the date of determination (or, if such date is not
a business day in London, the next business day in London), the offered rate
(“LIBOR”) for deposits in United States Dollars for the three-month period
beginning on such date that appears on Telerate Page 3750 as of 11:00 a.m.
London time (provided, that if such interest rates shall cease to be available
from Telerate News Service, such rate shall be determined from such financial
reporting service or other information as shall be mutually acceptable to the
Members) plus (ii) 8.00%.

“Defaulting Member” has the meaning set forth in Section 5.2(e).

“Delaware Act” means the Delaware Limited Liability Company Act.

“Delaware Courts” is defined in Section 17.2(b).

“Delinquent Member” is defined in Section 5.2(f).

“Determined Fair Market Value” means, with respect to any Project Sub, the
greater of such Project Sub’s (i) net book value (determined in accordance with
GAAP) or (ii) Fair Market Value.

“Devco” means DLS Power Development Company, LLC, a Delaware limited liability
company.

“Devco LLC Agreement” means the limited liability company agreement of Devco.

 

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“Development Projects” means Existing Developments and Accepted Future
Developments.

“Discontinuing Member” is defined in Section 13.6.

“Dispute” is defined in Section 16.1.

“Dynegy” means Dynegy Inc. (formerly named Dynegy Acquisition, Inc.), a Delaware
corporation.

“Dynegy Expansion Projects” means the Dynegy Projects and the Development
Projects identified in Parts II and III of Exhibit B, other than any Development
Projects that will, when completed, replace existing power generating facilities
owned or controlled by Dynegy or any Affiliate thereof on the Effective Date,
including the South Bay Replacement Project.

“Dynegy Projects” means the Development Projects identified as Dynegy Projects
in Exhibit C.

“Dynegy Project Sub” means any Project Sub that owns a Dynegy Project or any
other Development Project identified in Part II of Exhibit B.

“Dynegy Purchase Notice” is defined in Section 13.4(a).

“Effective Date” is defined in the introductory paragraph.

“Existing Developments” means the development projects described on Part I of
Exhibit B.

“Existing Dynegy Non-SPV Developments” is defined in the recitals.

“Existing LSP Non-SPV Developments” is defined in the recitals.

“Existing Membership Interests” is defined in the recitals.

“Existing SPVs” is defined in the recitals.

“Fair Market Value” means, with respect to any property, the cash price at which
a willing seller would sell and a willing buyer would buy such property in an
arm’s length transaction with a reasonable time period within which to conduct
negotiations. Fair Market Value shall be determined based on all relevant
information, including available financial and operational information regarding
such property, the phase of such property’s development, the status or existence
of any relevant contracts or permits relating to such property and any
environmental or other conditions relevant to such property.

“Final Appraiser” means an independent institution of national reputation,
qualified to determine the fair market value of property in question.

“Financing Plan” is defined in the Devco LLC Agreement.

 

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“Governance Dispute” is defined in Section 13.2(a).

“Governance Dispute Project Sub” is defined in Section 13.2(a).

“Governance Dispute Offer” is defined in Section 13.2(a).

“Governance Dispute Offeror” is defined in Section 13.2(a).

“Governance Dispute Offeree” is defined in Section 13.2(a).

“Indemnified Person” is defined in Section 15.1(a).

“Initial Appraiser” means an independent institution of national reputation,
qualified to determine the fair market value of property in question.

“Initial Non-Cash Contributions” is defined in Section 5.2(a).

“Initial Cash Contributions” is defined in Section 5.2(b).

“Intent to Transfer Notice” is defined in Section 13.3(a).

“Interest” means all rights and interests of a Member or other Person in the
Company under this Agreement, the Delaware Act or applicable law, including
(a) the right of a Member or other Person to receive allocations of income and
loss and distributions of cash, property or liquidation proceeds under this
Agreement and (b) all management rights, voting rights or rights to consent
related thereto.

“Lending Member” is defined in Section 5.2(f)(ii).

“LSP Member” is defined in the recitals.

“Managers” means the individuals appointed to manage the business of the Company
pursuant to Article 10.

“Members” means the Persons designated as Members on Exhibit A and any other
Persons hereafter admitted as a Member of the Company.

“Merger Agreement” is defined in the recitals.

“Minimum Gain” has the meaning assigned to that term in Treas. Reg. §1.704-2(d).

“Modified 752 Share of Recourse Debt” means, as of any date, the amount (if any)
of the economic risk that a Member is treated, as of such date, as bearing under
Treas. Reg. §1.752-2 with respect to recourse debt (i.e., debt of the Company
which is not Partner Nonrecourse Debt or a Nonrecourse Liability).

“Negotiation Period” is defined in Section 16.1.

 

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“Nonrecourse Deductions” has the meaning assigned to that term in Treas. Reg.
§1.704-2(b)(1).

“Nonrecourse Liability” has the meaning assigned to that term in Treas. Reg.
§1.704-2(b)(3).

“Non-Transferring Member” is defined in Section 13.3(a).

“Obligation” is defined in Section 5.2(f)(ii)(B).

“Other Assets” is defined in Section 13.3(c).

“Partner Nonrecourse Debt” has the meaning assigned to that term in Treas. Reg.
§1.704-2(b)(4).

“Partner Nonrecourse Deductions” has the meaning assigned to that term in Treas.
Reg. §1.704-2(i)(2).

“Partner Nonrecourse Debt Minimum Gain” has the meaning assigned to that term in
Treas. Reg. §1.704-2(i)(3).

“Person” means an individual, corporation, partnership, limited partnership,
limited liability company, trust or other entity.

“Profit and Loss” mean, for each fiscal year of the Company (or other period for
which Profit or Loss must be computed), the Company’s taxable income or loss
determined in accordance with section 703(a) of the Code, with the following
adjustments: (i) the adjustments provided by Section 7.1(b) shall be made;
(ii) Regulatory Allocations shall be excluded; and (iii) the Curative
Allocations shall be excluded.

“Project Sub” means a subsidiary of the Company.

“Project Sub Agreement” means the agreement between the Company and Devco
pursuant to which Devco provides development and/or management services to the
Project Subs.

“Project Sub LLC Agreement Term Sheet” means the form of Project Sub LLC
Agreement Term Sheet attached hereto as Exhibit E.

“Proposed Change in Parent Control Notice” is defined in Section 12.4.

“Proposed Resolution” is defined in Section 16.4(d).

“Purchase Offer” is defined in Section 13.3(a).

“Regulatory Allocations” means the allocations pursuant to Sections 7.6, 7.7,
7.8, 7.9, 7.10, 7.11 or 7.14 of items of income, gain, loss or deduction as
determined for purposes of maintaining the Capital Accounts.

“Reply” is defined in Section 16.4(b).

 

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“Respondent” is defined in Section 16.4(b).

“Section 705(a)(2)(B) Expenditure” means any expenditure of the Company
described in section 705(a)(2)(B) of the Code and any expenditure considered to
be an expenditure described in section 705(a)(2)(B) of the Code pursuant to
section 704(b) of the Code and the Treasury Regulations thereunder.

“Securities Act” means the Securities Act of 1933.

“Shared Facilities Provisions” means provisions that will (a) enable Dynegy and
its Affiliates, as contemplated by Section 5.2(a), to convey or otherwise
provide to owners of the relevant Development Projects appropriate interests in
or rights in respect of property, assets or facilities associated with existing
operating generating facilities that will be shared with or otherwise utilized
by such Development Projects, without payment by such owner of any consideration
(except as contemplated by Section 5.2(a)) and without the need for any lender
or other third-party consent, and (b) enable the relevant Development Projects,
through appropriate intercreditor arrangements or otherwise, to be financed by
way of traditional non-recourse financing structures, taking into account the
risk that, without such provisions, following a financing default, the relevant
Dynegy entities’ secured lenders (or, following a bankruptcy or similar
occurrence, the Dynegy entities themselves) could desire to own, and could
attempt to exercise rights and remedies with a view toward owning, any shared
property and/or facilities free and clear of the interests or rights in or in
respect of such property or facilities held by the owners of the relevant
Development Projects.

“Shareholder Agreement” means the Shareholder Agreement dated as of
September 14, 2006, among Dynegy and the shareholders party thereto.

“Specified Price” is defined in Section 13.3(a).

“Subject Interest” is defined in Section 13.3(a).

“Tax Distribution” is defined in Section 7.2(a).

“Transfer” means a voluntary or involuntary sale, assignment, transfer,
conveyance, exchange, foreclosure, bequest, devise, gift, mortgage, pledge,
grant of a security interest, encumbrance, or any other alienation (in each
case, with or without consideration) of any right, interest, or obligation with
respect to all or any portion of an Interest, including a Foreclosure Transfer.

“Transfer Offer Notice” is defined in Section 13.3(a).

“Transfer Option Period” is defined in Section 13.3(a).

“Transferring Member” is defined in Section 13.3(a).

“Treasury Regulations” or “Treas. Reg.” means the regulations promulgated by the
U.S. Treasury Department pursuant to the Code.

 

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“Unanimous Board Approval” is defined in Section 10.6.

“Unanimous Member Approval” means the approval of all Members other than
Delinquent Members.

ARTICLE 2

FORMATION

Section 2.1 Formation. The Company has been formed as a limited liability
company under and pursuant to the provisions of the Delaware Act. Except as
expressly provided herein to the contrary, the Delaware Act shall govern the
rights and obligations of the Members and the administration and termination of
the Company. The Company shall cause to be filed such other certificates or
documents as may be required for the formation and operation of a limited
liability company in Delaware or any other state in which the Company may elect
to do business. The Company shall file any necessary amendments to the
Certificate and do all things requisite to the maintenance of the Company as a
limited liability company under the laws of the State of Delaware and any other
state in which the Company may elect to do business.

Section 2.2 Term. Subject to earlier termination pursuant to the terms of this
Agreement, the Company’s existence shall be perpetual.

Section 2.3 Merger. The Company may merge with or into another limited liability
company or other entity, or enter into an agreement to do so, subject to the
requirements of the Delaware Act.

Section 2.4 No State Law Partnership. No provision of this Agreement shall be
deemed or construed to constitute the Company a partnership or any Member a
partner of any other Member for any purposes other than for federal and state
tax purposes. Without limiting the generality of the foregoing, each Member
acknowledges and agrees that it has no rights, claims or remedies against any
other Member in respect of any fiduciary or similar duties, whether in equity or
at law.

ARTICLE 3

NAME; PLACE OF BUSINESS; REGISTERED OFFICE AND AGENT

Section 3.1 Name. The name of the Company is “DLS Power Holdings, LLC” or such
other name as is set forth on the Certificate from time to time.

Section 3.2 Assumed Names. The Company may do business under one or more assumed
names as approved by the Members. In connection with the use of any such assumed
names, the Company shall comply with all applicable assumed name statutes.

Section 3.3 Registered Office; Registered Agent. The registered office of the
Company required by the Delaware Act to be maintained in the State of Delaware
shall be the initial registered office named in the Certificate or such other
office (which need not be a place of business of the Company) as the Members may
designate from time to time in the manner provided by law. The registered agent
of the Company in the State of Delaware shall be the initial registered agent
named in the Certificate of Formation of the Company or such other

 

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Person as the Members may designate from time to time in the manner provided by
law. The principal office of the Company shall be located at Two Tower Center,
11th Floor, East Brunswick, NJ 08816 or such other location as the Members may
designate from time to time. The Company may have such other offices as the
Members may designate from time to time.

ARTICLE 4

PURPOSES

The purposes of the Company are (a) to own, indirectly through the Project Subs,
and pursue development of, the Development Projects, and (b) carrying on any
activities reasonably relating thereto or arising therefrom and doing anything
reasonably incidental or necessary with respect to the foregoing, including,
without limitation, activities related to the construction, financing and
operation of the Development Projects. The Members intend that the Company will
not own any material assets other than (i) the Development Projects or
membership interests in Project Subs that own Development Projects, (ii) other
assets incidental to the Project Subs and the Development Projects, (iii) cash
and cash equivalents, and (iv) its rights under the Project Sub Agreement.

ARTICLE 5

MEMBERS

Section 5.1 Members. The Members of the Company and their respective Capital
Contributions and Interests are shown on Exhibit A, which Exhibit shall be
amended from time to time (with no Member approval required) to reflect
admission of Member(s), transfers of Interest(s) or Capital Contributions made,
in each case in accordance with this Agreement.

Section 5.2 Capital Contributions.

(a) Immediately following the Effective Time: (i) Dynegy shall contribute all of
its right, title and interest in the Existing Dynegy Non-SPV Developments and
(ii) LSP Member shall contribute all of its right, title and interest in the
Existing LSP Non-SPV Developments (collectively, the “Initial Non-Cash
Contributions”). Concurrently with the contribution by either Member of its
ownership interest in any Project Sub, if the name of such Project Sub contains
a reference to “LS Power”, “LSP” or “Dynegy”, the name of such Project Sub shall
be changed to a new name that does not contain such reference. The capital
contributions contemplated by clauses (i) and (ii) of this Section 5.2(a) shall
be effectuated by way of execution by the Member making the contribution of a
quitclaim deed and/or one or more comparable instruments pursuant to which the
Member making the contribution will convey to the Company all right, title and
interest of such Member in and to: (x) the development opportunities related to
the Existing Dynegy Non-SPV Developments or the Existing LSP Non-SPV
Developments, as the case may be, (y) any and all rights or interests of such
Member (and its Affiliates) associated with such development opportunities and
(z) in the case of a development opportunity that may utilize the project site
and/or facilities of an existing operating generating facility (or, in the case
of a development opportunity that, when completed, will replace an existing
operating generating facility, that may utilize emissions reduction credits or
other assets associated with such existing operating generating facility, once

 

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such credits or other assets are no longer used or usable by such existing
operating generating facility) the right to acquire or utilize a portion of such
project site, share such facilities and/or utilize such credits or other assets
(but only once such credits or other assets are no longer used or usable by the
existing operating generating facility being replaced) without any requirement
to pay any additional consideration to the Person that owns or controls such
project site, facilities and/or credits or other assets (other than a
requirement to pay such Person an amount equal to the direct out-of-pocket costs
incurred by such Person in connection with the Company’s or the applicable
Project Sub’s utilization of such portion of the project site, credits or other
assets or sharing of such facilities); provided, however, that if and to the
extent required at any time pursuant to loan or credit agreement (or comparable
financing document) or participation agreement (or comparable co-ownership
document) covenants applicable to the Person that owns or controls such project
site, facilities, credits and/or other assets, such Person may charge the
Company (or the relevant Project Sub) consideration in an amount not to exceed
the consideration that would be paid in an “arm’s-length” transaction; and
provided, further, that each of the Members agrees, and agrees to cause its
Affiliates, in connection with any financing transaction that closes on or after
the Effective Date that includes covenants applicable to the Persons that own or
control the project sites, facilities, credits and/or other assets in question:
(1) to use commercially reasonable efforts to exclude from the documentation for
such financing transaction any covenants that would require payment of any
consideration to any such Person in connection with such utilization of a
project site, credits or other assets or such sharing of facilities (other than
a requirement to pay such Person an amount equal to the direct out-of-pocket
costs incurred by such Person in connection with the Company’s or the applicable
Project Sub’s utilization of such portion of the project site, credits and/or
other assets or sharing of such facilities) and (2) to use commercially
reasonable efforts to have the documentation for such financing transaction
include Shared Facilities Provisions.

(b) The cash Capital Contribution made by each Member for its Interest as of the
Effective Date are shown under the column heading “Capital Contribution” on
Exhibit A. Immediately after the contributions described in Section 5.2(a) and
this Section 5.2(b) are made, the Capital Accounts of the Members shall be
identical.

(c) So long as the Project Sub Agreement remains in effect, the Members shall
make such additional cash Capital Contributions as are requested by Devco from
time to time for further contribution to any Project Sub to fund the development
of such Project Sub’s Development Project in accordance with the Project Sub
Agreement and the Devco LLC Agreement. Any such Capital Contribution shall
immediately be contributed to the applicable Project Sub.

(d) Each Member shall make such additional Capital Contributions that are
approved by Unanimous Board Approval.

(e) No Member shall be required to make any Capital Contribution other than
(i) the Initial Non-Cash Contributions, (ii) the Initial Cash Contributions and
(iii) Capital Contributions made pursuant to Section 5.2(c) or Section 5.2(d).

 

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(f) If a Member does not contribute by the time required all or any portion of a
Capital Contribution such Member is required to make as provided in this
Agreement, the Company (or the other Member on its behalf) may exercise, on
written notice to such Member (the “Delinquent Member”), one or more of the
following remedies (at the option of the Company or such other Member):

(i) taking such action (including court proceedings) as the Company (or such
Member) may deem appropriate to obtain payment by the Delinquent Member of the
portion of the Delinquent Member’s Capital Contribution that is in default,
along with the costs and expenses associated with the collection of such
Delinquent Member’s Capital Contribution;

(ii) permitting the other Member (the “Lending Member”) to advance the portion
of the Delinquent Member’s Capital Contribution that is in default, with the
following results:

(A) the sum advanced constitutes a loan from the Lending Member to the
Delinquent Member and a Capital Contribution of that sum to the Company by the
Delinquent Member pursuant to the applicable provisions of this Agreement,

(B) the principal balance of the loan and all accrued unpaid interest thereon
(collectively, the “Obligation”) is due and payable in whole on the tenth
Business Day after the day written demand requesting payment of the Obligation
is made by the Lending Member to the Delinquent Member,

(C) the amount lent bears interest at the Default Interest Rate from the date on
which the advance is deemed made until the date that the loan, together with all
interest accrued thereon, is repaid to the Lending Member,

(D) all distributions from the Company that otherwise would be made to the
Delinquent Member (whether before or after dissolution of the Company) instead
will be paid to the Lending Member until the Obligation has been paid in full to
the Lending Member (with payments being applied first to accrued and unpaid
interest and second to principal),

(E) the payment of the Obligation is secured by a security interest in the
Delinquent Member’s Interest, as more fully set forth in Section 5.2(g), and

(F) the Lending Member has the right, in addition to the other rights and
remedies granted to it pursuant to this Agreement or available to it at law or
in equity, to take any action (including court proceedings) that the Lending
Member may deem appropriate to obtain payment from the Delinquent Member of the
Obligation;

 

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(iii) exercising the rights of a secured Member under the Uniform Commercial
Code of the State of Delaware, as more fully set forth in Section 5.2(g); or

(iv) exercising any other rights and remedies available at law or in equity.

(g) Each Member grants to the Company, and to the Lending Member with respect to
any Obligation owed to the Lending Member by that Member as a Delinquent Member,
as security, equally and ratably, a security interest in its Interest and the
proceeds thereof, all under the Uniform Commercial Code of the State of
Delaware. Such security interest secures the payment of all Capital
Contributions such Member is required to make and the payment of any Obligation
owed to a Lending Member by such Member as a Delinquent Member. On any default
in the payment of a Capital Contribution or in the payment of any Obligation,
the Company or the Lending Member, as applicable, is entitled to all the rights
and remedies of a secured Member under the Uniform Commercial Code of the State
of Delaware with respect to the security interest granted in this
Section 5.2(g). Each Member will execute and deliver to the Company or the
Lending Member all financing statements and other instruments that the Company
or the Lending Member, as applicable, may request to effectuate and carry out
the preceding provisions of this Section 5.2(g). In addition, the Company or any
Lending Member may file a financing statement to evidence the security interest
granted pursuant to this Section 5.2(g).

(h) Initially, a loan by a Lending Member to another Member as contemplated by
Section 5.2(f) will not be considered a Capital Contribution by the Lending
Member and will not increase the Capital Account balance of the Lending Member.
Notwithstanding the foregoing, in the event the principal and interest of any
such loan have not been repaid within six months from the date of such loan, the
Lending Member, at any time thereafter by giving written notice to the Company,
may elect to have the unpaid principal and interest balance of such loan
transferred to and increase such Lending Member’s Capital Account with a
corresponding decrease in the Capital Account of the Delinquent Member on whose
behalf such loan was made. Upon such transfer, the loan will be treated as a
Capital Contribution and the Interest for each Member will be automatically
adjusted to equal the percentage obtained by dividing (A) the Capital Account of
such Member (including any Capital Contribution made on behalf of another
Member) by (B) the aggregate Capital Accounts of all Members (including all
Capital Contributions made on behalf of other Members).

(i) If the non-Delinquent Members do not exercise the rights granted by
Section 5.2(f)(ii) within 14 days after the Delinquent Member fails to make its
Capital Contribution when due, then the Company, by a vote of a majority in
interest of the non-Delinquent Members, will have the right to exercise the
following remedies:

(i) Company may at any time take such action (including court proceedings) as
the Company may deem appropriate to obtain payment by the Delinquent Member of
the portion of the Delinquent Member’s Capital Contribution that is in default;
and

 

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(ii) the Company may at any time exercise any other rights and remedies
available at law or in equity.

Section 5.3 Admission of Additional Members. Additional Members of the Company
may be admitted only as follows:

(a) If the proposed additional Member desires to purchase an Interest from the
Company, such issuance and purchase may be made, and the admission of the
additional Member shall become effective, only with Unanimous Member Approval.
An issuance of an Interest hereunder shall dilute all Members in proportion to
their respective Interests.

(b) If the proposed additional Member desires to acquire an Interest from an
existing Member, such transfer may be made, and the admission of the additional
Member shall become effective, only in accordance with Article 12.

Section 5.4 Return of Capital Contributions. Except as otherwise provided herein
or required by the Delaware Act, no Member shall have any right to withdraw, or
receive any return of, its Capital Contribution.

Section 5.5 Interest. No interest shall be paid by the Company on Capital
Contributions or on balances in Members’ Capital Accounts.

Section 5.6 Loans From Members. Loans by a Member to the Company shall not be
considered Capital Contributions.

ARTICLE 6

REPRESENTATIONS AND WARRANTIES

Section 6.1 Representations and Warranties. Each Member hereby represents and
warrants to the Company and each other Member that the statements in this
Section 6.1 are correct and complete as of the date such Member becomes party to
this Agreement.

(a) Such Member is an entity duly created, formed or organized, validly
existing, and in good standing under the laws of the jurisdiction of its
creation, formation, or organization. There is no pending or, to such Member’s
knowledge, threatened, action for the dissolution, liquidation, insolvency, or
rehabilitation of such Member.

(b) Such Member has the entity power and authority to execute and deliver this
Agreement, and to perform and consummate the transactions contemplated herein.
Such Member has taken all actions necessary to authorize the execution and
delivery of this Agreement, the performance of such Member’s obligations
hereunder and thereunder, and the consummation of the transactions contemplated
herein and therein. This Agreement has been duly authorized, executed, and
delivered by, and is enforceable against, such Member.

 

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(c) The execution and the delivery of this Agreement by such Member and the
performance and consummation of the transactions contemplated herein and therein
by such Member will not (i) violate any law or order to which such Member is
subject or any provision of its organizational documents, (ii) violate any
contract, order, or permit to which such Member is a party or by which such
Member is bound or to which any of such Member’s assets is subject, or
(iii) require any consent from any Person.

(d) Such Member: (i) is an “accredited investor” within the meaning of Rule 501
of Regulation D under the Securities Act; (ii) has sufficient knowledge and
experience in investing in companies similar to the Company in terms of the
Company’s stage of development so as to be able to evaluate the risks and merits
of its investment in the Company and it is able financially to bear the risks
thereof; (iii) has received or has had full access to all the information it has
requested and considers necessary or appropriate to make an informed investment
decision with respect to the Interest to be acquired by such Member; (iv) is
acquiring such Interest for its own account for the purpose of investment and
not with a view to, or for resale in connection with, any distribution thereof
within the meaning of the Securities Act; (v) has made its own independent
inquiry into and an independent judgment concerning, the Company and such
Interest; (vi) understands that such Interest has not been registered under the
Securities Act; and (vii) understands and agrees that such Interest may not be
sold, pledged, hypothecated or otherwise transferred except in accordance with
the terms of this Agreement and pursuant to an applicable exemption from
registration under the Securities Act and other applicable securities laws.

ARTICLE 7

CAPITAL ACCOUNTS, ALLOCATIONS AND DISTRIBUTIONS

Section 7.1 Capital Accounts. A Capital Account shall be maintained for each
Member in accordance with the capital accounting rules of Treas. Reg.
§1.704-1(b)(2)(iv) and, to the extent not inconsistent therewith, the following
provisions:

(a) A Member’s Capital Account shall be (i) increased by (A) any cash
contributions (but not loans) made by such Member to the Company, (B) the fair
market value of any property contributed by such Member to the Company (net of
liabilities secured by such property that the Company is considered to assume or
take subject to under section 752 of the Code), and (C) the amount of any income
or gain (or items thereof), including income and gain exempt from taxation,
allocated to such Member for federal income tax purposes, including any items in
the nature of income or gain which are specially allocated pursuant to this
Article 7; and (ii) reduced by (A) the amount of any distributions of cash (but
not any payment of interest or principal on loans made to the Company) made to
such Member by the Company, (B) the fair market value of any property
distributed to such Member by the Company (net of liabilities secured by such
distributed property that such Member is considered to assume or take subject to
under section 752 of the Code), (C) the amount of any Section 705(a)(2)(B)
Expenditure allocated to such Member for federal income tax purposes and (D) the
amount of any loss or deduction (or item thereof) allocated to such Member for
federal income tax purposes, including any items in the nature of expenses,
deductions or losses which are specially allocated pursuant to this Article 7.

 

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(b) For purposes of maintaining Capital Accounts, items of income, gain, loss
and deduction of the Company shall be determined in accordance with the
determination of taxable income of the Company with the following adjustments:

(i) all items of income, gain, loss and deduction required to be stated
separately pursuant to section 703(a)(1) of the Code shall be taken into
account;

(ii) The computation of all items of income, gain, loss and deduction shall be
made without regard to any adjustment in the basis of assets of the Company as a
result of an election under Section 754 of the Code which may be made by the
Company (except to the extent required by Treas. Reg. §1.704-1(b)(2)(iv)(m))
and, as to those items described in Section 705(a)(2)(B) of the Code, without
regard to the fact that such items are neither currently deductible nor
capitalizable for federal income tax purposes

(iii) any tax-exempt income of the Company, not otherwise taken into account in
computing Profit or Loss, shall be included in computing taxable income or loss;

(iv) any expenditures of the Company described in section 705(a)(2)(B) of the
Code (or treated as such pursuant to Treasury Regulations issued under
Section 704(b) of the Code), shall be excluded;

(v) gain or loss resulting from any disposition of Company property shall be
computed by reference to the Book Value of the property;

(vi) in lieu of the depreciation, amortization or cost recovery deductions
allowable in computing taxable income or loss, there shall be taken into account
Book Depreciation; and

(vii) if the Book Value of an asset of the Company is adjusted pursuant to the
first sentence of Section 7.13(b), any increase or decrease in the Book Value of
the asset as a result of the adjustment shall be treated as gain or loss,
respectively, from the disposition of the asset and shall be taken into account
in computing Profit or Loss.

(c) If any Interest is transferred pursuant to the terms of this Agreement, the
transferee shall succeed to the Capital Account of the transferor to the extent
the Capital Account is attributable to the transferred Interest; provided,
however, that if the transfer causes a termination of the Company under section
708(b)(1)(B) of the Code, the Capital Accounts of the Members shall be adjusted
in conformance with Treas. Reg. §1.704-1(b)(2)(iv)(l). A Member that has more
than one Interest shall have a single Capital Account that reflects all of its
Interests, regardless of the class of Interest owned by that Member and
regardless of the time or manner in which it was acquired.

 

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Section 7.2 Distributions.

(a) The Company will distribute, to the extent funds are available, to each
Member within 120 days following the end of each fiscal year of the Company, an
amount of cash (a “Tax Distribution”) equal to (i) the excess, if any, of
(A) the aggregate net federal taxable income allocated to such Member for the
current and all preceding fiscal years over (B) the aggregate net federal
taxable losses allocated to such Member in all preceding fiscal years multiplied
by (ii) the highest combined federal, state and local marginal income tax rate
prescribed for an individual resident of New York City. A Tax Distribution shall
be reduced by the amount of any prior Tax Distributions actually paid, and all
distributions made pursuant to this Section 7.2 (excluding any Tax Distributions
made pursuant to this Section 7.2(a)) in any fiscal year shall reduce the amount
otherwise payable as a Tax Distribution for such fiscal year. If funds are not
available to distribute to the Members the full amount of a Tax Distribution,
the Company will distribute partial Tax Distributions to the Members, in
proportion to their Interests, to the extent funds are available.

(b) If permitted by applicable law and not in contravention of any contract to
which the Company is party, then, to the extent that the Company has, as of each
June 30 and December 31, cash (excluding cash that will be used to pay amounts
payable by the Company within the succeeding six months) in excess of
$10,500,000, the Company shall distribute such excess cash and to the Members;
provided that the Board shall have the right to establish a reserve of such
excess cash in lieu of a distribution of such excess cash.

(c) Except as required by Section 7.2(a), Section 7.2(b) or Section 14.2(b), or
as otherwise permitted by Sections 13.3, 13.4, 13.5 and 13.6, the Company will
not make any distribution other than distributions approved by Unanimous Board
Approval.

(d) All distributions (other than those required by Section 7.2(a) and
Section 14.2(b)) shall be made to the Members in proportion to their Interests.

(e) If pursuant to this Agreement a Member is permitted to require the Company
to distribute the Company’s Interest in a Project Sub to the Members, then, at
the request of the relevant Member, and subject to the satisfaction of and
compliance with all conditions precedent to such distribution and any other
applicable requirements set forth in such limited liability company agreement
(the satisfaction of and compliance with which shall be certified in writing by
the requesting Member to the other Member), the Company shall distribute all of
the Interests of such Project Sub to the Members in accordance with
Section 7.2(d).

Section 7.3 Allocations of Profit and Loss. Except as otherwise required by this
Article 7, all Profit and Loss shall be allocated among the Members in
proportion to their Interests.

 

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Section 7.4 Tax Allocations.

(a) Except as otherwise provided in this Section 7.4, each item of income, gain,
loss, deduction and credit determined for federal income tax purposes shall be
allocated among the Members in the same manner as each correlative item of
income, gain, loss, deduction and credit is allocated to the Members for
purposes of maintaining their respective Capital Accounts.

(b) All items of income, gain, loss, deduction, credit and basis allocation
recognized by the Company for federal income tax purposes and allocated to the
Members in accordance with the provisions hereof shall be determined without
regard to any election under section 754 of the Code which may be made by the
Company; provided, however, such allocations, once made, shall be adjusted as
necessary or appropriate to take into account those adjustments permitted by
sections 734 and 743 of the Code and, where appropriate, to provide only Members
recognizing gain on Company distributions covered by section 734 of the Code
with the federal income tax benefits attributable to the increased basis in
Company property resulting from any election under section 754 of the Code.

(c) Under Section 704(c) of the Code and Treas. Reg. §1.704-3, income, gain,
loss, deduction and amount realized with respect to any asset contributed to the
capital of the Company, solely for federal income tax purposes, shall be
allocated among the Members so as to take into account any variation between the
Book Value of such property and its adjusted tax basis at the time of
contribution. If the Book Value of any asset is adjusted under Section 7.13,
subsequent allocations of income, gain, loss, deduction and amount realized,
solely for federal income tax purposes, shall be allocated among the Members so
as to take into account any variation between the Book Value of such property
and its adjusted tax basis at the time of revaluation as adjusted in the manner
required under Treas. Reg. §1.704-3(a)(6). The allocations required by this
Section 7.4(c) shall be made using the traditional method (within the meaning of
Treas. Reg. §1.704-3(b))as reasonably determined by the Members.

Section 7.5 Limitations on Loss Allocation. Notwithstanding any other provision
of this Agreement to the contrary, no item of loss or deduction of the Company
shall be allocated to a Member to the extent that such allocation would result
in a negative balance in such Member’s Adjusted Capital Account. Any such loss
or deduction shall be allocated among the Members in accordance with their
Interests as determined under Treas. Reg. §1.704-1(b)(3).

Section 7.6 Nonrecourse Deductions. All Nonrecourse Deductions shall be
allocated among the Members in proportion to their Interests.

Section 7.7 Minimum Gain Chargeback. Notwithstanding any other provision in this
Agreement, if in any fiscal year there is a net decrease in the amount of the
Company’s Minimum Gain (or if there was a net decrease in Minimum Gain for a
prior fiscal year and the Company did not have sufficient amounts of income and
gain during prior years to allocate among the Members under this Section 7.7),
then, prior to any other allocation pursuant to this Article 7, each Member
shall be allocated items of income and gain (including gross income) for

 

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such fiscal year (and, if necessary, for subsequent years) to the extent and in
the manner provided in Treas. Reg. §1.704-2(f). This Section 7.7 is intended to
satisfy the provisions of Treas. Reg. §1.704-2(f) and shall be interpreted
consistently therewith.

Section 7.8 Partner Nonrecourse Deductions. All Partner Nonrecourse Deductions
attributable to Partner Nonrecourse Debt shall be allocated to the Member that
is treated (under Treas. Reg. §§1.704-2 and 1.752-2) as bearing the economic
risk of loss for such debt.

Section 7.9 Partner Nonrecourse Debt Minimum Gain Chargeback. Notwithstanding
any other provision in this Agreement (except for Section 7.7 regarding minimum
gain chargeback), if in any fiscal year there is a net decrease in the amount of
Partner Nonrecourse Debt Minimum Gain (or if there was a net decrease in Partner
Nonrecourse Debt Minimum Gain for a prior fiscal year and the Company did not
have sufficient amounts of income and gain during prior years to allocate among
the Members under this Section 7.9), then, prior to any other allocation
pursuant to this Article 7, items of income and gain (including gross income)
shall be allocated to each Member for such fiscal year (and, if necessary, for
subsequent years) in an amount equal to such Member’s share of the net decrease
in such Partner Nonrecourse Debt Minimum Gain (as determined pursuant to Treas.
Reg. §1.704-2(i)(4)). It is the intent of the Members that any allocation
pursuant to this Section 7.9 shall constitute a “minimum gain chargeback” under
Treas. Reg. §1.704-2(i)(4) and shall be interpreted consistently therewith.

Section 7.10 Qualified Income Offset. Pursuant to Treas. Reg.
§1.704-1(b)(2)(ii)(d), income of the Company shall be allocated (after the
allocations required by Section 7.7 regarding minimum gain chargeback and
Section 7.9 regarding minimum gain chargeback for Partner Nonrecourse Debt but
before any other allocation required by this Article 7) to the Members with
deficit balances in their Adjusted Capital Accounts in an amount and in a manner
sufficient to eliminate such deficit balances as quickly as possible; provided,
however, that an allocation shall be made pursuant to this Section 7.10 only if
and to the extent that such Member would have a deficit balance in its Adjusted
Capital Account after all allocations in this Article 7 have been tentatively
made as if Section 7.10 were not in the Agreement. This Section 7.10 is intended
to satisfy the provisions of Treas. Reg. §1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.

Section 7.11 Curative Allocations. If any items of income and gain (including
gross income) or loss, deduction and Section 705(a)(2)(B) Expenditures are
allocated to a Member pursuant to the Regulatory Allocations, then, prior to any
allocation pursuant to Section 7.3 and subject to the Regulatory Allocations,
items of income and gain (including gross income) and items of loss, deduction
and Section 705(a)(2)(B) Expenditures for subsequent periods shall be allocated
to the Members in a manner designed to result in each Member’s Adjusted Capital
Account having a balance equal to what it would have been had such allocation of
items of income and gain (including gross income) or loss, deduction and
Section 705(a)(2)(B) Expenditures not occurred under the Regulatory Allocations;
provided that allocations under this Section 7.11 shall be made only to the
extent necessary to avoid a potential distortion in the economic agreement of
the Members that would result from prior allocations under the Regulatory
Allocations.

 

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Section 7.12 Interest in Company Profits. Pursuant to Treas. Reg.
§1.752-3(a)(3), the Members’ interests in Company profits for purposes of
determining the Members’ proportionate shares of the excess nonrecourse
liabilities (as defined in Treas. Reg. §1.752-3(a)(3)) of the Company shall be
determined in accordance with their respective Interests.

Section 7.13 Adjustments of Book Value. Book Value with respect to any asset of
the Company is the asset’s adjusted tax basis for federal income tax purposes,
except as follows:

(a) The initial Book Value of any asset contributed to the Company by a Member
shall be the fair market value of the asset as of the date of contribution.

(b) At the discretion of the Members, the Book Value of the assets of the
Company shall be revalued at the respective fair market values of such assets
upon the occurrence of an event described in Treas. Reg.
§1.704-1(b)(2)(iv)(f)(5). The Book Value of each asset shall be its fair market
value, as of the liquidation of the Company within the meaning of Treas. Reg.
§1.704-1(b)(2)(ii)(g).

(c) The Book Value of each asset distributed to any Member will be the fair
market value of the asset as of the date of distribution.

(d) The Book Value of each asset will be increased or decreased to reflect any
adjustment to the adjusted basis of the asset under sections 734(b) or 743(b) of
the Code, but only to the extent that the adjustment is taken into account in
determining Capital Accounts under Treas. Reg. §1.704-1(b)(2)(iv)(m); provided
that the Book Value will not be adjusted under this Section 7.13(d) to the
extent that an adjustment under Section 7.13(b) is necessary or appropriate in
connection with a transaction that would otherwise result in an adjustment under
this Section 7.13(d).

(e) Book Value will be adjusted by Book Depreciation. Gain or loss on a
disposition of any asset shall be determined by reference to such asset’s Book
Value as adjusted herein.

The determination of the fair market value of property as required under this
Section 7.13 shall be determined by the Members using any reasonable method of
valuation.

Section 7.14 Section 754 Adjustment. To the extent an adjustment to the adjusted
tax basis of any Company asset pursuant to sections 734(b) or 743(b) of the Code
is required to be-taken into account in determining Capital Accounts pursuant to
Treas. Reg. §1.704-1(b)(2)(iv)(m), the Book Value of the Company’s assets shall
be adjusted as set forth in Section 7.13, and any such adjustment in Book Value
shall be treated as gain or loss (as the case may be) in computing Profit or
Loss.

Section 7.15 Varying Interests. All Profit and Loss (and any item of income,
gain, loss, deduction or credit specially allocated under this Article 7) shall
be allocated, and all distributions shall be made, to the Persons shown on the
records of the Company to have been Members as of the last calendar day of the
period for which the allocation or distribution is to be made. Notwithstanding
the foregoing, if during any taxable year there is a change in any Member’s
Interest, the Members agree that their allocable shares of the Profit and Loss
(or items

 

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thereof) and any item of income, gain, loss, deduction or credit specially
allocated under this Article 7 for the taxable year shall be determined on any
method determined by Unanimous Member Approval to be permissible by section 706
of the Code and the related Treasury Regulations to take account of the Member’s
varying interests; provided that, on a transfer of an interest in the Company
(or an event treated as a transfer for purposes of the Code) in accordance with
the provisions of this Agreement, such items with respect to the interest that
is transferred (or treated as transferred) shall be allocated between the
transferor and the transferee under any method determined by the transferor that
is permitted under Code Section 706.

ARTICLE 8

OWNERSHIP OF COMPANY PROPERTY

Company assets shall be deemed to be owned by the Company as an entity, and no
Member shall have any ownership interest in Company assets or any portion
thereof. Title to any or all Company assets may be held in the name of the
Company or one or more nominees. All Company assets shall be recorded as the
property of the Company on its books and records, regardless of the name in
which legal title to such Company assets is held.

ARTICLE 9

FISCAL MATTERS, BOOKS AND RECORDS

Section 9.1 Bank Accounts; Investments; Borrowing. Capital Contributions,
revenues and any other Company funds shall be deposited by the Company in one or
more bank accounts established in the name of the Company, or shall be invested
in furtherance of the purposes of the Company. No other funds shall be deposited
into Company bank accounts or commingled with Company investments. Funds
deposited in the Company’s bank accounts may be withdrawn only to be expended or
invested in furtherance of the Company’s purposes, to pay Company debts or
obligations or to be distributed to the Members pursuant to this Agreement.

Section 9.2 Books and Records of Account. The Company shall maintain adequate
books and records of account.

Section 9.3 Tax Returns and Information. The Members intend for the Company to
be treated as a partnership for tax purposes only. The Company shall timely
prepare or cause to be prepared and timely filed all federal, state and local
income and other tax returns that the Company is required to file; provided,
that each Member must be provided with a reasonable opportunity to review and
provide comments on all tax returns before filing. As soon as is practicably
possible after the end of each year, the Company shall send or deliver to each
Person who was a Member at any time during such year such tax information as
shall be reasonably necessary for the preparation by such Person of his federal
income tax return and state income and other tax returns. The Members shall file
their tax returns consistent with the positions taken by the Company with
respect to taxes. At the request of any Member, the Company shall make an
election under section 754 of the Code.

Section 9.4 Delivery of Financial Statements to Members. As soon as is
reasonably practicable after the end of each fiscal quarter of the Company
(except the last quarter of the fiscal year), the Company shall send to each
Member an unaudited copy of (a) a balance sheet of

 

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the Company as of the end of such quarter, (b) an income statement of the
Company for such quarter and the fiscal year to date and (c) a statement showing
distributions to Members during such quarter. As soon as is reasonably
practicable after the end of the fiscal year of the Company, the Company shall
send to each Member a copy of (x) a balance sheet of the Company as of the end
of such year, (y) an income statement of the Company for such year and (z) a
statement showing distributions to Members during such year.

Section 9.5 Audits. The books of account and records of the Company shall be
audited as of the end of each Company fiscal year by such firm of certified
public accountants as is reasonably acceptable to the Board.

Section 9.6 Fiscal Year. The Company’s fiscal year shall be the calendar year.

Section 9.7 Tax Elections. The Company shall make such tax elections as shall be
determined by the Members; provided that neither the Company nor any Member
shall make an election for the Company to be excluded from the application of
the provisions of subchapter K of chapter 1 of subtitle A of the Code or any
similar provisions of applicable state law.

Section 9.8 Tax Matters Partner. The Members designate LSP Member to be the “tax
matters partner” of the Company pursuant to section 6231(a)(7) of the Code. The
Board may change the Member who is designated the “tax matters partner” at any
time. The Member who is the “tax matters partner” shall take such action as may
be necessary to cause each other Member to become a “notice partner” within the
meaning of section 6223 of the Code. Such Member shall inform each other Member
of all significant matters that may come to its attention in its capacity as
“tax matters partner” by giving notice thereof on or before the fifth business
day after becoming aware thereof and, within that time, shall forward to each
other Member copies of all significant written communications it may receive in
that capacity. Any Member who is designated as “tax matters partner” may not
take any action contemplated by sections 6222 through 6232 of the Code without
Unanimous Member Approval, and may not in any case take any action left to the
determination of an individual Member under sections 6222 through 6232 of the
Code.

Section 9.9 Classification. The Company intends to be classified as a
partnership for federal income tax purposes under Treas. Reg. §1.7704-3. Neither
the Company nor any Member may make an election under Treas. Reg. §1.7704-3(c)
to treat the Company as an association taxable as a corporation.

ARTICLE 10

MANAGEMENT OF THE COMPANY

Section 10.1 Managers. The powers of the Company shall be exercised by or under
the authority of, and the business and affairs of the Company shall be managed
under the direction of, the Board. Managers need not be residents of the State
of Delaware or Members of the Company. No Member, Manager or any other Person
will have individual authority to bind the Company or any Project Sub unless
such is expressly conferred upon them pursuant to this Agreement or by action of
the Members, the Board or a duly authorized committee, officer or other
representative.

 

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Section 10.2 Number and Election. The Board shall consist of four Managers. Each
Member shall have the right to appoint two Managers (and one alternate in the
event that Member’s appointed Manager is unavailable). Each Manager shall hold
office for the term for which appointed, if any term is specified, and until
that Manager’s successor has been appointed, or until that Manager’s earlier
death, resignation or removal. The initial Managers appointed are:

Managers appointed by Dynegy:

Lynn A. Lednicky

Ben C. Trammell, Jr.

Kevin M. Hole (alternate)

Managers appointed by LSP Member:

Bob Brooks

Jim Pagano

John King (alternate)

During the time that a Member is a Delinquent Member, the Manager appointed by
such Delinquent Member shall not have the right to vote and will not be counted
for purposes of taking any Board action.

Section 10.3 Resignation and Removal. Any Manager may resign at any time. Any
Manager may be removed any time, with or without cause, by the Member that
appointed such Manager.

Section 10.4 Vacancies. In the event of the death, resignation or removal of a
Manager, the resulting vacancy may be filled at any time by the current Member
that appointed such former Manager.

Section 10.5 Compensation. The Managers will not be paid any salaries or other
compensation for serving in such capacity.

Section 10.6 Powers of the Board.

(a) The Board shall have no power to cause the Company to do (directly or
through any Project Sub) any act outside the purposes of the Company set forth
in Article 4. Subject to the foregoing limitation and all other limitations in
this Agreement, the Board shall have full, complete and exclusive power and
authority to take any action the Board deems to be necessary, convenient or
advisable in connection with the management of the Company. Except for
situations in which the approval of the Members is required by this Agreement or
by nonwaivable provisions of applicable law, the Board will have broad
discretion to authorize any officer or other representative or agent to act on
behalf of the Company. The exercise of Board authority will occur only by the
affirmative vote of all of the Managers entitled to vote on the applicable
matter (“Unanimous Board Approval”).

 

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(b) The Board may make any decision or take any action at a meeting, by
conference telephone call, by written consent or any other method they elect;
provided that, at the request of any Manager with respect to a decision or
action of the Board, such decision or action must be made or taken by written
consent signed by at least the number of Managers required to approve such
decision or action.

(c) The Members acknowledge that, pursuant to the Project Sub Agreement, the
Company has delegated certain authority to Devco with regard to (i) the
development and management of Development Projects for the Project Subs and
(ii) the authorization of Capital Contributions to be made for further
contribution to the Project Subs pursuant to the “Annual Plan” determined by
Devco under the Devco LLC Agreement. Accordingly, no Member and no Manager shall
take any action in their capacity as Member or Manager to hinder Devco in the
performance of its duties to the extent that such performance is authorized
under the Project Sub Agreement.

Section 10.7 Project Sub Agreement. On the Effective Date the Company has
entered into the Project Sub Agreement, which agreement is expressly approved by
the Members and pursuant to which Devco will provide services to the Company and
the Project Subs, which services may be ultimately supplied by the Members or
their Affiliates. Except as provided in an agreement between Devco and such
Member or its Affiliate (which agreement shall not bind the Company unless the
Company is also party thereto), each Member shall be responsible for all costs
associated with its personnel providing services to the Company, including the
costs of all applicable taxes and associated administrative activities related
to its employees.

Section 10.8 Officers. The Board may designate one or more persons to serve as
officers of the Company. No officer need be a resident of Delaware. Each officer
will hold office until his successor will be duly appointed by the Board or
until he resigns or has been removed by the Board. The compensation, if any, of
any officer or agent of the Company shall be determined by the Board. The
officers of the Company will report to the Board and need not be Members or
Managers.

Section 10.9 Other Matters Regarding the Managers.

(a) The Managers may rely and shall be protected in acting or refraining from
acting upon any resolution, certificate, statement, instrument, opinion, report,
notice, request consent, order, bond, debenture, or other paper or document
believed by it to be genuine and to have been signed or presented by the
Managers.

(b) The Managers may consult with legal counsel, accountants, appraisers,
management consultants, investment bankers and other consultants and advisers
selected by it and any act taken or omitted in reliance upon the opinion of such
Persons as to matters that the Managers reasonably believes to be within such
Person’s professional or expert competence shall be conclusively presumed to
have been done or omitted in good faith and in accordance with such opinion.

(c) Each Member agrees and acknowledges that the Manager it appoints represents
the interests of such Member. Accordingly, no Manager owes any fiduciary or

 

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similar duties to the Company or any other Member. Without limiting the
foregoing, any standard of care and duty imposed by this Agreement or under the
Delaware Act or any applicable law, rule or regulation shall be modified, waived
or limited as required to permit the Managers to act in a manner consistent with
the preceding sentence.

Section 10.10 Development Principles. It is the Members’ intent and expectation,
as of the Effective Date, that all Development Projects will be developed,
constructed and operated in accordance with the development principles described
on Exhibit D. The Members acknowledge, however, that such development principles
are intended only as a non-binding guide and, with Unanimous Board Approval, any
Development Project may be developed, constructed or operated in a manner that
is inconsistent with such development principles.

ARTICLE 11

RIGHTS, POWERS AND OBLIGATIONS OF MEMBERS

Section 11.1 Action by Members.

(a) Except as expressly otherwise provided in this Agreement, all actions and
decisions of the Members shall require Unanimous Member Approval; provided, that
during the time that a Member is a Delinquent Member, such Delinquent Member
shall not have the right to vote and will not be counted for purposes of taking
any Member action.

(b) The Members may make any decision or take any action at a meeting, by
conference telephone call, by written consent, by oral agreement or by any other
method they elect; provided that, at the request of any Member with respect to a
decision or action of the Members in such capacity, such decision or action must
be made or taken by written consent signed by Members holding the Percentage
Interests required to approve such decision or action.

(c) Notwithstanding anything to the contrary in this Agreement, the following
actions on behalf of the Company require Member approval (only taking into
account the disinterested Members with respect to (ii) below):

(i) the liquidation of the Company;

(ii) except as contemplated by a Services Agreement or a Project Sub Agreement,
any transaction between the Company on one hand, and any Member or any Affiliate
thereof on the other hand;

(iii) the amendment of this Agreement or the Certificate;

(iv) the admission of any additional Members or the issuance of any additional
Interests; and

(v) changing any tax election of the Company.

 

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Section 11.2 Liability to Third Parties. No Member shall be liable for the
debts, obligations or liabilities of the Company, including under a judgment
decree or order of a court.

Section 11.3 Outside Activities. Each Member and its respective Affiliates and
Managers may engage, directly or indirectly, without the consent of the other
Member or the Company, in other business opportunities, transactions, ventures
or other arrangements of any nature or description, independently or with
others, including business of a nature which may be competitive with or the same
as or similar to the business of the Company, regardless of the geographic
location of such business, and without any duty or obligation to offer or
account to the other Member or the Company in connection therewith. Nothing
herein is intended to create a partnership, joint venture, agency, or other
relationship creating fiduciary or quasi-fiduciary duties or similar duties and
obligations or to subject the Members or Managers to joint and several or
vicarious liability or to impose any duty, obligation, or liability that would
arise therefrom with respect to any or all of the Members, Managers or their
Affiliates. LSP Member acknowledges that Dynegy is a producer and seller of
electric energy, capacity and ancillary services in many U.S. markets, with a
power generation portfolio consisting (as of June 30, 2006) of more than 12,800
megawatts of baseload, intermediate and peaking power plants fueled by a mix of
coal, fuel oil and natural gas, and that, accordingly, Dynegy owns assets that
may be competitive with assets developed or managed by the Company. Dynegy
acknowledges that one or more Affiliates of LSP Member may in the future own
assets that may be competitive with assets developed or managed by the Company.

ARTICLE 12

TRANSFER OF INTERESTS; CHANGE IN CONTROL

Section 12.1 General Rule. No Member may sell, give, transfer, assign, pledge,
encumber or otherwise dispose of all or any portion of its Interest (other than
to an Affiliate that remains an Affiliate of (a) such Member or (b) the Person
that, at the time of the transfer or assignment, ultimately controls such
Member) without the consent of the other Member. For purposes hereof, the
Members agree that a “transfer” by a Member of its Interest shall include any
transaction that would constitute a Change in Control of such Member.

Section 12.2 Transferees. A permitted transferee of a Member shall be entitled
to receive the share of Company income, gains, losses, deductions, credits and
distributions to which its transferor would have been entitled. However, the
transferee of any Interest shall not become a Member of the Company unless:
(a) the instrument of assignment so provides; (b) such transferee agrees in
writing to be bound as a Member by this Agreement; (c) all of the Members, in
their sole discretion, consent to the admission of such transferee as a Member
(which consent shall automatically be deemed given in the case of an Affiliate
transfer permitted under Section 12.1); and (d) the underlying transfer could
not reasonably be expected to result in the Company being treated as a
corporation or otherwise being taxed as an entity for federal income tax
purposes; provided, however, that such consent shall not be required with
respect to a transfer that is approved by the Members or is otherwise permitted
pursuant to the terms of this Agreement. Upon becoming a Member, such transferee
shall have all of the rights and powers of, shall be subject to all of the
restrictions applicable to, shall assume all of the obligations of, and shall
succeed to the status of, its predecessor, and shall in all respects be a Member
under this Agreement. Any transferee of an Interest who is admitted to the
Company as a Member

 

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shall be considered for all purposes to be a Member of the same class as his
transferor. The use of the term “Member” in this Agreement shall be deemed to
include any such additional Members. Until such transferee is admitted as a
Member pursuant to this Section 12.2, (a) such transferee shall not be entitled
to participate in the management of the Company or to exercise any voting or
other rights or powers of a Member, except for the rights described in the first
sentence of this Section 12.2, and (b) the transferor Member shall continue to
be a Member and to be entitled to exercise any rights or powers of a Member with
respect to the Interest transferred.

Section 12.3 No Preemptive Rights. Except as expressly provided in this
Agreement, no Member shall have any preemptive, preferential or other right to
acquire any Interests or any other securities of or other interests in the
Company.

Section 12.4 Change in Parent Control.

(a) Upon the occurrence of a Change in Parent Control with respect to a Member
(the “Change in Parent Control Member”), the Change in Parent Control Member
shall give written notice thereof to the other Member (a “Change in Parent
Control Notice”). At any time within 60 days following the receipt by the other
Member of a Change in Parent Control Notice from the Change in Parent Control
Member, such other Member may deliver a notice to the Change in Parent Control
Member, stating that such other Member offers unconditionally, at the option of
the Change in Parent Control Member, either (i) to purchase the Change in Parent
Control Member’s entire Interest or (ii) to sell such other Member’s entire
Interest, in each case with the same purchase price specified for each
percentage point of Interest of the selling Member (and in each case subject to
Section 12.4(d)). Such offer will be irrevocable until the earlier of (1) 60
days after the delivery of such offer or (2) the date on which the Change in
Parent Control Member elects to purchase or sell the applicable Interest
pursuant to (i) or (ii) above. Such offer will not have any other terms, except
that the purchase may be made by an Affiliate of the purchasing Member (and any
reference to the purchasing Member will also be a reference to any such
Affiliate) and may specify that the obligation of both the purchaser and the
seller to complete the purchase is subject to satisfaction of a reasonable and
customary condition precedent to the effect that no material adverse change has
occurred in connection with the relevant Development Project (other than any
material adverse change within the reasonable control of any Person claiming
that such condition has not been satisfied).

(b) At any time during the 60 days following delivery of the offer in
Section 12.4(a), the Change in Parent Control Member may give the other Member a
written notice electing either to (i) sell its entire Interest or (ii) buy the
other Member’s entire Interest, in either case upon the terms in this
Section 12.4 and otherwise as set out in such offer. If the Change in Parent
Control Member fails to give the notice within the 60 day period, then it will
be conclusively deemed to have accepted the offer of the other Member to
purchase the Change in Parent Control Member’s entire Interest in accordance
with the terms of the offer.

 

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(c) The closing of the purchase and sale will take place, at the offices of the
Company or at such other time or place as may be mutually agreed in writing, on
the 30th day (subject to Section 12.4(d)) following the earlier of (1) 60 days
after the delivery of the offer in Section 12.4(a) or (2) the date on which the
Change in Parent Control Member elects (or is deemed to elect) to purchase or
sell, as applicable, the applicable Interest, or, if that day is not a Business
Day, on the next following Business Day (the applicable of (1) or (2), the
“Decision Date”). Such closing date will be extended to the extent necessary for
either Member to secure any required governmental approval or consent so long as
that Member is using reasonable efforts to pursue the approval or consent. Each
Member will cooperate with, and take such actions as are necessary or
appropriate to cause the consummation of, such purchase (including, and by
causing its appointed Manager to, voting in favor of, or consenting to, any
resolutions necessary or appropriate to cause the Company to take such actions
as are necessary to consummate such purchase). At such closing, (i) the selling
Member shall then deliver a written assignment of its entire Interest to the
purchasing Member in a form reasonably acceptable to the purchasing Member, but
containing no representations or warranties other than as may be agreed by
Unanimous Board Approval, and (iii) the purchasing Member shall tender cash in
the amount of the purchase price to the selling Member.

(d) If, pursuant to this Section 12.4, the entire Interest of Dynegy is to be
purchased, then:

(i) Dynegy shall have the option, exercisable within 10 Business Days after the
Decision Date, to purchase one or more of the Project Subs that own Dynegy
Expansion Projects from the Company, exercisable by the delivery to LSP Member
of a notice that contains (A) notice of its election to purchase the applicable
Dynegy Project Sub(s) for cash in the amount equal to its Determined Fair Market
Value, (B) Dynegy’s calculation of the Determined Fair Market Value for such
Dynegy Project Sub and (C) Dynegy’s proposed method of acquiring such Dynegy
Project Sub by (A) purchasing such Dynegy Project Sub from the Company directly
or (B) first causing the Company to distribute such Dynegy Project Sub to the
Members and then purchasing LSP Member’s interest in such Dynegy Project Sub;
provided, however, that Dynegy shall not acquire such Dynegy Project Sub
pursuant to the method described in Section 12.4(d)(i)(B) without the prior
written consent of LSP Member (which consent shall not be unreasonably
withheld).

(ii) If LSP Member does not give notice, within 30 days following the delivery
of the notice in Section 12.4(d)(i), to Dynegy that it disagrees with the
calculation of the Determined Fair Market Value set forth in such notice, then
LSP Member shall be deemed to have agreed to such calculation. If LSP Member
gives such notice within such 30 day period and such dispute is not resolved
within 10 Business Days after the delivery of such notice of disagreement, then
the Members will determine the Determined Fair Market Value of the applicable
Dynegy Project Sub(s) by determining the Fair Market Value of the Dynegy Project
Sub(s). The Fair Market Value shall be determined by the Members, each of which
shall retain an Initial Appraiser (with the cost of such Initial Appraiser

 

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being borne by the Member retaining such Initial Appraiser) to make a
determination of the Fair Market Value within 60 days of receipt by LSP Member
of the notice in Section 12.4(d). If the Members’ determinations are within 10%
of each other (such percentage being calculated by using the higher of such
determinations as the base number), then the average of such determinations
shall result in a final, binding determination on the Members. If the
determinations are not within 10% of each other, the Members shall enter into
good faith negotiations for a 30-day period to determine the Fair Market Value.
If the Members still cannot agree after such 30-day period, the Members mutually
shall agree on a Final Appraiser to determine the Fair Market Value (with the
cost of such Final Appraiser being borne equally by the Members). If the Members
cannot agree on a Final Appraiser within three Business Days, the two Initial
Appraisers shall select the Final Appraiser within three Business Days
thereafter. Each Member shall then have the opportunity to provide supplemental
information to the Final Appraiser, including any information used to determine
its Initial Appraiser’s determination. The Final Appraiser shall then make a
final, binding determination of the Fair Market Value by choosing one of the
Initial Appraiser’s determinations in its entirety. Such determination shall be
made as soon as reasonably practicable but no later than 30 days after selection
of the Final Appraiser. Such determination of the Fair Market Value shall then
be used to determine the Determined Fair Market Value for purposes of this
Section 12.4.

(iii) The closing of the purchase of any Dynegy Project Sub(s) pursuant to this
Section 12.4(d) shall take place on the same day and at the same location as the
closing of the purchase and sale pursuant to Section 12.4(c) (the closing date
of which shall be postponed to the extent necessary to determine the Determined
Fair Market Value under Section 12.4(d)). Such closing date will be extended to
the extent necessary for either Member to secure any required governmental
approval or consent so long as that Member is using reasonable efforts to pursue
the approval or consent. Each Member will cooperate with, and take such actions
as are necessary or appropriate to cause the consummation of, such purchase
(including, and by causing its appointed Manager to, voting in favor of, or
consenting to, any resolutions necessary or appropriate to cause the Company to
take such actions as are necessary to consummate such purchase). At such
closing, the Company (or, as applicable, the Member) shall deliver written
assignments of all of its right, title and interest in the Dynegy Project Sub in
a form reasonably acceptable to the purchaser(s), but containing no
representations or warranties other than as may be agreed by Unanimous Board
Approval, and Dynegy shall tender cash in an amount equal to (i) if purchased
from the Company, the Determined Fair Market Value of the Dynegy Project Sub or
(ii) if purchased from LSP Member, the Determined Fair Market Value of the
Dynegy Project Sub multiplied by LSP Member’s percentage Interest immediately
prior to the closing of the purchase and sale pursuant to Section 12.4(c).

 

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ARTICLE 13

MATTERS REGARDING THE PROJECT SUBS

Section 13.1 Project Subs.

(a) As of the Effective Date, the Company owns the percentage interest of each
of the Existing SPVs as listed on Exhibit C, each of which owns the Project(s)
set forth next to its name on Exhibit C.

(b) If at any time Devco and/or any of its members is to transfer a Development
Project to the Company or a Project Sub in accordance with the Devco LLC
Agreement, (i) the Company or a Project Sub designated by the Company shall
receive such Development Project or (if approved by Devco) the entity holding
such Development Project pursuant to quitclaim-style documents (which will not
contain any representations or warranties except as otherwise required by Devco)
and (ii) the Company will reimburse Devco and/or its member(s), as applicable,
an amount determined by Devco under the Devco LLC Agreement.

(c) So long as the Project Sub Agreement is in effect, Devco will be providing
development and management services for each Project Sub and, accordingly, the
Annual Plan for each Project Sub will be determined by Devco in accordance with
the Project Sub Agreement and the Devco LLC Agreement.

Section 13.2 Governance Dispute Buy-Sell Option for Project Subs.

(a) If (w) at any time during the term of the Project Sub Agreement, the
managers and members of Devco are unable to agree on a Financing Plan for a
Project Sub required to be covered thereby, in each case after having complied
or attempted to comply with Section 10.7(f) of the Devco LLC Agreement,
(x) after the term of the Project Sub Agreement, the Members are unable to agree
on a material portion of the Financing Plan for a Project Sub required to be
covered thereby, after having complied or attempted to comply with Section 16.2,
(y) at any time during the term of the Project Sub Agreement, the managers and
members of Devco are unable to agree on a material portion of the Annual Plan
for a Project Sub or on the material terms of a Capital Contribution for a
Project Sub, in each case after having complied or attempted to comply with
Section 10.7(d) of the Devco LLC Agreement, or (z) after the term of the Project
Sub Agreement, the Members are unable to agree on a material portion of the
Annual Plan for a Project Sub or on the material terms of a Capital Contribution
for a Project Sub, in each case after having complied or attempted to comply
with Section 16.2 (either (w), (x), (y) or (z), a “Governance Dispute”), then
either Member (the “Governance Dispute Offeror”) may deliver a notice (a
“Governance Dispute Offer”) to the other Member (the “Governance Dispute
Offeree”), stating that the Governance Dispute Offeror offers unconditionally,
at the option of the Governance Dispute Offeree, either (i) to purchase the
applicable Project Sub (the “Governance Dispute Project Sub”) or (ii) to sell
the Governance Dispute Project Sub, in each case with the same purchase price
specified for each percentage point of Interest of the selling Member; provided,
however, that no Governance Dispute Notice may be delivered under this
Section 13.2(a)

 

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in respect of a Project Sub that owns a Dynegy Expansion Project. The Governance
Dispute Offer will be irrevocable by the Governance Dispute Offeror until the
earlier of (1) 60 days after the delivery of the Governance Dispute Offer or
(2) the date on which the Governance Dispute Offeree elects to purchase or sell
the Governance Dispute Project Sub pursuant to (i) or (ii) above. The Governance
Dispute Offer will not have any other terms, except that the purchase may be
made by an Affiliate of the purchasing Member (and any reference to the
purchasing Member will also be a reference to any such Affiliate) and may
specify that the obligation of both the purchaser and the seller to complete the
purchase is subject to satisfaction of a reasonable and customary condition
precedent to the effect that no material adverse change has occurred in
connection with the relevant Development Project (other than any material
adverse change within the reasonable control of any Person claiming that such
condition has not been satisfied).

(b) If, within 60 days after the delivery of a Governance Dispute Purchase
Notice, the applicable Governance Dispute has been fully resolved, then such
Governance Dispute Purchase Notice shall be deemed withdrawn.

(c) At any time during the 60 days following delivery of the Governance Dispute
Offer, the Governance Dispute Offeree may give the Governance Dispute Offeror a
written notice electing either to (i) sell the Governance Dispute Project Sub or
(ii) buy the Governance Dispute Project Sub, in either case upon the terms in
this Section 13.2 and otherwise as set out in the Governance Dispute Offer. If
the Governance Dispute Offeree fails to give the notice within the 60 day
period, then it will be conclusively deemed to have accepted the offer of the
Governance Dispute Offeror to purchase the Governance Dispute Project Sub in
accordance with the terms of the Governance Dispute Offer.

(d) The closing of the purchase and sale will take place, at the offices of the
Company or at such other time or place as may be mutually agreed in writing, on
the 30th day following the earlier of (1) 60 days after the delivery of the
Governance Dispute Offer (2) the date on which the Governance Dispute Offeree
elects (or is deemed to elect) to purchase or sell, as applicable, the
Governance Dispute Project Sub, or, if that day is not a Business Day, on the
next following Business Day. Such closing date will be extended to the extent
necessary for either Member to secure any required governmental approval or
consent so long as that Member is using reasonable efforts to pursue the
approval or consent. Each Member will cooperate with, and take such actions as
are necessary or appropriate to cause the consummation of, such purchase
(including, and by causing its appointed Manager to, voting in favor of, or
consenting to, any resolutions necessary or appropriate to cause the Company to
take such actions as are necessary to consummate such purchase). At such
closing, (i) the Company shall distribute all of the interest in the Governance
Dispute Project Sub to the Members in proportion to their Interests, (ii) the
selling Member shall then deliver a written assignment of all of its right,
title and interest in the Governance Dispute Project Sub to the purchasing
Member in a form reasonably acceptable to the purchasing Member, but containing
no representations or warranties other than as may be agreed by Unanimous Board
Approval, and (iii) the purchasing Member shall tender cash in the amount of the
purchase price to the selling Member.

 

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Section 13.3 Right of First Offer Option for Project Subs.

(a) If either Member (a “Transferring Member”) desires to transfer all or any
portion of its indirect interest in any Project Sub, the Transferring Member
must first provide written notice (the “Intent to Transfer Notice”) to the other
Member (the “Non-Transferring Member”) of its intent to transfer such interest
(the “Subject Interest”). Upon receipt of an Intent to Transfer Notice, the
Non-Transferring Member shall have the right, within the 30-day period following
the Non-Transferring Member’s receipt of the Intent to Transfer Notice, to make
an irrevocable written offer (the “Purchase Offer”) to purchase all of the
Subject Interest, which Purchase Offer shall specify the cash purchase price
(the “Specified Price”) at which the Non-Transferring Member is willing to
purchase the Subject Interest. If the Non-Transferring Member fails to make a
Purchase Offer within such 30-day period, the Transferring Member shall be
entitled to freely sell, transfer or otherwise dispose of the Subject Interest
to any Person or Persons, without having any further obligation to the
Non-Transferring Member in connection with such sale, in accordance with
Section 13.3(c). If the Non-Transferring Member makes a Purchase Offer within
such 30-day period, the Transferring Member may either accept or reject the
Purchase Offer within the 30-day period following the Transferring Member’s
receipt of the Purchase Offer (the “Acceptance Period”). If the Transferring
Member rejects the Purchase Offer, or the Acceptance Period expires without the
Transferring Member having accepted the Purchase Offer, the Purchase Offer shall
expire and the Transferring Member may freely sell, transfer or otherwise
dispose of the Subject Interest to any Person or Persons for a purchase price
equal to or greater than 100% of the Specified Price, but only if the
Transferring Member enters into a binding purchase and sale agreement with such
Person or Persons no later than 90 days from and including the date of the
expiration of the Acceptance Period; provided, however, that the Transferring
Member may sell, transfer or otherwise dispose of the Subject Interest for a
purchase price less than 100% of the Specified Price if the Non-Transferring
Member is first provided with written notice of the purchase price associated
with such proposed sale and provided with the opportunity, during the 30-day
period following the Non-Transferring Member’s receipt of such notice, to agree
to purchase the Subject Interest for such purchase price.

(b) If the Non-Transferring Member’s offer to acquire all of the Subject
Interest is accepted in accordance with Section 13.3(a), then each Member will
cooperate with each other in connection with, and take such actions as are
necessary or appropriate to cause the consummation of, such purchase (including,
and by causing its appointed Manager to, voting in favor of, or consenting to,
any resolutions necessary or appropriate to cause the Company to take such
actions as are necessary to consummate such purchase). At the closing, (i) the
Members shall cause the Company to distribute to the Members all of its right,
title and interest in the Project Sub (in connection with which distribution, if
the Subject Interest is less than all of the Transferring Member’s entire
indirect interest in the Project Sub, the members of the Project Sub shall enter
into an amended and restated limited liability company agreement with respect to
the Project Sub, with substantially the terms of the Project Sub LLC Agreement
Term Sheet, with such changes thereto, if any, as may be agreed to by the
members of the Project Sub at such times) in proportion to the Members’ relative
Interests, (ii) the Transferring Member

 

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shall transfer the Subject Interest in such former Project Sub to the
Non-Transferring Member, (iii) the Non-Transferring Member shall pay to the
Transferring Member the applicable purchase price, (iv) the Transferring Member
shall execute and deliver such documentation as is reasonably required by the
Non-Transferring Member and (v) if, following such transfer, the Transferring
Member is still an owner of such former Project Sub, the Transferring Member
shall take such actions as are necessary under such former Project Sub’s
then-current governing documents to recognize such transfer and grant to the
Non-Transferring Member all rights formerly associated with Subject Interest.

(c) If the Transferring Member is permitted to transfer its indirect interest in
a Project Sub pursuant to Section 13.3(a), then (i) the Members shall cause the
Company to distribute to the Members all of its right, title and interest in the
Project Sub (in connection with which distribution, if the Subject Interest is
less than all of the Transferring Member’s entire indirect interest in the
Project Sub, the members of the Project Sub shall enter into an amended and
restated limited liability company agreement with respect to the Project Sub,
with substantially the terms of the Project Sub LLC Agreement Term Sheet, with
such changes thereto, if any, as may be agreed to by the members of the Project
Sub at such times) in proportion to the Members’ relative Interests, (ii) the
Transferring Member shall transfer its direct interest in such former Project
Sub to the purchaser thereof upon the Proposed Sale Terms, (iii) the
Transferring Member shall cause the purchaser to execute and deliver such
documentation as is required by such former Project Sub’s then-current governing
documents and as is otherwise reasonably required by the Non-Transferring Member
and (iv) the Non-Transferring Member shall take such actions as are necessary
under such former Project Sub’s then-current governing documents to recognize
such transfer and grant to the purchaser all rights formerly associated with the
Transferring Member’s interest in such former Project Sub.

Section 13.4 Dynegy Purchase Option for Dynegy Expansion Projects.

(a) After the expiration of the Project Sub Agreement (but no later than 6
months following such expiration), Dynegy shall have the option, exercisable
thereafter at any time or from time to time, to purchase one or more of the
Project Subs that own Dynegy Expansion Projects from the Company, exercisable by
the delivery to LSP Member of a notice (the “Dynegy Purchase Notice”) that
contains (i) notice of its election to purchase the applicable Dynegy Project
Sub for cash in the amount equal to its Determined Fair Market Value,
(ii) Dynegy’s calculation of the Determined Fair Market Value for such Dynegy
Project Sub and (iii) Dynegy’s proposed method of acquiring such Dynegy Project
Sub by (A) purchasing such Dynegy Project Sub from the Company directly or
(B) first causing the Company to distribute such Dynegy Project Sub to the
Members and then purchasing LSP Member’s interest in such Dynegy Project Sub;
provided, however, that Dynegy shall not acquire such Dynegy Project Sub
pursuant to the method described in Section 13.4(a)(iii)(B) without the prior
written consent of LSP Member (which consent shall not be unreasonably
withheld).

(b) If LSP Member does not give notice, within 30 days following the delivery of
the Dynegy Purchase Notice, to Dynegy that it disagrees with the calculation

 

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of the Determined Fair Market Value set forth in the Dynegy Purchase Notice,
then LSP Member shall be deemed to have agreed to such calculation. If LSP
Member gives notice, within 30 days following the delivery of a Dynegy Purchase
Notice, to Dynegy that it disagrees with the determination of the Determined
Fair Market Value set forth in the Dynegy Purchase Notice and such dispute is
not resolved within 10 Business Days after the delivery of such notice of
disagreement, then Dynegy and LSP Member will determine the Determined Fair
Market Value of the applicable Dynegy Project Sub by determining the Fair Market
Value of the Dynegy Project Sub. The Fair Market Value shall be determined by
the Members, each of which shall retain an Initial Appraiser (with the cost of
such Initial Appraiser being borne by the Member retaining such Initial
Appraiser) to make a determination of the Fair Market Value within 60 days of
receipt by LSP Member of the Dynegy Purchase Notice. If the Members’
determinations are within 10% of each other (such percentage being calculated by
using the higher of such determinations as the base number), then the average of
such determinations shall result in a final, binding determination on the
Members. If the determinations are not within 10% of each other, the Members
shall enter into good faith negotiations for a 30-day period to determine the
Fair Market Value. If the Members still cannot agree after such 30-day period,
the Members mutually shall agree on a Final Appraiser to determine the Fair
Market Value (with the cost of such Final Appraiser being borne equally by the
Members). If the Members cannot agree on a Final Appraiser within three Business
Days, the two Initial Appraisers shall select the Final Appraiser within three
Business Days thereafter. Each Member shall then have the opportunity to provide
supplemental information to the Final Appraiser, including any information used
to determine its Initial Appraiser’s determination. The Final Appraiser shall
then make a final, binding determination of the Fair Market Value by choosing
one of the Initial Appraiser’s determinations in its entirety. Such
determination shall be made as soon as reasonably practicable but no later than
30 days after selection of the Final Appraiser. Such determination of the Fair
Market Value shall then be used to determine the Determined Fair Market Value
for purposes of this Agreement.

(c) The closing of the purchase of any Dynegy Project Sub shall take place on
the tenth Business Day after the determination of (or deemed agreement to) the
Determined Fair Market Value of such Dynegy Project Sub at the offices of the
Company or at such other time or place as may be mutually agreed in writing.
Such closing date will be extended to the extent necessary for either Member to
secure any required governmental approval or consent so long as that Member is
using reasonable efforts to pursue the approval or consent. Each Member will
cooperate with, and take such actions as are necessary or appropriate to cause
the consummation of, such purchase (including, and by causing its appointed
Manager to, voting in favor of, or consenting to, any resolutions necessary or
appropriate to cause the Company to take such actions as are necessary to
consummate such purchase). At such closing, the Company (or, as applicable, the
Member) shall deliver written assignments of all of its right, title and
interest in the Dynegy Project Sub in a form reasonably acceptable to the
purchaser(s), but containing no representations or warranties other than as may
be agreed by Unanimous Board Approval, and Dynegy shall tender cash in an amount
equal to (i) if purchased from the Company, the Determined Fair Market Value of
the Dynegy Project Sub or (ii) if purchased from LSP Member, the Determined Fair
Market Value of the Dynegy Project Sub multiplied by LSP Member’s percentage
Interest.

 

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(d) To the extent that a Dynegy Project Sub is purchased from the Company, all
cash proceeds from such purchase shall be distributed to the Members promptly
thereafter, except to the extent that such distribution would violate applicable
law or any contract to which the Company is party.

Section 13.5 LSP Member Governance Dispute Option Concerning Dynegy Expansion
Projects.

(a) If a Governance Dispute arises with respect to a Dynegy Expansion Project,
then either Member may deliver a notice to the other Member stating (i) that
Dynegy shall purchase the Project Sub that owns such Dynegy Expansion Project
for its Determined Fair Market Value, (ii) the delivering Member’s calculation
of the Determined Fair Market Value for such Dynegy Project Sub and (iii) the
delivering Member’s proposed method of acquiring such Dynegy Project Sub by
(A) purchasing such Dynegy Project Sub from the Company directly or (B) first
causing the Company to distribute such Dynegy Project Sub to the Members and
then purchasing LSP Member’s interest in such Dynegy Project Sub; provided,
however, that Dynegy shall not acquire such Dynegy Project Sub pursuant to the
method described in Section 13.5(a)(iii)(B) without the prior written consent of
LSP Member (which consent shall not be unreasonably withheld).

(b) If the receiving Member does not give notice, within 30 days following the
delivery of the notice in Section 13.5(a), to the delivering Member that it
disagrees with the calculation of the Determined Fair Market Value set forth in
such notice, then the receiving Member shall be deemed to have agreed to such
calculation. If the receiving Member gives notice, within 30 days following the
delivery of such notice, to the delivering Member that it disagrees with the
determination of the Determined Fair Market Value set forth in such notice and
such dispute is not resolved within 10 Business Days after the delivery of such
notice of disagreement, then the Members will determine the Determined Fair
Market Value of the applicable Dynegy Project Sub by determining the Fair Market
Value of the Dynegy Project Sub. The Fair Market Value shall be determined by
the Members, each of which shall retain an Initial Appraiser (with the cost of
such Initial Appraiser being borne by the Member retaining such Initial
Appraiser) to make a determination of the Fair Market Value within 60 days of
receipt by LSP Member of the notice in Section 13.5(a). If the Members’
determinations are within 10% of each other (such percentage being calculated by
using the higher of such determinations as the base number), then the average of
such determinations shall result in a final, binding determination on the
Members. If the determinations are not within 10% of each other, the Members
shall enter into good faith negotiations for a 30-day period to determine the
Fair Market Value. If the Members still cannot agree after such 30-day period,
the Members mutually shall agree on a Final Appraiser to determine the Fair
Market Value (with the cost of such Final Appraiser being borne equally by the
Members). If the Members cannot agree on a Final Appraiser within three Business
Days, the two Initial Appraisers shall select the Final Appraiser within three
Business Days thereafter. Each

 

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Member shall then have the opportunity to provide supplemental information to
the Final Appraiser, including any information used to determine its Initial
Appraiser’s determination. The Final Appraiser shall then make a final, binding
determination of the Fair Market Value by choosing one of the Initial
Appraiser’s determinations in its entirety. Such determination shall be made as
soon as reasonably practicable but no later than 30 days after selection of the
Final Appraiser. Such determination of the Fair Market Value shall then be used
to determine the Determined Fair Market Value for purposes of this Agreement.

(c) The closing of the purchase of any Dynegy Project Sub shall take place on
the tenth Business Day after the determination of (or deemed agreement to) the
Determined Fair Market Value of such Dynegy Project Sub at the offices of the
Company or at such other time or place as may be mutually agreed in writing.
Such closing date will be extended to the extent necessary for either Member to
secure any required governmental approval or consent so long as that Member is
using reasonable efforts to pursue the approval or consent. Each Member will
cooperate with, and take such actions as are necessary or appropriate to cause
the consummation of, such purchase (including, and by causing its appointed
Manager to, voting in favor of, or consenting to, any resolutions necessary or
appropriate to cause the Company to take such actions as are necessary to
consummate such purchase). At such closing, the Company (or, as applicable, the
Member) shall deliver written assignments of all of its right, title and
interest in the Dynegy Project Sub in a form reasonably acceptable to the
purchaser(s), but containing no representations or warranties other than as may
be agreed by Unanimous Board Approval, and Dynegy shall tender cash in an amount
equal to (i) if purchased from the Company, the Determined Fair Market Value of
the Dynegy Project Sub or (ii) if purchased from LSP Member, the Determined Fair
Market Value of the Dynegy Project Sub multiplied by LSP Member’s percentage
Interest.

(d) To the extent that a Dynegy Project Sub is purchased from the Company, all
cash proceeds from such purchase shall be distributed to the Members promptly
thereafter, except to the extent that such distribution would violate applicable
law or any contract to which the Company is party.

Section 13.6 Discontinuing Member. In the event either Member (the
“Discontinuing Member”) elects in writing not to proceed with any Development
Project, the other Member (the “Continuing Member”), shall have an option,
exercisable within 60 days after such election, to purchase from the Company
100% of the outstanding membership interests of the Project Sub that owns such
Development Project (or, if the Development Project is not yet owned by a
Project Sub, 100% of the assets, interests and property comprising such
Development Project) for a purchase price equal to 100% of the out-of-pocket
development costs incurred by the Company (including by way of reimbursement of
either Member, Devco or any of its members for development costs related to such
Development Project) in connection with such Development Project (it being
understood that if the Continuing Member does not exercise such option, such
Continuing Member does not, with the exception of the right to exercise of such
option, forfeit or waive any other rights in this Agreement). The closing of any
such purchase will take place on the financial closing date, if any, for the
Development Project in question, at the offices of the Company or at such other
time or place as

 

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may be mutually agreed in writing. Such closing date will be extended to the
extent necessary for either Member to secure any required governmental approval
or consent so long as that Member is using reasonable efforts to pursue the
approval or consent. Each Member will cooperate with, and take such actions as
are necessary or appropriate to cause the consummation of, such purchase
(including, and by causing its appointed Manager to, voting in favor of, or
consenting to, any resolutions necessary or appropriate to cause the Company to
take such actions as are necessary to consummate such purchase). At such
closing, the Company shall deliver written assignments of all of its right,
title and interest in the applicable Project Sub (or assets, interests and
property, as applicable) in a form reasonably acceptable to the purchaser(s),
but containing no representations or warranties other than as may be agreed by
Unanimous Board Approval, and the purchaser shall tender the purchase price in
cash. All cash proceeds from such purchase shall be distributed to the Members
promptly thereafter, except to the extent that such distribution would violate
applicable law or any contract to which the Company is party.

Section 13.7 Project Sub Transfers Contemplated by Financing Plan. If a
Financing Plan for a Project Sub has received Unanimous Board Approval that
explicitly permits the Project Sub to issue equity for the benefit of both
Members or explicitly permits one of the members to issue non-controlling equity
for purposes of financing construction of the relevant Development Project, then
(i) the Members shall cause the Company to distribute to the Members all of its
right, title and interest in the Project Sub (in connection with which
distribution, if the Subject Interest is less than all of the Transferring
Member’s entire indirect interest in the Project Sub, the members of the Project
Sub shall enter into an amended and restated limited liability company agreement
with respect to the Project Sub, with substantially the terms of the Project Sub
LLC Agreement Term Sheet, with such changes thereto, if any, as may be agreed to
by the members of the Project Sub at such times) in proportion to the Members’
relative Interests, (ii) each selling Member shall transfer its direct interest
in such former Project Sub to the purchaser thereof upon the terms agreed
between such Member and the purchaser, (iii) each selling Member shall cause the
purchaser to execute and deliver such documentation as is required by such
former Project Sub’s then-current governing documents (iv) the Members shall
take such actions as are necessary under such former Project Sub’s then-current
governing documents to recognize such transfer and grant to the purchaser all
rights formerly associated with the selling Member’s interest in such former
Project Sub.

ARTICLE 14

DISSOLUTION AND WINDING UP

Section 14.1 Dissolution. The Company shall be dissolved upon the first of the
following events to occur:

(a) the written consent of all of the Members at any time to dissolve and wind
up the affairs of the Company; or

(b) the entry of a decree of judicial dissolution of the Company under the
Delaware Act.

 

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The death, dissolution or Bankruptcy of a Member or the occurrence of any other
event which terminates the continued membership of a Member in the Company shall
not dissolve the Company.

Section 14.2 Liquidation.

(a) Except as otherwise provided herein, upon the dissolution of the Company,
unless it is reconstituted pursuant to the Delaware Act and this Agreement, no
further business shall be conducted except for the taking of such action as
shall be necessary for the winding up of the affairs of the Company and the
distribution of its assets to the Members pursuant to the provisions of this
Section 14.2(a). The Members shall have full authority to wind up the affairs of
the Company and to make final distribution as provided herein.

(b) Upon a dissolution of the Company requiring the winding up of its affairs,
unless it is reconstituted pursuant to the Delaware Act and this Agreement, the
Members (i) shall cause the inventory all of the Company’s assets, as well as
the Company’s liabilities, within 30 Business Days of dissolution, and (ii) may
sell the Company’s assets at the best price available or may distribute those
assets in kind. All of the Company’s assets shall be applied and distributed,
according to the fair market value thereof, after the allocations required by
Section 7.3 and the allocation thereunder of hypothetical gains or losses from
the Company’s assets distributed in kind, in the following order:

(i) to the creditors of the Company;

(ii) to establishing the reserves which the Members may deem necessary for
contingent or unforeseen liabilities or obligations of the Company; and

(iii) to the Members in accordance with the positive Capital Account balances of
the Members.

Any distributions required under Section 14.2(b)(iii) shall be made to the
Members within 120 days after the date of such liquidation.

(c) The Members shall comply with any requirements of the Delaware Act or other
applicable law, except as modified by this Agreement, pertaining to the
dissolution, liquidation and winding up of a limited liability company, at which
time the existence of the Company shall be terminated.

Section 14.3 Deficit Capital Accounts. Notwithstanding anything to the contrary
contained in this Agreement, and notwithstanding any custom or rule of law to
the contrary, no Member shall have any obligation to eliminate any deficit
(negative) balance in its Capital Account upon dissolution or liquidation of the
Company regardless of how such negative balance was caused, including by
deductions and losses of the Company (including non-cash items such as
depreciation) or distributions to Members pursuant to this Agreement, and upon
dissolution of the Company, such deficit shall not be an asset of the Company
and no Member shall be obligated to contribute any amount to the Company to
bring the balance of such Member’s Capital Account to zero; provided that this
Section 14.3 shall not affect any obligation of a Member to make Capital
Contributions pursuant to Section 5.2.

 

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ARTICLE 15

INDEMNIFICATION AND INSURANCE

Section 15.1 Indemnification and Advance of Expenses.

(a) To the fullest extent permitted by law but subject to the limitations
expressly provided in this Agreement, the Company 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, by reason of the fact that such Person is or was a Member,
officer, representative or other agent of the Company (an “Indemnified Person”),
or, while a Member, officer, representative or other agent of the Company, is or
was serving at the request of the Company as a director, officer, employee,
member, manager, partner, representative or agent of another corporation,
partnership, joint venture, limited liability company, trust or other
enterprise, against all Damages actually and reasonably incurred by such Person
in connection with such action, suit or proceeding if such Indemnified Person
acted in good faith and in a manner such Indemnified Person reasonably believed
to be in or not opposed to the best interests of the Company, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe such
Indemnified Person’s 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
such Indemnified Person did not act in good faith and in a manner which such
Indemnified Person reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that such Indemnified Person’s
conduct was unlawful.

(b) To the extent that an Indemnified Person has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in
Section 15.1(a), or in defense of any claim, issue or matter therein, such
Indemnified Person shall be indemnified against expenses (including attorneys’
and experts’ fees) actually and reasonably incurred in connection therewith.

(c) Any indemnification under Section 15.1(a) or Section 15.1(b) shall be made
assuming that indemnification of the Indemnified Person is proper in the
circumstances because such Indemnified Person has met the applicable standard of
conduct set forth in Section 15.1(a) or Section 15.1(b); provided, that the
Indemnified Person shall provide to the Partnership an undertaking by or on
behalf of such Indemnified Person to repay any amounts paid pursuant to such
indemnification if it shall ultimately be determined that such Indemnified
Person is not entitled to be indemnified by the Partnership as authorized in
this Section 15.1.

(d) Damages incurred by an Indemnified Person in defending any civil, criminal,
administrative or investigative action, suit or proceeding shall be paid by the
Company in advance of the final disposition of such action, suit or proceeding
upon

 

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receipt of an undertaking by or on behalf of such Indemnified Person to repay
such amount if it shall ultimately be determined that such an Indemnified Person
is not entitled to be indemnified by the Company as authorized in this
Section 15.1.

(e) The indemnification and advancement of Damages provided by, or granted
pursuant to, this Section 15.1 shall not be deemed exclusive of any other rights
to which Persons seeking indemnification or advancement of Damages may be
entitled under any agreement, pursuant to any action of the other Members,
officers, representatives or other agents, by operation of law or otherwise,
both as to action in such Person’s capacity as a Member, officer, representative
or other agent and as to action in another capacity while serving as a Member,
officer, representative or other agent of the Company.

Section 15.2 Insurance. The Company may purchase and maintain insurance or
another arrangement on behalf of any Person who is or was a Member, officer or
other representative against any liability asserted against him or incurred by
him in any capacity identified in Section 15.1 or arising out of his status as a
Member, officer or other representative, whether or not the Company would have
the power to indemnify him against that liability under Section 15.1 or
otherwise.

Section 15.3 Limit on Liability of Members. Any indemnification pursuant to this
Article 15 shall be made only out of the assets of the Company and shall in no
event cause the Members to incur any personal liability beyond their total
Capital Contributions, nor shall it result in any liability of any Member to any
third party.

ARTICLE 16

DISPUTE RESOLUTION

Section 16.1 Direct Negotiation. The Members encourage the prompt and equitable
settlement of all controversies or claims (a “Dispute”) between or among the
parties including those arising out of this Agreement or courses of dealing
related hereto, including any claim based on or arising from an alleged tort. At
any time, any Member can give the other written notice that it desires to settle
a Dispute. Within five days of delivery of such notice, each Member will cause
an officer having authority to resolve such Dispute, to meet with officers from
the other applicable Member(s) for four days out of four continuous weeks. The
period from the date of delivery of notice of under this Section 16.1 through
the termination of the meeting between such officers is referred to as the
“Negotiation Period.”

Section 16.2 Annual Plan/Capital Contribution/Financing Plan Dispute. Following
termination of the Project Sub Agreement: (a) if an Annual Plan has not received
Unanimous Board Approval by September 1 of a given year, an executive review
panel consisting of four executives (two appointed by LSP Member and two
appointed by Dynegy) who (i) have decision making ability and (ii) are not
Managers shall negotiate in good faith to approve an Annual Plan within 15
Business Days after such September 1, (b) if the Board is prepared to provide
Unanimous Board Approval for an Annual Plan as it relates to one or more, but
not all, of the Development Projects, then there shall be prepared, and the
Board shall separately consider and may provide Unanimous Board Approval for,
one or more separate Annual Plans

 

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for certain of the Development Projects, (c) if the Board has considered, but is
unable to provide Unanimous Board Approval for, any requested Capital
Contribution, then, upon written notice provided by one Member to the other
Member an executive review panel consisting of four executives (two appointed by
LSP Member and two appointed by Dynegy) who (i) have decision making ability and
(ii) are not Managers shall negotiate in good faith to approve the requested
Capital Contribution (or a modified Capital Contribution) within 15 Business
Days after the date of such notice, (d) if an Financing Plan has not received
Unanimous Board Approval by September 1 of a given year, an executive review
panel consisting of four executives (two appointed by LSP Member and two
appointed by Dynegy) who (i) have decision making ability and (ii) are not
Managers shall negotiate in good faith to approve a Financing Plan within 15
Business Days after such September 1, or (e) if the Board is prepared to provide
Unanimous Board Approval for an Financing Plan as it relates to one or more, but
not all, of the Development Projects, then there shall be prepared, and the
Board shall separately consider and may provide Unanimous Board Approval for,
one or more separate Financing Plans for certain of the Development Projects.

Section 16.3 Other Rights and Remedies. If a Dispute is not resolved during the
Negotiation Period, then, subject to Section 16.4, the Members may pursue any
and all rights and remedies available to them under applicable law.

Section 16.4. Mandatory Binding Arbitration for Arbitrable Disputes. If the
Dispute is an Arbitrable Dispute, a binding arbitration will be held; provided
that the foregoing shall not preclude equitable or other judicial relief to
enforce the provisions hereof or to preserve the status quo pending resolution
of Disputes; and provided further that resolution of Disputes with respect to
claims by third Persons will be deferred until any judicial proceedings with
respect thereto are concluded. Subject to the provisions of this section, the
Members will agree upon the rules of the arbitration prior to the arbitration
and based upon the nature of the Dispute. To the extent that the Parties cannot
agree on the rules of the arbitration, then the Commercial Arbitration Rules of
the American Arbitration Association (AAA) in effect on the date hereof, and
except as the applicable rules are modified by this Agreement, will apply. As a
minimum set of rules in the arbitration the Parties agree as follows:

(a) The arbitration will be held before a panel of three arbitrators consisting
of one arbitrator reasonably selected by each Member, and the third then
promptly thereafter selected by those two arbitrators. All arbitrator(s) will be
knowledgeable regarding the matter subject to the Dispute. The arbitration
proceedings will be held in New York, New York at such location selected by the
arbitrators.

(b) The Member initiating arbitration (the “Claimant”) will give to the other
Member (the “Respondent”) notice of its intention to arbitrate (the “Demand”).
The Demand will contain a statement setting forth in reasonable detail the
nature of the Claimant’s claim, the names and addresses of all other parties,
the amount involved, if any, and the remedy sought. The Respondent will file an
answering statement (the “Answer”) within five Business Days of the Demand. The
Answer will contain a statement setting forth in reasonable detail the
Respondent’s responses and defenses to the claim. If a counterclaim is asserted,
it will be sent with the Answer and will contain a statement setting forth in
reasonable detail the nature of the counterclaim, the amount

 

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involved, if any, and the remedy sought. The Claimant will file a reply
statement (the “Reply”) within five Business Days of the counterclaim. The Reply
will contain a statement setting forth in reasonable detail the Claimant’s
responses and defenses to the counterclaim. If no Answer or Reply is given
within the stated time, the claim or the counterclaim will be assumed to be
denied. Failure to file an Answer or Reply will not operate to delay the
arbitration.

(c) Unless the parties to the arbitration agree otherwise, no discovery will
take place except as provided in this Section 16.4(c). At least 60 days before
the date of the hearing, each Member shall provide to each other Member copies
of all exhibits, affidavits and other evidence they intend to submit at the
hearing, along with the identification of any witnesses to be called and a
summary of anticipated testimony. Based on a review of the information provided,
and not less than 30 days before the date of the hearing, each Member will
provide to each other Member copies of any additional exhibits, affidavits and
other evidence they intend to submit at the hearing, along with the
identification of any additional witnesses to be called and a summary of
anticipated testimony. The arbitrators will be authorized to resolve any
disputes concerning the exchange of information.

(d) Within 5 Business Days before the date the arbitration is to begin, each
Member will submit to the other and the arbitrators a response in which it
proposes a single determination of the damages to be paid in resolution of the
Dispute (such Member’s “Proposed Resolution”).

(e) The arbitration hearing will take place over no more than five Business Days
beginning no more than 20 Business Days after the date of the Demand, if any.

(f) The arbitrators will be required to select one of the two Proposed
Resolutions. The arbitrators will deliver their decision in writing within 10
days after the termination of the arbitration hearings. The arbitrators’
decision will be considered as a final and binding resolution of the
disagreement, will not be subject to appeal and may be entered as an order in
any court of competent jurisdiction in the United States. Each Member agrees to
submit to the jurisdiction of any such court for purposes of the enforcement of
any such order. The provisions of this Agreement will be binding on the
arbitrators.

(g) Any arbitration proceeding hereunder will be conducted on a confidential
basis.

(h) The Members party to such arbitration will bear their respective costs
incurred in connection with the arbitration, except that such Members will share
equally the fees and expenses of the arbitrators, the costs of obtaining the
facility for the arbitration, and the fees and expenses of any experts employed
at the arbitrators’ request.

 

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ARTICLE 17

MISCELLANEOUS PROVISIONS

Section 17.1 Notices. Any notice or communication given pursuant to this
Agreement must be in writing and may be given by registered or certified mail,
and if given by registered or certified mail, shall be deemed to have been given
and received when a registered or certified letter containing such notice,
properly addressed with postage prepaid is deposited in the United States mails;
and if given otherwise than by registered or certified mail, it shall be deemed
to have been given when delivered to and received by the party whom addressed.
Such notices or communications shall be given to the parties hereto at the
following addresses:

If to the Company:

1735 Technology Drive, Suite 820

San Jose, CA 95110

Facsimile: (408) 392-9757

Attention: John T. King

with a copy to each other Member.

If to any of the Members:

To the address set forth below such Member’s name on the signature page hereto.

Any party hereto may designate any other address in substitution for the
foregoing address to which such notice shall be given by five (5) days’ notice
duly given hereunder to the other parties.

Section 17.2 Governing Law; Venue; Submission to Jurisdiction.

(a) This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware. This Agreement is intended to comply with the
requirements of the Delaware Act and the Certificate. In the event of a direct
conflict between the provisions of this Agreement and the mandatory provisions
of the Delaware Act or any provision of the Certificate, the Delaware Act and
the Certificate, in that order of priority, will control.

(b) Each party hereto hereby irrevocably and unconditionally (a) consents and
submits to the exclusive jurisdiction of any federal or state court located in
the State of Delaware (the “Delaware Courts”) for any actions, suits or
proceedings arising out of or relating to this Agreement (and agrees not to
commence any litigation relating thereto except in such courts), and (b) waives
any objection to the laying of venue of any such litigation in the Delaware
Courts and agrees not to plead or claim in any Delaware Court that such
litigation brought therein has been brought in any inconvenient forum.

 

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Section 17.3 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the Members and their respective permitted heirs,
legal representatives, successors and assigns.

Section 17.4 Amendments. This Agreement may be amended only by Unanimous Member
Approval.

Section 17.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original, but all of which taken
together shall constitute a single document.

Section 17.6 Execution in Writing. A facsimile, telegram, telex, cablegram or
similar transmission by a Member, or a photographic, photostatic, facsimile or
similar reproduction of a writing executed by a Member, shall be treated as an
execution in writing for purposes of this Agreement.

Section 17.7 Offset. Whenever the Company is to pay any sum to any Member, any
amounts that a Member owes the Company (including pursuant to a breach by such
Member of its Contribution Agreement) may be deducted from that sum before
payment.

Section 17.8 Effect of Waiver or Consent. A waiver or consent, express or
implied, to or of any breach or default by any Member in the performance by that
Member of its obligations with respect to the Company is not a consent or waiver
to or of any other breach or default in the performance by that Member of the
same or any other obligations of that Member with respect to the Company.
Failure on the part of a Member or the Company to complain of any act of any
other Member or to declare any Member in default with respect to the Company,
irrespective of how long that failure continues, does not constitute a waiver by
that Person of its rights with respect to that default until the applicable
statute-of-limitations period has run.

Section 17.9 Further Assurances. In connection with this Agreement and the
transactions contemplated hereby, each Member will execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and any actions related therefor, or contemplated thereby.

Section 17.10 Waiver of Certain Rights. Except as otherwise expressly provided
herein, each Member irrevocably waives any right it may have to maintain any
action for dissolution of the Company or for partition of the property of the
Company.

Section 17.11 Notice to Members of Provisions of this Agreement. By executing
this Agreement, each Member acknowledges that it has actual notice of (a) all of
the provisions of this Agreement, and (b) all of the provisions of the
Certificate. Each Member hereby agrees that this Agreement constitute adequate
notice of all such provisions.

Section 17.12 Entire Agreement. This Agreement, together with the Exhibits
hereto, the Project Sub Agreement, and the certificates, documents, instruments
and writings that are delivered pursuant hereto and thereto, constitutes the
entire agreement and understanding of the Members in respect of its subject
matter and supersedes all prior understandings, agreements, or

 

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representations by or among the Members, written or oral, to the extent they
relate in any way to the subject matter hereof. Except as expressly contemplated
by Article 15, there are no third party beneficiaries having rights under or
with respect to this Agreement.

[The remainder of this page is intentionally left blank; the next page is the
signature page.]

 

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IN WITNESS WHEREOF, the Members have executed this Agreement to be effective as
of the Effective Date.

 

DYNEGY INC. (formerly named Dynegy Acquisition, Inc.)

By:

 

/s/ J. Kevin Blodgett

Name:

  J. Kevin Blodgett

Title:

  General Counsel, Executive Vice President-Administration and Secretary

 

Address for Notice:

Dynegy Inc.

1000 Louisiana, Suite 5800

Houston, TX 77002

Telecopy: (713) 767-8288

Attention: Ben Trammell

 

LS POWER ASSOCIATES, L.P.

By:

 

/s/ Frank Hardenbergh

Name:

 

 

Title:

 

 

 

Address for Notice:

c/o LS Power Development, LLC.

1700 Broadway, 35th Floor

New York, NY 10019

Facsimile: (212) 615-3440

Attention: Senior Counsel

Signature page to LLC Agreement of DLS Power Holdings, LLC