Exhibit 10.1

FACILITY AND SECURITY AGREEMENT

Dated as of June 17, 2008

Between

DYNEGY HOLDINGS INC.

as Borrower

and

 

MORGAN STANLEY CAPITAL GROUP INC.

as Lender, Issuer, Collateral Agent and Paying Agent

 

 

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TABLE OF CONTENTS

Section

Page

 

ARTICLE I

DEFINITIONS

SECTION 1.01.  Certain Defined Terms

1

SECTION 1.02.  Computation of Time Periods

6

SECTION 1.03.  Uniform Commercial Code

6

ARTICLE II

AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT

SECTION 2.01.  The Advances and the Letters of Credit

6

SECTION 2.02.  Requests for Credit Advances

7

SECTION 2.03.  Issuance of and Drawings under Letters of Credit

7

SECTION 2.04.  Repayment of Advances and Reimbursement Obligations

9

SECTION 2.05.  Obligations Unconditional; Limitations of Liability

10

SECTION 2.06.  Voluntary Prepayments and Mandatory Reduction/ Collateralization
of Letters of Credit

11

SECTION 2.07.  Interest

13

SECTION 2.08.  Fees

13

SECTION 2.09.  Payments and Computations

13

SECTION 2.10.  Evidence of Debt

13

SECTION 2.11.  Collateral Account

14

SECTION 2.12.  Permitted Contracts and Netting Agreements

15

ARTICLE III

CONDITIONS TO EFFECTIVENESS AND OF
ISSUANCES OF LETTERS OF CREDIT AND ADVANCES

SECTION 3.01.  Conditions to Effectiveness

15

SECTION 3.02.  Conditions Precedent to Initial Advances

17

SECTION 3.03.  Conditions Precedent to Certain Issuances and Advances

17

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

SECTION 4.01.  Representations and Warranties of the Borrower

18

 

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ARTICLE V

EVENTS OF DEFAULT

SECTION 5.01.  Events of Default

20

ARTICLE VI

THE PAYING AGENT

SECTION 6.01.  Authorization and Action

21

 

 

 

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SECTION 6.02.  Payments to the Paying Agent

21

SECTION 6.03.  Duties of Paying Agent; Exculpatory Provisions

21

SECTION 6.04.  Reliance by Paying Agent.

21

SECTION 6.05.  Indemnification

22

ARTICLE VII

GRANT OF SECURITY INTEREST; REMEDIES

SECTION 7.01.  Grant of Security Interest

22

SECTION 7.02.  Security for Obligations

22

SECTION 7.03.  Borrower Remains Liable

23

SECTION 7.04.  Control of the Collateral; Investments in the Collateral Account

23

SECTION 7.05.  Further Assurances

23

SECTION 7.06.  Collateral Agent Appointed Attorney-in-Fact

24

SECTION 7.07.  Collateral Agent May Perform

24

SECTION 7.08.  Reasonable Care

24

SECTION 7.09.  Remedies

25

SECTION 7.10.  Indemnity and Expenses

25

SECTION 7.11.  Continuing Security Interest; Assignments

26

SECTION 7.12. Release; Termination

26

ARTICLE VIII

COLLATERAL AGENT

SECTION 8.01.  Authorization and Action of the Collateral Agent; Delegation of
Duties.

27

SECTION 8.02.  Collateral Agent's Reliance, Etc

27

SECTION 8.03.  Collateral Agent and Affiliates

28

SECTION 8.04.  Lender Credit Decision

28

SECTION 8.05.  Successor Agents

28

SECTION 8.06.  Indemnification

29

ARTICLE IX

MISCELLANEOUS

SECTION 9.01.  Amendments, Etc

29

SECTION 9.02.  Notices, Etc

29

SECTION 9.03.  No Waiver; Remedies

31

SECTION 9.04.  Costs and Expenses; Indemnification

31

SECTION 9.05.  Binding Effect

32

SECTION 9.06.  Assignments and Participations

32

SECTION 9.07.  Set-off

32

SECTION 9.08.  Execution in Counterparts

33

SECTION 9.09.  No Liability of the Issuer

33

SECTION 9.10.  Jurisdiction, Etc

33

SECTION 9.11.  Termination

34

SECTION 9.12.  Governing Law

34

SECTION 9.13.  Waiver of Jury Trial

34

 

 

 

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EXHIBITS

 

Exhibit A-1 – Form of Letter of Credit (Reducing)

Exhibit A-2 – Form of Letter of Credit (Non-Reducing)

Exhibit B – Anti-Money Laundering Form

Exhibit C – Form of Guaranty

 

 

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FACILITY AND SECURITY AGREEMENT

FACILITY AND SECURITY AGREEMENT (this “Agreement”)dated as of June 17, 2008,
between DYNEGY HOLDINGS INC., a Delaware corporation (the “Borrower”), and
MORGAN STANLEY CAPITAL GROUP INC. (individually, “MSCG”), as issuer of letters
of credit hereunder (in such capacity, the “Issuer”), as lender to the Borrower
hereunder (in such capacity, the “Lender”) and as collateral agent for the
Issuer and the Lender (in such capacity, the “Collateral Agent”).

The Borrower has requested that each Lender Party (as defined below) extend a
credit facility to the Borrower, pursuant to which the Borrower may incur
obligations to repay borrowed money (including reimbursement obligations arising
from drawings pursuant to letters of credit). Each Lender Party has indicated
its willingness to extend such facility on the terms and conditions of this
Agreement.

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and
agreements contained herein, the parties hereto hereby agree as follows:

ARTICLE I

 

DEFINITIONS

SECTION 1.01.         Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):

“Acceleration Date” has the meaning specified at the end of Section 5.01.

 

“Account Bank” means The Northern Trust International Banking Corporation.

“Advance” means a Credit Advance or a Letter of Credit Advance.

“Amendment Condition” means the satisfaction of the conditions precedent set
forth in Section 3.02.

“Amendment Condition Effective Date” has the meaning specified in
Section 2.03(b).

“Available Amount” means, at any time in respect of any Letter of Credit, the
maximum amount available to be drawn under such Letter of Credit at such time
(assuming compliance at such time with all conditions to drawing).

“Bank Business Day” means a day of the year on which banks are not required or
authorized by law to close in New York City and on which dealings are carried on
in the London interbank market.

“Bankruptcy” means, in the case of any Person, that such Person (i) is dissolved
(other than pursuant to a consolidation, amalgamation, or merger); or (ii)
becomes insolvent or

 

 

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is unable to pay its debts, or fails, or admits in writing its inability
generally, to pay its debts as they become due; or (iii) makes a general
assignment, arrangement or composition with or for the benefit of its creditors;
or (iv) institutes or has instituted against it a proceeding, whether judicial,
quasi-judicial or administrative, seeking a judgment of insolvency or bankruptcy
or any other relief under any bankruptcy or insolvency law or other similar law
affecting creditors’ rights, or is subject to a petition presented for its
winding-up or liquidation, and, in the case of any such proceeding or petition
instituted or presented against it, such proceeding or petition (A) results in a
judgment of insolvency or bankruptcy or the entry of an order for relief or the
making of an order for its winding-up or liquidation or (B) is not dismissed,
discharged, stayed or restrained in each case within 30 days of the institution
or presentation thereof; or (v) has a resolution passed for its winding-up,
official management or liquidation (other than pursuant to a consolidation,
amalgamation or merger); or (vi) seeks or becomes subject to the appointment of
an administrator, provisional liquidator, liquidator, conservator, receiver,
trustee, custodian or other similar official for it or for all or substantially
all its assets; or (vii) has a secured party or a governmental entity take
possession of all or substantially all its assets or has a distress, execution,
attachment, sequestration or other legal process levied, enforced or sued on or
against all or substantially all its assets and such secured party or
governmental entity maintains possession, or any such process is not dismissed,
discharged, stayed or restrained, in each case within 30 days thereafter; or
(viii) causes or is subject to any event with respect to which, under the
applicable laws of any jurisdiction, has an analogous effect to any of the
events specified in clauses (i) to (vii) (inclusive).

“Borrower” has the meaning specified in the recital of parties to this
Agreement.

“Collateral” has the meaning specified in Section 7.01.

“Collateral Account” means Account No. 102897-20010 maintained in the name of
the Collateral Agent with the Account Bank at its office at Harborside Financial
Center Plaza 10, Suite 1401, 3 Second Street, Jersey City, NJ 07311-3988.

“Collateral Agent” has the meaning specified in the recital of parties to this
Agreement.

“Credit Advance” has the meaning specified in Section 2.01(a).

“Credit Facility” means, at any time, an amount equal to the Credit Facility
Available Amount reduced by the sum of (a) the aggregate principal amount of the
Advances outstanding at such time plus (b) the aggregate principal amount of
Reimbursement Obligations at such time plus (c) the aggregate Available Amount
in respect of all Letters of Credit at such time.

“Credit Facility Available Amount” has the meaning specified for such term in
the Letter Agreement; provided, however, that in no event shall the Credit
Facility Available Amount exceed $300,000,000.

“Default” means any Event of Default or any event that would constitute an Event
of Default but for the passage of time or the requirement that notice be given
or both.

 

 

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“DMT” means Dynegy Marketing and Trade, a Colorado partnership, that is a
Subsidiary of the Borrower.

“DPM” means Dynegy Power Marketing Inc., a Texas corporation, that is a
Subsidiary of the Borrower.

“Effective Date” has the meaning specified in Section 3.01.

“Events of Default” has the meaning specified in Section 5.01.

“Facility” means the Credit Facility or the Letter of Credit Facility.

“Federal Funds Rate” means, for any period, a fluctuating interest rate per
annum equal for each day during such period to the weighted average of the rates
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published for such day (or, if such
day is not a Bank Business Day, for the next preceding Bank Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day that is a Bank Business Day, the average of the quotations for such day for
such transactions received by the Issuer from three Federal funds brokers of
recognized standing selected by it.

“Force Majeure Event” means any force majeure event or act of state that is
beyond the control of the Issuer and that the Issuer could not, after using
reasonable commercial efforts (which will not require the Issuer to incur an
expense or loss, other than immaterial, incidental expenses), overcome.

“Interest Period” means, for each Advance and each Reimbursement Obligation, the
period commencing on the date of such Advance or Reimbursement Obligation, as
the case may be, and ending on the last day of the calendar quarter in which
such Advance is made or such Reimbursement Obligation is incurred, as the case
may be, and, thereafter, each subsequent period commencing on the first day of a
calendar quarter and ending on the last day of such quarter.

“ISP98” means the International Standby Practices (ISP98), in force as of
1 January 1999, ICC Publication No. 590.

“Issuer” has the meaning specified in the recital of the parties to this
Agreement.

“L/C Related Documents” has the meaning specified in Section 2.05(a).

“Lender” has the meaning specified in the recital of the parties to this
Agreement.

“Lender Party” means the Lender or the Issuer.

“Letter Agreement” means the letter agreement dated the date hereof between the
Borrower and the Issuer.

 

 

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“Letter of Credit” means a Reducing Letter of Credit or a Non-Reducing Letter of
Credit.

“Letter of Credit Advance” has the meaning specified in Section 2.03(b).

“Letter of Credit Availability”has the meaning specified in Section 2.01(b).

“Letter of Credit Facility” means, at any time, an amount equal to the Credit
Facility Available Amount reduced by the sum of (a) the aggregate principal
amount of the Advances outstanding at such time plus (b) the aggregate principal
amount of Reimbursement Obligations at such time.

“LIBOR Rate” means, for any Interest Period, a rate per annum (rounded upwards,
if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBOR01
(or any successor page) as the London interbank offered rate for deposits in
U.S. dollars at 11:00 a.m. (London time) two Bank Business Days before the first
day of such Interest Period for a period equal to three months; provided,
however, that, if for any reason such rate is not available, the term “LIBOR
Rate” means, for any Interest Period, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as
the London interbank offered rate for deposits in U.S. dollars at approximately
11:00 a.m. (London time) two Bank Business Days prior to the first day of such
Interest Period for a period equal to three months; provided if more than one
rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the
arithmetic mean of all such rates.

“MSCG” has the meaning specified in the recital of parties to this Agreement.

“Netting Agreement” has the meaning specified in the 2007 Credit Agreement.

“Non-Reducing Letter of Credit” means an irrevocable letter of credit, in
substantially the form of Exhibit A-2 hereto or in such other form as shall be
permitted under Section 2.03(a), supporting a Permitted Contract or a Netting
Agreement and issued by the Issuer pursuant to Section 2.01(b).

“Paying Agent” has the meaning specified in Section 6.01.

“Permitted Contract” has the meaning specified in the 2007 Credit Agreement.

“Person” means an individual, partnership, corporation (including a business
trust), limited liability company, joint stock company, trust, unincorporated
association, joint venture or other entity, or a government or any political
subdivision or agency thereof.

“Proposed Termination Date” has the meaning specified in Section 9.11(a).

“Proposed Termination Notice” has the meaning specified in Section 9.11(a).

"Public Disclosure" means Dynegy Inc.'s and the Borrower's most recent annual
report, Form 10-K for the most recently completed fiscal year, each quarterly
report on Form 10-Q or any current reports on Form 8-K (or similar reports filed
on successor forms) filed since the

 

 

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initial filing date of such Form 10-K, in each case filed at least five Bank
Business Days prior to the Effective Date.

“Reducing Letter of Credit” means an irrevocable letter of credit, in
substantially the form of Exhibit A-1 hereto or in such other form as shall be
permitted under Section 2.03(a) (provided, however, that such other form shall
provide for the automatic reduction of the amount of such letter of credit in a
manner similar to the form of Exhibit A-1), supporting a Permitted Contract or a
Netting Agreement and issued by the Issuer pursuant to Section 2.01(b).

 

“Reimbursement Obligation” has the meaning specified in Section 2.03(b).

“Repayment Schedule” means, for each Advance, unless otherwise agreed between
the parties hereto, repayment of one-third of the principal amount of such
Advance within three Bank Business Days from the date of such Advance and
repayment of the balance of such principal amount of such Advance in 12 equal
monthly installments on the last day of each month thereafter, beginning with
such last day next following such third Bank Business Day; provided, however,
that the full balance of such Advance shall be repayable in full on the
Termination Date.

“Request for Credit Advance” has the meaning specified in Section 2.02(a).

“Secured Obligations” has the meaning specified in Section 7.02.

“Subsidiary” of any Person means any corporation, partnership, joint venture,
limited liability company, trust or estate of which (or in which) more than 50%
of (a) the issued and outstanding capital stock having ordinary voting power to
elect a majority of the Board of Directors of such corporation (irrespective of
whether at the time capital stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence of any
contingency), (b) the interest in the capital or profits of such partnership,
joint venture or limited liability company or (c) the beneficial interest in
such trust or estate is at the time directly or indirectly owned or controlled
by such Person, by such Person and one or more of its other Subsidiaries or by
one or more of such Person’s other Subsidiaries.

“Termination Date” means the earliest of (i) March 20, 2010, (ii) the date of
termination in whole of the Facilities pursuant to Section 9.11, and (iii) the
Acceleration Date.

“Termination Fee” means a termination fee determined by the Issuer in its
reasonable discretion (taking into account (x) the difference between the
Ongoing Fee (as such term is defined in the Letter Agreement) and the Borrower’s
then-current credit default swap spreads from the time of the Borrower’s request
to terminate and December 16, 2009, (y) the time remaining between the
Termination Date and December 16, 2009, and (z) the Credit Facility Available
Amount) and notified to the Borrower in accordance with Section 9.02 on the Bank
Business Day prior to the Proposed Termination Date in accordance with Section
9.11(b).

“Transaction Documents” means this Agreement and the Letter Agreement.

 

“Trigger Date” has the meaning specified in Section 2.06(b).

 

 

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“2007 Credit Agreement” means the Fifth Amended and Restated Credit Agreement
dated as of April 2, 2007, as amended by Amendment No. 1 dated as of May 24,
2007, among the Borrower, Dynegy Inc., a Delaware corporation, Dynegy Illinois
Inc., an Illinois corporation, the other Guarantors party thereto, the Lenders
party thereto, Citicorp USA, Inc., as administrative agent and payment agent,
and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent and
each L/C Issuer party thereto, as such Agreement may be further amended, amended
and restated, supplemented, or otherwise modified, or refinanced or refunded.

“2007 Credit Agreement Amendment” means an amendment to the 2007 Credit
Agreement which permits the Borrower to obtain, repay and secure Advances
pursuant to the terms hereof, in form and substance reasonably satisfactory to
the Lender.

“2007 Credit Agreement Date” means the earliest of (i) October 2, 2013, (ii) the
date of termination in whole of the Facilities pursuant to Section 9.11 and
(iii) the Acceleration Date.

“UCC” means the Uniform Commercial Code from time to time in effect in the
specified jurisdiction.

“UCP” means the Uniform Customs and Practice for Documentary Credits, 2007
Revision, ICC Publication No. 600.

“U.S.” or “United States” means United States of America.

SECTION 1.02.         Computation of Time Periods. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word “from” means “from and including” and the words “to” and “until” each
mean “to but excluding.”

SECTION 1.03.         Uniform Commercial Code. Terms defined in Article 8 or
Article 9 of the UCC of the State of New York are used in this Agreement as such
terms are defined in such Article 8 or Article 9.

ARTICLE II

 

AMOUNTS AND TERMS OF THE ADVANCES

AND THE LETTERS OF CREDIT

SECTION 2.01.         The Advances and the Letters of Credit. (a) The Credit
Advances. Provided the Amendment Condition is satisfied, the Lender may, in its
sole discretion and on the terms and conditions hereinafter set forth, make
advances (each a “Credit Advance”) to the Borrower in U.S. Dollars from time to
time on any Bank Business Day during the period from the Amendment Condition
Effective Date until the Termination Date in an amount for each such Credit
Advance not to exceed the Credit Facility at such time (it being understood and
agreed that, subject to the other terms and conditions herein, the Borrower may
obtain such Credit Advances for its account on behalf of either DMT or DPM).
Within the foregoing limits, the Borrower may borrow under this Section 2.01,
prepay pursuant to Section 2.06, and reborrow under this Section 2.01.

 

 

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(b)       The Letters of Credit. The Issuer agrees, on the terms and conditions
hereinafter set forth, to issue Letters of Credit in U.S. dollars for the
account of the Borrower from time to time on any Bank Business Day during the
period from the Effective Date until December 15, 2009, in an Available Amount
for each such Letter of Credit not to exceed an amount equal to the Letter of
Credit Facility at such time reduced by the aggregate Available Amount of all
other Letters of Credit issued on or prior to the date of issuance of such
Letter of Credit and then outstanding (such amount as so reduced being
the“Letter of Credit Availability”)at such time (it being understood and agreed
that, subject to the other terms and conditions herein, the Borrower may obtain
Letters of Credit for its account on behalf of either DMT or DPM). Each Letter
of Credit shall be in the amount of at least $1,000,000. The expiration date for
each Letter of Credit shall be no later than the earlier of (i) one year after
the date of issuance thereof and (ii) March 15, 2010.

SECTION 2.02.         Requests for Credit Advances. (a) Provided that the
Amendment Condition is satisfied and the Lender agrees in its sole discretion,
the Borrower may request a Credit Advance by giving notice to the Lender. Each
such request for a Credit Advance shall be given to the Lender not later than
11:00 a.m. (New York City time) on the Bank Business Day prior to the date of
the proposed Credit Advance. Each such request for a Credit Advance (a “Request
for Credit Advance”) shall be by telephone, confirmed immediately by electronic
communication (and, at the Borrower’s option, also by telecopier), in each case
in accordance with Section 9.02, specifying therein the requested (i) date of
such Credit Advance, and (ii) amount of such Credit Advance and also specify
therein (iii) the deposit account of the Borrower to which such Advance should
be deposited and (iv) whether or not the Borrower is obtaining such Credit
Advance on behalf of DMT or DMP, and, if so, the name of such Subsidiary and its
ownership structure to support its status as a “Subsidiary” of the Borrower. The
Lender will, in its sole discretion and upon such other terms and conditions
(including, without limitation, a repayment schedule) as may be agreed by the
Lender and the Borrower, make such Credit Advance available to the Borrower in
same day funds by depositing such in such deposit account.

(b)       Each Request for Credit Advance shall be irrevocable and binding on
the Borrower. The Borrower shall indemnify the Lender against any loss
(including loss of anticipated profits), cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by the
Lender to fund the Credit Advance when such Credit Advance is not made on the
requested date specified in such Request for Credit Advance.

SECTION 2.03.         Issuance of and Drawings under Letters of Credit. (a)
Request for Issuance. (i) The Borrower may request the issuance of a Letter of
Credit by giving notice to the Issuer in accordance with Section 9.02; provided,
however, that at any time no more than twenty Letters of Credit may be issued
and outstanding. Each such request for issuance of a Letter of Credit shall be
given to the Issuer not later than 12:00 noon (New York City time) on the Bank
Business Day that is at least two Bank Business Days before the proposed date of
issuance of such Letter of Credit; provided, however, that the Issuer shall be
under no obligation to issue any Letter of Credit in a form other than in
substantially the form attached as Exhibit A-1 or Exhibit A-2 hereto, unless the
Issuer shall have approved in its sole discretion such other form of Letter of
Credit and two Bank Business Days shall have elapsed since the Issuer shall have
notified

 

 

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the Borrower of such approval. Each such request for issuance of a Letter of
Credit shall be by telephone, confirmed immediately by electronic communication
(and, at the Borrower’s option, also by telecopier), in each case in accordance
with Section 9.02, specifying therein (i) the Permitted Contract or Netting
Agreement to be supported by such Letter of Credit and (ii) whether or not the
Borrower is obtaining such Letter of Credit on behalf of DMT or DPM, and, if so,
the name of such Subsidiary and its ownership structure to support its status as
a “Subsidiary” of the Borrower, and specifying therein the requested (A) date of
such issuance (which shall be a Bank Business Day), (B) Available Amount of such
Letter of Credit (which Available Amount shall not be less than $1,000,000),
(C) expiration date of such Letter of Credit, (D) name and address of the
beneficiary of such Letter of Credit, and (E) form of such Letter of Credit. No
later than 12:00 noon (New York City time) on the date specified in the request
for issuance of a Letter of Credit by the Borrower, the Borrower shall notify
the Issuer by telephone, confirmed immediately by electronic communication (and,
at the Borrower’s option, also by telecopier), in each case in accordance with
Section 9.02, whether the proposed Letter of Credit will be a Reducing Letter of
Credit or a Non-Reducing Letter of Credit; provided, however, that the Borrower
shall use commercially reasonable efforts to induce the beneficiary of such
proposed Letter of Credit to accept a Reducing Letter of Credit (including,
without limitation, by providing the contact details of a representative of such
beneficiary to the Issuer to enable the Issuer to speak directly with such
beneficiary regarding a Reducing Letter of Credit); provided further, however,
that if the Borrower fails to notify the Issuer by the specified time whether
the proposed Letter of Credit will be a Reducing Letter of Credit or a
Non-Reducing Letter of Credit, the Borrower shall be deemed to have requested a
Non-Reducing Letter of Credit. If the Letter of Credit is in substantially the
form attached as Exhibit A-1 or Exhibit A-2 hereto or such other form as the
Issuer may approve in its sole discretion, the Issuer will, upon fulfillment of
the applicable conditions set forth in Article III, make such Letter of Credit
available to the Borrower on the date specified in such request for issuance
(unless a Force Majeure Event has occurred, in which case the Issuer will make
such Letter of Credit available to the Borrower upon the Bank Business Day after
the termination of the Force Majeure Event) at the Issuer’s office referred to
in Section 9.02 or as otherwise agreed with the Borrower in connection with such
issuance.

(ii)       If, on the date specified in the request for issuance of a Letter of
Credit by the Borrower in accordance with clause (i) above:

(A)      the Credit Facility Available Amount on such specified date is less
than the sum of (w) the requested Available Amount of such Letter of Credit plus
(x) the aggregate principal amount of the Advances outstanding at such time plus
(y) the aggregate principal amount of the Reimbursement Obligations at such time
plus (z) the aggregate Available Amount in respect of all existing Letters of
Credit at such time, then the Available Amount of the Letter of Credit issued
shall be reduced to an amount which, when added to the amounts set forth in (x),
(y) and (z) above, is equal to the Credit Facility Available Amount (rounded up
to the nearest $500,000) on such specified date; provided, however, that if the
Borrower has requested the issuance of two or more Letters of Credit on such
specified date, the Available Amounts of such Letters of Credit will be reduced
pro rata in

 

 

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accordance with this clause (A), unless the Borrower and the Issuer shall agree
otherwise; or

(B)      the Credit Facility Available Amount on such specified date is greater
than the sum of (w) the requested Available Amount of such Letter of Credit plus
(x) the aggregate principal amount of the Advances outstanding at such time plus
(y) the aggregate principal amount of the Reimbursement Obligations at such time
plus (z) the aggregate Available Amount in respect of all existing Letters of
Credit at such time, then the Borrower may make a request to the Issuer by
telephone, confirmed immediately by electronic communication (and, at the
Borrower’s option, also by telecopier), in each case in accordance with Section
9.02, no later than 12:00 noon (New York City time) on the date specified in the
request for issuance of such Letter of Credit, to increase the Available Amount
of such Letter of Credit to an amount not to exceed the amount which, when added
to the amounts set forth in (x), (y) and (z) above, is equal to the Credit
Facility Available Amount on such specified date.

(iii)      If at the time of, and in connection with, the Borrower’s request for
a Letter of Credit pursuant to Section 2.03(a)(i) above, the Borrower shall
notify the Issuer in accordance with Section 9.02 hereof that the beneficiary
requests that such Letter of Credit be guaranteed by Morgan Stanley, the Issuer
will arrange for such a guaranty to be issued by Morgan Stanley in substantially
the form of Exhibit C hereto.

(b)       Drawing and Reimbursement. The payment by the Issuer of each drawing
under any Letter of Credit shall automatically create for all purposes of this
Agreement an obligation (a “Reimbursement Obligation”) of the Borrower to the
Issuer to repay the Issuer the amount of such drawing pursuant to such Letter of
Credit pursuant to Section 2.04(c). On the date on which the Amendment Condition
is satisfied (the “Amendment Condition Effective Date”), each Reimbursement
Obligation shall automatically constitute, and on and after such date the
payment by the Issuer of each drawing under any Letter of Credit shall
constitute, for all purposes of this Agreement the making by the Issuer of an
advance (a “Letter of Credit Advance”) to the Borrower in the amount of such
Reimbursement Obligation or such drawing, as the case may be, and each such
Reimbursement Obligation shall be deemed to be repaid in full by the
corresponding Letter of Credit Advance.

SECTION 2.04.         Repayment of Advances and Reimbursement Obligations.
(a) Credit Advances. The Borrower shall repay to the Lender the principal amount
of each Credit Advance in accordance with the Repayment Schedule for such Credit
Advance.

(b)       Letter of Credit Advances. The Borrower shall repay to the Issuer the
principal amount of each Letter of Credit Advance in accordance with the
Repayment Schedule for such Letter of Credit Advance.

(c)       Reimbursement Obligations. The Borrower shall repay to the Issuer the
principal amount of each Reimbursement Obligations on the 2007 Credit Agreement
Date; provided, however, that upon the Amendment Condition Effective Date, each
Reimbursement Obligation shall thereupon automatically constitute, and be deemed
repaid in full by, a

 

 

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corresponding Letter of Credit Advance in accordance with Section 2.03(b) and
the Borrower shall repay such Letter of Credit Advance in accordance with
Section 2.04(b).

SECTION 2.05.         Obligations Unconditional; Limitations of Liability. (a)
The obligations of the Borrower under this Agreement shall be unconditional and
irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement, including, without limitation, the following circumstances:

(i)        any lack of validity or enforceability of this Agreement, any Letter
of Credit or any other agreement or instrument relating thereto (all of the
foregoing being, collectively, the “L/C Related Documents”);

(ii)       any change in the time, manner or place of payment of, or in any
other term of, all or any of the obligations of the Borrower in respect of any
L/C Related Document or any other amendment or waiver of or any consent to
departure from all or any of the L/C Related Documents;

(iii)      the existence of any claim, set-off, defense or other right that the
Borrower may have at any time against any Lender Party or any beneficiary or
transferee of a Letter of Credit (or any Persons for which any such beneficiary
or transferee may be acting), or any other Person, whether in connection with
the transactions contemplated by the L/C Related Documents or any unrelated
transaction;

(iv)      any statement or any other document presented under a Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect;

(v)       payment by the Issuer under a Letter of Credit against presentation of
a draft, certificate or other document that does not strictly comply with the
terms of such Letter of Credit; or

(vi)      any other circumstance or happening whatsoever, whether or not similar
to any of the foregoing, including, without limitation, any other circumstance
that might otherwise constitute a defense available to, or a discharge of, the
Borrower or a guarantor.

The foregoing shall not be construed to excuse the Issuer from liability to the
Borrower to the extent of any direct, but not consequential, damages suffered by
the Borrower that are caused by the Issuer’s failure to exercise reasonable care
when determining whether a draft and other document presented under any Letter
of Credit appear, on their face, to be in strict compliance with the terms and
conditions thereof, in accordance with, and to the extent set forth in,
Section 9.09, the UCP or ISP98 (in either case, as applicable to such Letter of
Credit), and Article 5 of the Uniform Commercial Code as in effect in the State
of New York.

(b)       Without limiting any other provision of this Agreement or of ISP98 or
the UCP (as applicable), the Issuer and any guarantor or confirmer of any Letter
of Credit:

 

 

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(i)        shall not be responsible for the identity or authority of any signer
or the form, accuracy, genuineness, falsification or legal effect of any
statement, certificate or other document presented under any Letter of Credit if
such statement, certificate or other document on its face appears to be in
accordance with the terms and conditions of such Letter of Credit;

(ii)        shall not be responsible for any acts or omissions by, or the
solvency of, the beneficiary of any Letter of Credit or any other Person having
any role in any transaction underlying any Letter of Credit;

(iii)      shall not be responsible for any failure of any statement,
certificate or other document presented under any Letter of Credit to conform,
to comply, or to be in accordance, in any way with any underlying contract or
agreement between the beneficiary of such Letter of Credit and the Borrower or
any of its affiliates; and

(iv)      may accept or pay as complying with the terms and conditions of any
Letter of Credit any statement, certificate or other document appearing on its
face (A) substantially to comply with the terms and conditions of such Letter of
Credit, (B) to be signed or presented by or issued to any successor of the
beneficiary or any other Person in whose name such Letter of Credit requires or
authorizes that any statement, certificate or other document be signed,
presented or issued, including any administrator, trustee in bankruptcy, debtor
in possession, liquidator, receiver, or successor by merger or consolidation, or
any other Person purporting to act as the representative of or in place of any
of the foregoing, or (C) to have been signed, presented or issued after a change
of name of the beneficiary.

SECTION 2.06.         Voluntary Prepayments and Mandatory Reduction/
Collateralization of Letters of Credit . (a) The Borrower may, at any time and
from time to time upon at least three Bank Business Days’ notice to the Lender
(such notice to be provided in accordance with Section 9.02) stating the
proposed date and aggregate principal amount of the prepayment, and if such
notice is given the Borrower shall, prepay in whole or in part the outstanding
aggregate principal amount of the Advances and the Reimbursement Obligations,
together with accrued interest to the date of such prepayment on the aggregate
principal amount prepaid.

(b)       If, on any Bank Business Day (a “Trigger Date”), the sum of (x) the
aggregate principal amount of the Advances outstanding at such time plus (y) the
aggregate principal amount of the Reimbursement Obligations at such time plus
(z) the aggregate Available Amount in respect of all Letters of Credit at such
time, exceeds the Credit Facility Available Amount by more than $500,000 at such
time, the Issuer shall, by 11:00 a.m. (New York City time) on such Bank Business
Day, notify the Borrower of the occurrence of such Trigger Date in accordance
with Section 9.02.

(c)       If the Issuer shall notify the Borrower of the occurrence of any
Trigger Date, the Borrower shall, by 2:00 p.m. (New York City time) on the day
that is two Bank Business Days after the day of such notification, terminate or
amend existing Letters of Credit sufficient to reduce the aggregate Available
Amount of such Letters of Credit to the amount

 

 

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which is the greater of (i) the amount which is equal to the Credit Facility
Available Amount on the date of such notification less the sum of (x) the
aggregate principal amount of the Advances outstanding at such time plus (y) the
aggregate principal amount of the Reimbursement Obligations at such time and
(ii) zero; provided, however, that the Borrower shall have no obligation to
amend or terminate any existing Letter of Credit pursuant to this clause (c) if
it has used commercially reasonable efforts to induce the beneficiary of such
Letter of Credit to terminate or amend such Letter of Credit, including, without
limitation, offering cash collateral to such beneficiary, and such beneficiary
has refused to so amend or terminate such Letter of Credit.

(d)       If, after taking the actions required pursuant to clause (c) above,
the sum of (x) the aggregate principal amount of the Advances outstanding at
such time plus (y) the aggregate principal amount of the Reimbursement
Obligations at such time plus (z) the aggregate Available Amount in respect of
all Letters of Credit at such time, still exceeds the Credit Facility Available
Amount on the date of such notification, then the Borrower shall, by 2:00 p.m.
(New York City time) on the day that is two Bank Business Days after the day the
Issuer notifies the Borrower of the occurrence of such Trigger Date and subject
to the provisions of Section 2.11(c) below:

(i)         first, prepay Advances, if any, plus interest thereon as directed by
the Lender or the Issuer, in an amount which is the lesser of (A) the aggregate
principal amount of the Advances outstanding at such time and (B) the amount by
which the sum of (x) the aggregate principal amount of the Advances outstanding
at such time plus (y) the aggregate principal amount of the Reimbursement
Obligations at such time plus (z) the aggregate Available Amount in respect of
all Letters of Credit at such time (after giving effect to any actions take
pursuant to clause (c) above), exceeds the Credit Facility Available Amount on
the day of such notification; and

(ii)       second, pay to the Paying Agent in same day funds the amount which is
the lesser of (1) the aggregate Available Amount of all then outstanding Letters
of Credit and (2) the amount by which the sum of (x) the aggregate principal
amount of the Advances outstanding at such time (after giving effect to any
actions take pursuant to clause (d)(i) above) plus (y) the aggregate principal
amount of the Reimbursement Obligations at such time plus (z) the aggregate
Available Amount in respect of all Letters of Credit at such time (after giving
effect to any actions take pursuant to clause (c) above), exceeds the Credit
Facility Available Amount on the day of such notification (such excess, an
“Excess Payment”). The Paying Agent shall, at the direction of the Issuer it its
sole discretion, either:

(A)      pay such Excess Payment, or a portion thereof, pro rata to the
beneficiaries under the outstanding Reducing Letters of Credit, ratably in
accordance with their respective Available Amounts, pursuant to the payment
instructions furnished to the Lender or the Issuer under Section 3.03(b)(ii)(B);
and/or

(B)      pay such Excess Payment, or a portion thereof, into the Collateral
Account in accordance with Section 2.11(b).

 

 

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The Paying Agent shall, not later than one Bank Business Day after the
application of any funds pursuant to this Section 2.06(d)(ii), notify the
Borrower in accordance with Section 9.02 as to the details of how such funds
were applied.

SECTION 2.07.         Interest. The Borrower shall pay interest (without having
regard to any Collateral provided by or on behalf of the Borrower) on (a) the
unpaid principal amount of each Advance owing to each Lender Party from the date
of such Advance until such principal amount shall be paid in full and (b) the
full amount of each Reimbursement Obligation owing to the Issuer from the date
such Reimbursement Obligation is incurred until such Reimbursement Obligation is
paid in full, in each case at the applicable rate per annum, and payable at the
times, set forth in the Letter Agreement.

SECTION 2.08.         Fees. The Borrower shall pay to the Issuer the fees set
forth in the Letter Agreement.

SECTION 2.09.         Payments and Computations. (a) The Borrower shall make
each payment hereunder and under the Letter Agreement, irrespective of any right
of counterclaim or set-off, not later than 2:00 p.m. (New York City time) on the
day when due in U.S. dollars in same day funds to the applicable Lender Party at
the deposit account designated by such Lender Party to the Borrower.

(b)       All computations of interest under Section 2.07 and Section 2.11(d)
and the Letter Agreement and of the ongoing fees under Section 2.08 and the
Letter Agreement shall be made on the basis of a year of 360 days, in each case
for the actual number of days (including the first day but excluding the last
day) occurring in the period for which such interest or fee is payable. Each
determination of such interest rate or fee by any Lender Party shall be
conclusive and binding for all purposes, absent manifest error.

(c)       Whenever any payment hereunder or under the Letter Agreement shall be
stated to be due on a day other than a Bank Business Day, such payment shall be
made on the next succeeding Bank Business Day, and such extension of time shall
in such case be included in the computation of payment of interest or fee, as
the case may be.

SECTION 2.10.         Evidence of Debt. (a) Each Lender Party shall maintain in
accordance with its usual practice an account or accounts evidencing the
indebtedness of the Borrower to such Lender Party resulting from each Advance or
Reimbursement Obligation owing to such Lender Party from time to time, including
the amounts of principal and interest payable and paid to such Lender Party from
time to time hereunder. Entries made in good faith by such Lender Party in such
account or accounts shall be prima facie evidence of the amount of principal and
interest due and payable or to become due and payable from the Borrower to such
Lender Party under this Agreement and the Letter Agreement, absent manifest
error; provided, however, that the failure of such Lender Party to make an
entry, or any finding that an entry is incorrect, in such account or accounts
shall not limit or otherwise affect the obligations of the Borrower to such
Lender Party under this Agreement and the Letter Agreement.

 

 

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(b)       MSCG will provide to Borrower within ten Bank Business Days after the
end of each month a statement of interest and fees accrued during such month
pursuant to this Agreement and to the Letter Agreement.

SECTION 2.11.         Collateral Account(i).   (a) Upon each drawing under a
Letter of Credit during the period from the Effective Date to the Amendment
Condition Effective Date, (i) the Issuer shall notify the Borrower of such
drawing in accordance with Section 9.02 and (ii) the Borrower shall, not later
than 2:00 p.m. (New York City time) on the Bank Business Day next succeeding the
day of such notification referred to in clause (i), pay into the Collateral
Account cash in U.S. dollars in an amount which, when combined with the
aggregate amount of cash maintained in the Collateral Account immediately prior
to such payment, is equal to or greater than 103% of the aggregate amount of all
Reimbursement Obligations after giving effect to such drawing.

(b)       The Borrower shall pay into the Collateral Account cash in U.S.
dollars in the amounts required to be paid, and at the times required to be paid
therein, pursuant to Section 2.06(d)(ii)(B). Such amounts shall be maintained in
the Collateral Account until such time as:

(i)         the sum of (x) the aggregate principal amount of the Advances
outstanding at such time plus (y) the aggregate principal amount of the
Reimbursement Obligations at such time plus (z) the aggregate Available Amount
in respect of all Letters of Credit at such time is less than the Credit
Facility Available Amount; and

(ii)       the Borrower shall have delivered a written request to the Collateral
Agent in accordance with Section 9.02, requesting a refund from the Collateral
Account of the amount by which the Credit Facility Available Amount exceeds the
sum of (x) the aggregate principal amount of the Advances outstanding at such
time plus (y) the aggregate principal amount of the Reimbursement Obligations at
such time plus (z) the aggregate Available Amount in respect of all Letters of
Credit at such time,

whereupon the Collateral Agent shall, within three Bank Business Days of receipt
of such written request, pay such amount into an account designated by the
Borrower for such purpose; provided, however, that any such request for a refund
shall be for an amount not less that $500,000 or an integral multiple thereof;
and provided further, however, that anything to the contrary notwithstanding,
the provisions of this Section 2.11(b) shall not affect the amounts required to
be in the Collateral Account pursuant to Section 2.11(a).

(c)       If, on any Bank Business Day, the Borrower is required to provide
amounts both to the Collateral Agent pursuant to Section 2.11(a) and to the
Paying Agent pursuant to Section 2.06(d), any amounts received by MSCG on such
Bank Business Day shall be provided first to the Collateral Agent for
application in accordance with Section 2.11(a), and any amounts remaining
thereafter shall be provided to the Paying Agent to be applied in accordance
with Section 2.06(d).

(d)       The Collateral Agent shall pay to the Borrower interest on the average
daily amount of cash in the Collateral Account, if any, at the applicable rate
per annum, and payable at the times, set forth in the Letter Agreement

 

 

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SECTION 2.12.         Permitted Contracts and Netting Agreements. At all times
on and after the Effective Date, the Borrower shall, as soon as possible and in
any event within three Bank Business Days after the occurrence of any default
under a Permitted Contract or Netting Agreement supported by a Letter of Credit,
furnish to the Issuer a statement of an officer of the Borrower setting forth
the details of such default and the action that the Borrower has taken and
proposes to take with respect thereto.

ARTICLE III

 

CONDITIONS TO EFFECTIVENESS AND OF

ISSUANCES OF LETTERS OF CREDIT AND ADVANCES

SECTION 3.01.         Conditions to Effectiveness. Section 2.01 of this
Agreement shall become effective on and as of the first date (the “Effective
Date”) on which (i) the Borrower shall have paid to the Issuer the upfront fee
referred to in the Letter Agreement and (ii) each Lender Party and the
Collateral Agent shall have received, on or before the Effective Date, the
following, each dated such day (unless otherwise specified), in form and
substance reasonably satisfactory to such Lender Party and the Collateral Agent:

 

(a)

The Letter Agreement.

(b)       Certified copies of the resolutions of the Board of Directors of the
Borrower approving this Agreement, the Letter Agreement and the transactions
contemplated hereby and thereby, including the grant of a security interest in
the Collateral, and of all documents evidencing other necessary corporate action
and governmental and other third party approvals and consents, if any, with
respect to this Agreement and the Letter Agreement.

(c)       A copy of a certificate of the Secretary of State of the jurisdiction
of incorporation of the Borrower, dated reasonably near the Effective Date,
certifying (i) as to a true and correct copy of the certificate of incorporation
of the Borrower and each amendment thereto on file in such Secretary’s office
and (ii) that (A) such amendments are the only amendments to the Borrower’s
certificate of incorporation on file in such Secretary’s office, (B) the
Borrower has paid all franchise taxes to the date of such certificate and
(C) the Borrower is duly incorporated and in good standing or presently
subsisting under the laws of the State of the jurisdiction of its incorporation.

(d)       A certificate of the Secretary or any Assistant Secretary of the
Borrower, dated the Effective Date (the statements made in which certificate
shall be true on and as of the Effective Date), certifying as to (i) the absence
of any amendments to the certificate of incorporation of the Borrower since the
date of the Secretary of State’s certificate referred to in Section 3.01(c),
(ii) a true and correct copy of the bylaws of the Borrower as in effect on the
date on which the resolutions referred to in Section 3.01(b) were adopted and on
the Effective Date, (iii) the due incorporation and good standing or valid
existence of the Borrower as a corporation organized under the laws of the
jurisdiction of its incorporation, and the absence of any proceeding for the
dissolution or

 

 

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liquidation of the Borrower, and (iv) the names and true signatures of the
officers of the Borrower authorized to sign this Agreement and the Letter
Agreement.

(e)       A certificate of the Borrower signed on behalf of the Borrower by its
President or a Vice President, dated on the Effective Date (the statements made
in which certificate shall be true on and as of the Effective Date), certifying
as to (i) the truth of the representations and warranties contained in
Section 4.01 of this Agreement as though made on and as of the Effective Date
and (ii) the absence of any event occurring and continuing that constitutes a
Default.

(f)        Proper financing statements naming the Borrower as the debtor and the
Collateral Agent as secured party in form appropriate for filing under the UCC
of all jurisdictions necessary or desirable in order to perfect and protect the
security interest created in the Collateral pursuant to Article VII of this
Agreement.

(g)       A favorable opinion of Akin Gump Strauss Hauer & Feld LLP, counsel for
the Borrower, in form and substance reasonably satisfactory to the Lender
Parties and the Collateral Agent.

 

(h)  

A favorable opinion of in-house counsel of the Borrower, to the effect that:

(i)        the Borrower is a corporation duly organized and is validly existing
under the laws of the State of Delaware with all necessary corporate power and
authority to own its properties and conduct its business as presently conducted
and as proposed to be conducted and to enter into this Agreement and the Letter
Agreement, and perform its obligations hereunder and thereunder;

(ii)       the Borrower is in good standing under the laws of the State of
Delaware and is qualified to do business in each jurisdiction where the nature
of its business requires such qualifications;

(iii)      the execution, delivery and performance by the Borrower of this
Agreement and the Letter Agreement have all been duly authorized by all
necessary corporate action of the Borrower;

(iv)      this Agreement and the Letter Agreement have been duly executed and
delivered by the Borrower; and

(v)       the execution and delivery by the Borrower of this Agreement and the
Letter Agreement and the consummation of the transactions contemplated thereby,
and the performance by the Borrower of its respective obligations under this
Agreement and the Letter Agreement, do not conflict with, result in a breach of
or violate any of the terms, conditions or provisions of the Borrower’s
certificate of incorporation or by-laws or the Delaware General Corporation Law.

In rendering such opinion, the counsel of the Borrower shall opine only as to
matters governed by the federal laws of the United States of America, the laws
of the State of

 

 

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Texas and the Delaware General Corporation Law. Such counsel may also state that
he/she relied on certificates of public officials, certificates of officers of
the Borrower and other sources believed by him/her to be responsible.

SECTION 3.02.         Conditions Precedent to Initial Advances. The willingness
of the Lender to make its initial Advance hereunder is subject to the condition
precedent that the Lender and the Collateral Agent shall have received, on or
before the date of such Advance, the following, each dated such date (unless
otherwise specified), in form and substance reasonably satisfactory to the
Lender and the Collateral Agent:

 

(a)

The 2007 Credit Agreement Amendment.

(b)       Favorable opinions with respect to this Agreement after giving effect
to the 2007 Credit Agreement Amendment, in form and substance substantially
similar to those delivered pursuant to Sections 3.01(g) and (h) with respect to
this Agreement, but expressly covering the making of Advances, the repayment of
Advances, and the providing of Collateral, pursuant to this Agreement as not
violating, or resulting in the creation or imposition of any lien upon any
property of the Borrower under, the 2007 Credit Agreement as amended by the 2007
Credit Agreement Amendment or any other credit agreement, indenture or financing
document then binding on or affecting the Borrower as specified in such opinion.

SECTION 3.03.         Conditions Precedent to Certain Issuances and Advances.
The obligations of the Issuer to issue or to increase any Letter of Credit, and
the willingness of the Lender to make any Credit Advances, shall be subject to
the further conditions precedent that on the date of such issuance or such
Credit Advance (a) the following statement shall be true:

(i)        the representations and warranties contained in Section 4.01 of this
Agreement are correct in all material respects on and as of such date, before
and after giving effect to such issuance or such Credit Advance, as though made
on and as of such date except to the extent that such representations and
warranties specifically refer to an earlier date, in which case they shall be
correct in all material respects as of such earlier date; and

(ii)       no Default or Event of Default has occurred and is continuing or
would result from such issuance or such Credit Advance,

and (b) the Lender or the Issuer, as applicable, shall have received on or
before the date of such issuance or such Credit Advance, the following, each
dated such date, in form and substance reasonably satisfactory to the Lender or
the Issuer, as applicable:

(i)        a certificate of the Treasurer or Assistant Treasurer of the Borrower
certifying that the Borrower is in compliance, on a pro forma basis after giving
effect to such Credit Advance or such issuance, with the conditions specified in
provisos (I) and (II) of clause (xii) of Section 7.03(b) of the 2007 Credit
Agreement as in effect on the date hereof (or, in the event the 2007 Credit
Agreement is amended, amended and restated, supplemented, or otherwise modified
or refinanced, any comparable provision)

 

 

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and including in or attached to such certificate detailed calculations
supporting such compliance;

(ii)       in the case of an issuance of a Letter of Credit, (A) a completed
anti-money laundering form in the form of Exhibit B hereto and (B) payment
instructions on the beneficiary’s letterhead (with contact details), in each
case in respect of the beneficiary of such Letter of Credit; and

(iii)      such other approvals, opinions or documents as the Lender or the
Issuer may reasonably request.

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES

SECTION 4.01.         Representations and Warranties of the Borrower. The
Borrower represents and warrants as follows:

(a)       It is duly organized, validly existing and in good standing in its
jurisdiction of incorporation.

(b)       It has full corporate power and authority, and has taken all corporate
action necessary, to execute and deliver the Transaction Documents, to grant a
security interest in the Collateral and to fulfill its obligations under, and to
consummate the transaction contemplated by, the Transaction Documents.

(c)       The making and performance by it of the Transaction Documents,
including the grant by the Borrower of the security interest in the Collateral
granted pursuant hereto, do not and will not (i) violate its certificate of
incorporation or bylaws, (ii) violate in any material respect any law or
regulation of its jurisdiction of incorporation or any other law or regulation
applicable to it, or (iii) violate in any material respect any contractual
restriction binding on or affecting it.

(d)       All consents, licenses, approvals, authorizations, exemptions,
registrations, filings, opinions and declarations from or with any agency,
department, administrative authority, statutory corporation or judicial entity
necessary for the validity or enforceability of the security interest in the
Collateral granted pursuant to this Agreement or enforceability of its
obligations under the Transaction Documents have been obtained, and no
governmental authorization other than any already obtained are required in
connection with its execution, delivery and performance of the Transaction
Documents, the perfection or maintenance of the security interest created
pursuant to this Agreement (including the first priority nature thereof), or the
exercise by the Collateral Agent of its remedies in respect of the Collateral
pursuant hereto, except in each case for the timely filing of the financing
statements referred to in Section 3.01(f).

(e)       Each of the Transaction Documents has been duly executed and delivered
by it and constitutes its legal, valid and binding obligations, enforceable
against it in accordance with its terms, except as limited by the bankruptcy,
insolvency,

 

 

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reorganization, liquidation, moratorium and other similar laws affecting
creditors’ rights generally and by general principles of equity.

(f)        There is no litigation or governmental proceeding pending at law or
in equity, nor to its knowledge threatened, against or affecting it which, if
determined adversely to it, would result in any material adverse change in its
interest in the Collateral or its ability to perform its obligations under the
Transaction Documents.

(g)       No Default has occurred and is continuing or would occur by reason of
its entering into or performing its obligations under the Transaction Documents.

(h)       To the best knowledge of the executive officers of Dynegy Inc. (the
corporate parent of the Borrower) and the Borrower as of the Effective Date, the
written information furnished by or on behalf of Borrower to MSCG in connection
with the transactions contemplated hereby (including, without limitation,
reports, financial statements and certificates) and the negotiation of this
Agreement or delivered hereunder or under any other L/C Related Document (as
modified or supplemented by other information so furnished), when taken as a
whole together with the Public Disclosure and any Form 10-K, Form 10-Q or Form
8-K filed by Dynegy Inc. or the Borrower after the Effective Date (all of the
foregoing as updated, restated, or otherwise modified in writing from time to
time) do not contain any material misstatement of fact or omit to state any
material facts necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that with respect to projected financial information, the Borrower represents
only that such information was prepared in good faith based upon assumptions
believed to be reasonable at the time. Notwithstanding anything to the contrary
in the preceding sentence, no representation, warranty or covenant is made with
respect to information for which the source is any separately identified (a)
third party source or (b) other person or entity not affiliated with or acting
as agent or representative for Dynegy Inc. or any of its subsidiaries.

(i)        The Collateral is free and clear of all liens, security interests and
other adverse claims. This Agreement creates in favor of the Collateral Agent
for the benefit of the Lender Parties a valid and perfected security interest in
the Collateral, securing the payment of all of the Secured Obligations purported
to be secured thereby. Such security interest is a first priority security
interest. There are no effective UCC financing statements on file in any
recording office with respect to the Collateral.

 

(j)

Each of DMT and DPM is a Subsidiary of the Borrower.

For the sake of clarity, the Borrower is not making any representations or
warranties that it may receive Advances hereunder prior to the Amendment
Condition Effective Date without such Advance constituting a violation of the
2007 Credit Agreement or a Default or Event of Default under Section 5.01(c).

 

 

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ARTICLE V

 

EVENTS OF DEFAULT

SECTION 5.01.         Events of Default. If any of the following events (“Events
of Default”) shall occur and be continuing:

(a)       (i) the Borrower shall fail to pay any principal of any Advance or any
Reimbursement Obligation when the same shall become due and payable or (ii) the
Borrower shall fail to pay any interest on any Advance or of any Reimbursement
Obligation, or the Borrower shall fail to make any other payment under this
Agreement or the Letter Agreement, within two Bank Business Days after the same
shall become due and payable; or

(b)       the Borrower shall fail to perform or observe any terms, covenants or
agreements contained in Section 2.06 or Section 2.11, within two Bank Business
Day after the same shall be required to be performed or observed; or

(c)       an “Event of Default” (as defined in the 2007 Credit Agreement) shall
have occurred and be continuing; or

 

(d)

any Bankruptcy of the Borrower; or

(e)       the Collateral Agent ceases to have a valid and perfected
first-priority security interest on any material portion of the Collateral free
and clear of any other security interest; or

(f)        any representation or warranty made by the Borrower (or any of its
officers) under or in connection with this Agreement or in any certificate
furnished hereunder shall prove to have been incorrect in any material respect
when made;

then, and in any such event, the Lender Parties may, (A) by notice to the
Borrower provided in accordance with Section 9.02, declare the Facilities and
the obligations of the Issuer to issue Letters of Credit to be terminated,
whereupon the same shall forthwith terminate, (B) by notice to the Borrower
provided in accordance with Section 9.02, declare that each Reimbursement
Obligation shall thereupon automatically constitute, and be deemed repaid in
full by, a corresponding Letter of Credit Advance and (C) by notice to the
Borrower provided in accordance with Section 9.02, declare the Advances
(including, without limitation, the Letter of Credit Advances referred to in (B)
above), all interest thereon and all other amounts payable under this Agreement
to be forthwith due and payable, whereupon the Advances, all such interest and
all such amounts shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Borrower, provided, however, that, in the event
of an actual or deemed entry of an order for relief with respect to the Borrower
under the Federal Bankruptcy Code, (x) the Facilities and the obligations of the
Issuer to issue Letters of Credit shall automatically terminate and (y) the
Advances and the Reimbursement Obligations, all such interest and all such
amounts shall automatically become and be due and payable, without presentment,
demand, protest or any notice of any kind, all of which are hereby expressly
waived by the Borrower (the date on which

 

 

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any event referred to in clause (A), (B) or (C), or clause (x) or (y), above
shall occur being the “Acceleration Date”).

ARTICLE VI

 

THE PAYING AGENT

SECTION 6.01.         Authorization and Action. The Borrower hereby appoints and
authorizes MSCG to act as paying agent (the “Paying Agent”) hereunder on behalf
of the Borrower with respect to the payments to be made pursuant to Section
2.06(d)(ii).

SECTION 6.02.         Payments to the Paying Agent. The Borrower shall make any
payment to be made to the Paying Agent pursuant to Section 2.06(d)(ii) to the
following account:

The Northern Trust International Banking Corporation

ABA NO. 026001122

Morgan Stanley Capital Group Inc.

A/C NUMBER 102897- 20010

                               Section 6.03.         Duties of Paying Agent;
Exculpatory Provisions.   (a) The Paying Agent’s duties hereunder are solely
mechanical and administrative in nature and the Paying Agent shall have no
duties or obligations except those expressly set forth herein. Without limiting
the generality of the foregoing, the Paying Agent shall not:

 

(i)

be subject to any fiduciary or other implied duties, or

(ii)    have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated hereby.

(iii)    The Paying Agent shall not be liable for any action taken or not taken
by it, except for its own gross negligence or willful misconduct.

(iv)    The Paying Agent shall not be responsible for or have any duty to
ascertain or inquire into (x) any statement, warranty or representation made in
or in connection with this Agreement, (y) the contents of any certificate,
report or other document delivered hereunder or in connection herewith, or
(z) the performance or observance of any of the covenants, agreements or other
terms or conditions set forth herein. The Paying Agent shall not be responsible
for the adequacy, accuracy and/or completeness of any information (whether oral
or written) supplied by the Borrower or any other Person.

SECTION 6.04.        Reliance by Paying Agent. The Paying Agent shall be
entitled to rely upon, and shall not incur any liability for relying upon, any
notice, request, certificate, consent, statement, instrument, document or other
writing (including any electronic message, Internet or intranet website posting
or other distribution) believed by it to be genuine and to have been signed,
sent or otherwise authenticated by the proper Person. The Paying Agent also may

 

 

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rely upon any statement made to it orally or by telephone and believed by it to
have been made by the proper Person, and shall not incur any liability for
relying thereon.

SECTION 6.05.         Indemnification. The Borrower hereby agrees to indemnify
the Paying Agent and its affiliates and their respective officers, directors,
employees, agents and advisors from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever that may be imposed
on, incurred by, or asserted against the Paying Agent in any way relating to or
arising out of this Agreement or any Letter of Credit or any action taken or
omitted by the Paying Agent under this Agreement or any Letter of Credit
(collectively, the “Indemnified Costs”); provided, however, that the Borrower
shall not be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from such Agent’s gross negligence or willful misconduct as found in a
final, non-appealable judgment by a court of competent jurisdiction. In the case
of any investigation, litigation or proceeding giving rise to any Indemnified
Costs, this Section 6.05 applies whether any such investigation, litigation or
proceeding is brought by the Borrower or any other Person.

ARTICLE VII

 

GRANT OF SECURITY INTEREST; REMEDIES

SECTION 7.01.        Grant of Security Interest. The Borrower hereby grants to
the Collateral Agent, for its benefit and the ratable benefit of the Lender
Parties, a security interest in the Borrower’s right, title and interest in and
to the following, whether now owned or hereafter acquired by the Borrower,
wherever located, and whether now or hereafter existing or arising
(collectively, the “Collateral”):

(a)      the Collateral Account, all cash and security entitlements with respect
to all financial assets from time to time credited to the Collateral Account,
and all financial assets, and all dividends, distributions, return of capital,
interest, cash, instruments and other property, from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such cash or security entitlements or financial assets and all warrants,
rights or options issued thereon or with respect thereto; and

(b)      all proceeds of, collateral for, income and other payments now or
hereafter due and payable with respect to, and supporting obligations relating
to, any and all of the Collateral (including, without limitation, proceeds,
collateral and supporting obligations that constitute property of the types
described in clause (a) of this Section 7.01) and, to the extent not otherwise
included, all (i) payments under insurance (whether or not the Collateral Agent
is the loss payee thereof), or any indemnity, warranty or guaranty, payable by
reason of loss or damage to or otherwise with respect to any of the foregoing
Collateral, and (ii) cash constituting proceeds of Collateral.

SECTION 7.02.        Security for Obligations. The grant of the security
interest set forth in Section 7.01 is made to the Collateral Agent to secure,
for its benefit and the benefit of the Lender Parties, the payment of all
obligations of the Borrower under the Transaction Documents, now or hereafter
existing, whether direct or indirect, absolute or contingent, and

 

 

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whether for Advances, Reimbursement Obligations, interest, fees, costs, expenses
or otherwise (all such obligations being the “Secured Obligations”).

SECTION 7.03.        Borrower Remains Liable. Anything herein to the contrary
notwithstanding, (i) the Borrower shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to perform
all of its duties and obligations thereunder to the same extent as if this
Agreement had not been executed, (ii) the exercise by the Collateral Agent of
any of the rights hereunder shall not release the Borrower from any of its
duties or obligations under the contracts and agreements included in the
Collateral and (iii) neither any Lender Party nor the Collateral Agent shall
(x) have any obligation or liability to perform any of the obligations or duties
of the Borrower under the contracts and agreements included in the Collateral by
reason of this Agreement or (y) be obligated to perform any of the obligations
or duties of the Borrower thereunder.

SECTION 7.04.        Control of the Collateral; Investments in the Collateral
Account.  (a) All Collateral shall be controlled (within the meaning of
Section 9-106 of the UCC in effect in the State of New York) by the Collateral
Agent.

(b)      Without limiting the rights and obligations of the Collateral Agent and
the Lender Parties hereunder, the Collateral Agent will, notwithstanding Section
9-207(c) of the UCC in effect in the State of New York, have the right to:

(i)       sell, pledge, rehypothecate, assign, invest, use, commingle or
otherwise dispose of, or otherwise use in its business, any and all of the
Collateral, free from any claim or right of any nature whatsoever of the
Borrower, including any equity or right of redemption by the Borrower; and

(ii)     register any and all of the Collateral in the name of the Collateral
Agent or its nominee.

SECTION 7.05.        Further Assurances. (a) The Borrower agrees that, at any
time and from time to time, at the expense of the Borrower, the Borrower will
promptly execute and deliver all further instruments and documents, and take all
further action that the Collateral Agent may reasonably request, in order to
perfect and protect any security interest granted or purported to be granted
hereby or to enable the Collateral Agent to exercise and enforce its rights and
remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, the Borrower will, upon the reasonable request of
the Collateral Agent, (i) execute or authenticate and file such financing or
continuation statements or amendments thereto, and such other instruments or
notices, as may be necessary or desirable, or as the Collateral Agent may
reasonably request, in order to perfect and preserve the security interests
granted or purported to be granted hereby, (ii) take all action necessary to
ensure that the Collateral Agent has control of Collateral consisting of deposit
accounts and/or securities accounts as provided in Sections 9-104 and 9-106 of
the UCC, and (iii) deliver to the Collateral Agent evidence that all other
action that the Collateral Agent may deem reasonably necessary or desirable from
time to time in order to perfect and protect the security interest created by
the Borrower under this Agreement has been taken. The Borrower hereby authorizes
the Collateral Agent to file one or more financing or continuation statements,
and amendments thereto, relating to all or any part of the Collateral.

 

 

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The Borrower ratifies its authorization for the Collateral Agent to have filed
such financing statements, continuation statements or amendments filed prior to
the date hereof.

(b)      The Borrower will not, without the prior written consent of the
Collateral Agent (after having given the Collateral Agent not less than thirty
days’ prior written notice thereof in accordance with Section 9.02 and after
having executed and delivered to the Collateral Agent such further instruments
and documents in connection therewith as may be reasonably requested by the
Collateral Agent pursuant to this Section 7.05), change its jurisdiction of
organization or its name.

(c)      The Borrower shall defend the Collateral against all claims and demands
of all Persons at any time claiming any interest therein that is, or in a manner
which is, adverse to the Collateral Agent or any Lender Party.

(d)      The Borrower shall not sell, lease, transfer, assign (by operation of
law or otherwise) or otherwise dispose of, or grant any security interest in or
option with respect to, directly or indirectly (or agree to any of the foregoing
at any future time), all or any portion of the Collateral.

(e)      The Borrower shall not deposit any funds in respect of, or proceeds
from, any Collateral into any account other than the Collateral Account.

SECTION 7.06.        Collateral Agent Appointed Attorney-in-Fact. The Borrower
hereby irrevocably, upon the occurrence and during the continuation of any
Default or Event of Default, appoints the Collateral Agent the Borrower’s
attorney-in-fact, with full authority in the place and stead of the Borrower and
in the name of the Borrower or otherwise, from time to time in the Collateral
Agent’s discretion, to take any action and to execute any instrument that the
Collateral Agent may deem necessary or advisable to accomplish the purposes of
this Agreement (such power being coupled with an interest).

SECTION 7.07.        Collateral Agent May Perform. If the Borrower fails to
perform any agreement contained herein, the Collateral Agent may, but without
any obligation to do so and without notice, itself perform, or cause performance
of, such agreement, if an Event of Default then exists; and the reasonable
expenses of the Collateral Agent incurred in connection therewith shall be
payable by the Borrower pursuant to Section 7.10.

SECTION 7.08.        Reasonable Care. The powers conferred on the Collateral
Agent hereunder are solely to protect its interest in the Collateral and shall
not impose any duty upon it to exercise any such powers. The Collateral Agent
shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which an ordinary person accords its own
property, it being understood that none of the Collateral Agent or the Lender
Parties shall have any responsibility for taking any necessary steps to preserve
rights against any parties with respect to any Collateral, other than, with
respect to the Collateral Agent, (a) the safe custody of any Collateral in its
possession, (b) the accounting for monies actually received by it under this
Agreement and (c) the application of monies in accordance with this Agreement.

 

 

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SECTION 7.09.        Remedies. In the event that any Event of Default shall have
occurred and be continuing, then:

(a)      The Collateral Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party upon default under the UCC
in effect in the State of New York (whether or not such UCC applies to the
affected Collateral) and also may: (i)  with notice as specified in the next
succeeding sentence unless Article 9 of such UCC permits sale without notice,
sell the Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Collateral Agent’s offices or elsewhere, for cash,
on credit or for future delivery, and upon such other terms as the Collateral
Agent may deem commercially reasonable, and (ii) exercise any and all rights and
remedies of the Borrower under or in connection with the Collateral, or
otherwise in respect of the Collateral, including, without limitation, (A) any
and all rights of the Borrower to demand or otherwise require payment of any
amount in respect of the Collateral and (B) exercise all other rights and
remedies with respect to the Collateral, including, without limitation, those
set forth in Section 9-607 of such UCC. The Borrower agrees that at least ten
days’ notice to the Borrower provided in accordance with Section 9.02, sent
after the occurrence of an Event of Default, of the time and place of any public
sale or the time after which any private sale is to be made shall constitute
reasonable notification. The Collateral Agent shall not be obligated to make any
sale of Collateral regardless of notice of sale having been given. The
Collateral Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.

(b)      Any cash held by or on behalf of the Collateral Agent and all cash
proceeds received by or on behalf of the Collateral Agent in respect of any sale
of, collection from, or other realization upon all or any part of the Collateral
shall be applied by the Collateral Agent to reimburse the Collateral Agent and
the Lender Parties for the Secured Obligations. Any surplus of such cash or cash
proceeds held by or on the behalf of the Collateral Agent and remaining after
reimbursement in full of all the Secured Obligations shall be paid over to the
Borrower or to whomsoever may be lawfully entitled to receive such surplus.

(c)      All payments received by the Borrower in respect of the Collateral
shall be received in trust for the benefit of the Collateral Agent, shall be
segregated from other funds of the Borrower and shall be forthwith paid over to
the Collateral Agent in the same form as so received (with any necessary
endorsement).

(d)      The Collateral Agent may, without notice to the Borrower except as
required by law and at any time or from time to time, charge, set-off and
otherwise apply all or any part of the Secured Obligations against any funds
held with respect to the Collateral or in any other deposit account.

SECTION 7.10.        Indemnity and Expenses. (a) The Borrower agrees to
indemnify, defend and save and hold harmless the Collateral Agent and each
Lender Party and

 

 

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their respective officers, directors, employees, agents and advisors (each, an
“Indemnified Party”) from and against, and shall pay on demand, any and all
claims, damages, losses, liabilities and expenses (including, without
limitation, reasonable fees and expenses of counsel) that may be incurred by or
asserted or awarded against any Indemnified Party, in each case arising out of
or in connection with or resulting from this Agreement or the Collateral
(including, without limitation, enforcement of this Agreement), except to the
extent such claim, damage, loss, liability or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to have resulted
from such Indemnified Party’s gross negligence or willful misconduct.

(b)      The Borrower will upon demand pay to the Collateral Agent the amount of
any and all reasonable expenses, including, without limitation, the reasonable
fees and expenses of its counsel and of any experts and agents, that the
Collateral Agent may incur in connection with (i) the administration of this
Article VII, (ii) the custody or preservation of, or the sale of, collection
from or other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of the Collateral Agent hereunder or (iv) the
failure by the Borrower to perform or observe any of the provisions hereof.

SECTION 7.11.        Continuing Security Interest; Assignments. This Article VII
shall create a continuing security interest in the Collateral and shall (a)
subject to Section 7.12, remain in full force and effect until the later of (i)
the Termination Date and (ii) the date of payment in full, in cash, of the
Secured Obligations, (b) be binding upon the Borrower and its successors and
assigns and (c) inure, together with the rights and remedies of the Collateral
Agent hereunder, to the benefit of the Lender Parties and their respective
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (c), each Lender Party may assign or otherwise transfer all or
a portion of its rights and obligations under this Agreement (including all or
any portion of an Advance or Reimbursement Obligation held by it and all rights
corresponding thereto under any of the Transaction Documents) to any other
person to the extent permitted under Section 9.06, and such other person shall
thereupon become vested with all the benefits in respect thereof granted to such
Lender Party herein or otherwise, as provided in Section 9.06.

SECTION 7.12.        Release; Termination. Upon the earlier of (a) the later of
(i) payment in full, in cash, of the Secured Obligations then due and payable
and (ii) the Termination Date and (b) the consummation of any sale or
foreclosure in respect of any of the Collateral conducted by or under the
direction of the Collateral Agent, the security interest granted by this Article
VII shall automatically terminate and the Collateral shall automatically be
released from such security interest but, in the case of the foregoing clause
(b), only to the extent of the Collateral disposed of in such transaction, and
only following the receipt by the Collateral Agent of the proceeds of such
disposition, and the Collateral Agent, on behalf of the Lender Parties, shall
enter into such documentation as may be reasonably requested by the purchaser of
such Collateral and reasonably acceptable to the Collateral Agent in order to
evidence such release. Upon the earlier date referred to in the first sentence,
the Borrower shall be entitled to the return, upon its request and at its
expense, of such of the Collateral as shall not have been sold or otherwise
applied pursuant to the terms hereof and the Collateral Agent will, on behalf of
the Lender Parties, enter into and deliver such documentation as shall be
reasonably requested by the Borrower, and as may be reasonably acceptable to the
Collateral Agent, to evidence such

 

 

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release, including UCC termination statements and such notices as the Borrower
may reasonably request, at the Borrower’s expense, to evidence and confirm the
release and discharge of the security interest granted by this Article VII. In
the event that the Collateral Agent is required to refund any amounts to the
Borrower pursuant to Section 2.11(b), the amounts that are so refunded shall
automatically be released from the security interest granted by this Article VII
and the Collateral Agent, on behalf of the Lender Parties, shall enter into such
documentation as may be reasonably requested by the Borrower and reasonably
acceptable to the Collateral Agent in order to evidence such release, all at the
expense of the Borrower.

ARTICLE VIII

 

COLLATERAL AGENT

SECTION 8.01.        Authorization and Action of the Collateral Agent;
Delegation of Duties.

(a)      Each of the Lender Parties hereby appoints and authorizes MSCG. as the
Collateral Agent hereunder to take such action as Collateral Agent on its behalf
and to exercise such powers and discretion under this Agreement and the other
Transaction Documents as are delegated to the Collateral Agent by the terms
hereof and thereof, together with such powers and discretion as are reasonably
incidental thereto and consistent herewith and the other Transaction Documents.
The Collateral Agent is hereby irrevocably authorized and instructed to enter
into the other Transactions Documents to which it is intended to be a party. As
to any matters requiring the exercise of discretion by the Collateral Agent, and
not expressly requiring the consent of the Lender Parties, pursuant to the
Transaction Documents (including enforcement of the Transaction Documents), the
Collateral Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the written
instructions of both Lender Parties; provided, however, that neither the
Collateral Agent nor the Lender Parties shall be required to take an action that
exposes such persons to personal liability or that is contrary to the
Transaction Documents or applicable law. The Collateral Agent agrees to give to
each Lender Party prompt notice of each notice and copies of all other documents
given to it by the Borrower pursuant to the terms of this Agreement unless
otherwise delivered by another party.

(b)      The Collateral Agent may execute any of its duties under this Agreement
or any other Transaction Document by or through agents, subagents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Collateral Agent and any such sub-agent
or attorney-in-fact may perform any and all its duties and exercise its rights
and powers by or through their respective affiliates. The exculpatory provisions
of this Article VIII shall apply to any such sub-agent or attorney-in-fact and
to the affiliates of the Collateral Agent and any such sub-agent or
attorney-in-fact.

SECTION 8.02.        Collateral Agent’s Reliance, Etc. Neither the Collateral
Agent, nor any of its directors, officers, agents or employees shall be liable
for any action taken or omitted to be taken by them under or in connection with
the Transaction Documents, except for their own gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction. Without
limiting the generality of the foregoing, the Collateral Agent (a) may treat

 

 

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each Lender Party as the holder of its interest in the Advances and the
Reimbursement Obligations until it receives notice from the relevant Lender
Party that such interest has been assigned; (b) may consult with legal counsel,
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the good faith advice of such counsel, accountants or experts;
(c) does not make any warranty or representation to any Lender Party and shall
not be responsible to any Lender Party for any statements, warranties or
representations (whether written or oral) made by any person other than itself
in or in connection with the Transaction Documents; (d) shall not have any duty
to ascertain or to inquire as to the performance or observance of any of the
terms, covenants or conditions of any Transaction Document on the part of the
Borrower or any other party thereto or to inspect the property (including the
books and records) of the Borrower; (e) shall not be responsible to any Lender
Party for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of, or the perfection or priority of, any Lien or other
interest created or purported to be created under, or in connection with, any
Transaction Document; (f) shall incur no liability under or in respect of any
Transaction Document by acting upon any notice, consent, certificate or other
instrument or writing (which may be by facsimile) believed by it to be genuine
and signed or sent by the proper party or parties; (g) shall have no
responsibility concerning the value or validity of the Collateral; and (h) may
assume that no Default has occurred and is continuing unless it has, in its
capacity as Collateral Agent, actual knowledge or actual notice to the contrary.

SECTION 8.03.        Collateral Agent and Affiliates. With respect to any
interest in an Advance or a Reimbursement Obligation held by the Collateral
Agent, the Collateral Agent shall have the same rights and powers under the
Transaction Documents as any Lender Party and may exercise the same as though it
were not the Collateral Agent, and the term “Lender Party” shall, unless
otherwise expressly indicated, include the Collateral Agent in its individual
capacity. The Collateral Agent and its affiliates may accept deposits from, lend
money to, act as trustee under indentures of, accept investment banking
engagements from and generally engage in any kind of business with, the Borrower
and/or any of its affiliates and any person who may do business with or own an
interest in any of them, all as if it were not a Collateral Agent and without
any duty to account therefor to any Lender Party.

SECTION 8.04.        Lender Credit Decision.  Each of the Lender Parties
acknowledges that it has, independently and without reliance upon the Collateral
Agent or any other Lender Party or any affiliate thereof and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each of the Lender Parties
also acknowledges that it will, independently and without reliance upon the
Collateral Agent or any other Lender Party or affiliate thereof and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement and the other Transaction Documents.

SECTION 8.05.        Successor Agents. The Collateral Agent may resign at any
time by giving not less than thirty Bank Business Days’ prior written notice to
the Lender Parties, such resignation to be effective upon the appointment and
acceptance of a successor Collateral Agent as provided for below. Upon any such
resignation, the Lender Parties shall appoint a replacement Collateral Agent
hereunder, subject (unless a Default or Event of Default

 

 

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is continuing) to the prior written consent of the Borrower (which consent may
not be unreasonably withheld or delayed). Upon the acceptance of any appointment
as Collateral Agent hereunder by a successor Collateral Agent and upon the
execution and filing or recording of such instruments or notices as may be
necessary or desirable or as the Lender Parties may reasonably request, in order
to continue the perfection of the security interests granted or purported to be
granted by the Transaction Documents, such successor Collateral Agent shall
succeed to and become vested with all the rights, powers, discretion,
privileges, duties and obligations of the retiring Collateral Agent, and the
retiring Collateral Agent shall be discharged from its duties and obligations
under the Transaction Documents. After any retiring Collateral Agent’s
resignation hereunder as Collateral Agent, the provisions of this Article VIII
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Collateral Agent under this Agreement.

SECTION 8.06.        Indemnification.  Each Lender Party shall, jointly and
severally, indemnify, defend and save and hold harmless the Collateral Agent,
its affiliates and their respective officers, directors, employees, agents and
advisors (each, an “Indemnitee”) (to the extent not reimbursed by the Borrower)
from and against, and shall pay on demand, any and all claims, damages, losses,
liabilities and expenses (including, without limitation, reasonable and
documented fees and expenses of counsel) that may be incurred by or asserted or
awarded against such Indemnitee, in each case arising out of or in connection
with or by reason of (including in connection with any investigation, litigation
or proceeding or preparation of a defense in connection therewith) an Advance, a
letter of credit or a Reimbursement Obligation, the actual or proposed use of a
letter of credit or the proceeds of an Advance, the Transaction Documents or any
of the transactions contemplated thereby, including in connection with
enforcement by such Indemnitee of its rights under this Section 8.06, except to
the extent such claim, damage, loss, liability or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to have resulted
from such Indemnitee’s bad faith, gross negligence or willful misconduct.

ARTICLE IX

 

MISCELLANEOUS

SECTION 9.01.        Amendments, Etc.  No amendment or waiver of any provision
of the Transaction Documents, nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Borrower, the Lender Parties and the Collateral Agent and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.

SECTION 9.02.        Notices, Etc.  All notices and other communications
provided for hereunder shall be in writing (including teletransmissions) and
mailed or teletransmitted or delivered:

if to the Borrower, at its address at:

Dynegy Holdings Inc.

Attn: Charles C. Cook

 

 

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Senior Vice President of Strategic Planning, Corporate Business Development and
Treasurer

1000 Louisiana Street, Suite 5800

Houston, Texas 77002-5050

Phone: (713) 767-8648

Fax: (713) 356-2200

E-mail: Charles.C.Cook@Dynegy.com

with a copy to:

Dynegy Holdings Inc.

Attn: J. Kevin Blodgett

Executive Vice President and General Counsel

1000 Louisiana Street, Suite 5800

Houston, Texas 77002-5050

Phone: (713) 507-6847

Fax: (713) 356-2185

E-mail: Kevin.Blodgett@Dynegy.com

if to any Lender Party, the Collateral Agent or the Paying Agent, at its address
at:

Morgan Stanley

1585 Broadway, 2nd Floor

New York, NY 10036

Attention: Structured Credit Products Group

James Hill

 

Telephone:

(212) 761-2514

 

Fax:

(212) 507-8465

 

Email:

james.hill@morganstanley.com

 

Attention Global Capital Markets

Brendan Johnson

 

Telephone:

(212) 761-5345

 

Fax:

(212) 507-0140

 

Email:

brendan.johnson@morganstanley.com

Ryan Comerford

 

Telephone:

(914) 225-1602

 

Fax:

(914) 225-9301

 

Email:

ryan.comerford@morganstanley.com

with a copy to:

 

 

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Morgan Stanley

2000 Westchester Ave

Purchase, NY 10577

Attention Sean Handley/Trang Price

 

Telephone:

(914) 225-4362/ (914) 225-4532

 

Fax:

(914) 225-9308/(914) 750-1480

 

Email:

sean.handley@morganstanley.com/

 

trang.price@morganstanley.com

 

and the following e-mail address:

dynegylc@morganstanley.com

or as to each such party at such other address as shall be designated by such
party in a written notice to the other party hereto. All such notices and other
communications shall be effective when received during business hours. Delivery
by electronic communication or telecopier of an executed counterpart of a
signature page to any amendment or waiver of any provision of this Agreement
shall be effective as delivery of an original executed counterpart thereof.

SECTION 9.03.        No Waiver; Remedies.  No failure by any of the Lender
Parties or the Collateral Agent to exercise, and no delay in exercising, any
right under this Agreement shall operate as a waiver thereof; nor shall any
single or partial exercise of any right under this Agreement preclude any other
or further exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law.

SECTION 9.04.        Costs and Expenses; Indemnification.  (a) The Borrower
agrees to pay on demand all reasonable costs and expenses of each Lender Party
and the Collateral Agent in connection with the enforcement of the Transaction
Documents, whether in any action, suit or litigation, or any bankruptcy,
insolvency or other similar proceeding affecting creditors’ rights generally
(including, without limitation, the reasonable fees and expenses of a single
counsel for all Lender Parties and the Collateral Agent with respect thereto).

(b)      The Borrower will indemnify and hold each Lender Party and its
officers, directors, affiliates, employees, attorneys and agents (each, an
“Indemnified Party”) harmless from and against any and all claims, liabilities,
losses, damages, costs and expenses, including without limitation, reasonable
attorneys’ fees and disbursements, other dispute resolution expenses (including
fees and expenses in preparation for a defense of any investigation, litigation
or proceeding) and costs of collection that arise out of or in connection with:

 

 

(i)

the issuance of any Letter of Credit,

(ii)    any payment or action taken or omitted to be taken in connection with
any Letter of Credit (including any action or proceeding seeking (i) to restrain
any drawing under such Letter of Credit, (ii) to compel or restrain the payment
of any amount or the taking of any other action under such Letter of Credit,
(iii) to compel or restrain the taking of any action under this Agreement, or
(iv) to obtain similar relief (including by

 

 

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 way of interpleader, declaratory judgment, attachment, or otherwise),
regardless of who the prevailing party is in any such action or proceeding),

 

(iii)

the enforcement of this Agreement, or

(iv)   any act or omission, whether rightful or wrongful, of any present or
future de jure or de facto government or governmental authority or any other
cause beyond such Lender Party’s control,

except to the extent such claim, liability, loss, damage, cost or expense is
found in a final, non-appealable judgment by a court of competent jurisdiction
to have resulted from such Indemnified Party’s gross negligence or willful
misconduct.

SECTION 9.05.        Binding Effect. This Agreement shall, subject to the
provisions of Section 3.01, become effective when it shall have been executed by
the Borrower, the Lender Parties and the Collateral Agent and thereafter shall
be binding upon and inure to the benefit of the Borrower, each Lender Party and
the Collateral Agent and their respective successors and assigns, except that
the Borrower shall not have the right to assign its rights hereunder or any
interest herein without the prior written consent of each Lender Party and the
Collateral Agent.

SECTION 9.06.        Assignments and Participations. Each Lender Party may, with
the prior written consent of the Borrower (which consent may not be unreasonably
withheld or delayed) during any period in which no Default or Event of Default
shall have occurred and be continuing, and upon the occurrence and during the
continuance of any Default or Event of Default without any consent of or notice
to the Borrower, assign to one or more assignees all or a portion of its rights
(but not its obligations) under the Transaction Documents (including, without
limitation, all or a portion of the Advances owing to it). Any such assignment
that requires the prior written consent of the Borrower under this Section 9.06
but was made without such consent shall be void. For the avoidance of any doubt,
the Issuer and Lender agree that any assignment permitted by this Agreement
shall not relieve the Issuer and the Lender of their respective obligations
hereunder. Each Lender Party may, without any consent of or notice to the
Borrower, sell participations to one or more Persons in or to all or a portion
of its rights and obligations under the Transaction Documents (including,
without limitation, all or a portion of the Advances owing to it).

SECTION 9.07.        Set-off(a).  (a) When an Event of Default is continuing,
any amount payable to the Borrower pursuant to either (i) this Agreement or the
Letter Agreement and/or (ii) any other obligations between the Borrower and MSCG
or any of its affiliates or instruments or undertakings issued or executed by
MSCG or any of its affiliates to, or in favor of, the Borrower, will, at the
option of MSCG, be reduced by its setoff against any amounts payable (whether at
such time or in the future or upon the occurrence of a contingency) by the
Borrower pursuant to either (i) this Agreement or the Letter Agreement or (ii)
any other obligations between the Borrower and MSCG or any of its affiliates or
instruments or undertakings issued or executed by the Borrower to, or in favor
of, MSCG and any of its affiliates. The relevant Lender Party or Collateral
Agent, as the case may be, will give notice to the Borrower in accordance with
Section 9.02 of any setoff effected under this Section 9.07.

 

 

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(b)      For this purpose, any amounts set off under this Section 9.07 (or the
relevant portion of such amount) may be converted by the relevant Lender Party
or Collateral Agent into the currency in which the other is denominated at the
rate of exchange at which such party would be able, acting in a reasonable
manner and in good faith, to purchase the relevant amount of such currency.

(c)      If an obligation is unascertained, the relevant Lender Party or
Collateral Agent may in good faith estimate that obligation and setoff in
respect of the estimate, subject to the relevant party accounting to the other
when the obligation is ascertained.

(d)      Nothing in this Section 9.07 shall be effective to create a security
interest. This Section 9.07 shall be without prejudice and in addition to any
right of setoff, combination of accounts, lien or other right to which any party
is at any time otherwise entitled (whether by operation of law, contract or
otherwise).

SECTION 9.08.        Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Delivery by electronic communication or telecopier of an executed counterpart of
a signature page to this Agreement shall be effective as delivery of an original
executed counterpart of this Agreement.

SECTION 9.09.        No Liability of the Issuer.  The Borrower assumes all risks
on the acts or omissions of any beneficiary or transferee of any Letter of
Credit with respect to its use of such Letter of Credit. Neither the Issuer nor
any of its officers or directors shall be liable or responsible for: (a) the use
that may be made of any Letter of Credit or any acts or omissions of any
beneficiary or transferee in connection therewith; (b) the validity, sufficiency
or genuineness of documents, or of any endorsement(s) thereon, even if such
documents should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged; or (c) payment by the Issuer against
presentation of documents that do not comply with the terms of any Letter of
Credit, including failure of any documents to bear any reference or adequate
reference to any Letter of Credit; or (d) any other circumstances whatsoever in
making or failing to make payment under any Letter of Credit, except only that
the Borrower shall have a claim against the Issuer, and the Issuer shall be
liable to the Borrower, to the extent of any direct, but not consequential,
damages suffered by the Borrower that the Borrower proves were caused by the
Issuer’s failure to exercise reasonable care when determining whether a draft
and other document presented under any Letter of Credit appear, on their face,
to be in strict compliance with the terms and conditions thereof, in accordance
with, and to the extent set forth in, Section 9.09, the UCP or ISP98 (in either
case, as applicable to such Letter of Credit), and Article 5 of the UCC as in
effect in the State of New York.

SECTION 9.10.        Jurisdiction, Etc.  (a) Each of the parties hereto hereby
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of any New York State court or Federal court of the
United States of America sitting

 

 

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in the Borough of Manhattan, New York City, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to the
Transaction Documents, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be heard and
determined in any such New York State court or, to the fullest extent permitted
by law, in such Federal court. Each of the parties hereto agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in the Transaction Documents shall affect any right
that any party may otherwise have to bring any action or proceeding relating to
this Agreement in the courts of any jurisdiction.

(b)      Each of the parties hereto irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection that it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to the Transaction Documents to which it
is a party in any New York State or Federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.

SECTION 9.11.        Termination.  (a) On any Bank Business Day, the Borrower
may notify the Issuer, in accordance with Section 9.02, that it proposes to
terminate either (x) this Agreement in accordance with subsection (c)(i) below
or (y) a specified unused portion of the Facilities in accordance with
subsection (c)(ii) below, on a Bank Business Day (the “Proposed Termination
Date”) which is at least five Bank Business Days after such notice is given
(such notice being the “Proposed Termination Notice”).

(b)      After the Borrower shall send to the Issuer the Proposed Termination
Noticed pursuant to subsection (a) above, the Issuer will, on the Bank Business
Day before any Proposed Termination Date, notify the Borrower, in accordance
with Section 9.02, of the amount of the Termination Fee which would be payable
on the Proposed Termination Date if this Agreement, or a specified portion of
the Facilities, is then terminated as specified in the Proposed Termination
Notice, which notice by the Issuer shall set forth the calculation of such
Termination Fee in reasonable detail.

(c)      After the Borrower shall send to the Issuer the Proposed Termination
Notice pursuant to subsection (a) above and on the Proposed Termination Date,
upon payment to the Issuer of the Termination Fee as notified to the Borrower
pursuant to subsection (b) above, the Borrower may (i) on the condition
precedent that there is no Advance, Reimbursement Obligation or Letter of Credit
outstanding at the time, terminate this Agreement (including both of the
Facilities) or (ii) terminate in whole or in part the unused portions of both of
the Facilities, as specified in the Proposed Termination Notice sent pursuant to
subsection (a) above.

SECTION 9.12.        Governing Law.  This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.

SECTION 9.13.        Waiver of Jury Trial.  Each of the Borrower, the Lender
Parties, the Collateral Agent and the Paying Agent irrevocably waives all right
to trial by jury in any action, proceeding or counterclaim (whether based on
contract, tort or otherwise) arising out of or relating to either of the
Transaction Documents, the Advances, the Letters of Credit or the actions of any
Lender Party or the Collateral Agent or the Paying Agent in the negotiation,
administration, performance or enforcement thereof.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.

DYNEGY HOLDINGS INC.

 

By

______________________________

Name:

Title:

MORGAN STANLEY CAPITAL GROUP INC.,

as Lender, Issuer, Collateral Agent and Paying Agent

 

By

______________________________

Name:

Title:

 

 

 

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