Exhibit 10.1

 

Execution Copy

 

TERMINATION AGREEMENT AND RELEASE

 

This Termination Agreement and Release (“Agreement”) is made and entered into
this 23rd day of December, 2005 (the “Signing Date”) by and among Quachita
Power, LLC, formerly known as Ouachita Power, LLC (“Quachita Power”), a Delaware
limited liability company, and Dynegy Power Marketing, Inc. (“DYPM”), a Texas
corporation. DYPM and Quachita Power are sometimes referred to in this Agreement
individually as a “Party” and collectively as the “Parties.”

 

RECITALS

 

A. An Amended and Restated Dependable Capacity and Conversion Services Agreement
(as amended, the “Capacity and Services Agreement”) was entered into between
Quachita Power and DYPM as of June 1, 2000 pursuant to which DYPM agreed to
purchase, and Quachita Power agreed to sell, certain quantities of electric
energy and capacity from Quachita Power’s electric generating facility in
Sterlington, Ouachita Parish, Louisiana.

 

B. The Parties remain bound by their obligations to each other under the terms
and conditions of the Capacity and Services Agreement, but the Parties have been
engaged in discussions regarding specific arrangements whereby the Capacity and
Services Agreement would be terminated in consideration for the payment of
certain sums by DYPM to Quachita Power.

 

C. As a consequence of those discussions, the Parties desire to, upon
satisfaction of the conditions set forth herein: (i) terminate the Capacity and
Services Agreement in accordance with and subject to the provisions set forth
below; (ii) execute mutual releases in conjunction with the early termination of
the Capacity and Services Agreement as set forth below; and (iii) provide for
the payment of the Termination Amount (as defined below) in consideration for
the termination of the Capacity and Services Agreement and the releases set
forth below.

 

NOW, THEREFORE, in consideration of their mutual promises and other good and
valuable consideration (the adequacy and receipt of which is hereby
acknowledged), the Parties agree as follows:

 

1. DYPM shall pay to Quachita Power the aggregate amount of three hundred
seventy million dollars ($370,000,000) (the “Termination Amount”), subject to
adjustment pursuant to the provisions of Paragraph 2(b), on the Effective Date
(as defined in Paragraph 2) by wire transfer to the following account:

 

ABA: 053000196

Account Number: 000687649253

Account Name: Ouachita Power Revenue

Reference: Dynegy Power Marketing

 

DYPM shall promptly provide to Quachita Power the Federal Reference Number for
such wire. Once paid, the Termination Amount shall not be refundable for any
reason.

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2. (a) DYPM shall pay the Termination Amount to Quachita Power on or before the
date (the “Effective Date”) which shall be the later of (i) December 31, 2005
and (ii) the date on which the following conditions shall be met to the
reasonable satisfaction of Quachita Power (as acknowledged in writing by
Quachita Power):

 

(i) all consents and other authorizations required to be obtained by Cogentrix
Delaware Holdings, Inc. and Cogentrix Energy, Inc. under the Credit Agreement,
dated as of April 14, 2005, among Cogentrix Delaware Holdings, Inc., as
Borrower, Cogentrix Energy, Inc., BNP Paribas, as Issuer, Union Bank of
California, N.A., as Collateral Agent, BNP Paribas, as Administrative Agent, and
the Arrangers and Lenders named therein in connection with the transactions
contemplated hereby shall have been obtained; and

 

(ii) to the extent that any outstanding amounts are owed under the Loan and
Reimbursement Agreement, dated as of August 17, 2000 (as amended, the “Loan and
Reimbursement Agreement”), among Quachita Power, as Borrower, the Lenders named
therein, Bank of America, N.A., as Issuing Bank and Administrative Agent, and
Banc of America Securities LLC, as Syndication Agent, and such Loan and
Reimbursement Agreement remains in full force and effect, all consents and other
authorizations required to be obtained by Quachita Power under such Loan and
Reimbursement Agreement in connection with the transactions contemplated hereby
shall have been obtained; and

 

(iii) all consents and other authorizations required to be obtained by Quachita
Power or any affiliate from the Federal Energy Regulatory Commission, including,
but not limited to, any Section 203 filings, in connection with the transactions
contemplated hereby or any transactions related to this Agreement, including,
but not limited to, the acquisition by Cogentrix Ouachita Holdings, Inc. of all
of the membership interests in Quachita Power owned by MEP-I LLC (the
“Acquisition Transaction”), shall have been obtained; and

 

(iv) all filings required to be made by Cogentrix Ouchita Holdings, Inc. and
MEP-I LLC under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (“HSR”), in connection with the consummation of the Acquisition
Transaction shall have been timely made with the proper governmental authority,
and any waiting period required under HSR relating to such filings which is
applicable to the consummation of the Acquisition Transaction shall have expired
or been terminated.

 

(b) Each of the Parties shall use commercially reasonable efforts to satisfy the
conditions set forth in this Paragraph 2, and to make and cause to be made any
filings with respect to consents or approvals set forth in Paragraphs 2(a)(iii)
and (iv), as soon as reasonably practicable. In the event that the conditions
set forth in this Paragraph 2 are not satisfied by December 31, 2005, the
Termination Payment shall be reduced pursuant to the following formula:

 

TP = $370,000,000.00 – (CP – [X × D])

 

Where:

 

TP    =

   Termination Payment;

 

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CP    =

   Capacity Payments (as such term is defined in the Capacity and Services
Agreement) that are paid or that have accrued and not been paid and are not past
due by DYPM to Quachita Power with respect to periods after December 31, 2005
under the Capacity and Services Agreement (and excluding, for the avoidance of
doubt, Capacity Payments with respect to November 2005 or December 2005);

X    =

   $60,000.00 from and including January 1, 2006, through and including February
28, 2006, and $40,000.00 from and after March 1, 2006; and

D    =

   The number of days between December 31, 2005 and the Effective Date.

 

Notwithstanding the foregoing or any other provision of this Agreement to the
contrary, if the conditions set forth in this Paragraph 2 are not satisfied by
March 31, 2006 (“Termination Date”) for any reason (other than the bad faith or
willful misconduct of a Party), this Agreement shall terminate and be of no
further force and effect, and neither Party or any of their affiliates shall
have any rights or obligations with respect to or arising out of this Agreement
from and after the Termination Date.

 

(c) Each of the Parties shall continue to perform fully all of its obligations
under the Capacity and Services Agreement for the period (“Performance Period”)
between the Signing Date and the Effective Date, including, without limitation,
with respect to DYPM, its payment obligations thereunder, including
(i) obligations that have accrued and not been paid and are not past due and
(ii) its obligation to pay the pro rata portion of any Capacity Payments
applicable to the month in which the Capacity and Services Agreement is
terminated hereunder, which shall be in addition to its obligation to pay the
Termination Amount.

 

3. The Capacity and Services Agreement shall terminate immediately on the
Effective Date in consideration for, and subject to, the payment of the
Termination Amount on or prior to such date. Except as provided in this
Agreement, none of the Parties shall have any further rights or obligations with
respect to or arising out of the Capacity and Services Agreement after the
Effective Date save and except for rights and obligations with respect to
payment and indemnity arising under the Capacity and Services Agreement prior to
the Effective Date, provided that in the event of offsetting monetary
obligations, such obligations shall be set off against each other and the Party
owing any net amount following such setoff shall pay such amount to the other
Party.

 

4. As of the Effective Date, but subject to the payment of the Termination
Amount and, in addition, any accrued but unpaid amounts owed by DYPM under the
Capacity and Services Agreement arising during the Performance Period, Quachita
Power and all of its present and former parent companies, affiliates,
subsidiaries, and divisions, and its and their agents, assigns, attorneys,
employees, representatives, officers, directors, predecessors and successors,
and each and all of them (collectively, the “Quachita Releasors”), release, and
shall be deemed to have forever released and discharged, DYPM and all of its
present and former parent companies, affiliates, subsidiaries, and divisions,
and its and their agents, assigns, attorneys, employees, representatives,
officers, directors, predecessors and successors, and each and all of them
(collectively, the “Dynegy Released Entities and Persons”), from any and all
claims, demands and causes of action of every kind and nature, whether known or
unknown, suspected or

 

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unsuspected, accrued or unaccrued, liquidated or unliquidated, fixed,
contingent, direct, derivative or indirect, consequential, for lost profits or
business or economic loss, or otherwise, whether at common law, equitable, or
statutory, whether in court, arbitration or other forum, whether based on
contract, tort, express or implied warranty, breach of a duty of good faith and
fair dealing, tortious interference with prospective economic advantage, fraud,
equitable estoppel, promissory estoppel, unjust enrichment, punitive damages or
other cause of action or theory that the Quachita Releasors have, may have, or
claim to have or hereafter may acquire against the Dynegy Released Entities and
Persons, in each case arising by reason or in respect of any act, omission,
cause, matter or thing whatsoever, whether known or unknown, in connection with
the Capacity and Services Agreement, and whether arising prior to or after the
Effective Date.

 

5. As of the Effective Date, but subject to the payment of the Termination
Amount, DYPM and all of its present and former parent companies, affiliates,
subsidiaries, and divisions, and its and their agents, assigns, attorneys,
employees, representatives, officers, directors, predecessors and successors,
and each and all of them (collectively, the “DYPM Releasors”), release, and
shall be deemed to have forever released and discharged, Quachita Power and all
of its present and former parent companies, affiliates, subsidiaries, and
divisions, and its and their agents, assigns, attorneys, employees,
representatives, officers, directors, predecessors and successors, and each and
all of them (collectively, the “Quachita Power Released Entities and Persons”),
from any and all claims, demands and causes of action of every kind and nature,
whether known or unknown, suspected or unsuspected, accrued or unaccrued,
liquidated or unliquidated, fixed, contingent, direct, derivative or indirect,
consequential, for lost profits or business or economic loss, or otherwise,
whether at common law, equitable, or statutory, whether in court, arbitration or
other forum, whether based on contract, tort, express or implied warranty,
breach of a duty of good faith and fair dealing, tortious interference with
prospective economic advantage, fraud, equitable estoppel, promissory estoppel,
unjust enrichment, punitive damages or other cause of action or theory that the
DYPM Releasors have, may have, or claim to have or hereafter may acquire against
the Quachita Power Released Entities and Persons, in each case arising by reason
or in respect of any act, omission, cause, matter or thing whatsoever, whether
known or unknown, in connection with the Capacity and Services Agreement, and
whether arising prior to or after the Effective Date.

 

6. In furtherance of the foregoing, the Parties agree as follows:

 

(a) The Guaranty (the “Cogentrix Guaranty”) issued by Cogentrix Energy, Inc.,
dated October 1, 2002, in favor of DYPM, to secure certain payment obligations
of Quachita Power up to the aggregate amount of five million dollars
($5,000,000) pursuant to Section 2.6(b) of the Capacity and Services Agreement
shall: (i) include and guarantee Quachita Power, LLC’s obligations under this
Agreement (subject, in all cases, to the $5,000,000 limitation of liability set
forth in the Cogentrix Guaranty); and (ii) terminate irrevocably and no longer
be of any force and effect immediately upon the Effective Date, and Cogentrix
Energy, Inc. shall be released from all of its obligations under the Cogentrix
Guaranty immediately upon such termination.

 

(b) The Guaranty (the “Dynegy Guaranty”) issued by Dynegy Holdings Inc., dated
April 19, 2005, in favor of Quachita Power, to secure certain payment
obligations of DYPM pursuant to Section 2.6(c) of the Capacity and Services
Agreement, shall: (i) include and

 

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guarantee DYPM’s obligations under this Agreement; and (ii) terminate
irrevocably and no longer be of any force and effect immediately upon the
Effective Date, and Dynegy Holdings Inc. shall be released from all of its
obligations under the Dynegy Guaranty immediately upon such termination;
provided, however, that in the event that any unpaid Capacity Payments or Energy
Payments (as each such term is defined in the Capacity and Services Agreement)
are due and owing on the Effective Date, the Dynegy Guaranty shall remain in
effect to secure the payment by DYPM of such Capacity Payments and Energy
Payments up to the aggregate outstanding amount thereof (the “Remaining Guaranty
Obligations”) until such Capacity Payments and Energy Payments shall be paid in
full, at which time the Remaining Guaranty Obligations of Dynegy Holdings Inc.
shall terminate irrevocably and no longer be of any force and effect.

 

7. Each of the Quachita Releasors and each of the DYPM Releasors hereby
covenants, upon and following the Effective Date, not to sue or otherwise seek
recovery of any amount, damage or injury in any litigation, arbitration or other
forum for any claim released under this Agreement; provided that nothing herein
shall limit or release any action or claim for enforcement of this Agreement.
Each of the Quachita Power Released Entities and Persons, and each of the DYPM
Released Entities and Persons may, in addition to any other rights or remedies
it may have at law or in equity, plead this Agreement as a bar to any claim, or
proceeding in respect of any claim, released under this Agreement.

 

8. Except to the extent otherwise provided in this Agreement, each of the
Parties is responsible for its own respective costs, disbursements, and
attorney’s fees incurred in connection with the negotiation and execution of
this Agreement.

 

9. If it becomes necessary for any Party to proceed against the other Party for
breach of any of the terms of this Agreement or to enforce the terms hereof,
then the Party that is determined by any court of competent jurisdiction to have
breached the terms hereof or failed to perform its obligations hereunder shall
pay to the other Party, in addition to any other damages, all reasonable
attorneys’ fees and costs incurred by the other Party in such proceeding;
provided, however, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY
INDIRECT, SPECIAL, CONSEQUENTIAL, PUNITIVE, OR EXEMPLARY LOSS OR DAMAGE THAT MAY
BE SUFFERED BY THE OTHER PARTY, INCLUDING ANY LOST PROFITS, REVENUE, OR EARNINGS
OR LOST OPPORTUNITY OR USE, WHETHER ARISING IN CONTRACT, TORT (INCLUDING
NEGLIGENCE AND STRICT LIABILITY), OR OTHERWISE, AND EACH PARTY HEREBY RELEASES
THE OTHER PARTY FROM LIABILITY THEREFROM. THIS PARAGRAPH 9 IS NOT INTENDED AND
SHALL NOT BE CONSTRUED TO LIMIT A PARTY’S RIGHT TO RECOVER REASONABLE ATTORNEYS’
FEES, COURT COSTS, OR OTHER COSTS AND EXPENSES INCURRED BY SUCH PARTY AS SET
FORTH IN THIS PARAGRAPH 9. NOTWITHSTANDING THE FOREGOING PROVISIONS OF THIS
SECTION 9 OR ANYTHING IN THIS AGREEMENT TO THE CONTRARY, UNTIL THE EFFECTIVE
DATE, IF ANY, THE CAPACITY AND SERVICES AGREEMENT AND THE PARTIES’ OBLIGATIONS
THEREUNDER SHALL NOT BE AMENDED, MODIFIED OR TERMINATED IN WHOLE OR IN PART AS A
RESULT OF ANY OF THE PROVISIONS OF THIS AGREEMENT.

 

10. Each Party agrees that, upon and following the Effective Date, this
Agreement is intended to constitute a general release, and THIS AGREEMENT IS
INTENDED TO EXTEND TO CLAIMS WHICH A PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN
ITS FAVOR AT THE TIME OF EXECUTING THIS AGREEMENT, WHICH IF KNOWN BY IT

 

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COULD HAVE MATERIALLY AFFECTED ITS SETTLEMENT WITH THE OTHER PARTY. EACH PARTY
EXPRESSLY WAIVES ANY RIGHTS THAT PARTY MAY HAVE UNDER ANY APPLICABLE STATUTE OR
COMMON LAW PRINCIPLE LIMITING ANY SUCH UNKNOWN CLAIM, OR OTHERWISE CONCERNING
THIS RELEASE AND/OR THE CLAIMS RELEASED HEREUNDER.

 

11. In making this compromise settlement and release, the Parties are each
relying upon their own respective judgment and knowledge as to all aspects of
the Capacity and Services Agreement and upon the advice of their own respective
attorneys. Neither of the Parties hereto shall be considered to be the drafter
of this Agreement or any provision hereof for the purpose of any statute, case
law or rule of interpretation or construction that would or might cause any
provision to be construed in favor of or against any Party. In making this
compromise settlement and release, the Parties acknowledge that they have not
relied upon the representations or statements of the other Party other than
those recitals, representations and warranties set out in this Agreement.

 

12. This Agreement supersedes any and all prior oral or written agreements
entered into by and among the Parties concerning the termination of the Capacity
and Services Agreement and the settlement and releases herein and comprises the
entire and final agreement and understanding of the Parties. This Agreement may
not be amended or modified orally and any proposed amendment or modification of
this Agreement shall be effective only upon each Party’s signature of a written
instrument that makes express reference to this Agreement and expressly states
that it is an amendment hereof. Each of the Parties hereto represents that it
has had the advice of counsel concerning the terms and conditions of this
Agreement and in entering into it; and each Party expressly assumes the risk of
any mistake of fact or law relating to this Agreement.

 

13. Upon and following the Effective Date, this Agreement reflects the
compromise of the Parties’ respective rights under the Capacity and Services
Agreement. This Agreement shall in no way be deemed or construed to constitute
an admission of any liability, obligation or right by either of the Parties.

 

14. Upon and following the Effective Date, each Party agrees to execute and
deliver, or cause to be executed and delivered, all instruments, certificates,
and documents, and to take all such other actions, as the other Party may
reasonably request in order to implement and effectuate the purpose and intent
of this Agreement.

 

15. Each of the Parties covenants, warrants and represents, as of the Signing
Date, that:

 

(a) It is duly organized, validly existing, and in good standing under the laws
of its state of organization;

 

(b) It has full power and authority to enter into this Agreement and, subject to
Paragraph 2, all necessary approvals and authorizations regarding same has been
obtained;

 

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(c) The person executing this Agreement is fully authorized to execute this
Agreement on behalf of such Party;

 

(d) Subject to Paragraph 2(a), neither this Agreement, nor any obligation, duty
or requirement hereunder, if performed as provided herein, violates or would
cause a default of any agreement, contract, or indenture to which it is a party
or by which it is bound, or any order of a court or other governmental entity
asserting jurisdiction; and

 

(e) This Agreement represents the legal, valid and binding obligation of such
Party, enforceable in accordance with its terms.

 

16. Each of the representations, warranties, agreements and covenants of the
Parties contained in this Agreement shall survive the execution and delivery of
this Agreement and the date hereof and shall be binding upon and enforceable by
the successors and assigns of the Parties.

 

17. Nothing in this Agreement is intended to apply to or to operate as a
cancellation or release of any obligations under any agreement or contract
(other than, upon and following the Effective Date, the Capacity and Services
Agreement, the Dynegy Guaranty and the Cogentrix Guaranty) between DYPM or any
of its affiliates and Quachita Power and any of Quachita Power’s affiliates that
is in effect as of the Signing Date or the Effective Date.

 

18. This Agreement shall be governed by and construed in accordance with the law
of the State of New York, exclusive of conflicts of laws provisions that would
direct the application of any other governing law.

 

19. This Agreement may be executed in separate counterparts, each of which will
be deemed an original. This Agreement may be executed through facsimile or other
electronic transmission of a Party’s signature to the other Party and any such
signature shall be deemed to be an original for all purposes.

 

[The next page is the signature page.]

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their duly authorized representatives to be effective as of the Signing Date.

 

Dynegy Power Marketing, Inc.

By:

  /s/    LYNN A. LEDNICKY        

Name:

  Lynn A. Lednicky

Title:

  Executive Vice President

Quachita Power, LLC

By:

  /s/    JOHN W. O’CONNOR        

Name:

  John W. O’Connor

Title:

  Vice President and Treasurer

 

[Next Page is Guaranty Acknowledgment Page]

 

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The undersigned has executed this Agreement solely for the purpose of
acknowledging that: (a) the Cogentrix Guaranty shall remain in full force and
effect until termination of the Cogentrix Guaranty pursuant to Paragraph 6(a) of
this Agreement; and (b) the Cogentrix Guaranty shall include and guarantee
Quachita Power, LLC’s obligations under this Agreement (subject, in all cases,
to the $5,000,000 limitation of liability set forth in the Cogentrix Guaranty):

 

Cogentrix Energy, Inc.

By:

  /s/    JOHN W. O’CONNOR        

Name:

  John W. O’Connor

Title:

  Senior Vice President and     Co-Chief Financial Officer

 

The undersigned has executed this Agreement solely for the purpose of
acknowledging that: (a) the Dynegy Guaranty shall remain in full force and
effect until termination of the Dynegy Guaranty pursuant to Paragraph 6(b) of
this Agreement; and (b) the Dynegy Guaranty shall include and guarantee DYPM’s
obligations under this Agreement:

 

Dynegy Holdings Inc.

By:

  /s/    LYNN A. LEDNICKY        

Name:

  Lynn A. Lednicky

Title:

  Executive Vice President

 

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