Document:

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                                                                    Exhibit 10.8
                                                                  EXECUTION COPY

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                    SECOND LIEN NON-SHARED SECURITY AGREEMENT

                              Dated August 11, 2003

                                      From

                         The Grantors referred to herein

                                   as Grantors
                                   -----------

                                       to

                        Wells Fargo Bank Minnesota, N.A.

                              as Collateral Trustee
                              ---------------------

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                Dynegy Second Lien Non-Shared Security Agreement

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                          T A B L E  O F  C O N T E N T S
                          - - - - -  - -  - - - - - - - -

Section                                                                     Page

Section 1. Definitions; Other Interpretive Provisions.......................  2

Section 2. Grant of Security................................................ 10

Section 3. Security for Obligations......................................... 14

Section 4. Grantors Remain Liable........................................... 14

Section 5. Delivery and Control of Security Collateral...................... 15

Section 6. Maintaining the Account Collateral............................... 17

Section 7. Maintaining Electronic Chattel Paper, Transferable Records
           and Letter-of-Credit Rights and Giving Notice of Commercial
           Tort Claims...................................................... 18

Section 8. Representations and Warranties................................... 19

Section 9. Further Assurances............................................... 21

Section 10. Post-Closing Changes; Bailees; Collections on
            Receivables and Related Contracts............................... 22

Section 11. As to Intellectual Property Collateral.......................... 23

Section 12. Voting Rights; Dividends; Etc................................... 24

Section 13. As to Letter-of-Credit Rights................................... 25

Section 14. Transfers and Other Liens; Additional Shares.................... 26

Section 15. Collateral Trustee Appointed Attorney-in-Fact................... 26

Section 16. Collateral Trustee May Perform.................................. 27

Section 17. The Collateral Trustee's Duties................................. 27

Section 18. Remedies........................................................ 28

Section 19. Indemnity and Expenses.......................................... 29

Section 20. Amendments; Waivers; Additional Grantors; Etc................... 30

Section 21. Notices, Etc.................................................... 31

Section 22. Continuing Security Interest.................................... 32

Section 23. Release; Termination............................................ 32

Section 24. Security Interest Absolute...................................... 32

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                                       ii

Section 25. Execution in Counterparts....................................... 33

Section 26. The Mortgages................................................... 33

Section 27. Collateral in the State of Louisiana............................ 34

Section 28. Governing Law................................................... 34

Section 29. Submission to Jurisdiction and Waiver........................... 34

Section 30. Intercreditor Agreement......................................... 35

Schedules
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Schedule I      -   Location, Chief Executive Office, Place Where Agreements Are
                    Maintained, Type Of Organization, Jurisdiction Of
                    Organization And Organizational Identification Number
Schedule II     -   Pledged Equity, Pledged Debt, Securities Accounts and
                    Commodity Accounts
Schedule II-A   -   Equity not to Be Pledged
Schedule III    -   Changes in Name, Location, Etc.
Schedule IV     -   Account Collateral (Designated Accounts)
Schedule V      -   Account Collateral not Subject to Account Control Agreement
Schedule VI     -   Commercial Tort Claims

Exhibits
--------

Exhibit A       -   Form of Second Lien Non-Shared Security Agreement Supplement
Exhibit B       -   Form of Account Control Agreement
                    (Deposit Account/Securities Account)
Exhibit C       -   Form of Securities Account Control Agreement
Exhibit D       -   Form of Commodity Account Control Agreement
Exhibit E       -   Form of Intellectual Property Second Lien Non-Shared
                    Security Agreement
Exhibit F       -   Form of Intellectual Property Second Lien Non-Shared
                    Security Agreement Supplement
Exhibit G       -   Form of Consent to Assignment of Letter of Credit Rights

                  Dynegy Second Lien Non-Shared Security Agreement

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                    SECOND LIEN NON-SHARED SECURITY AGREEMENT

          SECOND LIEN NON-SHARED SECURITY AGREEMENT dated August 11, 2003 (this
"Second Lien Non-Shared Security Agreement") made by Dynegy Inc., an Illinois
corporation (the "Parent Guarantor"), the other Persons listed on the signature
pages hereof (the "Initial Grantors") and the Additional Grantors (as defined in
Section 20) (Parent Guarantor, Initial Grantors and the Additional Grantors
being, collectively, the "Grantors"), to Wells Fargo Bank Minnesota, N.A., (with
its successors in such capacity, the "Collateral Trustee") for the benefit of
the Secured Parties (as defined below).

          PRELIMINARY STATEMENTS.

          (1)  Dynegy Holdings Inc., a Delaware corporation ("DHI") and the
guarantors named therein have entered into an Indenture, dated as of the date
hereof (the "Indenture") with Wilmington Trust Company, as Trustee (in such
capacity, the "Trustee") and the Collateral Trustee pursuant to which it is
issuing, as of the date hereof, (i) $225,000,000 of Second Priority Senior
Secured Floating Rate Notes due 2008, (ii) $525,000,000 of 9.875% Second
Priority Senior Secured Notes due 2010, (iii) $700,000,000 of 10.125% Second
Priority Senior Secured Notes due 2013 and (iv) may, from time to time, issue
additional notes in accordance with the provisions of the Indenture
(collectively, the "Notes").

          (2)  DHI has entered into a Credit Agreement dated as of April 1, 2003
with the Parent Guarantor, the other guarantor parties thereto, Citibank, N.A.
and Bank of America, N.A., as administrative agents, the other lender parties
thereto, Citibank, N.A., as payment agent, Bank One, NA (main office Chicago),
as L/C Issuer, Bank One, NA (main office Chicago), as collateral agent (together
with successors in such capacity, the "First Priority Collateral Agent"),
Salomon Smith Barney, Inc., Banc of America Securities LLC and Bank One, NA
(main office Chicago), as co-lead arrangers, and Salomon Smith Barney, Inc. and
Banc of America Securities LLC, as book running managers (said Agreement, as it
may hereafter be amended, amended and restated, supplemented, replaced,
refinanced or otherwise modified from time to time, being the "Credit
Agreement").

          (3)  Pursuant to the Credit Agreement, the Grantors and the First
Priority Collateral Agent entered into a Non-Shared Security Agreement, dated
April 1, 2003 (together with any amendments, supplements, replacements and
restatements thereof, the "First Priority Non-Shared Security Agreement"), in
order to grant to the First Priority Collateral Agent for the ratable benefit of
the Non-Shared Secured Parties (as defined in the Credit Agreement) a security
interest in the Non-Shared Collateral.

          (4)  Pursuant to the Credit Agreement and the Indenture, the Grantors,
the Existing First Priority Collateral Trustees (as defined therein), the First
Priority Collateral Agent and the Collateral Trustee have agreed to enter into
an Intercreditor Agreement, dated as of the date hereof (as such agreement may
be amended, amended and restated, supplemented, replaced or otherwise modified
hereafter from time to time the "Intercreditor Agreement").

          (5)  The Collateral Trustee has agreed, pursuant to the terms of the
Indenture and the Intercreditor Agreement, to accept the pledge and assignment,
and the grant of a security

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interest, under this Second Lien Non-Shared Security Agreement as security for
the Parity Lien Obligations.

          (6)  Each Grantor is the owner of the Initial Pledged Equity set forth
opposite such Grantor's name on and as otherwise described in Part I of Schedule
II hereto and issued by the Persons named therein and of the Initial Pledged
Debt set forth (to the extent the same is evidenced by instruments) opposite
such Grantor's name on and as otherwise described in Part II of Schedule II
hereto and issued by the Obligors named therein.

          (7)  Each Grantor has Pledged Security Entitlements with respect to
all the Pledged Financial Assets credited from time to time to such Grantor, as
set forth opposite such Grantor's name on and as otherwise described in Part III
of Schedule II hereto.

          (8)  Each Grantor has rights in and to the Pledged Commodity Contracts
carried from time to time in such Grantor's Commodities Accounts, set forth
opposite such Grantor's name on and as otherwise described in Part IV of
Schedule II hereto.

          (9)  Each Grantor has opened Other Deposit Accounts with banks, in the
name of such Grantor and subject to the terms of this Second Lien Non-Shared
Security Agreement, as described in Schedule IV hereto.

          (10) It is a condition precedent to the Trustee entering into the
Indenture that the Grantors shall have granted the assignment and security
interest and made the pledge and assignment contemplated by this Second Lien
Non-Shared Security Agreement.

          (11) Each Grantor will derive substantial direct and indirect benefit
from the transactions contemplated by this Second Lien Non-Shared Security
Agreement.

          NOW, THEREFORE, in consideration of the premises and in order to
induce the Trustee to enter into the Indenture and the holders of the Notes to
purchase the Notes, each Grantor hereby agrees with the Collateral Trustee for
the ratable benefit of the Secured Parties as follows:

          Section 1. Definitions; Other Interpretive Provisions. The
interpretive provisions set forth in Section 1.04 of the Indenture are
incorporated by reference herein. Terms defined in the Indenture or the
Intercreditor Agreement and not otherwise defined in this Second Lien Non-Shared
Security Agreement are used in this Second Lien Non-Shared Security Agreement as
defined in the Indenture or the Intercreditor Agreement. The terms incorporated
by reference to the Credit Agreement are defined as used in the Credit Agreement
as in effect as of the date hereof. Further, unless otherwise defined in this
Second Lien Non-Shared Security Agreement, the Indenture or the Intercreditor
Agreement, terms defined in Article 8 or 9 of the UCC and/or in the Federal Book
Entry Regulations are used in this Second Lien Non-Shared Security Agreement as
such terms are defined in such Article 8 or 9 and/or the Federal Book Entry
Regulations. As used in this Second Lien Non-Shared Security Agreement the
following terms shall have the meanings set forth below:

          "Account Collateral" means, collectively, the following:

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               (a)  the Other Deposit Accounts and all funds and financial
          assets from time to time credited thereto (including, without
          limitation, all Cash Equivalents), all interest, dividends,
          distributions, 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 funds and financial assets, and all
          certificates and instruments, if any, from time to time representing
          or evidencing the Cash Collateral Accounts and the Other Deposit
          Accounts;

               (b)  all promissory notes, certificates of deposit, deposit
          accounts, checks and other instruments from time to time delivered to
          or otherwise possessed by the Collateral Trustee for or on behalf of
          any Grantor, including, without limitation, those delivered or
          possessed in substitution for or in addition to any or all of the then
          existing Account Collateral; and

               (c)  all interest, dividends, distributions, 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 the then
          existing Account Collateral.

          "Account Control Agreement" has the meaning specified in Section 6(a).

          "Additional Grantor" has the meaning specified in Section 20(b).

          "Additional Provisions" has the meaning specified in the definition of
     "Federal Book Entry Regulations" set forth herein.

          "After-Acquired Intellectual Property" has the meaning specified in
     Section 11(b).

          "Agreement Collateral" means the Assigned Agreements, including,
     without limitation, (a) all rights of any Grantor to receive moneys due and
     to become due under or pursuant to the Assigned Agreements, (b) any rights
     of such Grantor to receive proceeds of any insurance, indemnity, warranty
     or guaranty with respect to the Assigned Agreements, (c) claims of any
     Grantor for damages arising out of or for breach of or default under the
     Assigned Agreements and (d) the right of any Grantor to terminate the
     Assigned Agreements, to perform thereunder and to compel performance and
     otherwise exercise all remedies thereunder.

          "Assigned Agreements" means, collectively, each of the contracts and
     agreements to which any Grantor is now or may hereafter become a party, in
     each case as such contracts and agreements may be amended, amended and
     restated, supplemented or otherwise modified from time to time, to the
     extent permitted by the Indenture.

          "Collateral Trustee" has the meaning specified in the recital of the
     parties hereto.

          "Commercial Tort Claims Collateral" means all commercial tort claims
     described in Schedule VI hereto, provided, however, that any commercial
     tort claim shall not be included in the "Commercial Tort Claims Collateral"
     to the extent, but only to the

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     extent, that the assignment thereof or grant of a security interest therein
     would violate any effective or enforceable provision of applicable law.

          "Commodity Account Control Agreement" has the meaning specified in
     Section 5(d).

          "Commodity Accounts" means those commodities accounts of each Grantor
     as described in Part IV of Schedule II hereto.

          "Computer Software" means all computer software, programs and
     databases (including, without limitation, source code, object code and all
     related applications and data files), firmware and documentation and
     materials relating thereto, together with any and all maintenance rights,
     service rights, programming rights, hosting rights, test rights,
     improvement rights, renewal rights and indemnification rights and any
     substitutions, replacements, improvements, error corrections, updates and
     new versions of any of the foregoing.

          "Consent to Assignment of Letter of Credit Rights" means an agreement
     in substantially the form of the Consent to Assignment of Letter of Credit
     Rights attached hereto as Exhibit G or otherwise in form and substance
     reasonably satisfactory to the Collateral Trustee.

          "Copyrights" means all copyrights, including, without limitation,
     copyrights in Computer Software (as hereinafter defined), internet web
     sites and the content thereof, whether registered or unregistered.

          "Credit Agreement" has the meaning specified in Preliminary Statement
     (2).

          "Designated Accounts" means any Account Collateral that constitutes:
     (a) any deposit accounts listed in Schedule IV hereto and the funds
     credited to any such deposit accounts, and (b) any securities accounts and
     any financial assets that are credited to any such securities accounts.

          "DHI" has the meaning set forth in Preliminary Statement (1).

          "Equipment" means all equipment in all of its forms, including,
     without limitation, all machinery, tools, motor vehicles, vessels,
     aircraft, furniture and fixtures, and all parts thereof and all accessions
     thereto and all software related thereto, including, without limitation,
     software that is embedded in and is part of the equipment.

          "Excluded Agreements" has the meaning specified in paragraph (ii) in
     the "notwithstanding" clause at the end of Section 2.

          "Excluded Authorizations" has the meaning specified in paragraph (iii)
     of the "notwithstanding" clause at the end of Section 2.

          "Excluded Equity" has the meaning specified in paragraph (v) of the
     "notwithstanding" clause at the end of Section 2.

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          "Excluded Non-Shared Collateral" means any Non-Shared Collateral that,
     under the provisions of paragraph (i) of the "notwithstanding" clause at
     the end of Section 2, is to be excluded from the lien and security interest
     granted by any Grantor under clauses (a) through (j) of Section 2.

          "Federal Book Entry Regulations" means (a) the federal regulations
     contained in Subpart B ("Treasury/Reserve Automated Debt Entry System
     (TRADES)") governing book-entry securities consisting of U.S. Treasury
     bonds, notes and bills and Subpart D ("Additional Provisions") of 31 C.F.R.
     Part 357, 31 C.F.R. Section 357.2, Section 357.10 through Section 357.14
     and Section 357.41 through Section 357.44 and (b) to the extent
     substantially identical to the federal regulations referred to in clause
     (a) above (as in effect from time to time), the federal regulations
     governing other book-entry securities.

          "First Priority Collateral Agent" has the meaning specified in
     Preliminary Statement (2).

          "First Priority Controlling Collateral Parties" has the meaning
     specified in the Intercreditor Agreement.

          "First Priority Lien Satisfaction Date" means the first date on which
     the Priority Lien Obligations are Paid in Full.

          "First Priority Non-Shared Security Agreement" has the meaning
     specified in Preliminary Statement (3).

          "Grantors" has the meaning specified in the recital of the parties
     hereto.

          "Indemnified Party" has the meaning specified in Section 19.
     "Indenture" has the meaning specified in Preliminary Statement (1).

          "Indenture Documents" means the Indenture, the Notes, the Mortgages,
     this Second Lien Non-Shared Security Agreement, the Second Lien Shared
     Security Agreement and the Intercreditor Agreement.

          "Initial Grantors" has the meaning specified in the recital of the
     parties hereto.

          "Initial Pledged Debt" means the indebtedness described in Part II of
     Schedule II hereto.

          "Initial Pledged Equity" means the shares of stock or other Equity
     Interests as described in Part I of Schedule II hereto.

          "Intellectual Property Collateral" means, collectively, the following:
     (a) all Patents; (b) all Trademarks; (c) all Copyrights; (d) all Computer
     Software; (e) all Trade Secrets and all other intellectual, industrial and
     intangible property of any type, including, without limitation, industrial
     designs and mask works; (f) all registrations and applications for
     registration for any of the foregoing, together with all reissues,
     divisions,

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     continuations, continuations-in-part, extensions, renewals and
     reexaminations thereof; (g) all tangible embodiments of the foregoing, all
     rights in the foregoing provided by international treaties or conventions,
     all rights corresponding thereto throughout the world and all other rights
     of any kind whatsoever of any Grantor accruing thereunder or pertaining
     thereto; (h) all agreements, permits, consents, orders and franchises
     relating to the license, development, use or disclosure of any of the
     foregoing to which any Grantor, now or hereafter, is a party or a
     beneficiary ("IP Agreements"); and (i) any and all claims for damages and
     injunctive relief for past, present and future infringement, dilution,
     misappropriation, violation, misuse or breach with respect to any of the
     foregoing, with the right, but not the obligation, to sue for and collect,
     or otherwise recover, such damages.

          "Intellectual Property Second Lien Non-Shared Security Agreement" has
     the meaning specified in Section 11(a).

          "Intercreditor Agreement" has the meaning specified in Preliminary
     Statement (4).

          "Inventory" means all inventory in all of its forms, including,
     without limitation, (a) all raw materials, work in process, finished goods
     and materials used or consumed in the manufacture, production, preparation
     or shipping thereof, (b) goods in which any Grantor has an interest in mass
     or a joint or other interest or right of any kind, and (c) goods that are
     returned to or repossessed or stopped in transit by any Grantor), and all
     accessions thereto and products thereof and documents therefor, and all
     software related thereto, including, without limitation, software that is
     embedded in and is part of the inventory, provided, however, that goods in
     which any Grantor has an interest or right as consignee shall be excluded
     from the definition of "Inventory".

          "IP Agreements" has the meaning specified in the definition of the
     term "Intellectual Property Collateral" herein.

          "IP Second Lien Non-Shared Security Agreement Supplement" has the
     meaning specified in Section 11(b).

          "Knowledge" means, in the case of the knowledge of a Grantor, the best
     knowledge of such Grantor's executive officers after due inquiry and
     investigation.

          "Mortgages" means each deed of trust, trust deed, mortgage, leasehold
     mortgage and leasehold deed of trust delivered by a Grantor pursuant to the
     Indenture or any instrument evidencing Parity Lien Obligations.

          "Netting Agreements" has the meaning set forth in Section 1.01 of the
     Credit Agreement.

          "Non-Shared Collateral" has the meaning specified in the first
     paragraph of Section 2.

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          "Non-Shared Collateral Documents" has the meaning set forth in Section
     1.01 of the Intercreditor Agreement.

          "Notes" has the meaning specified in Preliminary Statement (1).

          "Obligors" means any Person obligated on an account, chattel paper,
     instrument, or general intangible.

          "Other Deposit Accounts" means those deposit accounts with banks
     opened by each Grantor, as described in Schedule IV and Schedule V hereto.

          "Paid in Full" means (a) the payment in full in cash of (i) all
     principal and interest in respect of the Priority Lien Obligations and (ii)
     all other valid Priority Lien Obligations that are claimed within 30 days
     of the last date on which all principal and interest in respect of the
     Priority Lien Obligations shall have been paid in full and (b) the
     termination in full of all commitments in respect of the Priority Lien
     Obligations. "Payment in Full" shall have the correlative meaning.

          "Parent Guarantor" has the meaning specified in the recital of the
     parties hereto.

          "Patents" means all patents, patent applications, utility models and
     statutory invention registrations, all inventions claimed or disclosed
     therein and all improvements thereto.

          "Permitted Collateral" means any of the following property: (a)
     Receivables (together with all general intangibles, and payment intangibles
     related thereto or arising therefrom and all proceeds and products of any
     of the foregoing), (b) cash and short-term investments, and (c) all
     dividends, interest, distributions, and other proceeds from time to time
     received, receivable or otherwise distributed in respect of, or in exchange
     for, any or all of the foregoing.

          "Permitted Contracts" has the meaning set forth in Section 1.01 of the
     Credit Agreement.

          "Pledged Account Banks" has the meaning specified in Section 6(a).

          "Pledged Commodity Contracts" means the commodity contracts carried
     from time to time in each Grantor's Commodity Account.

          "Pledged Debt" has the meaning specified in the definition of the term
     "Security Collateral" herein.

          "Pledged Equity" has the meaning specified in the definition of the
     term "Security Collateral" herein.

          "Pledged Financial Assets" means the financial assets credited from
     time to time to each Grantor's Securities Accounts.

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          "Pledged Security Entitlements" means each Grantor's security
     entitlements with respect to the Pledged Financial Assets credited from
     time to time to such Grantor's Securities Accounts.

          "Receivables" means, to the extent the same are not referred to in
     Sections 2(d), 2(e) and 2(f) herein, all accounts (including, without
     limitation, receivables under Permitted Contracts or Netting Agreements),
     chattel paper (including, without limitation, tangible chattel paper and
     electronic chattel paper), instruments (including, without limitation,
     promissory notes), deposit accounts, letter-of-credit rights, general
     intangibles (including, without limitation, payment intangibles) and other
     obligations of any kind, whether or not arising out of or in connection
     with the sale or lease of goods or the rendering of services and whether or
     not earned by performance, and all rights now or hereafter existing in and
     to all supporting obligations and in and to all security agreements,
     mortgages, Liens, leases, letters of credit and other contracts securing or
     otherwise relating to the foregoing property (any and all such supporting
     obligations, security agreements, mortgages, Liens, leases, letters of
     credit and other contracts being referred to herein as the "Related
     Contracts").

          "Related Contracts" has the meaning specified in the definition of the
     term "Receivables" herein.

          "Second Lien Non-Shared Security Agreement" has the meaning specified
     in the recital of the parties hereto.

          "Second Lien Non-Shared Security Agreement Supplement" has the meaning
     specified in Section 20(c).

          "Second Lien Shared Security Agreement" has the meaning specified in
     the Intercreditor Agreement.

          "Second Preferred Fleet Mortgage" means the Second Preferred Fleet
     Mortgage dated as of August 11, 2003 by Midstream Barge Company, L.L.C. in
     favor of the Collateral Trustee, as the same may be amended, amended and
     restated, supplemented, replaced or otherwise modified from time to time in
     accordance with the Indenture and the Intercreditor Agreement.

          "Secured Parties" means each of the Collateral Trustee, the Trustee,
     the holders of any Note, the holders of any other Parity Lien Obligations
     and any other Second Priority Collateral Party.

          "Securities Account Control Agreement" has the meaning specified in
     Section 5(c).

          "Securities Accounts" means those securities accounts of each Grantor
     as described in Part III of Schedule II hereto.

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          "Security Collateral" means, collectively, the following:

               (a)  the Initial Pledged Equity and the certificates, if any,
          representing the Initial Pledged Equity, and all dividends,
          distributions, return of capital, 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 the Initial Pledged Equity
          and all subscription warrants, rights or options issued thereon or
          with respect thereto;

               (b)  the Initial Pledged Debt and the instruments, if any,
          evidencing the Initial Pledged Debt, and all 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 the Initial Pledged Debt;

               (c)  all additional shares of stock and other Equity Interests of
          or in any issuer of the Initial Pledged Equity or any successor entity
          from time to time acquired by any Grantor in any manner and all
          additional shares of stock or Equity Interests of or in any new direct
          Subsidiary of any Grantor formed or acquired by any Grantor in any
          manner after the date of this Second Lien Non-Shared Security
          Agreement (such shares and other Equity Interests, together with the
          Initial Pledged Equity, being the "Pledged Equity"), and the
          certificates, if any, representing such additional shares or other
          Equity Interests, and all dividends, distributions, return of capital,
          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 shares or other Equity Interests and all
          subscription warrants, rights or options issued thereon or with
          respect thereto;

               (d)  all additional indebtedness from time to time owed to any
          Grantor (such indebtedness, together with the Initial Pledged Debt,
          being the "Pledged Debt") and the instruments, if any, evidencing such
          indebtedness, and all 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 indebtedness;

               (e)  the Securities Account, all Pledged Security Entitlements
          with respect to all Pledged Financial Assets from time to time
          credited to the Securities Account, and all Pledged 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 Pledged Security Entitlements or such Pledged Financial Assets
          and all subscription warrants, rights or options issued thereon or
          with respect thereto;

               (f)  the Commodities Account, all Pledged Commodity Contracts
          from time to time carried in the Commodities Account, and all value,
          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 Pledged Commodity Contracts; and

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               (g)  all other investment property (including, without
          limitation, all (i) securities, whether certificated or
          uncertificated, (ii) security entitlements, (iii) securities accounts,
          (iv) commodity contracts and (v) commodity accounts) in which any
          Grantor has now, or acquires from time to time hereafter, any right,
          title or interest in any manner, and the certificates or instruments,
          if any, representing or evidencing such investment property, and all
          dividends, distributions, return of capital, interest, distributions,
          value, 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 investment property and all
          subscription warrants, rights or options issued thereon or with
          respect thereto.

          "Security Control Agreements" has the meaning specified in Section
     5(d).

          "Subagent" has the meaning specified in Section 17(b).

          "Trademarks" means all trademarks, service marks, domain names, trade
     dress, logos, designs, slogans, trade names, business names, corporate
     names and other source identifiers, whether registered or unregistered
     (provided that no security interest shall be granted in United States
     intent-to-use trademark applications to the extent that, and solely during
     the period in which, the grant of a security interest therein would impair
     the validity or enforceability of such intent-to-use trademark applications
     under applicable federal law), together, in each case, with the goodwill
     symbolized thereby.

          "Trade Secrets" means all confidential and proprietary information,
     including, without limitation, know-how, trade secrets, manufacturing and
     production processes and techniques, inventions, research and development
     information, databases and data, including, without limitation, technical
     data, financial, marketing and business data, pricing and cost information,
     business and marketing plans and customer and supplier lists and
     information.

          "Trustee" has the meaning specified in Preliminary Statement (1).

          "UCC" means the Uniform Commercial Code as in effect, from time to
     time, in the State of New York; provided that, if perfection or the effect
     of perfection or non-perfection or the priority of any security interest in
     any Collateral is governed by the Uniform Commercial Code as in effect in a
     jurisdiction other than the State of New York, "UCC" means the Uniform
     Commercial Code as in effect from time to time in such other jurisdiction
     for purposes of the provisions hereof relating to such perfection, effect
     of perfection or non-perfection or priority.

          "UETA" means the Uniform Electronic Transactions Act, as in effect in
     any relevant jurisdiction.

          Section 2.  Grant of Security. Each Grantor hereby grants to the
Collateral Trustee, in each case, in trust pursuant to the Indenture for the
ratable benefit of the Secured Parties, a security interest in, such Grantor's
right, title and interest in and to the following, in each case, as to each type
of property described below, whether now owned or hereafter acquired

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by such Grantor, wherever located, and whether now or hereafter existing or
arising (collectively, the "Non-Shared Collateral"):

          (a)  all Equipment;

          (b)  all Inventory;

          (c)  all Receivables and all Related Contracts;

          (d)  the Security Collateral;

          (e)  the Agreement Collateral;

          (f)  the Account Collateral;

          (g)  the Intellectual Property Collateral;

          (h)  all Commercial Tort Claims Collateral;

          (i)  all books and records (including, without limitation, customer
     lists, credit files, printouts and other computer output materials and
     records) of such Grantor pertaining to any of the Non-Shared Collateral;
     and

          (j)  all proceeds of, collateral for, income, royalties and other
     payments now or hereafter due and payable with respect to, and supporting
     obligations relating to, any and all of the Non-Shared Collateral
     (including, without limitation, proceeds, collateral and supporting
     obligations that constitute property of the types described in clauses (a)
     through (i) of this Section 2 and this clause (j)) and, to the extent not
     otherwise included, all (A) payments under insurance (whether or not the
     Collateral Trustee 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 Non-Shared Collateral, (B) tort claims,
     including, without limitation, all commercial tort claims and (C) cash.

          Notwithstanding anything to the contrary contained in this Section 2,
the following property shall be excluded from the lien and security interest
granted hereunder (and shall, as applicable, not be included as "Non-Shared
Collateral", "Equipment", "Inventory", "Receivables", "Related Contracts",
"Security Collateral", "Agreement Collateral", "Account Collateral",
"Intellectual Property Collateral", "Commercial Tort Claims Collateral",
"Assigned Agreements", "Pledged Equity" or "Pledged Debt" for the purposes
hereof):

          (i)    any Non-Shared Collateral constituting property that is the
     subject of or relating to any contract, agreement or other document to
     which any Grantor is a party on the date hereof or any similar contract,
     agreement or other document entered into by such Grantor after the date
     hereof shall, in each case, be excluded from the lien and security interest
     created by such Grantor under this Section 2 to the extent (but only to the
     extent) that the assignment thereof, or the creation of a lien and security
     interest therein, would constitute a breach of the terms of such contract,
     agreement or other

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     document, or would cause a default or event of default under the terms of
     such contract, agreement or other document, or would permit any party to
     such contract, agreement or other document to terminate any material
     contract right arising under any such contract agreement or other document
     or to exercise any put, call, right of refusal, purchase option or other
     similar right, or would permit any party to such contract, agreement or
     other document to terminate such contract, agreement or other document;
     provided, however, that any of the Excluded Non-Shared Collateral shall
     automatically cease to be excluded from this Section 2 at such time as (x)
     the prohibition of assignment or of the creation of a lien and security
     interest in such Excluded Non-Shared Collateral is no longer in effect or
     is rendered ineffective as a matter of law or (y) the applicable Grantor
     has obtained the consent of the other parties to such agreement to the
     assignment of, or creation of a lien and security interest in, such
     Excluded Non-Shared Collateral (which consent such Grantor shall not be
     required to obtain hereunder, except upon a request of the Collateral
     Trustee after the occurrence and during the continuance of an Event of
     Default following the First Priority Lien Satisfaction Date) or (z) the
     breach, default, event of default or any other conditions otherwise giving
     rise to the exclusion of such property under this clause (i) shall cease to
     exist;

          (ii)   any contract, agreement or other document (and any contract
     rights arising thereunder) to which any of the Grantors is a party on the
     date hereof and any similar contract or agreement entered into by any
     Grantor after the date hereof, in each case, shall be excluded from the
     lien and security interest granted by such Grantor under this Section 2 to
     the extent (but only to the extent) that the assignment thereof, or the
     creation of a lien and security interest therein, would constitute a breach
     of the terms of such contract, agreement or other document to which any of
     the Grantors may now or hereafter be a party or to which any Grantor may
     now or hereafter be subject, or would cause a default or event of default
     under the terms of such contract, agreement or other document, or would
     permit any party to such contract, agreement or other document to terminate
     any material contract right arising under any such contract agreement or
     other document or to exercise any put, call, right of refusal, purchase
     option or other similar right, or would permit any party to such contract,
     agreement or other document to terminate such contract, agreement or other
     document (all such contracts, agreements and other documents being the
     "Excluded Agreements"); provided, however, that (x) except as set forth in
     clause (iv) below, the exclusion from the lien and security interest
     granted by such Grantor hereunder of any contract rights of any of the
     Grantors under one or more of the Excluded Agreements shall not limit,
     restrict or impair the grant by such Grantor of the lien and security
     interest in any accounts or receivables arising under any such Excluded
     Agreement or any payments due or to become due thereunder, and (y) any of
     the Excluded Agreements shall automatically cease to be excluded from this
     Section 2 at such time as, (A) the prohibition of assignment or of the
     creation of a lien and security interest in such agreement is no longer in
     effect or is rendered ineffective as a matter of law or (B) the applicable
     Grantor has obtained the consent of the other parties to such agreement to
     the assignment of, or creation of a lien and security interest in, the
     contract rights of such Grantor thereunder (which consent such Grantor
     shall not be required to obtain hereunder, except upon a request of the
     Collateral Trustee after the occurrence and during the continuance of an
     Event of Default following the First Priority Lien Satisfaction Date);

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          (iii)  any license, permit or authorization from any Governmental
     Authority (as defined in the Credit Agreement) in favor of any Grantor
     shall be excluded from the lien and security interest granted by such
     Grantor under this Section 2 to the extent (but only to the extent) that
     the assignment thereof or the creation of a lien and security interest
     therein would constitute a breach of or a default or event of default under
     the terms of such license, permit or authorization or would require any
     separate license, permit or authorization or would otherwise terminate such
     license, permit or authorization (all of the licenses, permits and
     authorizations referred to herein being the "Excluded Authorizations");
     provided, however, that any of the Excluded Authorizations shall cease to
     be excluded from this Section 2 at such time as (x) the prohibition of
     assignment or of the creation of a lien and security interest in such
     license, permit or authorization is no longer in effect or is rendered
     ineffective as a matter of law or (y) the applicable Grantor has obtained
     the consent of the applicable Governmental Authority (as defined in the
     Credit Agreement) to the assignment of, or creation of a lien and security
     interest in, such license, permit or authorization of such Grantor (which
     consent such Grantor shall not be required to obtain hereunder, except upon
     a request of the Collateral Trustee after the occurrence and during the
     continuance of an Event of Default following the First Priority Lien
     Satisfaction Date);

          (iv)   any Permitted Collateral of any Grantor from time to time
     pledged, assigned, conveyed or transferred, or against which any right of
     set-off is granted or in which a Lien or security interest is granted, by
     such Grantor under any Permitted Contract or Netting Agreement shall be
     excluded from the lien and security interest granted by such Grantor under
     this Section 2. To the extent any such lien and security interest is deemed
     to be granted pursuant to this Agreement in such Permitted Collateral
     hereunder notwithstanding the exclusion contemplated hereby, such lien and
     security interest shall ipso facto immediately and automatically terminate,
     without any further action by any Person, upon any such pledge, assignment,
     conveyance, transfer, grant of such right of set-off or grant of such Lien
     and security interest, provided, however, that any such Permitted
     Collateral shall cease to be excluded from this Section 2 at such time as
     (x) the Permitted Contract or Netting Agreement, as the case may be,
     related thereto is terminated and the setoff rights, Lien and security
     interest granted in such Permitted Collateral are terminated or (y) the
     applicable Grantor has obtained the consent of the applicable Counterparty
     (as defined in the Credit Agreement) to such Permitted Contracts or Netting
     Agreements to the assignment of, or creation of a lien and security
     interest in such Permitted Collateral hereunder (which consent such Grantor
     shall not be required to obtain hereunder, except upon a request of the
     Collateral Trustee after the occurrence and during the continuance of an
     Event of Default following the First Priority Lien Satisfaction Date);

          (v)    as to each Grantor, any outstanding voting stock of any entity
     that is a controlled foreign corporation under Section 957 of the Internal
     Revenue Code (or any successor provision thereto), except for voting stock
     consisting of no more than 66% of the outstanding voting stock of such
     entity (any such stock being the "Excluded Equity");

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                                       14

          (vi)   any property or accounts (including without limitation, coal,
     power, energy, other energy related products, natural gas, natural gas
     liquids, condensate, and sulfur, and including any other products resulting
     from generating, gas gathering, processing, fractionating and refining,
     marketed by any Grantor on behalf of third parties and the proceeds derived
     therefrom pursuant to processing agreements and/or marketing arrangements),
     to the extent (but only to the extent) that any Grantor manages, maintains
     or markets such property on behalf of a third party, including, without
     limitation, any Non-Shared Collateral maintained, managed or marketed by
     any Grantor for a joint venture in which third parties participate or on
     behalf of third parties;

          (vii)  any policy of insurance, provided, however, that proceeds of
     insurance shall be included as Non-Shared Collateral to the extent the
     security interest granted hereby in the goods covered by such insurance
     would continue in accordance with Section 9-315 of the UCC; and

          (viii) the shares of stock or such other Equity Interests owned by and
     set forth opposite any relevant Grantor's name on Schedule II-A hereto;

provided, however, that any proceeds received by any Grantor from the
disposition of Excluded Non-Shared Collateral, Excluded Authorizations, Excluded
Equity and any other property excluded under clauses (i) through (viii) above
shall constitute Non-Shared Collateral unless any assets or property
constituting such proceeds are themselves subject to the exclusions set forth in
clauses (i) through (viii) above.

          Section 3.  Security for Obligations. This Second Lien Non-Shared
Security Agreement secures, in the case of each Grantor, the payment of all
Parity Lien Obligations, whether direct or indirect, absolute or contingent, and
whether for principal, reimbursement obligations, interest, fees, premiums,
penalties, indemnifications, contract causes of action, costs, expenses or
otherwise. Without limiting the generality of the foregoing, this Second Lien
Non-Shared Security Agreement secures, as to each Grantor, the payment of all
amounts that constitute part of the Parity Lien Obligations and would be owed by
such Grantor to any Secured Party but for the fact that they are unenforceable
or not allowable due to the existence of a bankruptcy, reorganization or similar
proceeding involving a Grantor.

          Section 4.  Grantors Remain Liable. Anything herein to the contrary
notwithstanding, (a) each Grantor shall remain liable under the contracts and
agreements included in such Grantor's Non-Shared Collateral to the extent set
forth therein to perform all of its duties and obligations thereunder to the
same extent as if this Second Lien Non-Shared Security Agreement had not been
executed, (b) the exercise by the Collateral Trustee of any of the rights
hereunder shall not release any Grantor from any of its duties or obligations
under the contracts and agreements included in the Non-Shared Collateral and (c)
none of the Collateral Trustee or any Secured Party shall have any obligation or
liability under the contracts and agreements included in the Non-Shared
Collateral by reason of this Second Lien Non-Shared Security Agreement or any
other Indenture Document, nor shall any of the Collateral Trustee or any Secured
Party be obligated to perform any of the obligations or duties of any Grantor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder or thereunder.

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          Section 5.  Delivery and Control of Security Collateral. (a) Subject
to Section 5(h), with respect to any certificates or instruments representing or
evidencing Security Collateral (other than Permitted Investments), to the extent
that any relevant Grantor has Knowledge of the existence of such certificates
and instruments, such certificates and instruments shall be delivered to and
held by or on behalf of the Collateral Trustee pursuant to this Second Lien
Non-Shared Security Agreement and shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance reasonably satisfactory to the
Collateral Trustee. After the occurrence and during the continuance of an Event
of Default following the First Priority Lien Satisfaction Date, the Collateral
Trustee shall have the right, at any time in its discretion and with notice to
DHI, to transfer to or to register in the name of the Collateral Trustee or any
of its nominees any or all of the Security Collateral, subject only to the
revocable rights specified in Section 13(a), provided, however, that the failure
to deliver any such notice to DHI shall not affect the validity of such actions
of the Collateral Trustee. In addition, after the occurrence and during the
continuance of an Event of Default and subject to the Intercreditor Agreement,
the Collateral Trustee shall have the right at any time to exchange certificates
or instruments representing or evidencing Security Collateral for certificates
or instruments of smaller or larger denominations.

          (b)  Subject to Section 5(h), with respect to any Security Collateral
in which any Grantor has any right, title or interest and that constitutes an
uncertificated security, to the extent that such Grantor has Knowledge of the
existence of such uncertificated securities, such Grantor will cause the issuer
thereof either (at such Grantor's election) (i) to register the Collateral
Trustee as the registered owner of such security or (ii) to agree in an
authenticated record with such Grantor and the Collateral Trustee that such
issuer will comply with instructions with respect to such security originated by
the Collateral Trustee without further consent of such Grantor, such
authenticated record to be in form and substance reasonably satisfactory to the
Collateral Trustee provided, however, that the Collateral Trustee agrees that it
will not deliver any such instructions to such issuer except upon the occurrence
and during the continuance of an Event of Default. With respect to any Security
Collateral in which any Grantor has any right, title or interest and that is not
an uncertificated security, upon the request of the Collateral Trustee after the
occurrence and during the continuance of an Event of Default following the First
Priority Lien Satisfaction Date, such Grantor will notify each such issuer of
Pledged Equity that such Pledged Equity is subject to the security interest
granted hereunder.

          (c)  Subject to Section 5(h), with respect to any Security Collateral
in which any Grantor has any right, title or interest and that constitutes a
security entitlement in which the Collateral Trustee is not the entitlement
holder, to the extent that such Grantor has Knowledge of the existence of such
security entitlements, such Grantor will cause the securities intermediary with
respect to such security entitlement either (at such Grantor's election) (i) to
identify in its records the Collateral Trustee as the entitlement holders of
such security entitlement against such securities intermediary or (ii) to agree
in an authenticated record with such Grantor and the Collateral Trustee that
such securities intermediary will comply with entitlement orders (that is,
notifications communicated to such securities intermediary directing transfer or
redemption of the financial asset to which such Grantor has a security
entitlement) originated by the Collateral Trustee without further consent of
such Grantor, such authenticated record to be in substantially

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                                       16

the form of Exhibit C hereto or otherwise in form and substance reasonably
satisfactory to the Collateral Trustee (such agreement being a "Securities
Account Control Agreement").

          (d)  Subject to Section 5(h), with respect to any Security Collateral
in which any Grantor has any right, title or interest and that constitutes a
commodity contract, to the extent that such Grantor has Knowledge of the
existence of such commodity contracts, such Grantor shall cause the commodity
intermediary with respect to such commodity contract to agree in an
authenticated record with such Grantor and the Collateral Trustee that such
commodity intermediary will apply any value distributed on account of such
commodity contract as directed by the Collateral Trustee without further consent
of such Grantor, such authenticated record to be in substantially the form of
Exhibit D hereto or otherwise in form and substance reasonably satisfactory to
the Collateral Trustee (such agreement being a "Commodity Account Control
Agreement", and all such authenticated records, together with all Securities
Account Control Agreements being, collectively, "Security Control Agreements").

          (e)  No Grantor will change or add any securities intermediary or
commodity intermediary that maintains any securities account or commodity
account in which any of the Non-Shared Collateral is credited or carried, or
change or add any such securities account or commodity account, in each case
without first complying with the above provisions of this Section 5 in order to
perfect the security interest granted hereunder in such Non-Shared Collateral.
For the avoidance of doubt, the provisions of this Section 5(e) shall not apply
to any securities account or commodity account that any Grantor manages or
maintains on behalf of third parties, such as securities accounts and commodity
accounts maintained or managed by any Grantor for a joint venture in which third
parties participate.

          (f)  Upon the request of the Collateral Trustee upon the occurrence
and during the continuance of an Event of Default following the First Priority
Lien Satisfaction Date, such Grantor will notify each such issuer of Pledged
Debt that such Pledged Debt is subject to the security interest granted
hereunder.

          (g)  To the extent that any of the Non-Shared Collateral constituting
money or any of the Account Collateral or any Security Collateral is subject to
a Permitted Lien and such Permitted Lien has been perfected through control (as
such term is used in Sections 9-104 and 9-106 of the UCC) or possession,
perfection through possession or control of the security interest created
hereunder shall not be required.

          (h)  Notwithstanding anything to the contrary set forth in this
Section 5 or any other provision of this Second Lien Non-Shared Security
Agreement, until the First Priority Lien Satisfaction Date, Grantors shall not
be required to (i) take any of the actions required under Sections 5(a) through
5(d) herein or (ii) take any other actions with respect to any Collateral that
would violate or be inconsistent with the terms of the Intercreditor Agreement
or the First Priority Non-Shared Security Agreement. Subject to the terms of the
Intercreditor Agreement, the Grantors shall comply with the provisions set forth
in Sections 5 and 9 of the First Priority Non-Shared Security Agreement until
the First Priority Lien Satisfaction Date. Under the terms of Section 2.09 of
the Intercreditor Agreement, the First Priority Collateral Parties have agreed
to act as bailees on behalf of the Collateral Trustee in respect of certain
Collateral on the terms and conditions set forth therein.

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          Section 6.  Maintaining the Account Collateral. Following the First
Priority Lien Satisfaction Date and so long as any Parity Lien Obligations
(other than indemnification obligations that are not yet due and payable) which
are accrued and payable shall remain unpaid and unsatisfied and subject to the
Intercreditor Agreement:

          (a)  Each Grantor will maintain all Designated Accounts only with the
     Collateral Trustee or with banks (the "Pledged Account Banks") that have
     agreed, in a record authenticated by the Grantor, the Collateral Trustee
     and the Pledged Account Banks, to (i) comply with instructions originated
     by the Collateral Trustee (as set forth in the Account Control Agreement)
     directing the disposition of funds in the Designated Accounts without the
     further consent of the Grantor and (ii) waive or subordinate (other than as
     agreed between any Pledged Account Bank and the Collateral Trustee) in
     favor of the Collateral Trustee all claims of the Pledged Account Banks
     (including, without limitation, claims by way of a security interest, lien
     or right of setoff or right of recoupment) to the Account Collateral, which
     authenticated record shall be substantially in the form of Exhibit B
     hereto, or shall otherwise be in form and substance reasonably satisfactory
     to the Collateral Trustee (the "Account Control Agreement"); provided,
     however, this Section 6(a) shall not apply to Other Deposit Accounts listed
     in Schedule V hereto, as such Schedule may be updated from time to time.

          (b)  Subject in all respects to the provisions of Section 5(g) hereof,
     each Grantor agrees that it will not add any bank that maintains a deposit
     account for such Grantor or open any new deposit account with any then
     existing Pledged Account Bank unless (i) the Collateral Trustee shall have
     received at least 10 days' prior written notice of such additional bank or
     such new deposit account and (ii) the Collateral Trustee shall have
     received, in the case of a bank or Pledged Account Bank that is not the
     Collateral Trustee, an Account Control Agreement authenticated by such new
     bank and such Grantor, or a supplement to an existing Account Control
     Agreement with such then existing Pledged Account Bank, covering such new
     deposit account (and, upon the receipt by the Collateral Trustee of such
     Account Control Agreement or supplement, Schedule IV hereto shall be
     automatically amended to include such Other Deposit Account). Each Grantor
     may terminate any bank as a Pledged Account Bank or terminate any
     Designated Account, if it gives the Collateral Trustee at least 10 days'
     prior written notice of such termination (and, upon such termination,
     Schedule IV hereto shall be automatically amended to delete such Pledged
     Account Bank and Other Deposit Account without any additional formal
     actions or agreements). For the avoidance of doubt, the provisions of this
     Section 6(b) shall not apply to any deposit account that any Grantor
     manages or maintains on behalf of third parties, such as deposit accounts
     maintained or managed by any Grantor for a joint venture in which third
     parties participate.

          (c)  Subject in all respects to the provisions of Section 5(g) hereof,
     upon any termination by a Grantor of any Other Deposit Account by such
     Grantor, or any Pledged Account Bank with respect thereto, such Grantor
     will promptly (i) either (at such Grantor's election), (A) comply with the
     provisions regarding the opening of new deposit accounts as set forth in
     the first sentence of Section 6(b) or (B) subject to the restrictions set
     forth in Section 6(f), transfer all funds and property held in such
     terminated Other Deposit Account to another Other Deposit Account listed in
     Schedule IV and (ii) notify

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     all Obligors that were making payments to such Other Deposit Account to
     make all future payments to another Other Deposit Account listed in
     Schedule IV hereto, in each case so that the Collateral Trustee shall have
     a continuously perfected security interest in such Designated Accounts.
     Subject in all respects to the provisions of Section 5(g) hereof, after the
     occurrence and during the continuance of an Event of Default following the
     First Priority Lien Satisfaction Date, each Grantor agrees to terminate any
     or all Account Collateral and Account Control Agreements upon request by
     the Collateral Trustee.

          (d)  Upon the occurrence and during the continuance of an Event of
     Default following the First Priority Lien Satisfaction Date, the Collateral
     Trustee shall have sole right to direct the disposition of funds with
     respect to each of the Designated Accounts.

          (e)  Following the First Priority Lien Satisfaction Date, the
     Collateral Trustee may, at any time after notice to DHI (provided, however,
     that the failure to give any such notice to DHI shall not affect the
     validity of any action taken by the Collateral Trustee pursuant to the
     provisions of this Section 6(e)), but without consent from the Grantor,
     transfer, or direct the transfer of, funds from the Designated Accounts to
     satisfy the Grantor's obligations under this Second Lien Non-Shared
     Security Agreement if (A) a payment default in respect of principal under
     this Second Lien Non-Shared Security Agreement shall have occurred and be
     continuing for a period greater than or equal to three Business Days, or
     (B) a payment default in respect of any amount other than principal due
     under this Second Lien Non-Shared Security Agreement shall have occurred
     and be continuing for a period greater than or equal to five Business Days,
     or (C) an acceleration of the Parity Lien Debt shall have occurred and be
     continuing.

          (f)  Each of the Grantors agrees that at no time shall the aggregate
     amount on deposit in the Other Deposit Accounts listed in Schedule V hereto
     (other than any Other Deposit Account that is subject to a Permitted Lien)
     exceed $20,000,000.

          Section 7.  Maintaining Electronic Chattel Paper, Transferable Records
and Letter-of-Credit Rights and Giving Notice of Commercial Tort Claims. So long
as any Parity Lien Obligations (other than indemnification obligations that are
not yet due and payable) which are accrued and payable shall remain unsatisfied:

          (a)  Following the First Priority Lien Satisfaction Date, each Grantor
     will maintain all (i) electronic chattel paper (to the extent that such
     Grantor has Knowledge of the existence of such electronic chattel paper) so
     that the Collateral Trustee have control of the electronic chattel paper in
     the manner specified in Section 9-105 of the UCC and (ii) all transferable
     records (to the extent that such Grantor has Knowledge of the existence of
     such transferable records) so that the Collateral Trustee have control of
     the transferable records in the manner specified in Section 16 of the UETA;
     and

          (b)  Each Grantor will immediately give notice to the Collateral
     Trustee of any material commercial tort claim that may arise in the future
     and will immediately execute or otherwise authenticate a supplement to this
     Second Lien Non-Shared Security Agreement, and otherwise take all necessary
     action, to subject such material commercial tort claim to security interest
     created under this Second Lien Non-Shared Security

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     Agreement provided, however, that any commercial tort claim shall not be
     covered by the provisions of this Section 7(b) to the extent, but only to
     the extent, that the assignment thereof or grant of a security interest
     therein would violate any effective or enforceable provision of applicable
     law.

          Section 8.  Representations and Warranties. Each Grantor represents
and warrants as follows:

          (a)  As of the date hereof, such Grantor's exact legal name, which is
     sufficient in accordance with Section 9-503(a) of the UCC, is correctly set
     forth in Schedule I hereto. With respect to each Grantor that is not a
     "registered organization" as such term is defined in Section 9-102 of the
     UCC, such Grantor has its chief executive office in the state or
     jurisdiction set forth in Schedule I hereto. Within the five years
     preceding the execution of this Second Lien Non-Shared Security Agreement,
     the information set forth in Schedule I hereto with respect to such Grantor
     is true and accurate in all respects, except to the extent that failure of
     such information to be true and accurate could not reasonably be expected
     to result in a Material Adverse Effect (as defined in the Credit
     Agreement). To the Knowledge of such Grantor, such Grantor has not
     previously changed its name, the location of its chief executive office,
     type of organization, jurisdiction of organization or organizational
     identification number (if such Grantor, now or has been organized in a
     jurisdiction that requires the organizational number of a debtor to be
     identified on the relevant financing statement in order to create a
     perfected second priority security interest) from those set forth in
     Schedule I hereto except as disclosed in Schedule III hereto.

          (b)  Subject to Section 5(h), all Security Collateral consisting of
     certificated securities and instruments (other than Permitted Investments),
     have to the Knowledge of the relevant Grantor been delivered to the
     Collateral Trustee. Subject to Section 5(h), to the Knowledge of the
     relevant Grantor, none of the Receivables or Agreement Collateral is
     evidenced by a promissory note or other instrument that has not been
     delivered to the Collateral Trustee.

          (c)  Such Grantor is the legal and beneficial owner of the Non-Shared
     Collateral of such Grantor free and clear of any Lien, claim, option or
     right of others, except for Permitted Liens or the security interest
     created under this Second Lien Non-Shared Security Agreement. No effective
     financing statement or other instrument similar in effect covering all or
     any part of such Non-Shared Collateral or listing such Grantor or any trade
     name of such Grantor as debtor is on file in any recording office, except
     (i) such as may have been filed in favor of the First Priority Controlling
     Collateral Parties relating to the First Priority Shared Secured Agreement,
     (ii) such as may have been filed in favor of the Collateral Trustee
     relating to this Second Lien Non-Shared Security Agreement or (iii) as
     otherwise permitted under the Indenture.

          (d)  Subject to Section 5(h), with respect to the Pledged Equity that
     is an uncertificated security, to the extent that such Grantor has
     Knowledge of the existence of any such uncertificated securities, such
     Grantor has caused the issuer thereof either (at such Grantor's election)
     (i) to register the Collateral Trustee as the registered owner of

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     such security or (ii) to agree in an authenticated record with such Grantor
     and the Collateral Trustee that such issuer will comply with instructions
     with respect to such security originated by the Collateral Trustee without
     further consent of such Grantor provided, however, that the Collateral
     Trustee agrees that they will not deliver any such instructions to such
     issuer except upon the occurrence and during the continuance of an Event of
     Default. If such Grantor is an issuer of Pledged Equity, such Grantor
     confirms that it has received notice of such security interest. Subject to
     Section 5(h), with respect to all Security Collateral consisting of
     certificated securities and instruments, to the extent that the relevant
     Grantor has Knowledge of the existence of such certificated securities and
     instruments, all such certificated securities and instruments have been
     delivered to the Collateral Trustee.

          (e)  The Initial Pledged Equity pledged by such Grantor constitutes
     the percentage of the issued and outstanding Equity Interests of the
     issuers thereof indicated on Schedule II hereto.

          (f)  Subject in all respects to the provisions of Section 5(g) hereof,
     to the Knowledge of the relevant Grantor, such Grantor has no deposit
     accounts, other than the Account Collateral listed on Schedule IV hereto,
     as such Schedule IV may be amended from time to time pursuant to Section
     6(b), and to the Knowledge of the relevant Grantor, legal, binding and
     enforceable Account Control Agreements with the First Priority Controlling
     Collateral Parties are in effect for each deposit account that constitutes
     Account Collateral (other than Account Collateral consisting of deposit
     accounts maintained with the First Priority Controlling Collateral
     Parties), except to the extent such Account Control Agreements are not
     required by Sections 5(g) or 6(a). For the avoidance of doubt, the
     representations and warranties in this Section 8(f) do not apply with
     respect to any deposit account that any Grantor manages or maintains on
     behalf of third parties, such as deposit accounts maintained or managed by
     any Grantor for a joint venture in which third parties participate.

          (g)  Except for the consent of the First Priority Collateral Agent
     which has been obtained and subject in all respects to the provisions of
     Sections 5(g) and 5(h) hereof, to the Knowledge of the relevant Grantor,
     all filings and other actions (including without limitation, (A) actions
     necessary to obtain control of Non-Shared Collateral as provided in
     Sections 9-104, 9-105 and 9-106 of the UCC and Section 16 of UETA and (B)
     actions necessary to perfect the Collateral Trustee's security interest
     with respect to Non-Shared Collateral constituting certificated securities
     or instruments) necessary to perfect the security interest in the
     Non-Shared Collateral of such Grantor created under this Second Lien
     Non-Shared Security Agreement have been duly made or taken and are in full
     force and effect, and this Second Lien Non-Shared Security Agreement
     creates in favor of the Collateral Trustee for the benefit of the Secured
     Parties a valid and, together with such filings and other actions,
     perfected security interest in the Non-Shared Collateral of such Grantor,
     securing the payment of the Parity Lien Obligations except, in each case,
     (i) as is otherwise permitted pursuant to the express provisions of this
     Second Lien Non-Shared Security Agreement and (ii) for Permitted Liens.

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          (h)  To the Knowledge of the relevant Grantor, the Grantor has no
     commercial tort claims other than those listed in Schedule VI hereto.

          Section 9.  Further Assurances. (a) Subject to Section 5(h) and the
Intercreditor Agreement, each Grantor agrees that from time to time, at the
expense of such Grantor, such Grantor will promptly execute and deliver, or
otherwise authenticate, all further instruments and documents, and take all
further action that (to the Knowledge of such Grantor) may be necessary, or that
the Collateral Trustee reasonably may request, in order to perfect and protect
any pledge, assignment or security interest granted or purported to be granted
by such Grantor hereunder or to enable the Collateral Trustee to exercise and
enforce its rights and remedies hereunder with respect to any Non-Shared
Collateral of such Grantor. Without limiting the generality of the foregoing,
each Grantor will promptly with respect to Non-Shared Collateral of such Grantor
and subject to the Indenture, Section 5(h) hereof and the Intercreditor
Agreement (and the right of the First Priority Controlling Collateral Parties to
have such actions taken for their benefit): (i) if any such Non-Shared
Collateral shall be evidenced by a promissory note or other instrument or
chattel paper and if such Grantor has Knowledge of the existence of any such
promissory notes, instruments, or chattel paper, deliver and pledge to the
Collateral Trustee hereunder such note or instrument or chattel paper duly
indorsed and accompanied by duly executed instruments of transfer or assignment,
all in form and substance reasonably satisfactory to the Collateral Trustee;
(ii) execute or authenticate and file such financing or continuation statements,
or amendments thereto, and such other instruments or notices, as may be
necessary, or as the Collateral Trustee reasonably may request, in order to
perfect and preserve the security interest granted or purported to be granted by
such Grantor hereunder; (iii) with respect to any certificates representing
Security Collateral that constitutes certificated securities, to the extent that
the relevant Grantor has Knowledge of the existence of such certificates,
deliver and pledge to the Collateral Trustee for ratable benefit of the Secured
Parties certificates representing Security Collateral that constitutes
certificated securities, accompanied by undated stock or bond powers executed in
blank; (iv) subject in all respects to the provisions of Section 5(g) hereof,
with respect to any Non-Shared Collateral consisting of deposit accounts,
electronic chattel paper, investment property or transferable records, to the
extent that the relevant Grantor has Knowledge of the existence of such deposit
accounts, electronic chattel paper, investment property or transferable records,
take all action necessary to ensure that the Collateral Trustee has control of
Non-Shared Collateral consisting of deposit accounts, electronic chattel paper,
investment property and transferable records as provided in Sections 9-104,
9-105 and 9-106 of the UCC and in Section 16 of UETA; (v) upon the occurrence
and during the continuance of an Event of Default, at the request of the
Collateral Trustee, take all action to ensure that the Collateral Trustee's
security interest is noted on any certificate of title related to any Non-Shared
Collateral evidenced by a certificate of title; and (vi) deliver to the
Collateral Trustee evidence that all other action that the Collateral Trustee
may deem reasonably necessary in order to perfect and protect the security
interest created by such Grantor under this Second Lien Non-Shared Security
Agreement has been taken.

          (b)  Each Grantor hereby authorizes the Collateral Trustee to file one
or more financing and continuation statements, and amendments thereto, relating
to all or any part of the Non-Shared Collateral of such Grantor without the
signature of such Grantor where permitted by law. A photocopy or other
reproduction of this Second Lien Non-Shared Security Agreement or any financing
statement covering the Non-Shared Collateral or any part thereof shall be

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                                       22

sufficient as a financing statement where permitted by law. Each Grantor
ratifies its authorization for the Collateral Trustee to have filed such
financing statements, continuation statements or amendments filed prior to the
date hereof.

          (c)  Each Grantor will furnish to the Collateral Trustee from time to
time statements and schedules further identifying and describing the Non-Shared
Collateral of such Grantor and such other reports in connection with such
Non-Shared Collateral as the Collateral Trustee may reasonably request, all in
reasonable detail.

          Section 10. Post-Closing Changes; Bailees; Collections on Receivables
and Related Contracts. (a) No Grantor will change its name, type of
organization, jurisdiction of organization, organizational identification number
(if such Grantor is organized in a jurisdiction that requires the organizational
number of a debtor to be identified on a financing statement in order to create
a perfected second priority security interest) or location of its chief
executive office (in the case only of a Grantor that is not a "registered
organization", as such term is defined in Section 9-102 of the UCC) from those
set forth in Section 8(a) of this Second Lien Non-Shared Security Agreement
without first giving at least 30 days' prior written notice to the Collateral
Trustee and taking all action required by the Collateral Trustee for the purpose
of perfecting or protecting the security interest granted by this Second Lien
Non-Shared Security Agreement. Except with respect to security agreements
related to Permitted Liens, no Grantor will become bound by a security agreement
authenticated by another Person (determined as provided in Section 9-203(d) of
the UCC) without giving the Collateral Trustee 30 days' prior written notice
thereof and taking all action required by the Collateral Trustee to ensure that
the perfection and second priority nature of the Collateral Trustee's security
interest in the Non-Shared Collateral will be maintained. If any Grantor that is
organized in a jurisdiction that requires the organizational number of a debtor
to be identified on a relevant financing statement in order to create a
perfected second priority security interest does not have an organizational
identification number and later obtains one, it will forthwith notify the
Collateral Trustee of such organizational identification number.

          (b)  If any Non-Shared Collateral constituting goods of any Grantor
is, to the Knowledge of such Grantor, at any time in the possession or control
of a warehouseman, bailee or agent, or if the Collateral Trustee so requests,
such Grantor will (i) notify such warehouseman, bailee or agent of the security
interest created hereunder and under the First Priority Shared Security
Agreement, (ii) instruct such warehouseman, bailee or agent to hold all such
Non-Shared Collateral solely for the Collateral Trustee's account subject (A) to
the Intercreditor Agreement (and the prior rights of the First Priority
Controlling Collateral Parties on behalf of the holders of the First Priority
Obligations) and (B) after the First Priority Lien Satisfaction Date, to the
Collateral Trustee's instructions (which shall permit such Non-Shared Collateral
to be removed by such Grantor in the ordinary course of business until the
Collateral Trustee notifies such warehouseman, bailee or agent that an Event of
Default has occurred and is continuing), (iii) use commercially reasonable
efforts, to cause such warehouseman, bailee or agent to authenticate a record
acknowledging that it holds possession of such Non-Shared Collateral for the
applicable First Priority Controlling Collateral Parties' and Collateral
Trustee's benefit and shall, after the First Priority Lien Satisfaction Date,
act solely on the instructions of the Collateral Trustee without the further
consent of the Grantor or any other Person; provided, however, that the
Collateral Trustee agrees that it will not deliver any such instructions to such

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                                       23

issuer except upon the occurrence and during the continuance of an Event of
Default following the First Priority Lien Satisfaction Date, and (iv) make such
authenticated record available to the Collateral Trustee.

          (c)  Except as otherwise provided in this subsection (c), each Grantor
will continue to collect, at its own expense, all amounts due or to become due
such Grantor under the Assigned Agreements, Receivables and Related Contracts.
In connection with such collections, such Grantor may take (and, at the
Collateral Trustee's direction given after the occurrence and during the
continuance of an Event of Default following the First Priority Lien
Satisfaction Date, will take) such action as such Grantor or the Collateral
Trustee may deem necessary to enforce collection of the Assigned Agreements,
Receivables and Related Contracts; provided, however, that the Collateral
Trustee shall have the right at any time, upon the occurrence and during the
continuance of an Event of Default following the First Priority Lien
Satisfaction Date, and upon written notice to such Grantor of its intention to
do so, to notify the Obligors under any Receivables and Related Contracts of the
assignment of such Receivables and Related Contracts to the Collateral Trustee
and to direct such Obligors to make payment of all amounts due or to become due
to such Grantor thereunder directly to the Collateral Trustee and, upon such
notification and at the expense of such Grantor, to enforce collection of any
such Receivables and Related Contracts, to adjust, settle or compromise the
amount or payment thereof, in the same manner and to the same extent as such
Grantor might have done, and to otherwise exercise all rights with respect to
such Receivables and Related Contracts, including, without limitation, those set
forth set forth in Section 9-607 of the UCC. After receipt by any Grantor of the
notice from the Collateral Trustee referred to in the proviso to the preceding
sentence, (i) all amounts and proceeds (including, without limitation,
instruments) received by such Grantor in respect of the Receivables and Related
Contracts of such Grantor shall be received in trust for the benefit of the
Collateral Trustee hereunder, shall be segregated from other funds of such
Grantor and shall be forthwith paid over to the Collateral Trustee in the same
form as so received (with any necessary indorsement) to be applied as provided
in the Intercreditor Agreement and (ii) such Grantor will not adjust, settle or
compromise the amount or payment of any Receivable or amount due on any Related
Contract, release wholly or partly any Obligor thereof, or allow any credit or
discount thereon except in the ordinary course of such Grantor's business. For
the avoidance of doubt, none of the provisions of this Section 10(c) shall apply
with respect to any Property that is excluded from the lien and security
interest granted hereunder pursuant to the provisions of paragraphs (i), (ii),
(iii), (iv), (v), (vi), (vii) or (viii) of the "notwithstanding" clause at the
end of Section 2, including, but not limited to, Excluded Non-Shared Collateral,
Excluded Authorizations, Permitted Collateral or Excluded Equity.

          Section 11. As to Intellectual Property Collateral. (a) With respect
to its material Intellectual Property Collateral, each Grantor agrees, upon the
request of the Collateral Trustee, to execute or otherwise authenticate an
agreement in substantially the form set forth in Exhibit E hereto or otherwise
in form and substance reasonably satisfactory to the Collateral Trustee (an
"Intellectual Property Second Lien Non-Shared Security Agreement"), for
recording the security interest granted hereunder to the Collateral Trustee in
such Intellectual Property Collateral with the U.S. Patent and Trademark Office,
the U.S. Copyright Office and any other governmental authorities necessary to
perfect the security interest hereunder in such material Intellectual Property
Collateral; provided that such Intellectual Property Collateral is granted to
the First Priority Controlling Collateral Parties.

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                                       24

          (b)  Each Grantor agrees that should it obtain an ownership interest
in any item of the type set forth in Section 2(g) that is not on the date hereof
a part of the Intellectual Property Collateral ("After-Acquired Intellectual
Property") (i) the provisions of this Second Lien Non-Shared Security Agreement
shall automatically apply thereto, and (ii) any such After-Acquired Intellectual
Property and, in the case of trademarks, the goodwill symbolized thereby, shall
automatically become part of the Intellectual Property Collateral subject to the
terms and conditions of this Second Lien Non-Shared Security Agreement with
respect thereto; provided that such Intellectual Property Collateral is granted
to the First Priority Controlling Collateral Parties. At the end of each fiscal
quarter of DHI, each Grantor shall give written notice to the Collateral Trustee
identifying any material After-Acquired Intellectual Property acquired during
such fiscal quarter, and upon the request of the Collateral Trustee, such
Grantor shall execute and deliver to the Collateral Trustee with such written
notice, or otherwise authenticate, an agreement substantially in the form of
Exhibit F hereto or otherwise in form and substance reasonably satisfactory to
the Collateral Trustee (an "IP Second Lien Non-Shared Security Agreement
Supplement") covering such material After-Acquired Intellectual Property which
IP Second Lien Non-Shared Security Agreement Supplement shall be recorded with
the U.S. Patent and Trademark Office, the U.S. Copyright Office and any other
governmental authorities necessary to perfect the security interest hereunder in
such material After-Acquired Intellectual Property; provided that such
Intellectual Property Collateral is granted to the First Priority Controlling
Collateral Parties.

          Section 12. Voting Rights; Dividends; Etc. (a) So long as no Event of
Default shall have occurred and be continuing:

          (i)   Each Grantor shall be entitled to exercise any and all voting
     and other consensual rights pertaining to the Security Collateral of such
     Grantor or any part thereof for any purpose; provided however, that such
     Grantor will not exercise or refrain from exercising any such right if such
     action could reasonably be expected to result in a Material Adverse Effect
     (as defined in the Credit Agreement).

          (ii)  Each Grantor shall be entitled to receive and retain any and
     all dividends, interest and other distributions paid in respect of the
     Security Collateral of such Grantor if and to the extent that the payment
     thereof is not otherwise prohibited by the terms of this Second Lien
     Non-Shared Security Agreement; provided, however, that any and all
     dividends, interest and other distributions paid or payable other than in
     cash in respect of, and instruments and other property received, receivable
     or otherwise distributed in respect of, or in exchange for, any Security
     Collateral shall be, and shall be forthwith delivered to the First Priority
     Controlling Collateral Parties, or following the First Priority Lien
     Satisfaction Date, the Collateral Trustee to hold as, Security Collateral
     and shall, if received by such Grantor, be received in trust for the
     benefit of the Collateral Trustee, be segregated from the other property or
     funds of such Grantor and be forthwith delivered to the Collateral Trustee
     as Security Collateral in the same form as so received (with any necessary
     indorsement).

          (iii) Following the First Priority Lien Satisfaction Date, the
     Collateral Trustee will execute and deliver (or cause to be executed and
     delivered) to each Grantor all such proxies and other instruments as such
     Grantor may reasonably request for the purpose of

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                                       25

     enabling such Grantor to exercise the voting and other rights that it is
     entitled to exercise pursuant to paragraph (i) above and to receive the
     dividends or interest payments that it is authorized to receive and retain
     pursuant to paragraph (ii) above.

          (b)  Upon the occurrence and during the continuance of an Event of
Default, subject to the Intercreditor Agreement and notice to DHI (provided that
the failure to give any such notice shall not affect the validity of any of the
following actions taken by the Collateral Trustee):

          (i)   All rights of each Grantor (x) to exercise or refrain from
     exercising the voting and other consensual rights that it would otherwise
     be entitled to exercise pursuant to Section 12(a)(i) shall, upon notice to
     such Grantor by the First Priority Controlling Collateral Parties, or
     following the First Priority Lien Satisfaction Date, the Collateral
     Trustee, cease and (y) to receive the dividends, interest and other
     distributions that it would otherwise be authorized to receive and retain
     pursuant to Section 12(a)(ii) shall automatically cease, and all such
     rights shall thereupon become vested in the First Priority Controlling
     Collateral Parties, or following the First Priority Lien Satisfaction Date,
     the Collateral Trustee, who shall thereupon have the sole right to exercise
     or refrain from exercising such voting and other consensual rights and to
     receive and hold as collateral such dividends, interest and other
     distributions.

          (ii)  All dividends, interest and other distributions that are
     received by any Grantor contrary to the provisions of paragraph (i) of this
     Section 12(b) shall be received in trust for the benefit of the Collateral
     Trustee, shall be segregated from other funds of such Grantor and shall be
     forthwith paid over to the First Priority Controlling Collateral Parties,
     or following the First Priority Lien Satisfaction Date, the Collateral
     Trustee as collateral in the same form as so received (with any necessary
     indorsement).

          (iii) Following the First Priority Lien Satisfaction Date, the
     Collateral Trustee shall be authorized to send to each Securities
     Intermediary or Commodity Intermediary as defined in and under any Security
     Control Agreement a Notice of Exclusive Control as defined in and under
     such Security Control Agreement.

          Section 13. As to Letter-of-Credit Rights. (a) Each Grantor, by
granting a security interest in its Receivables consisting of letter-of-credit
rights to the Collateral Trustee, intends to (and hereby does) assign to the
Collateral Trustee its rights (including its contingent rights) to the proceeds
of all Related Contracts consisting of letters of credit of which it is or
hereafter becomes a beneficiary or assignee, subject to the prior rights of the
First Priority Controlling Collateral Parties therein for the benefit of the
holders of the First Priority Obligations. Following the First Priority Lien
Satisfaction Date and upon the request of the Collateral Trustee after the
occurrence and during the continuance of an Event of Default and subject to the
Intercreditor Agreement, each Grantor will promptly use its commercially
reasonable efforts to cause the issuer of each letter of credit and each
nominated person (if any) with respect thereto to consent to such assignment of
the proceeds thereof in a Consent to Assignment of Letter of Credit Rights.

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          (b)  Upon the occurrence and during the continuance of an Event of
Default following the First Priority Lien Satisfaction Date, each Grantor will,
promptly upon request by the Collateral Trustee, (i) notify (and such Grantor
hereby authorizes the Collateral Trustees to notify) the issuer and each
nominated person with respect to each of the Related Contracts consisting of
letters of credit that the proceeds thereof have been assigned to the Collateral
Trustee hereunder and any payments due or to become due in respect thereof are
to be made directly to the Collateral Trustee or its designee.

          (c)  With respect to any Securities Account Control Agreement,
Commodity Accounts Control Agreement, Account Control Agreement or Consent to
Assignment of Letter of Credit Rights, the Collateral Trustee agrees that it
will not issue any entitlement orders or other directions, instructions or
notifications thereunder with respect to the disposition or transfer of any
Non-Shared Collateral therein addressed or blocking any Grantor's ability to
deal with any such Non-Shared Collateral, except upon the occurrence and during
the continuance of an Event of Default following the First Priority Lien
Satisfaction Date. The Collateral Trustee further agrees that, upon its issuance
of any such entitlement orders, directions, instructions or notifications, it
will promptly provide a copy thereof to the relevant Grantor.

          Section 14. Transfers and Other Liens; Additional Shares. (a) Each
Grantor agrees that it will not (i) sell, assign or otherwise dispose of, or
grant any option with respect to, any of the Non-Shared Collateral, other than
sales, assignments and other dispositions of Non-Shared Collateral, and options
relating to Non-Shared Collateral, permitted under the terms of the Indenture
and Intercreditor Agreement or (ii) create or suffer to exist any Lien upon or
with respect to any of the Non-Shared Collateral of such Grantor except for the
pledge, assignment and security interest created under this Second Lien
Non-Shared Security Agreement and Liens permitted under the Indenture.

          (b)  Each Grantor agrees that it will pledge hereunder, promptly upon
its acquisition (directly or indirectly) thereof, any and all additional Equity
Interests or other securities that are issued by any Grantor and are Pledged
Equity.

          Section 15. Collateral Trustee Appointed Attorney-in-Fact. Subject to
the Indenture and the Intercreditor Agreement, each Grantor hereby irrevocably
appoints the Collateral Trustee such Grantor's attorney-in-fact, with full
authority in the place and stead of such Grantor and in the name of such Grantor
or otherwise, from time to time, upon the occurrence and during the continuance
of an Event of Default following the First Priority Lien Satisfaction Date, in
the Collateral Trustee's discretion, to take any action and to execute any
instrument that the Collateral Trustee may deem necessary or advisable to
accomplish the purposes of this Second Lien Non-Shared Security Agreement,
including, without limitation:

          (a)  to obtain and adjust insurance required to be paid to the
     Collateral Trustee pursuant to the provisions of the Indenture,

          (b)  to ask for, demand, collect, sue for, recover, compromise,
     receive and give acquittance and receipts for moneys due and to become due
     under or in respect of any of the Non-Shared Collateral,

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          (c)  to receive, indorse and collect any drafts or other instruments,
     documents and chattel paper, in connection with clause (a) or (b) above,
     and

          (d)  to file any claims or take any action or institute any
     proceedings that the Collateral Trustee may deem necessary or desirable for
     the collection of any of the Non-Shared Collateral or otherwise to enforce
     compliance with the terms and conditions of any Assigned Agreement or the
     rights of the Collateral Trustee with respect to any of the Non-Shared
     Collateral.

          Section 16. Collateral Trustee May Perform. Subject to the
Intercreditor Agreement, if any Grantor fails to perform any agreement contained
herein, the Collateral Trustee may, but without any obligation to do so and
without notice, themselves perform, or cause performance of, such agreement, and
the expenses of the Collateral Trustee incurred in connection therewith shall be
payable by such Grantor under Section 19.

          Section 17. The Collateral Trustee's Duties. (a) The powers conferred
on the Collateral Trustee hereunder are solely to protect the Secured Parties'
interest in the Non-Shared Collateral and shall not impose any duty upon them to
exercise any such powers. Except for the safe custody of any Non-Shared
Collateral in its possession and the accounting for moneys actually received by
them hereunder, the Collateral Trustee shall have no duty as to any Non-Shared
Collateral, as to ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Non-Shared Collateral, whether or not any Secured Party has or is deemed to have
knowledge of such matters, or as to the taking of any necessary steps to
preserve rights against any parties or any other rights pertaining to any
Non-Shared Collateral. The Collateral Trustee shall be deemed to have exercised
reasonable care in the custody and preservation of any Non-Shared Collateral in
its possession if such Non-Shared Collateral is accorded treatment substantially
equal to that which it accords its own property.

          (b)  Anything contained herein to the contrary notwithstanding, the
Collateral Trustee may from time to time, when the Collateral Trustee deems it
to be necessary, appoint one or more subagents (each a "Subagent") for the
Collateral Trustee hereunder with respect to all or any part of the Non-Shared
Collateral, subject to Section 11.02 of the Indenture. In the event that the
Collateral Trustee so appoints any Subagent with respect to any Non-Shared
Collateral, (i) the assignment and pledge of such Non-Shared Collateral and the
security interest granted in such Non-Shared Collateral by each Grantor
hereunder shall be deemed for purposes of this Second Lien Non-Shared Security
Agreement to have been made to such Subagent, in addition to the Collateral
Trustee, for the ratable benefit of the Secured Parties, as security for the
Parity Lien Obligations of such Grantor, (ii) such Subagent shall automatically
be vested, in addition to the Collateral Trustee, with all rights, powers,
privileges, interests and remedies of the Collateral Trustee hereunder with
respect to such Non-Shared Collateral, and (iii) the term "Collateral Trustee,"
when used herein in relation to any rights, powers, privileges, interests and
remedies of the Collateral Trustee with respect to such Non-Shared Collateral,
shall include such Subagent; provided, however, that no such Subagent shall be
authorized to take any action with respect to any such Non-Shared Collateral
unless and except to the extent expressly authorized in writing by the
Collateral Trustee and permitted by the Intercreditor Agreement.

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          Section 18. Remedies. If any Event of Default shall have occurred and
be continuing and subject to the Intercreditor Agreement:

          (a)  The Collateral Trustee may exercise in respect of the Non-Shared
     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 (whether or not the UCC applies to the affected
     Non-Shared Collateral) and also may: (i) require each Grantor to, and each
     Grantor hereby agrees that it will at its expense and upon request of the
     Collateral Trustee forthwith, assemble all or part of the Non-Shared
     Collateral as directed by the Collateral Trustee and make it available to
     the Collateral Trustee at a place and time to be designated by the
     Collateral Trustee that is reasonably convenient to all parties; (ii)
     without notice except as specified below, sell the Non-Shared Collateral or
     any part thereof in one or more parcels at public or private sale, at any
     of the Collateral Trustee's offices or elsewhere, for cash, on credit or
     for future delivery, and upon such other terms as the Collateral Trustee
     may deem commercially reasonable; (iii) to the fullest extent permitted by
     applicable law and by contracts with third parties, and subject to any
     applicable safety requirements at any such premises, occupy any premises
     owned or leased by any of the Grantors where the Non-Shared Collateral or
     any part thereof is assembled or located for a reasonable period in order
     to effectuate their rights and remedies hereunder or under law, without
     obligation to such Grantor in respect of such occupation; and (iv) exercise
     any and all rights and remedies of any of the Grantors under or in
     connection with the Non-Shared Collateral, or otherwise in respect of the
     Non-Shared Collateral, including, without limitation, (A) any and all
     rights of such Grantor to demand or otherwise require payment of any amount
     under, or performance of any provision of, the Assigned Agreements, the
     Receivables, the Related Contracts and the other Non-Shared Collateral, (B)
     withdraw, or cause or direct the withdrawal, of all funds with respect to
     the Account Collateral and (C) exercise all other rights and remedies with
     respect to the Assigned Agreements, the Receivables, the Related Contracts
     and the other Non-Shared Collateral, including, without limitation, those
     set forth in Section 9-607 of the UCC. Each Grantor agrees that, to the
     extent notice of sale shall be required by law, at least ten days' notice
     to such Grantor 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 Trustee shall not be obligated to make any
     sale of Non-Shared Collateral regardless of notice of sale having been
     given. The Collateral Trustee 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 Trustee and all
     cash proceeds received by or on behalf of the Collateral Trustee in respect
     of any sale of, collection from, or other realization upon all or any part
     of the Non-Shared Collateral may, in the discretion of the Collateral
     Trustee, be held by the Collateral Trustee as collateral for, and/or then
     or at any time thereafter applied (after payment of any amounts payable to
     the Collateral Trustee pursuant to Section 19) in whole or in part by the
     Collateral Trustee for the ratable benefit of the Secured Parties against,
     all or any part of the Parity Lien Obligations, in accordance with the
     terms of the Intercreditor Agreement.

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          (c)  All payments received by any Grantor under or in connection with
     any Assigned Agreement or otherwise in respect of the Non-Shared Collateral
     shall be received in trust for the benefit of the Collateral Trustee, shall
     be segregated from other funds of such Grantor and shall be forthwith paid
     over to the First Priority Controlling Collateral Parties, or following the
     First Priority Lien Satisfaction Date, the Collateral Trustee in the same
     form as so received (with any necessary endorsement).

          (d)  The Collateral Trustee may, without notice to any Grantor 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 Parity Lien Obligations against
     any funds held with respect to the Account Collateral or in any other
     deposit account.

          (e)  In the event of any sale or other disposition of any of the
     Intellectual Property Collateral of any Grantor, the goodwill symbolized by
     any Trademarks subject to such sale or other disposition shall be included
     therein, and such Grantor shall supply to the Collateral Trustee or their
     designee such Grantor's know-how and expertise, and documents and things
     relating to any Intellectual Property Collateral subject to such sale or
     other disposition, and such Grantor's customer lists and other records and
     documents relating to such Intellectual Property Collateral and to the
     manufacture, distribution, advertising and sale of products and services of
     such Grantor.

          Section 19. Indemnity and Expenses. (a) Each Grantor agrees to
indemnify, defend and save and hold harmless the Collateral Trustee and each
Secured Party and each of their affiliates and 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 Second Lien Non-Shared Security Agreement (including,
without limitation, enforcement of this Second Lien Non-Shared Security
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. The provisions of this Section 19(a) shall survive the
termination of this Agreement.

          (b)  Each Grantor will upon demand pay to the Collateral Trustee the
amount of any and all reasonable expenses, including, without limitation, the
reasonable fees and expenses of their counsel and of any experts and agents,
that the Collateral Trustee may incur in connection with (i) the administration
of this Second Lien Non-Shared Security Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from or other
realization upon, any of the Non-Shared Collateral of such Grantor, (iii) the
exercise or enforcement of any of the rights of the Collateral Trustee, the
Secured Parties hereunder or (iv) the failure by such Grantor to perform or
observe any of the provisions hereof.

          (c)  EACH GRANTOR ACKNOWLEDGES THAT THIS SECOND LIEN NON-SHARED
SECURITY AGREEMENT AND OTHER TRANSACTION DOCUMENTS CONTAIN PROVISIONS RELEASING
EACH INDEMNIFIED PARTY FROM LIABILITY AND/OR INDEMNIFYING AND HOLDING HARMLESS
EACH

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                                       30

INDEMNIFIED PARTY FOR, AMONG OTHER THINGS, INDEMNIFIED PARTY'S OWN NEGLIGENCE.
EACH GRANTOR AGREES THAT THE RELEASE AND/OR INDEMNITY PROVISIONS CONTAINED IN
THESE DOCUMENTS ARE CAPTIONED TO CLEARLY IDENTIFY THE RELEASE AND/OR INDEMNITY
PROVISIONS AND, THEREFORE, ARE SO CONSPICUOUS THAT EACH GRANTOR HAS FAIR NOTICE
OF THE EXISTENCE AND CONTENTS OF SUCH PROVISIONS. EACH GRANTOR HEREBY WAIVES ANY
DEFENSES IT MIGHT ASSERT AGAINST EACH INDEMNIFIED PARTY BASED ON THE HOLDING OF
THE TEXAS SUPREME COURT IN ETHYL CORP. v. DANIEL CONST. CO., 725 S.W.2d 705
(Tex. 1987), PAGE PETROLEUM, INC., et al. V. DRESSER INDUSTRIES, INC., et al.,
853 S.W.2d 505 (Tex. 1993), AND QUORUM HEALTH RESOURCES, L.L.C. v. MAVERICK
COUNTY HOSPITAL DISTRICT et al., 308 F.3rd 451 (5th Cir. 2002) AND ANY RELATED
CASE LAW HOLDINGS.

          Section 20. Amendments; Waivers; Additional Grantors; Etc. (a) Subject
to the terms of the Indenture and the Intercreditor Agreement and clause (b)
below, no amendment or waiver of any provision of this Second Lien Non-Shared
Security Agreement, and no consent to any departure by any Grantor herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Collateral Trustee and DHI and otherwise shall comply with the provisions
of Section 3.01 of the Intercreditor Agreement, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given. No failure on the part of the Collateral Trustee or any other
Secured Party to exercise, and no delay in exercising any right hereunder, shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or the exercise of any
other right.

          (b)  This Second Lien Non-Shared Security Agreement shall be
automatically amended or waived without further action under the conditions set
forth in the Intercreditor Agreement. In the event of any such amendment, the
Collateral Trustee upon the request of any Grantor or any First Priority Secured
Party will enter into an instrument confirming such amendment or waiver.

          (c)  Upon the execution and delivery, or authentication, by any Person
of a security agreement supplement in substantially the form of Exhibit A hereto
(each a "Second Lien Non-Shared Security Agreement Supplement"), (i) such Person
shall be referred to as an "Additional Grantor" and shall be and become a
Grantor hereunder, and each reference in this Second Lien Non-Shared Security
Agreement to "Grantor" shall also mean and be a reference to such Additional
Grantor, and each reference in this Second Lien Non-Shared Security Agreement to
"Non-Shared Collateral" shall also mean and be a reference to the Non-Shared
Collateral of such Additional Grantor, and (ii) the supplemental schedules I-VI
attached to each Second Lien Non-Shared Security Agreement Supplement shall be
incorporated into and become a part of and supplement Schedules I-VI,
respectively, hereto, and the Collateral Trustee may attach such supplemental
schedules to such Schedules; and each reference to such Schedules shall mean and
be a reference to such Schedules as supplemented pursuant to each Second Lien
Non-Shared Security Agreement Supplement.

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          Section 21. Notices, Etc. (a) Unless otherwise expressly provided
herein, all notices and other communications provided for hereunder or any other
Non-Shared Collateral Document shall be in writing (including by facsimile
transmission). All such written notices shall be mailed, faxed or delivered to
the applicable address, facsimile number or (subject to Section 21(c))
electronic mail address, as follows:

          (i)   as to the Collateral Trustee, addressed to its address specified
     in the Indenture;

          (ii)  as to any Grantor, addressed to it at its address shown on
     Schedule I hereto; and

          (iii) as to any party, at such other address as shall be designated by
     such party in a written notice to the other parties.

          All such notices and other communications shall be deemed to be given
or made upon the earlier to occur of (i) actual receipt by the relevant party
hereto and (ii) (A) if delivered by hand or by courier, when signed for by or on
behalf of the relevant party hereto; (B) if delivered by mail, four Business
Days after deposit in the mails, postage prepaid; (C) if delivered by facsimile,
when sent and receipt has been confirmed by telephone; and (D) if delivered by
electronic mail (which form of delivery is subject to the provisions of Section
21(c)), when delivered. In no event shall a voicemail message be effective as a
notice, communication or confirmation hereunder.

          (b)  Any amendment or waiver of any provision of this Second Lien
Non-Shared Security Agreement or of any Second Lien Non-Shared Security
Agreement Supplement or Schedule hereto may be transmitted and/or signed by
facsimile. The effectiveness of any such documents and signatures shall, subject
to applicable law, have the same force and effect as manually signed originals
and shall be binding on all parties thereto. The Collateral Trustee may also
require that any such documents and signatures be confirmed by a manually signed
original thereof; provided, however, that the failure to request or deliver the
same shall not limit the effectiveness of any facsimile document or signature.

          (c)  Electronic mail and Internet and intranet websites may be used
only to distribute routine communications and to distribute Non-Shared
Collateral Documents for execution by the parties thereto, and may not be used
for any other purpose.

          (d)  The Collateral Trustee shall be entitled to rely and act upon any
notices purportedly given by or on behalf of any Grantor even if (i) such
notices were not made in a manner specified herein, were incomplete or were not
preceded or followed by any other form of notice specified herein, or (ii) the
terms thereof, as understood by the recipient, varied from any confirmation
thereof. Each Grantor shall indemnify the Collateral Trustee from all losses,
costs, expenses and liabilities resulting from the reliance by such Person on
each notice purportedly given by or on behalf of any Grantor. All telephonic
notices to and other communications with the Collateral Trustee may be recorded
by the Collateral Trustee, and each of the parties hereto hereby consents to
such recording.

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                                       32

          Section 22. Continuing Security Interest. This Second Lien Non-Shared
Security Agreement shall create a continuing security interest in the Non-Shared
Collateral and shall (a) remain in full force and effect until all of the
Non-Shared Collateral is released, and this Second Lien Non-Shared Security
Agreement is terminated in accordance with the terms of this Second Lien
Non-Shared Security Agreement and the Indenture, (b) be binding upon each
Grantor, its successors and assigns and (c) inure, together with the rights and
remedies of the Collateral Trustee hereunder, to the benefit of the Collateral
Trustee and on behalf of the Secured Parties and their respective successors,
transferees and assigns. Without limiting the generality of the foregoing clause
(c), any holder of the Notes may assign or otherwise transfer all or any portion
of its Notes to any other Person, and such other Person shall thereupon become
vested with all the benefits in respect thereof granted to such holder of the
Notes herein or otherwise, in each case as provided in Section 2.06 of the
Indenture.

          Section 23. Release; Termination. The Collateral Trustee shall release
all or any portion of the Non-Shared Collateral solely on terms and subject to
the conditions set forth in, or as required by, Article 2 of the Intercreditor
Agreement or Section 12.04 of the Indenture. Upon request (and at the expense)
of any Grantor, the Collateral Trustee will execute and deliver such instruments
of release as such Grantor may reasonably request to evidence any such release.

          Section 24. Security Interest Absolute. The obligations of each
Grantor under this Second Lien Non-Shared Security Agreement are independent of
the Parity Lien Obligations or any other Obligations of any other Grantor under
or in respect of this Second Lien Non-Shared Security Agreement, and a separate
action or actions may be brought and prosecuted against each Grantor to enforce
this Second Lien Non-Shared Security Agreement, irrespective of whether any
action is brought against such Grantor or any other Grantor or whether such
Grantor or any other Grantor is joined in any such action or actions. All rights
of the Collateral Trustee and the other Secured Parties and the pledge,
assignment and security interest hereunder, and all obligations of each Grantor
hereunder, shall to the fullest extent permitted under applicable law, be
irrevocable, absolute and unconditional irrespective of, and to the fullest
extent permitted under applicable law, each Grantor hereby irrevocably waives
(to the maximum extent permitted by applicable law) any defenses it may now have
or may hereafter acquire in any way relating to, any or all of the following:

          (a)  any lack of validity or enforceability of this Second Lien
     Non-Shared Security Agreement or any other agreement or instrument relating
     thereto;

          (b)  any change in the time, manner or place of payment of, or in any
     other term of, all or any of the Parity Lien Obligations or any other
     Obligations of any other Grantor under or in respect of this Second Lien
     Non-Shared Security Agreement or any other amendment or waiver of or any
     consent to any departure from this Second Lien Non-Shared Security
     Agreement, including, without limitation, any increase in the Parity Lien
     Obligations resulting from the extension of additional credit to any
     Grantor or any of its Subsidiaries or otherwise;

          (c)  any taking, exchange, release or non-perfection of any Non-Shared
     Collateral or any other collateral, or any taking, release or amendment or
     waiver of or consent to departure from any guaranty, for all or any of the
     Parity Lien Obligations;

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                                       33

          (d)  any manner of application of any Non-Shared Collateral or any
     other collateral, or proceeds thereof, to all or any of the Parity Lien
     Obligations, or any manner of sale or other disposition of any Non-Shared
     Collateral or any other collateral for all or any of the Parity Lien
     Obligations or any other Obligations of any other Grantor under or in
     respect of this Second Lien Non-Shared Security Agreement or any other
     assets of any Grantor or any of its Subsidiaries;

          (e)  any change, restructuring or termination of the corporate
     structure or existence of any Grantor or any of its Subsidiaries;

          (f)  any failure of any Secured Party to disclose to any Grantor any
     information relating to the business, condition (financial or otherwise),
     operations, performance, assets, nature of assets, liabilities or prospects
     of any other Grantor now or hereafter known to such Secured Party (each
     Grantor waiving any duty on the part of the Secured Parties to disclose
     such information);

          (g)  the failure of any other Person to execute this Second Lien
     Non-Shared Security Agreement or any other Non-Shared Collateral Document,
     guaranty or agreement or the release or reduction of liability of any
     Grantor or other grantor or surety with respect to the Parity Lien
     Obligations; or

          (h)  any other circumstance (including, without limitation, any
     statute of limitations) or any existence of or reliance on any
     representation by any Secured Party that might otherwise constitute a
     defense available to, or a discharge of, such Grantor or any other Grantor
     or a third party grantor of a security interest.

To the fullest extent permitted under applicable law, this Second Lien
Non-Shared Security Agreement shall continue to be effective or be reinstated,
as the case may be, if at any time any payment of any of the Parity Lien
Obligations is rescinded or must otherwise be returned by the Collateral Trustee
or any Secured Party or by any other Person upon the insolvency, bankruptcy or
reorganization of any Grantor or otherwise, all as though such payment had not
been made.

          Section 25. Execution in Counterparts. This Second Lien Non-Shared
Security Agreement may be executed in any number of 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 of an executed
counterpart of a signature page to this Second Lien Non-Shared Security
Agreement by telecopier shall be effective as delivery of an original executed
counterpart of this Second Lien Non-Shared Security Agreement.

          Section 26. The Mortgages. In the event that any of the Non-Shared
Collateral hereunder is also subject to a valid and enforceable Lien under the
terms of any Mortgage or the Second Preferred Fleet Mortgage and the terms of
such Mortgage or Second Preferred Fleet Mortgage are inconsistent with the terms
of this Second Lien Non-Shared Security Agreement, then with respect to such
Non-Shared Collateral, the terms of such Mortgage or such Second Preferred Fleet
Mortgage shall be controlling in the case of fixtures and real estate leases,
letting and licenses of, and contracts and agreements relating to the lease of,
real property, and the terms

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<PAGE>
                                       34

of this Second Lien Non-Shared Security Agreement shall be controlling in the
case of all other Non-Shared Collateral.

          Section 27. Collateral in the State of Louisiana. (a) As to all
Non-Shared Collateral now or hereafter located in the State of Louisiana, or as
to which the laws of the State of Louisiana may now be or hereafter become
applicable, each Grantor hereby acknowledges the Parity Lien Obligations,
whether now existing or to arise hereafter, and confesses judgment thereon if
the Parity Lien Obligations are not paid at maturity, and does by these presents
consent, agree and stipulate that if any portion of the Parity Lien Obligations
is not promptly and fully paid when due, the Parity Lien Obligations shall, at
the option of the Collateral Trustee and subject to the Intercreditor Agreement,
become immediately due and payable and it shall be lawful for the Collateral
Trustee, without making a demand and without notice or putting in default, the
same being hereby expressly waived, to cause all and singular the Non-Shared
Collateral to be seized and sold by executory process, without appraisement
(appraisement being hereby expressly waived), either in its entirety or in lots
or parcels, as the Collateral Trustee may determine, to the highest bidder for
cash, or on such terms as plaintiff in such proceedings may direct.

          (b)  To the fullest extent permitted under applicable law, each
Grantor hereby expressly waives: (a) the benefit of appraisement, as provided in
Articles 2332, 2336, 2723 and 2724, Louisiana Code of Civil Procedure, and all
other laws conferring the same; (b) the demand and three (3) days delay accorded
by Articles 2639 and 2721, Louisiana Code of Civil Procedure; (c) the notice of
seizure required by Articles 2293 and 2721, Louisiana Code of Civil Procedure;
(d) the three (3) days delay provided by Articles 2331 and 2722, Louisiana Code
of Civil Procedure; and (e) the benefit of the other provisions of Articles
2331, 2722 and 2723, Louisiana Code of Civil Procedure, and the benefit of any
other Articles or laws relating to rights of appraisement, notice, or delay not
specifically mentioned above; and, to the fullest extent permitted under
applicable law, each Grantor expressly agrees to the immediate seizure of the
Non-Shared Collateral in the event of suit hereon.

          (c)  Each Grantor acknowledges that the Collateral Trustee shall have
all rights to appointment of a keeper in connection with any action to foreclose
the lien hereof, all in accordance with La. R.S. 9:5136 et seq. The Court before
which the proceedings are pending shall determine the keeper's fees, and the
payment of such fees shall constitute a portion of the Parity Lien Obligations
secured by the lien hereof.

          (d)  This Section 27 shall in no way affect or be deemed a waiver of
the provisions of Section 28 or Section 29.

          Section 28. Governing Law. This Second Lien Non-Shared Security
Agreement shall be governed by, and construed in accordance with, the laws of
the State of New York.

          Section 29. Submission to Jurisdiction and Waiver. (a) Each Grantor
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 sitting in New York City, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this Second
Lien Non-Shared Security Agreement and the other Indenture Documents

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                                       35

to which it is or is to be a party, or for recognition or enforcement of any
judgment, and each Grantor 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 extent permitted by law,
in such federal court. Each Grantor 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 this Second Lien Non-Shared Security Agreement shall affect any right
that any party may otherwise have to bring any action or proceeding relating to
this Second Lien Non-Shared Security Agreement in the courts of any
jurisdiction.

          (b)  Each Grantor 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 this Second Lien Non-Shared Security Agreement to
which it is or is to be a party in any New York State or federal court. Each
Grantor hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such suit, action or
proceeding in any such court.

          (c)  EACH GRANTOR HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY
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 THIS SECOND LIEN NON-SHARED SECURITY AGREEMENT, THE LOANS OR THE
ACTIONS OF ANY BANKS IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR
ENFORCEMENT THEREOF.

          Section 30. Intercreditor Agreement. Notwithstanding anything in
this Second Lien Non-Shared Security Agreement to the contrary, the Lien and
security interest granted to the Collateral Trustee pursuant to this Second Lien
Non-Shared Security Agreement and the exercise of any right or remedy by the
Collateral Trustee hereunder are subject to the provisions of the Intercreditor
Agreement. In the event of any conflict between the terms of the Intercreditor
Agreement and this Second Lien Non-Shared Security Agreement, the terms of the
Intercreditor Agreement shall govern.

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                                       36

          IN WITNESS WHEREOF, the parties hereto have executed this Second Lien
Non-Shared Security Agreement to be effective as provided herein.

                                          ILLINOVA CORPORATION

                                          By:  /s/ Robert T. Ray
                                              ----------------------------------
                                          Name:  Robert T. Ray
                                                 -------------------------------
                                          Title: Sr. Vice-President-Treasurer
                                                 -------------------------------

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                                       37

                                          DYNEGY INC.
                                          ILLINOVA GENERATING COMPANY
                                          IGC GRIMES COUNTY, INC.
                                          IGC GRIMES FRONTIER, INC.
                                          IPG FERNDALE, INC.
                                          IPG PARIS, INC.
                                          CHARTER OAK (PARIS) INC.
                                          ILLINOVA ENERGY PARTNERS, INC.

                                          By:  /s/ Robert T. Ray
                                              ----------------------------------
                                              Robert T. Ray
                                              Sr. Vice President-Treasurer

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                                       38

Acknowledged on the date hereof by:

WELLS FARGO BANK MINNESOTA, N.A.,
as Collateral Trustee

By: /s/ Jeffery Rose
   --------------------------------------
   Name:  Jeffery Rose
   Title:  Corporate Trust Officer

                Dynegy Second Lien Non-Shared Security Agreement<PAGE>

                                                                    Exhibit 10.9
                                                                  CONFORMED COPY
                                  $175,000,000

                                   Dynegy Inc.

               4.75% Convertible Subordinated Debentures due 2023

                               PURCHASE AGREEMENT
                               ------------------

                                                                  August 1, 2003
Credit Suisse First Boston LLC
Morgan Stanley & Co. Incorporated
J.P. Morgan Securities Inc.
Lehman Brothers Inc.
Credit Lyonnais Securities (USA) Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
c/o Eleven Madison Avenue
New York, N.Y. 10010-3629

Dear Sirs:

     1.  Introductory. Dynegy Inc., an Illinois corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the several initial purchasers named in Schedule A hereto (the "Purchasers")
an aggregate of U.S. $175,000,000 principal amount of its 4.75% Convertible
Subordinated Debentures due 2023 ("Firm Securities") and, at the election of the
Purchasers, an aggregate of up to an additional aggregate of U.S. $50,000,000
principal amount of its 4.75% Convertible Subordinated Debentures due 2023
("Optional Securities"), each to be issued under an indenture dated as of August
11, 2003 (the "Indenture"), among the Issuers (as defined below) and Wilmington
Trust Company, as trustee (the "Trustee"), on a private placement basis pursuant
to an exemption under Section 4(2) of the United States Securities Act of 1933,
as amended (the "Securities Act"). The Firm Securities and the Optional
Securities will both be unconditionally guaranteed as to the payment of
principal, premium, if any, and interest on a senior unsecured basis (the
"Guarantee" and, together with the Firm Securities and the Optional Securities,
the "Offered Securities") by Dynegy Holdings Inc. (the "Guarantor" and, together
with the Company, the "Issuers"). Capitalized terms used but not defined herein
shall have the meanings given to such terms in the Offering Circular (as defined
below).

     The holders of the Offered Securities will be entitled to the benefits of a
Registration Rights Agreement to be dated August 11, 2003 among the Issuers and
the Purchasers (the "Registration Rights Agreement"), pursuant to which the
Issuers will agree to file a shelf registration statement with the Securities
Exchange Commission (the "Commission") registering the resale of the Offered
Securities and the Underlying Shares, as hereinafter defined, under the
Securities Act.

     As used herein, the term "Operative Documents" refers to this Agreement,
the Indenture and the Registration Rights Agreement. As used herein, the term
"Underlying Shares" shall mean the shares of Common Stock of the Company
issuable upon conversion of the Offered Securities in accordance with the terms
of the Indenture. Concurrent with the offering of the Offered Securities, the
Guarantor is offering $1.45 billion of its second priority senior secured notes
(the "Notes") which will be guaranteed by certain affiliates of the Guarantor,
including the Company, which Notes will be issued pursuant to an indenture (the
"Notes Indenture") of even date with the Indenture.

<PAGE>

     2.  Representations and Warranties of the Issuers. Each of the Issuers,
jointly and severally, represents and warrants to, and agrees with, the several
Purchasers that:

     (a)  A preliminary offering circular dated July 25, 2003 (the "Preliminary
Offering Circular") has been prepared by the Issuers and an offering circular
dated the date hereof (the "Offering Circular") relating to the Offered
Securities has been prepared by the Issuers. Such Preliminary Offering Circular
and Offering Circular, as supplemented as of the date of this Agreement, and any
other document approved by the Company for use in connection with the
contemplated resale of the Offered Securities, are hereinafter collectively
referred to as the "Offering Document," which term shall include the portions of
the documents specifically incorporated by reference therein (the "Incorporated
Information"). The Preliminary Offering Circular did not, as of the date
thereof, and the Offering Circular (in the form used by the Purchasers to
confirm sales) as of its date does not, include any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The preceding sentence does not apply to statements in or
omissions from the Preliminary Offering Circular or the Offering Circular based
upon written information furnished to the Company by any Purchaser through
Credit Suisse First Boston LLC ("CSFB") specifically for use therein, it being
understood and agreed that the only such information is that described as such
in Section 7(b) hereof.

     (b)  No order or decree preventing the use of the Offering Document, or any
order asserting that the transactions contemplated by this Agreement are subject
to the registration requirements of the Securities Act, has been issued and no
proceeding for that purpose has commenced or is pending or, to the knowledge of
the Company or the Guarantor, is contemplated.

     (c)  Each Issuer has been duly incorporated or formed and is an existing
corporation in good standing under the laws of its state of organization, with
power and authority (corporate and other) to own its properties and conduct its
business as described in the Offering Document; and each Issuer is duly
qualified to do business as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or the conduct of its
business requires such qualification, except to the extent the failure to so
qualify or be in good standing could not reasonably be expected to have a
material adverse effect on the condition (financial or other), business,
properties, results of operations or, to the knowledge of the Issuers, prospects
of Dynegy Inc. and its subsidiaries, taken as a whole (a "Material Adverse
Effect"). Each Issuer has all requisite corporate power and authority to enter
into the Operative Documents and each Issuer has full power and authority to
authorize, issue and sell the Offered Securities as contemplated by this
Agreement.

     (d)  Illinois Power Company has been duly incorporated and is an existing
corporation in good standing under the laws of Illinois, with power and
authority (corporate and other) to own its properties and conduct its business
as described in the Offering Document, and is duly qualified to do business as a
foreign corporation in good standing in all other jurisdictions in which its
ownership or lease of property or the conduct of its business requires such
qualification, except to the extent the failure to so qualify or be in good
standing could not reasonably be expected to have a Material Adverse Effect.

     (e)  Neither of the Issuers nor any of their respective subsidiaries is (i)
in default in the performance of any obligation, agreement, covenant or
condition contained in any indenture, loan agreement, mortgage, lease or other
agreement or instrument that is material to the Issuers and their respective
subsidiaries, taken as a whole, to which either Issuer or their respective
subsidiaries is a party or by which the Company or any of its subsidiaries or
their respective property is bound, except for alleged defaults with respect to
certain agreements as disclosed in the Offering Circular under the caption
"Business--Legal Proceedings", or (ii) in violation of its respective charter or
by-laws, operating agreement or other organizational document that governs the
existence or administration of such entity, in each case, except as could not
reasonably be expected to have a Material Adverse Effect.

                                       2

<PAGE>

     (f)  (i) As of March 31, 2003, the Company has an authorized capitalization
as set forth in the Offering Document under the heading "Capitalization of
Dynegy Inc. - Actual", (ii) all of the issued shares of capital stock of each of
the Issuers have been duly and validly authorized and issued and are fully paid
and non-assessable; (iii) all of the issued shares of capital stock of each
subsidiary of the Company, other than the Guarantor, have been duly and validly
authorized and issued and are fully paid and non-assessable; and (iv) the
capital stock of each subsidiary owned by the Issuers, directly or through
subsidiaries, is owned free from liens, encumbrances and material defects other
than liens on Pledged Equity (as defined in the Notes Indenture) and that secure
the Notes and Priority Lien Debt (as defined in the Notes Indenture).

     (g)  Except as disclosed in the Offering Circular or pursuant to stock
option plans which are disclosed in the Offering Circular, there are no
outstanding (1) options, warrants or other rights to purchase from the Company
or any of its subsidiaries, (2) agreements, contracts, arrangements or other
obligations of the Company or any of its subsidiaries to issue, or (3) other
rights to convert any obligation into or exchange any securities for, in the
case of each of clauses (1) through (3), shares of capital stock of, or other
ownership or equity interests in, the Company or any of its subsidiaries.

     (h)  The Firm Securities and the Optional Securities have been duly and
validly authorized by the Company and, when duly executed by the Company in
accordance with the terms of the Indenture, assuming due authentication of the
Firm Securities or the Optional Securities, as the case may be, by the Trustee,
upon delivery to the Purchasers against payment therefor in accordance with the
terms hereof, will be validly issued and delivered, and will constitute valid
and binding obligations of the Company entitled to the benefits of the
Indenture, enforceable against the Company in accordance with their terms,
except as such enforceability may be limited by (i) bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium, or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which any proceeding
therefore may be brought (regardless of whether such enforcement is considered
in a proceeding in equity or at law). On the First Closing Date (as defined
below), the Firm Securities will conform in all material respects, and on the
Optional Closing Date (as defined below), the Optional Securities will conform
to the descriptions thereof contained in the Offering Circular.

     (i)  The Guarantee to be issued by the Guarantor has been, or as of the
Closing Date will have been, duly and validly authorized by the Guarantor and
when duly executed and delivered by the Guarantor in accordance with the terms
of the Indenture and upon the due execution, authentication and delivery of the
Firm Securities or the Optional Securities, as the case may be, in accordance
with the Indenture and the attachment of the Guarantee thereto and the issuance
of the Offered Securities in the sale to the Purchasers contemplated by this
Agreement, will constitute valid and binding obligation of the Guarantor,
enforceable against the Guarantor in accordance with its terms, except as such
enforceability may be limited by (i) bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium, or other similar laws now or hereafter
in effect relating to creditors' rights generally and (ii) general principles of
equity and the discretion of the court before which any proceeding therefore may
be brought (regardless of whether such enforcement is considered in a proceeding
in equity or at law). On the Closing Date, the Guarantee will conform to the
description thereof in the Offering Circular.

     (j)  The Indenture has been, or as of the Closing Date will have been, duly
and validly authorized by each of the Issuers, and upon its execution and
delivery and, assuming due authorization, execution and delivery by the Trustee,
will constitute the valid and binding agreement of the Issuers, enforceable
against the Issuers in accordance with its terms, except as such enforceability
may be limited by (i) bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium, or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity
and the discretion of the court before which any proceeding therefore may be
brought (regardless of whether such enforcement is considered in a proceeding in
equity or at law); and assuming the accuracy of the Purchasers' representations
and warranties and the Purchasers' compliance with the agreements in Section

                                       3

<PAGE>

4 hereof and compliance with the limitations and restrictions contained under
the heading "Transfer Restrictions" in the Offering Circular, no qualification
of the Indenture under the Trust Indenture Act of 1939, as amended (the "TIA")
is required in connection with the offer and sale of the Offered Securities
contemplated hereby; and the Indenture conforms in all material respects to the
requirements of the TIA, and the rules and regulations of the Commission
applicable to an indenture which is qualified thereunder. On the Closing Date,
the Indenture will conform to the description thereof in the Offering Circular.

     (k)  The Registration Rights Agreement has been, or as of the Closing Date
will have been, duly and validly authorized by the Company and the Guarantor
and, on each Closing Date, will have been duly executed and delivered by the
Company and the Guarantor. When the Registration Rights Agreement has been duly
executed and delivered, the Registration Rights Agreement will constitute a
valid and legally binding obligation of the Company and the Guarantor,
enforceable against the Company and the Guarantor in accordance with its terms,
except as such enforceability may be limited by (i) bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium, or similar laws now or
hereafter in effect relating to or affecting creditors' rights generally and
(ii) general principles of equity and the discretion of the court before which
any proceeding therefore may be brought (regardless of whether such enforcement
is considered in a proceeding in equity or at law). On the Closing Date, the
Registration Rights Agreement will conform to the description thereof in the
Offering Circular.

     (l)  When the Offered Securities are delivered and paid for pursuant to
this Agreement on each Closing Date, such Offered Securities will be convertible
into the Underlying Shares in accordance with the terms of the Indenture; the
Underlying Shares initially issuable upon conversion of such Offered Securities
have been duly authorized and reserved for issuance upon such conversion and,
when issued upon such conversion, will be validly issued, fully paid and
non-assessable; and the shareholders of the Company have no preemptive rights
with respect to the Offered Securities or the Underlying Shares, other than the
pre-emptive rights of Chevron U.S.A. Inc. as described in the Offering Document,
which rights have been waived in connection with the issuance of the Offered
Securities so long as the Series B Preferred Stock Restructuring (as defined in
the Offering Document) is consummated.

     (m)  This Agreement has been duly authorized, executed and delivered by
each of the Issuers.

     (n)  Except as disclosed in the Offering Document, there are no contracts,
agreements or understandings between the Company or the Guarantor and any person
that would give rise to a valid claim against the Company, the Guarantor or any
Purchaser for a brokerage commission, finder's fee or other like payment.

     (o)  No consent, approval, authorization, or order of, or filing with, any
governmental agency or body or any court is required for the consummation of the
transactions contemplated by the Operative Documents in connection with the
issuance and sale of the Offered Securities by the Issuers, except for (i) the
order of the Commission declaring the Shelf Registration Statement (as defined
in the Registration Rights Agreement) effective; (ii) such as may be required
under foreign or state securities laws, blue sky laws and related regulations;
(iii) those that have been obtained or made on or prior to the Closing Date; and
(iv) those that could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect and would not materially adversely
affect the ability of the Issuers to perform their respective obligations under
the Operative Documents.

     (p)  The execution, delivery and performance of the Operative Documents and
the issuance and sale of the Offered Securities will not conflict with or result
in a breach or violation of any of the terms and provisions of, or constitute a
default under (i) any statute, any rule, regulation or order of any governmental
agency or body or any court, domestic or foreign, having jurisdiction over the
Issuers or any of their respective subsidiaries or any of their properties, (ii)
any agreement or instrument to which the Issuers or any of their respective
subsidiaries is a party or by which the Issuers or any of their respective

                                       4

<PAGE>

subsidiaries is bound or to which any of the properties of the Issuers or any of
their respective subsidiaries is subject, or (iii) the charter or by-laws of the
Issuers or any of their respective subsidiaries, except in the case of (i) and
(ii), for such breaches, violations or defaults as could not reasonably be
expected to have a Material Adverse Effect.

     (q)  Except as disclosed in the Offering Document or as could not
reasonably be expected to have a Material Adverse Effect, each obligor under the
Operative Documents (the "Obligors" and each an "Obligor") has (i) good and
marketable title to (in the case of fee interests in real property), (ii) valid
leasehold interests in (in the case of leasehold interests in real or personal
property), and (iii) good title to (in the case of all other personal property),
all of its respective properties and assets reflected in its respective
financial statements. All such properties and assets are free and clear of Liens
except for Priority Liens and Permitted Liens (as each term is defined in the
Notes Indenture).

     (r)  Except as disclosed in the Offering Document, each of the Issuers and
their respective subsidiaries possesses adequate certificates, authorities or
permits issued by appropriate governmental agencies or bodies necessary to
conduct the business now operated by them and have not received any notice of
proceedings relating to the revocation or modification of any such certificate,
authority or permit that, if determined adversely to either of the Issuers or
their respective subsidiaries, could individually or in the aggregate reasonably
be expected to have a Material Adverse Effect.

     (s)  Except as disclosed in the Offering Document, each of the Issuers and
their respective subsidiaries is in compliance with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by all
governmental agencies, bodies or courts, except where the failure to comply
could not reasonably be expected to have a Material Adverse Effect.

     (t)  No labor dispute with the employees of the Issuers and their
respective subsidiaries, that could reasonably be expected to result in a
Material Adverse Effect, to the knowledge of the Issuers, is imminent.

     (u)  The Issuers and their respective subsidiaries own or possess on
reasonable terms, adequate trademarks, trade names and other rights to patents,
copyrights and other intellectual property (collectively, "intellectual property
rights") necessary to conduct the business now operated by them, or presently
employed by them, and have not received any notice of infringement of or
conflict with asserted rights of others with respect to any intellectual
property rights that, if determined adversely to the Issuers or any of their
respective subsidiaries, could reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect.

     (v)  Except as disclosed in the Offering Document, none of the Issuers or
any of their respective subsidiaries is in violation of any statute, any rule,
regulation, decision or order of any governmental agency or body or any court,
domestic or foreign having jurisdiction over the Issuers or any of their
respective subsidiaries or any of their respective properties, relating to the
use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, "environmental laws"), owns or operates any real
property contaminated with any substance that is subject to any environmental
laws, is liable for any off-site disposal or contamination pursuant to any
environmental laws, or is subject to any claim relating to any environmental
laws, which violation, contamination, liability or claim could reasonably be
expected to, individually or in the aggregate, have a Material Adverse Effect;
and neither the Company nor the Guarantor is aware of any pending investigation
which might lead to such a claim.

     (w)  Except as disclosed in the Offering Document, there are no pending
actions, suits or proceedings against or affecting the Issuers, any of their
respective subsidiaries or their respective

                                       5

<PAGE>

properties that, if determined adversely to the Issuers, or their respective
subsidiaries, could reasonably be expected to, individually or in the aggregate,
have a Material Adverse Effect, or would materially and adversely affect the
ability of the Company or the Guarantor to perform their respective obligations
under the Operative Documents; and except as disclosed in the Offering Document
no such actions, suits or proceedings are, to the Company's or the Guarantor's
knowledge, threatened or contemplated.

     (x)  The financial statements included in the Offering Document present
fairly the financial position of Dynegy Inc. and its consolidated subsidiaries
as of the dates shown and their results of operations and cash flows for the
periods shown, and such financial statements have been prepared in conformity
with the generally accepted accounting principles in the United States applied
on a consistent basis.

     (y)  Except as disclosed in the Offering Document, since the date of the
latest audited financial statements in the Offering Circular, there has been no
material adverse change, nor any development or event involving a prospective
material adverse change, in the condition (financial or other), business,
properties, results of operations or, to the knowledge of the Issuers, prospects
of the Issuers and their respective subsidiaries taken as a whole, and, except
as disclosed in or contemplated by the Offering Circular, there has been no
dividend or distribution of any kind declared, paid or made by Dynegy Inc. on
any class of its capital stock.

     (z)  The Company is subject to the reporting requirements of either Section
13 or Section 15(d) of the Exchange Act and files reports with the Commission on
the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system.

     (aa) The Company is not an open-end investment company, unit investment
trust or face-amount certificate company that is or is required to be registered
under Section 8 of the United States Investment Company Act of 1940 (the
"Investment Company Act"); and the Company is not and, after giving effect to
the offering and sale of the Offered Securities and the application of the
proceeds thereof as described in the Offering Document, will not be an
"investment company" as defined in the Investment Company Act.

     (bb) The Company has established and maintains disclosure controls and
procedures (as such term is defined in Rule 13a-14 under the Exchange Act),
which (i) are designed to ensure that material information relating to the
Company and its consolidated subsidiaries, is made known to the principal
executive officer and its principal financial officer by others within those
entities, particularly during the periods in which the periodic reports required
under the Exchange Act are being prepared; (ii) have been evaluated for
effectiveness as of a date within 90 days prior to the date of the Company's
most recently filed quarterly report; and (iii) are effective in all material
respects to perform the functions for which they were established.

     (cc) Based on the most recent evaluation of its disclosure controls and
procedures, the Company is not aware of (i) any significant deficiency in the
design or operation of internal controls which could adversely affect the
ability of the Company to record, process, summarize and report financial data
or any material weaknesses in internal controls, except as disclosed in the
Offering Document; or (ii) any fraud, whether or not material, that involves
management or other employees who have a significant role in internal controls.

     (dd) Since the date of the most recent evaluation of such disclosure
controls and procedures, there have been no significant changes in internal
controls or in other factors that could significantly affect internal controls,
including any corrective actions with regard to significant deficiencies and
material weaknesses, except as disclosed in the Offering Document.

                                       6

<PAGE>

     (ee) PricewaterhouseCoopers LLP who have certified certain financial
statements of the Company and its subsidiaries are independent public
accountants as required by the Securities Act and the rules and regulations of
the Commission thereunder.

     (ff) Except as set forth in the Offering Document, none of the Issuers or
any of their respective subsidiaries is (i) a "registered holding company," or a
"subsidiary company" or "affiliate" of a "registered holding company" within the
meaning of the Public Utility Holding Company Act of 1935 ("PUHCA"); (ii) a
"public utility company" as defined under Section 2(a) of PUHCA, with the
exception of Illinois Power Company; (iii) subject to regulation under the
Federal Power Act, as amended ("FPA"), other than as a power marketer or an
"exempt wholesale generator" ("EWG") with market-based rate authority, or as a
"qualifying facility" ("QF") under the Public Utility Regulatory Policies Act of
1978, as amended (16 U.S.C. Section 796 et seq.) ("PURPA"), as contemplated by
18 C.F.R. Section 292.601(c), with the exception of Illinois Power Company, or
(iv) with respect to each of the power generation projects in which any of the
Issuers or their respective subsidiaries has an interest that is a QF, subject
to any state law or regulation with respect to rates or the financial or
organizational regulation of electric utilities, other than as contemplated by
18 C.F.R. Section 292.602(c).

     (gg) Each of the Company's subsidiaries, providing retail electric service
in the states of Illinois, Michigan, New York and Texas has a validly issued
order from the relevant state public utility or commerce commission to sell
electricity on a retail basis, and such orders are not subject to any pending
challenge, investigation, or proceeding, authorizing such subsidiary to engage
in sales of electricity at retail under the laws of that state. None of the
Company's subsidiaries providing retail electric service is subject to any rate
cap or mitigation measure other than rate caps and mititgation measures
generally applicable to similarly situated retail service providers selling in
the geographic market where such subsidiary conducts its business (and with
respect to Illinois Power Company, its geographic market shall be the State of
Illinois and Illinois Power Company does not provide retail electric service
outside the State of Illinois).

     (hh) Except as disclosed in the Offering Document, each of the power
generation projects certified as QF under PURPA in which the Company or its
subsidiaries has an interest meets the requirements for certification as a QF as
set out in PURPA and the regulations of the Federal Energy Regulatory Commission
("FERC") promulgated thereunder, as amended from time to time.

     (ii) The Guarantor and each of its subsidiaries that is an Eligible
Facility within the meaning of Section 32 of PUHCA has received a determination
from the FERC, not subject to any pending challenge, that it is an Exempt
Wholesale Generator as that term is defined and used in PUHCA and in the FPA.

     (jj) Each of the Issuers and their respective subsidiaries that sells power
at market-based rates outside of the Electric Reliability Councuil of Texas,
Inc. ("ERCOT") has a validly-issued order from the FERC authorizing it to engage
in wholesale sales of electricity, ancillary services in certain markets and, to
the extent permitted under its market-based rate tariff, other products and
services at market-based rates. The FERC has not issued any orders limiting the
ability of each such entity to engage in the wholesale sales of electricity at
market-based prices, and had not imposed any rate caps or mitigation measures
other than rate caps and mitigation measures generally applicable to similarly
situated marketers or generators selling electricity, ancillary services or
other products at wholesale in the geographic market where each such entity
conducts its business.

     (kk) Each of the Company's subsidiaries participating in the ERCOT
wholesale electric market has registered with the Public Utilities Commission of
Texas ("PUCT") as a power generation company, and has authority to sell power at
wholesale at a market-based rate that is not subject to any rate cap or
mitigation measure other than those generally applicable to similarly situated
marketers or generators selling electricity in the ERCOT wholesale electric
market.

                                       7

<PAGE>

     (ll) Other than the complaint proceedings challenging (i) the contract
between the California Department of Water Resources and Dynegy Power Marketing,
Inc., Cabrillo Power I LLC, El Segundo Power LLC, and Long Beach Generation LLC
and (ii) the contract between the Kroger Company and Dynegy Power Marketing,
Inc., there are no pending complaints filed with the FERC seeking abrogation or
modification of a contract for the sale of power by the Company or any of its
subsidiaries.

     (mm) No securities of the same class (within the meaning of Rule 144A(d)(3)
under the Securities Act) as the Offered Securities are listed on any national
securities exchange registered under Section 6 of the Exchange Act or quoted in
a U.S. automated inter-dealer quotation system.

     (nn) The offer and sale of the Offered Securities by the Issuers to the
several Purchasers in the manner contemplated by this Agreement (assuming that
the representations and warranties in Section 4 of this Agreement are true and
correct and the Purchasers comply with the offer and sale procedures set forth
in this Agreement) will be exempt from the registration requirements of the
Securities Act by reason of Section 4(2) thereof, and Regulation D and
Regulation S thereunder.

     (oo) None of the Issuers nor any of their respective affiliates, nor any
person acting on its or their behalf (it being understood that no representation
is made with respect to any Purchaser or any Purchaser's affiliates or any of
their representatives) (i) has, within the six-month period prior to the date
hereof, offered or sold in the United States or to any U.S. person (as such
terms are defined in Regulation S under the Securities Act) the Offered
Securities or any security of the same class or series as the Offered Securities
or (ii) has offered or will offer or sell the Offered Securities (A) in the
United States by means of any form of general solicitation or general
advertising within the meaning of Rule 502(c) under the Securities Act or (B)
with respect to any such securities sold in reliance on Rule 903 of Regulation S
under the Securities Act, by means of any directed selling efforts within the
meaning of Rule 902(c) of Regulation S. The Issuers, their respective affiliates
and any person acting on its or their behalf (it being understood that no
representation is made with respect to any Purchaser or any Purchaser's
affiliates or any of their representatives) have complied and will comply with
the offering restrictions requirement of Regulation S and the sale of the
Offered Securities pursuant to Regulation S is not part of a plan or scheme to
evade the registration provisions of the Securities Act. The Company and the
Guarantor have not entered and will not enter into any contractual arrangement
with respect to the distribution of the Offered Securities except for this
Agreement.

     (pp) Except in connection with (1) the junior unsecured subordinated notes
due 2015 of Dynegy Inc. issued or to be issued to Chevron USA pursuant to one or
more valid exemptions from registration under the Securities Act, (3) the
convertible preferred stock due 2033 of Dynegy Inc. issued or to be issued to
Chevron USA pursuant to one or more valid exemptions from registration under the
Securities Act and (4) as disclosed in the Offering Document, there are no
contracts, agreements or understandings between the Company or the Guarantor and
any person granting such person the right to require the Company or the
Guarantor to file a registration statement under the Securities Act with respect
to any securities of the Company or the Guarantor or to require the Company or
the Guarantor to include such securities with the Offered Securities registered
pursuant to any Registration Statement.

     (qq) None of the Company, the Guarantor, any of their respective
subsidiaries or any agent thereof acting on the behalf of them has taken, and
none of them will take, any action that might cause this Agreement or the
issuance or sale of the Offered Securities to violate Regulation T, Regulation U
or Regulation X of the Board of Governors of the Federal Reserve System.

     (rr) The Issuers and each of their respective subsidiaries carry, or are
covered by, insurance in such amounts and covering such risks as is adequate for
the conduct of their respective businesses and the value of their respective
properties and as is customary for companies engaged in similar businesses in
similar industries.

                                       8

<PAGE>

     (ss) Except for the "negative watch" outlook for Dynegy Inc. issued by
Standard & Poor's Ratings Group prior to the date of this Agreement, no
"nationally recognized statistical rating organization" as such term is defined
for purposes of Rule 436(g)(2) under the Securities Act (i) has imposed (or has
informed the Company or the Guarantor that it is considering imposing) any
condition (financial or otherwise) on the Company's or the Guarantor's retaining
any rating assigned to the Company or the Guarantor, any securities of the
Company or the Guarantor or (ii) has indicated to the Company or the Guarantor
that it is considering (a) the downgrading, suspension, or withdrawal of, or any
review for a possible change that does not indicate the direction of the
possible change in, any rating so assigned or (b) any change in the outlook for
any rating of the Company, the Guarantor or any securities of the Company or the
Guarantor.

     (tt) Except for such matters as could not reasonably be expected to have a
Material Adverse Effect, the Company is in compliance in all material respects
with all presently applicable provisions of ERISA; no "reportable event" (as
defined in ERISA), has occurred with respect to any "pension plan" (as defined
in ERISA), for which the Company would have any liability; the Company has not
incurred and does not expect to incur liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any "pension plan" or (ii)
Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including
the regulations and published interpretations thereunder (the "Code"); and each
"pension plan" for which the Company would have any liability that is intended
to be qualified under Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or by failure to act, which
would cause the loss of such qualification.

     (uu) Except as disclosed in the Offering Circular, the Company and its
subsidiaries have filed all material federal, state and local income and
franchise tax returns required to be filed through the date hereof and have paid
all taxes due thereon, and no tax deficiency except where the same may be
contested in good faith by appropriate proceedings, and no tax deficiency has
been determined adversely to the Issuers or any of their respective subsidiaries
which has had (nor does the Company or the Guarantor have any knowledge of any
tax deficiency in writing which, if determined adversely to the Issuers or any
of their respective subsidiaries, could reasonably be expected to have) a
Material Adverse Effect.

     (vv) Prior to the date hereof, neither the Company nor any of its
affiliates has taken any action which is designed to or which has constituted or
which might have been expected to cause or result in stabilization or
manipulation of the price of any security of the Company in connection with the
offering of the Offered Securities.

     (ww) The Offering Document contains all the information specified in, and
meeting the requirements of, Rule 144A(d)(4) under the Securities Act.

     (xx) The statements set forth in the Offering Circular under the caption
"Description of the Convertible Debentures," insofar as they purport to
constitute a summary of the terms of the Offered Securities, under the captions
"Offering Circular Summary--Recent Developments," "Certain Relationships and
Related Party Transactions," "Description of the Capital Stock," "Description of
the Amended Credit Facility," "Series B Preferred Stock Restructuring,"
"Material United States Federal Income Tax Considerations," "Price Range of
Common Stock and Dividend Policy" and "Plan of Distribution," insofar as they
purport to describe the provisions of the laws and documents referred to
therein, are accurate and fair summaries in all material respects.

     (yy) The market-related and customer-related data and estimates included in
the Offering Document are based on or derived from sources which the Company
believes to be reliable.

                                       9

<PAGE>

     3.  Purchase, Sale and Delivery of Offered Securities. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Issuers or agree to sell to the
Purchasers, and the Purchasers agree, severally and not jointly, to purchase
from the Issuers, at a purchase price of 97% of the principal amount thereof
(the "Purchase Price") plus accrued interest from August 11, 2003 to the First
Closing Date (as hereinafter defined) U.S. $175,000,000 principal amount of the
Firm Securities in the respective amounts set forth opposite the names of the
several Purchasers in Schedule A hereto.

     The Company will deliver against payment of the purchase price the Firm
Securities in the form of one or more permanent global Securities in definitive
form with the Guarantee affixed thereto (the "Global Securities") deposited with
the Trustee as custodian for The Depository Trust Company ("DTC") and registered
in the name of Cede & Co., as nominee for DTC. Interests in any permanent Global
Securities will be held only in book-entry form through DTC, except in the
limited circumstances described in the Offering Document. Payment for the
Offered Securities shall be made by the Purchasers in Federal (same day) funds
by wire transfer to an account at a bank acceptable to CSFB on August 11, 2003,
or at such other time not later than seven full business days thereafter as CSFB
and the Company determine, such time being herein referred to as the "First
Closing Date", against delivery to the Trustee as custodian for DTC of the Firm
Securities representing all of the Firm Securities. The Firm Securities will be
made available for checking at the office of O'Melveny & Myers, 30 Rockefeller
Plaza, New York, New York 10012 at least 24 hours prior to the First Closing
Date.

     In addition, upon written notice from CSFB given to the Company from time
to time not more than 30 days subsequent to the date of this Agreement the
Purchasers may purchase all or less than all of the Optional Securities at the
Purchase Price (including any accrued interest thereon to the related Optional
Closing Date (as defined below) to be paid for the Firm Securities; provided,
however, that Optional Securities may not be issued in whole or in part after
the period which ends 13 days after the date hereof unless the Purchasers
determine that such Optional Securities would not be treated as having been
issued with "original issue discount" for purposes of Sections 1271-1275 of the
Code and the applicable Treasury regulations promulgated thereunder. The Company
agrees to sell to the Purchasers the principal amount of Optional Securities
specified in such notice and the Purchasers agrees to purchase such Optional
Securities. Such Optional Securities shall be purchased from the Issuers for the
account of each Purchaser in the same proportion as the amount of Firm
Securities set forth next to such Purchaser's name in Schedule A hereto bears to
the total number of Offered Securities. No Optional Securities shall be sold or
delivered unless the Firm Securities previously have been, or simultaneously
are, sold and delivered. The right to purchase the Optional Securities or any
portion thereof may be exercised from time to time and to the extent not
previously exercised may be surrendered and terminated at any time upon notice
by CSFB to the Company.

     Each time for the delivery of and payment for the Optional Securities,
being herein referred to as the "Optional Closing Date", which may be the First
Closing Date (the First Closing Date and each Optional Closing Date, if any,
being sometimes referred to as a "Closing Date"), shall be determined by CSFB
but shall not be later than seven full business days after written notice of
election to purchase Optional Securities is given. The Company will deliver
against payment of the purchase price the Optional Securities being purchased on
each Optional Closing Date in the form of one or more permanent global
Securities in definitive form (each, an "Optional Global Security") deposited
with the Trustee as custodian for DTC and registered in the name of Cede & Co.,
as nominee for DTC. Payment for such Optional Securities shall be made by the
Purchasers in Federal (same day) funds by wire transfer to an account at a bank
acceptable to CSFB against delivery to the Trustee as custodian for DTC of the
Optional Global Securities representing all of the Optional Securities being
purchased on such Optional Closing Date.

     4.  Representations by Purchasers; Resale by Purchasers.

                                       10

<PAGE>

     (a)  Each Purchaser severally represents and warrants to the Issuers that
it is an "accredited investor" within the meaning of Regulation D under the
Securities Act.

     (b)  Each Purchaser severally acknowledges that the Offered Securities have
not been registered under the Securities Act and may not be offered or sold
within the United States or to, or for the account or benefit of, U.S. persons
except in accordance with Regulation S or pursuant to an exemption from the
registration requirements of the Securities Act. Each Purchaser severally
represents and agrees that it has offered and sold the Offered Securities and
will offer and sell the Offered Securities only in accordance with Rule 903 or
Rule 144A ("Rule 144A") under the Securities Act. Accordingly, neither such
Purchasers nor any of its affiliates, nor any persons acting on its or their
behalf, have engaged or will engage in any directed selling efforts with respect
to the Offered Securities, and such Purchaser, its affiliates and all persons
acting on its or their behalf have complied and will comply with the offering
restrictions requirement of Regulation S and Rule 144A.

     (c)  Each Purchaser severally agrees that it and each of its affiliates has
not entered and will not enter into any contractual arrangement with respect to
the distribution of the Offered Securities except for any such arrangements with
the other Purchasers or affiliates of the other Purchasers or with the prior
written consent of the Company.

     (d)  Each Purchaser severally agrees that it and each of its affiliates
will not offer or sell the Offered Securities by means of any form of general
solicitation or general advertising, within the meaning of Rule 502(c) under the
Securities Act, including, but not limited to (i) any advertisement, article,
notice or other communication published in any newspaper, magazine or similar
media or broadcast over television or radio, or (ii) any seminar or meeting
whose attendees have been invited by any general solicitation or general
advertising. Each Purchaser severally agrees, with respect to resales made in
reliance on Rule 144A of any of the Offered Securities, to deliver either with
the confirmation of such resale or otherwise prior to settlement of such resale
a notice to the effect that the resale of such Offered Securities has been made
in reliance upon the exemption from the registration requirements of the
Securities Act provided by Rule 144A.

     (e)  Each Purchaser severally represents and agrees that: (i) it has not
offered or sold and prior to the expiry of a period of six months from the
closing date, will not offer or sell any of the Offered Securities to persons in
the United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or agent)
for the purposes of their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995; (ii) it
has only communicated or caused to be communicated and will only communicate or
cause to be communicated any invitation or inducement to engage in investment
activity (within the meaning of section 21 of the Financial Services and Markets
Act 2000) received by it in connection with the issue or sale of any of the
Offered Securities in circumstances in which section 21(1) of the FSMA does not
apply to the Issuers; and (iii) it has complied and will comply with all
applicable provisions of the FSMA with respect to anything done by it in
relation to the of the Offered Securities in, from or otherwise involving the
United Kingdom.

     5.  Certain Agreements of the Issuers. Each of the Issuers, jointly and
severally, agrees with the several Purchasers that:

     (a)  The Company will advise CSFB promptly of any proposal to amend or
supplement the Offering Circular and will not effect such amendment or
supplement without CSFB's consent (which consent shall not be unreasonably
withheld or delayed). If, at any time prior to the completion of the resale of
the Offered Securities by the Purchasers any event occurs as a result of which
the Offering Document as then amended or supplemented would include an untrue
statement of a material fact or omit

                                       11

<PAGE>

to state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading, the
Company promptly will notify CSFB of such event and promptly will prepare, at
its own expense, an amendment or supplement which will correct such statement or
omission. Neither CSFB's consent to, nor the Purchasers' delivery to offerees or
investors of, any such amendment or supplement shall constitute a waiver of any
of the conditions set forth in Section 6.

     (b)  The Company will furnish to CSFB copies of the Preliminary Offering
Circular, the Offering Circular and all amendments and supplements to such
documents, in each case as soon as available and in such quantities as CSFB
reasonably requests. At any time when the Company is not subject to Section 13
or 15(d) of the Exchange Act, and any Offered Securities remain "restricted
securities" within the meaning of the Securities Act, the Company will promptly
furnish or cause to be furnished to CSFB (and, upon request, to each of the
other Purchasers) and, upon request of holders and prospective purchasers of the
Offered Securities, to such holders and purchasers, copies of the information
required to be delivered to holders and prospective purchasers of the Offered
Securities pursuant to Rule 144A(d)(4) under the Securities Act (or any
successor provision thereto) in order to permit compliance with Rule 144A in
connection with resales by such holders of the Offered Securities. The Company
will pay the expenses of printing and distributing to the Purchasers all such
documents.

     (c)  The Issuers will use all commercially reasonable efforts to obtain the
qualification of the Offered Securities for sale and the determination of their
eligibility for investment under the laws of such jurisdictions in the United
States and Canada as CSFB designates and will continue such qualifications in
effect so long as required for the resale of the Offered Securities by the
Purchasers, provided that neither the Company nor the Guarantor will be required
to qualify as a foreign corporation or to file a general consent to service of
process in any such state.

     (d)  During the period of two years after the Closing Date, the Issuers
will, upon request, furnish to CSFB, each of the other Purchasers and any holder
of Offered Securities a copy of the restrictions on transfer applicable to the
Offered Securities.

     (e)  Subject to the Purchasers' compliance with its representations and
warranties and agreements set forth in Section 4 hereof, the Issuers consent to
the use of the Offering Document, and any amendments and supplements thereto
required pursuant to Section 5(a) hereto, by the Purchasers.

     (f)  During the period of two years after the later of the First Closing
Date and the last Optional Closing Date, the Company will not, and will not
permit any of its affiliates (as defined in Rule 144 under the Securities Act)
to, resell any of the Offered Securities that have been reacquired by any of
them, unless such Offered Securities are resold in a transaction registered
under the Securities Act.

     (g)  During the period of two years after the later of the First Closing
Date and the last Optional Closing Date, the Company will not be or become, an
open-end investment company, unit investment trust or face-amount certificate
company that is or is required to be registered under Section 8 of the
Investment Company Act.

     (h)  Each of the Issuers, jointly and severally, agree to pay all expenses
incidental to the performance of its obligations under the Operative Documents
including (i) the fees and expenses of the Trustee and its professional
advisers, (ii) all expenses in connection with the execution, issue,
authentication, packaging and initial delivery of the Offered Securities, the
preparation and printing of the Preliminary Offering Circular and the Offering
Circular and amendments and supplements thereto, and any other document relating
to the issuance, offer, sale and delivery of the Offered Securities, (iii) the
cost of qualifying the Offered Securities for trading in The Portal/SM/ Market
("PORTAL") of The Nasdaq Stock

                                       12

<PAGE>

Market, Inc. and any expenses incidental thereto, (iv) for any expenses
(including fees and disbursements of counsel) incurred in connection with
qualification of the Offered Securities for sale under the state securities laws
as provided in Section 5(c) and the printing of memoranda relating thereto, (v)
for any fees charged by investment rating agencies for the rating of the Offered
Securities, and (vi) for expenses incurred in distributing the Preliminary
Offering Circular and the Offering Circular (including any amendments and
supplements thereto) to the Purchasers. The Company will reimburse the
Purchasers for all travel expenses of the Purchasers and the Company's officers
and employees and any other expenses of the Purchaser and the Company in
connection with attending or hosting meetings with prospective purchasers of the
Offered Securities.

     (i)  In connection with the offering, until CSFB shall have notified the
Company and the other Purchasers, which notice shall be promptly provided upon
the written request of the Company, of the completion of the resale of the
Offered Securities, neither the Company nor any of its affiliates has or will,
either alone or with one or more other persons, bid for or purchase for any
account in which it or any of its affiliates has a beneficial interest any
Offered Securities or attempt to induce any person to purchase any Offered
Securities; and neither it nor any of its affiliates will make bids or purchases
for the purpose of creating actual, or apparent, active trading in, or of
raising the price of, the Offered Securities.

     (j)  For a period of 90 days from the date of the initial offering of the
Offered Securities by the Purchasers, neither the Company nor the Guarantor will
offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, any shares of Class A Common Stock of the Company except issuances
of Class A Common Stock pursuant to the conversion or exchange of the Offered
Securities or other convertible or exchangeable securities or the exercise of
warrants or options, in each case outstanding on the date hereof, grants of
employee, consultant or director stock options pursuant to the terms of a plan
in effect on the date hereof, issuances of Offered Securities pursuant to the
exercise of such options or the exercise of any other employee stock options
outstanding on the date hereof, or upon issuance or conversion of Optional
Securities. Neither the Company nor the Guarantor will at any time offer, sell,
contract to sell, pledge or otherwise dispose of, directly or indirectly, any
securities under circumstances where such offer, sale, pledge, contract or
disposition would cause the exemption afforded by Section 4(2) of the Securities
Act or the safe harbor of Regulation S thereunder to cease to be applicable to
the offer and sale of the Offered Securities.

     (k)  The Company will apply the net proceeds from the sale of the Offered
Securities to be sold by it hereunder substantially in accordance with the
description set forth in the Offering Document under the caption "Use of
Proceeds."

     (l)  Except as stated in this Agreement and in the Offering Document,
neither the Issuers nor any of their respective affiliates have taken, nor will
any of them take, directly or indirectly, any action designed to or that might
reasonably be expected to cause or result in stabilization or manipulation of
the price of any security of the Issuers to facilitate the sale or resale of the
Offered Securities.

     (m)  The Issuers will use their best efforts to permit the Offered
Securities to be designated PORTAL securities in accordance with the rules and
regulations adopted by the National Association of Securities Dealers, Inc.
relating to trading in PORTAL and to permit the Offered Securities to be
eligible for clearance and settlement through DTC.

     (n)  The Issuers agree not to sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in the Securities
Act), that would be integrated with the sale of the Offered Securities in a
manner that would require the registration under the Securities Act of the sale
to the Purchasers or the resale of the Offered Securities.

                                       13

<PAGE>

     (o)  The Issuers agree to comply with all the terms and conditions of the
Operative Documents and all agreements set forth in the representation letters
of the Issuers to DTC relating to the approval of the Offered Securities by DTC
for "book entry" transfer.

     (p)  The Issuers agree that prior to any registration of the Offered
Securities pursuant to the Registration Rights Agreement, or at such earlier
time as may be required, the Indenture shall be qualified under the TIA and any
necessary supplemental indentures will be entered into in connection therewith,
provided that the agreement set forth in this paragraph shall remain in effect
until the Registration Rights Agreement has been executed by all parties thereto
and has become a binding agreement enforceable against each party thereto.

     (q)  The Issuers will do and perform all things required or necessary to be
done and performed under this Agreement by them prior to each Closing Date, and
to satisfy all conditions precedent to the Purchasers' obligations hereunder to
purchase the Offered Securities.

     6.  Conditions of the Obligations of the Purchasers. The obligations of the
several Purchasers to purchase and pay for the Offered Securities will be
subject to the accuracy of the representations and warranties on the part of the
Issuers herein as of the date hereof and on the Closing Date, to the accuracy of
the statements of officers of the Issuers made pursuant to the provisions
hereof, to the performance by the Issuers of their respective obligations
hereunder and to the following additional conditions precedent:

     (a)  The Purchasers shall have received a letter, substantially in the form
attached hereto as Annex A, dated the date of this Agreement, of
PricewaterhouseCoopers LLP confirming that they are independent public
accountants within the meaning of the Securities Act and the applicable
published rules and regulations thereunder ("Rules and Regulations"). Such
letter shall be in form and substance reasonably satisfactory to the Purchasers
as agreed as of the date hereof and shall cover the matters ordinarily covered
by accountants' "comfort letters" to initial purchasers in connection with
offerings similar to the offering of the Offered Securities.

     (b)  Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) any change, or any development or event involving a
prospective change, in the condition (financial or other), business, properties
or results of operations of the Company or any of the Guarantors and their
respective subsidiaries taken as a whole which, in the judgment of a majority in
interest of the Purchasers, including CSFB, is material and adverse and makes it
impractical or inadvisable to proceed with completion of the offering or the
sale of and payment for the Offered Securities; (ii) any downgrading in the
rating of any debt securities of the Company by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule 436(g) under
the Securities Act), or any public announcement that any such organization has
under surveillance or review its rating of any debt securities of the Company
(other than an announcement with positive implications of a possible upgrading,
and no implication of a possible downgrading, of such rating) or, except for the
"negative watch" outlook for the Company issued by Standard & Poor's Ratings
Group prior to the date of this Agreement, any announcement that the Company has
been placed on negative outlook as of or after the date of this Agreement; (iii)
any change in U.S. or international financial, political or economic conditions
or currency exchange rates or exchange controls as would, in the judgment of a
majority in interest of the Purchasers, including CSFB, be likely to prejudice
materially the success of the proposed issue, sale or distribution of the
Offered Securities, whether in the primary market or in respect of dealings in
the secondary market; (iv) any material suspension or material limitation of
trading in securities generally on the New York Stock Exchange or any setting of
minimum prices for trading on such exchange, or any suspension of trading of any
securities of the Company on any exchange or in the over-the-counter market; (v)
any general banking moratorium declared by U.S. Federal or New York authorities;
(vi) any major disruption of settlements of securities or clearance services in
the United States; or (vii) any attack on, outbreak or escalation of

                                       14

<PAGE>

hostilities or act of terrorism involving the United States, any declaration of
war by Congress or any other national or international calamity or emergency if,
in the judgment of a majority in interest of the Purchasers including CSFB, the
effect of any such attack, outbreak, escalation, act, declaration, calamity or
emergency makes it impractical or inadvisable to proceed with completion of the
offering or sale of and delivery and payment for the Offered Securities.

     (c)  The Guarantor shall have received the consent of the requisite lenders
under the its existing Credit Agreement dated as of April 1, 2003, to amend the
credit facility thereunder substantially on the terms set forth in the Offering
Document, and such amendment shall have become effective prior to or on the
Closing Date on substantially the terms described in the Offering Circular; upon
the effectiveness of such amendment the consummation of the transactions
contemplated under the Agreement shall not conflict with the Guarantor's Credit
Agreement as then in effect; and the Purchasers shall have received
counterparts, conformed as executed, of such amendment to the Credit Agreement
and such other documentation as they deem necessary to evidence the consummation
thereof.

     (d)  The Purchasers shall have received counterparts, conformed as
executed, of the Exchange Agreement, dated as of July 28, 2003, with respect to
the exchange of Dynegy Inc.'s $1.5 billion Series B mandatorily convertible
redeemable preferred stock currently held by a subsidiary of ChevronTexaco for
cash and other securities of Dynegy Inc., substantially on the terms described
in the Offering Circular.

     (e)  The Purchasers shall have received an opinion, dated such Closing
Date, of O'Melveny & Myers LLP, special counsel for the Issuers, that:

               (i)    The Guarantor is validly existing as a corporation in good
          standing under the laws of the State of Delaware, has the corporate
          power and authority under the Delaware General Corporate Law (the
          "DGCL") and its certificate of incorporation and bylaws to own its
          properties and conduct its business as described in the Offering
          Circular;

               (ii)   The Guarantor has all requisite corporate power and
          authority to enter into the Operative Documents;

               (iii)  Assuming that the Firm Securities and the Optional
          Securities have been duly authorized by all necessary corporate action
          on the part of the Company, when executed and authenticated in
          accordance with the provisions of the Indenture and delivered to and
          paid for by the Purchasers in accordance with the terms of this
          Agreement, the Firm Securities and the Optional Securities will be the
          legally valid and binding obligations of the Company, entitled to the
          benefits of the Indenture and enforceable against the Company in
          accordance with their terms, except to the extent that such
          enforceability may be limited by bankruptcy, insolvency,
          reorganization, moratorium or similar laws relating to or affecting
          creditors' rights generally (including, without limitation, fraudulent
          conveyance laws) and by general principles of equity including,
          without limitation, concepts of materiality, reasonableness, good
          faith and fair dealing and the possible unavailability of specific
          performance or injunctive relief, regardless whether considered in a
          proceeding in equity or at law. The Firm Securities and the Optional
          Securities conform in all material respects to the description thereof
          in the Offering Document;

               (iv)   The Guarantee of the Guarantor has been duly authorized by
          the Guarantor and, when executed by the Guarantor and when the Offered
          Securities on which the Guarantee has been endorsed have been duly
          executed by the Company and

                                       15

<PAGE>

          authenticated by the Trustee in accordance with the terms of the
          Indenture and delivered and paid for by the Purchasers in accordance
          with the terms of this Agreement, the Guarantee will be the legally
          valid and binding obligation of the Guarantor, enforceable against the
          Guarantor in accordance with its terms, except to the extent that such
          enforceability may be limited by bankruptcy, insolvency,
          reorganization, moratorium or similar laws relating to or affecting
          creditors' rights generally (including, without limitation, fraudulent
          conveyance laws) and by general principles of equity including,
          without limitation, concepts of materiality, reasonableness, good
          faith and fair dealing and the possible unavailability of specific
          performance or injunctive relief, regardless whether considered in a
          proceeding in equity or at law. The Guarantee conforms in all material
          respects to the descriptions thereof in the Offering Document;

               (v)    The execution and delivery of the Indenture has been duly
          authorized by all necessary corporate action of the Guarantor and,
          assuming the due authorization, execution and delivery thereof by the
          Trustee and the Company, is the legally valid and binding agreement of
          the Company and the Guarantor, enforceable against the Company and the
          Guarantor in accordance with its terms, except to the extent that such
          enforceability may be limited by bankruptcy, insolvency,
          reorganization, moratorium or similar laws relating to or affecting
          creditors' rights generally (including, without limitation, fraudulent
          conveyance laws) and by general principles of equity including,
          without limitation, concepts of materiality, reasonableness, good
          faith and fair dealing and the possible unavailability of specific
          performance or injunctive relief, regardless whether considered in a
          proceeding in equity or at law. The Indenture conforms in all material
          respects to the descriptions thereof in the Offering Document;

               (vi)   The Indenture conforms in all material respects to the
          requirements of the TIA, and the rules and regulations of the
          Commission applicable to an indenture which is qualified thereunder;

               (vii)  The Registration Rights Agreement has been duly
          authorized, executed and delivered by the Guarantor and, assuming the
          due execution and delivery thereof by the Purchasers and the Company,
          is the legally valid and binding agreement of the Company and the
          Guarantor, enforceable against the Company and the Guarantor in
          accordance with its terms, except to the extent that such
          enforceability may be limited by bankruptcy, insolvency,
          reorganization, moratorium or similar laws relating to or affecting
          creditors' rights generally (including, without limitation, fraudulent
          conveyance laws) and by general principles of equity including,
          without limitation, concepts of materiality, reasonableness, good
          faith and fair dealing and the possible unavailability of specific
          performance or injunctive relief, regardless whether considered in a
          proceeding in equity or at law. The Registration Rights Agreement
          conforms in all material respects to the descriptions thereof in the
          Offering Circular;

               (viii) Each of the Company and the Guarantor is not and, after
          giving effect to the offering and sale of the Offered Securities and
          the application of the proceeds thereof as described in the Offering
          Document, will not be an "investment company" as defined in the
          Investment Company Act and the rules and regulations of the Commission
          thereunder;

               (ix)   Neither the Company nor the Guarantor is (i) a registered
          holding company or is required, by Section 5 of the Public Utility
          Holding Company Act of 1935, as amended ("PUHCA"), to register as a
          holding company, or (ii) a "subsidiary

                                       16

<PAGE>

          company" (as defined in PUHCA) of a company that is a registered
          holding company or is required by Section 5 of PUHCA, to register as a
          holding company;

               (x)    No FPA approval or authorization is required for the
          execution and delivery by the Issuers of this Agreement, the Offered
          Securities, the Indenture and the Registration Rights Agreement, and
          the performance by the Issuers of the obligations thereunder;

               (xi)   No consent, approval, authorization or order of, or filing
          with, any governmental agency or body or any court is required for the
          consummation of the transactions contemplated by the Operative
          Documents in connection with the issuance or sale of the Offered
          Securities by the Company, except for the order of the Commission
          declaring the Shelf Registration Statement effective; except that this
          opinion shall be limited to the following (the "Applicable Laws"):
          those current statutes, rules or regulations of any governmental,
          legislative, judicial, administrative or regulatory body of the State
          of New York, the State of Delaware and the United States of America by
          which the Company or the Guarantor is bound, which such counsel has,
          in the exercise of customary professional diligence, recognized as
          applicable to the transactions of the type contemplated by the
          Purchase Agreement other than (i) the anti-fraud provisions and
          registration requirements of the federal securities laws and the rules
          and regulations of the Commission thereunder (which, in the case of
          registration rights, is the subject of the opinion set forth in
          paragraph (xv) of the opinion), (ii) applicable state or foreign
          securities or Blue Sky laws, (iii) the rules and regulations of the
          NASD in connection with the purchase and distribution of the Firm
          Securities and the Optional Securities by the Purchasers and (iv)
          energy regulatory laws, except as set forth in paragraphs (ix) and (x)
          of the opinion;

               (xii)  The execution and delivery by each of the Company and the
          Guarantor of each of the Operative Documents to which it is a party,
          the issuance, sale and delivery of the Firm Securities and the
          Optional Securities and performance by the Company, and the issuance,
          sale and delivery of the Guarantee and the performance by the
          Guarantor, will not conflict with or result in a breach of violation
          of any of the terms and provisions of, or constitute a default under
          (i) to our knowledge, any Applicable Laws; (ii) any agreement or
          instrument to which the Company or the Guarantor or any of their
          respective subsidiaries is a party or by which the Company or the
          Guarantor or any of their respective subsidiaries is bound or to which
          any of the properties of the Company or the Guarantor or any of their
          respective subsidiaries is subject that is filed pursuant to paragraph
          4 or paragraph 10 of Item 601 of Regulation S-K as an exhibit to the
          Company's Annual Report on Form 10-K/A for the year ended December 31,
          2002 and to the Company's other reports filed since January 1, 2003
          pursuant to Section 13 of the Exchange Act; or (iii) the charter or
          by-laws of the Guarantor or any of its subsidiaries that are organized
          under the laws of the State of New York or the State of Delaware;

               (xiii) The Purchase Agreement has been duly authorized, executed
          and delivered by the Guarantor;

               (xiv)  The statements contained in the Offering Document under
          the captions (a) "Description of the Convertible Debentures" insofar
          as such statements purport to constitute a summary of the terms of the
          Firm Securities, the Optional Securities, the Guarantee, the Indenture
          and the Registration Rights Agreement; (b) "Certain Relationships and
          Related Transactions", "Description of Capital Stock", "Description of
          the Amended Credit Facility", "The Series B Preferred Stock
          Restructuring" and "Plan of

                                       17

<PAGE>

          Distribution", insofar as such statements purport to constitute a
          summary of the documents referred to therein; (c) "Material United
          States Federal Income Tax Considerations" insofar as such statements
          purport to constitute a summary of the United States federal tax laws
          referred to therein; and (d) "Price Range of Common Stock and Dividend
          Policy;" in each case, are accurate and fairly summarize in all
          material respects the matters referred to therein; and

               (xv)   Assuming without independent investigation, (a) that the
          Offered Securities are sold to the Purchasers, and initially resold by
          the Purchasers, in accordance with the terms of and in the manner
          contemplated by, the Purchase Agreement and the Offering Circular; (b)
          the accuracy of the representations and warranties of the Company and
          the Guarantor set forth in the Purchase Agreement and in those certain
          certificates delivered at the closing; (c) the accuracy of the
          representations and warranties of the Purchasers set forth in the
          Purchase Agreement; (d) the due performance and compliance by the
          Company, the Guarantor and the Purchasers of their respective
          covenants and agreements set forth in the Purchase Agreement; and (e)
          the Purchasers' compliance with the Offering Circular and the transfer
          procedures and restrictions described therein, it is not necessary to
          register the Offered Securities under the Securities Act or to qualify
          an indenture in respect thereof under the Trust Indenture Act in
          connection with the issuance and sale of the Offered Securities by the
          Company to the Purchasers or in connection with the offer, resale and
          delivery of the Offered Securities by the Purchasers in the manner
          contemplated by the Purchase Agreement and the Offering Circular, it
          being expressly understood that we express no opinion as to any
          subsequent offer or resale of any of the Offered Securities.

     Such shall also state that it has no reason to believe that the Offering
Circular, as of its date or the date of any amendment or supplement thereto, as
of the date hereof and as of such Closing Date, contained or contains any untrue
statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made not misleading; it being understood that such counsel
need express no opinion as to the financial statements and other financial data
contained in the Offering Circular.

     (f)  Local counsel to the Company in Illinois shall have furnished to the
Purchasers their written opinion, dated the Closing Date, substantially in the
form attached hereto as Annex B. Such opinion shall be in form and substance
reasonably satisfactory to the Purchasers hereto as agreed as of the date
hereof, as to such matters under the laws of Illinois as the Purchasers may
reasonably request.

     (g)  The Purchasers shall have received an opinion, dated such Closing
Date, of Kevin Blodgett, Group General Counsel--Corporate Finance & Securities
for the Company, that:

               (i)    As of March 31, 2003, the Company has an authorized
          capitalization as set forth in the Offering Document; and except as
          set forth in the Offering Document, the capital stock of each
          subsidiary owned by the Company or the Guarantors, as the case may be,
          directly or through subsidiaries, to his knowledge is owned free from
          liens, encumbrances and material defects;

               (ii)   Except as set forth in the Offering Document, there are no
          contracts, agreements or understandings between the Company or the
          Guarantor and any person granting such person the right to require the
          Company or the Guarantor to file a registration statement under the
          Securities Act with respect to any securities of the Company or the
          Guarantor or to require the Company or the Guarantor to include such

                                       18

<PAGE>

          securities with the Offered Securities and Guarantee registered
          pursuant to any Registration Statement; and

               (iii)  To my knowledge, and other than as set forth in the
          Offering Document, there are no pending actions, suits or proceedings
          against or affecting the Company, the Guarantor or any of their
          respective subsidiaries or any of their respective properties that, if
          determined adversely to the Company, the Guarantor or any of their
          respective subsidiaries, would individually or in the aggregate have a
          Material Adverse Effect, or would materially and adversely affect the
          ability of the Company or the Guarantor to perform its obligations
          under the Operative Documents, or which are otherwise material in the
          context of the sale of the Offered Securities; and no such actions,
          suits or proceedings are, to such counsel's knowledge, threatened or
          contemplated; and

               (iv)   Except as set forth in the Offering Document with respect
          to the preemptive rights of Chevron U.S.A. Inc., which rights have
          been waived in connection with the issuance of the Offered Securities
          so long as the Series B Preferred Stock Restructuring (as defined in
          the Offering Document) is consummated, the shareholders of the Company
          have no preemptive rights with respect to the Firm Securities or
          Optional Securities under any agreement or instrument to which the
          Company is a party or by which the Company is bound.

     Such shall also state that it has no reason to believe that the Offering
Circular, as of its date or as of the Closing Date, contained or contains any
untrue statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading; it being understood that such
counsel need express no opinion as to the financial statements or other
financial data contained in the Offering Circular. Such counsel also shall
confirm, based on certificates of public officials, that each of the Company and
the Guarantor is duly qualified to do business as a foreign corporation in good
standing in the other jurisdictions where so qualified and nothing has come to
the attention of such counsel to cause him to believe that the Company is not so
duly qualified, in each case except to the extent the failure to so qualify or
be in good standing in such other jurisdictions could not reasonably be expected
to have a Material Adverse Effect.

     (h)  The Purchasers shall have received from Latham & Watkins LLP, counsel
for the Purchasers, such opinion or opinions, dated the Closing Date, with
respect to the incorporation of the Company and the Guarantor, the validity of
the Offered Securities, the Offering Document, the exemption from registration
for the offer and sale of the Firm Securities and the Optional Securities by the
Company and the Guarantee thereof by the Guarantor, to the several Purchasers
and the resales by the several Purchasers as contemplated hereby and other
related matters as CSFB may require, and the Issuers shall have furnished to
such counsel such documents as they request for the purpose of enabling them to
pass upon such matters.

     (i)  The Purchasers shall have received a certificate, dated such Closing
Date, of the President or any Vice President and a principal financial or
accounting officer of the Company and the Guarantor in which such officers, to
the best of their knowledge after reasonable investigation, shall state that the
representations and warranties of the Company and the Guarantor in this
Agreement are true and correct, that the Company and the Guarantor have complied
with all agreements and satisfied all conditions on its part to be performed or
satisfied hereunder and under other Operative Documents at or prior to such
Closing Date, and that, subsequent to the date of the most recent financial
statements in the Offering Document there has been no material adverse change,
nor any development or event that reasonably could be expected to result in a
prospective material adverse change, in the condition (financial or other),
business, properties, results of operations or prospects of the Company, the
Guarantor or any of their

                                       19

<PAGE>

respective subsidiaries except as set forth in the Offering Circular (exclusive
of any amendment or supplement thereto on or after the date hereof).

     (j)  The Purchasers shall have received a letter, dated such Closing Date,
of PricewaterhouseCoopers LLP which meets the requirements of subsection (a) of
this Section, except that the specified date referred to in such subsection will
be a date not more than three days prior to such Closing Date for the purposes
of this subsection.

     (k)  As of such Closing Date, the representations and warranties contained
in the Operative Documents will be true and correct in all material respects.

     (l)  The Company shall have furnished or caused to be furnished to the
Trustee on such Closing Date certificates of officers of the Company reasonably
satisfactory to the Trustee as to the accuracy of the representations and
warranties of the Obligors in the Operative Documents at and as of such Closing
Date and as to such other matters as the Trustee may reasonably request.

     (m)  On such Closing Date, each Operative Document will conform, as to
legal matters, in all material respects to the description thereof contained in
the Offering Circular.

     (n)  The Company shall have furnished to the Purchasers executed copies of
a lock-up letter agreement from each executive officer of the Company listed in
the Offering Circular under the caption "Management" substantially in the form
set forth in Annex C hereto.

     (o)  The Issuers shall have authorized, executed and delivered the
Registration Rights Agreement, substantially in the form of Annex D hereto.

     (p)  The Company and the Guarantor will furnish the Purchasers with such
conformed copies of such opinions, certificates, letters and documents as the
Purchasers reasonably request. CSFB may in its sole discretion waive on behalf
of the Purchasers compliance with any conditions to the obligations of the
Purchasers hereunder.

     7.  Indemnification and Contribution.

     (a)  The Company and the Guarantor will, jointly and severally, indemnify
and hold harmless each Purchaser, its partners, affiliates, directors and
officers and each person, if any, who controls such Purchaser within the meaning
of Section 15 of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such Purchaser may become subject, under
the Securities Act or the Exchange Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the Offering Document, or any amendment or supplement thereto,
or any related preliminary offering circular, or arise out of or are based upon
the omission or alleged omission to state therein a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, including any losses, claims, damages or
liabilities arising out of or based upon the Company's or the Guarantor's
failure to perform its obligations under Section 5(a) of this Agreement, and
will reimburse each Purchaser for any legal or other expenses actually and
reasonably incurred by such Purchaser in connection with investigating or
defending any such loss, claim, damage, liability or action as such expenses are
incurred; provided, however, that the neither the Company nor the Guarantor will
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement in or omission or alleged omission from any of such documents in
reliance upon and in conformity with written information furnished to the
Company by any Purchaser through CSFB specifically for use therein, it being
understood and agreed that

                                       20

<PAGE>

the only such information consists of the information described as such in
subsection (b) below; provided, further, however, that the foregoing indemnity
agreement with respect to losses, claims, damages or liabilities shall not inure
to the benefit of any Purchaser (or any person controlling any Purchaser) to the
extent that such losses, claims, damages or liabilities arise out of or based
upon (x) any untrue statement or alleged untrue statement of any material fact
in the Preliminary Offering Circular or (y) the omission or alleged omission to
state in the Preliminary Offering Circular a material fact necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading, if and only if: (1) the person asserting such losses,
claims, damages or liabilities purchased Offered Securities from such Purchaser
in the initial resale by such Purchaser (such person, an "Initial Resale
Purchaser") and a copy of the Offering Circular was not sent or given by or on
behalf of such Purchaser to such Initial Resale Purchaser, (2) the Company
furnished to the Purchasers sufficient copies of the Offering Circular on a
timely basis to permit delivery of the Offering Circular by the Purchasers to
all Initial Resale Purchasers at or prior to the delivery of the written
confirmation of the sale of the Offered Securities to such person, and (3) the
disclosure contained in the Offering Circular cured the defect in the
Preliminary Offering Circular giving rise to such losses, claims, damages or
liabilities.

     (b)  Each Purchaser will severally and not jointly indemnify and hold
harmless the Company, the Guarantor and their respective directors and officers
and each person, if any, who controls the Company or the Guarantor within the
meaning of Section 15 of the Securities Act, against any losses, claims, damages
or liabilities to which the Company or the Guarantor may become subject, under
the Securities Act or the Exchange Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the Offering Document, or any amendment or supplement thereto,
or any related preliminary offering circular, or arise out of or are based upon
the omission or the alleged omission to state therein a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such Purchaser through CSFB specifically
for use therein, and will reimburse any legal or other expenses reasonably
incurred by the Company and the Guarantor in connection with investigating or
defending any such loss, claim, damage, liability or action as such expenses are
incurred, it being understood and agreed that the only such information
furnished by any Purchaser consists of the following information in the Offering
Document furnished on behalf of each Purchaser: the third, sixth, eleventh and
thirteenth paragraphs under the caption "Plan of Distribution"; provided,
however, that the Purchasers shall not be liable for any losses, claims, damages
or liabilities arising out of or based upon the Company's or the Guarantor's
failure to perform its obligations under Section 5(a) of this Agreement.

     (c)  Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the failure to notify the indemnifying party shall not relieve it
from any liability that it may have under subsection (a) or (b) above except to
the extent that it has been materially prejudiced (through the forfeiture of
substantive rights or defenses) by such failure; and provided further that the
failure to notify the indemnifying party shall not relieve it from any liability
that it may have to an indemnified party otherwise than under subsection (a) or
(b) above. In case any such action is brought against any indemnified party and
it notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party (who shall not, except with the consent of the indemnified party, be
counsel to the indemnifying party), and after notice from the indemnifying party
to such indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such

                                       21

<PAGE>

indemnified party in connection with the defense thereof other than reasonable
costs of investigation. In any such proceeding, any indemnified party shall have
the right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the indemnifying
party and the indemnified party shall have mutually agreed to the contrary; (ii)
the indemnifying party has failed within a reasonable time to retain counsel
reasonably satisfactory to the indemnified party; (iii) the indemnified party
shall have reasonably concluded that there may be legal defenses available to it
that are different from or in addition to those available to the indemnifying
party; (or (iv) the named parties in any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. It is understood
and agreed that the indemnifying party shall not, in connection with any
proceeding or related proceeding in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm (in addition to any local
counsel) for all indemnified parties, and that all such fees and expenses shall
be reimbursed as they are incurred. Any such separate firm for any Purchaser,
its affiliates, directors and officers and any control persons of such Purchaser
shall be designated in writing by CSFB and any such separate firm for the
Company, the Guarantors, their directors and officers and any control persons of
the Company and the Guarantors shall be designated in writing by the Company. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened action in respect of
which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party unless such settlement
includes (i) an unconditional release of such indemnified party from all
liability on any claims that are the subject matter of such action and (ii) does
not include a statement as to or an admission of fault, culpability or failure
to act by or on behalf of any indemnified party.

     (d)  If the indemnification provided for in this Section is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsection (a) or (b) above (i) in such proportion as
is appropriate to reflect the relative benefits received by the Issuers on the
one hand and the Purchasers on the other from the offering of the Offered
Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Issuers on the one hand and the Purchasers on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by the Issuers on the one hand
and the Purchasers on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering (before deducting expenses) received by
the Issuers bear to the total discounts and commissions received by the
Purchasers from the Issuers under this Agreement. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Issuers or the Purchasers
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The amount
paid by an indemnified party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim which is the subject of this subsection (d). Notwithstanding the
provisions of this subsection (d), no Purchaser shall be required to contribute
any amount in excess of the amount by which the total discounts, fees and
commissions received by such Purchaser exceeds the amount of any damages which
such Purchaser has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. The Purchasers'
obligations in this subsection (d) to contribute are several in proportion to
their respective purchase obligations and not joint.

     (e)  The obligations of the Issuers under this Section shall be in addition
to any liability which the Issuers may otherwise have and shall extend, upon the
same terms and conditions, to each person, if

                                       22

<PAGE>

any, who controls any Purchaser within the meaning of the Securities Act or the
Exchange Act; and the obligations of the Purchasers under this Section shall be
in addition to any liability which the respective Purchasers may otherwise have
and shall extend, upon the same terms and conditions, to each person, if any,
who controls the Company or the Guarantor within the meaning of the Securities
Act or the Exchange Act.

     8.  Default of Purchasers. If any Purchaser or Purchasers default in their
obligations to purchase Securities hereunder and the aggregate principal amount
of the Offered Securities that such defaulting Purchaser or Purchasers agreed
but failed to purchase does not exceed 10% of the total principal amount of the
Offered Securities, CSFB may make arrangements satisfactory to the Company for
the purchase of such Offered Securities by other persons, including any of the
Purchasers, but if no such arrangements are made by the Closing Date, the
non-defaulting Purchasers shall be obligated severally, in proportion to their
respective commitments hereunder, to purchase the Offered Securities that such
defaulting Purchasers agreed but failed to purchase. If any Purchaser or
Purchasers so default and the aggregate principal amount of the Offered
Securities with respect to which such default or defaults occur exceeds 10% of
the total principal amount of the Offered Securities and arrangements
satisfactory to CSFB and the Company for the purchase of such Offered Securities
by other persons are not made within 36 hours after such default, this Agreement
will terminate without liability on the part of any non-defaulting Purchaser or
the Issuers, except as provided in Section 9. As used in this Agreement, the
term "Purchaser" includes any person substituted for a Purchaser under this
Section. Nothing herein will relieve a defaulting Purchaser from liability for
its default.

     9.  Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Issuers or their respective officers and of the several Purchasers set forth in
or made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation, or statement as to the results thereof, made by
or on behalf of any Purchaser, its affiliates, the Issuers or any of their
respective representatives, officers or directors or any controlling person, and
will survive delivery of and payment for the Offered Securities. If this
Agreement is terminated pursuant to Section 8 or if for any reason the purchase
of the Offered Securities by the Purchasers is not consummated, the Issuers
shall remain responsible for the expenses to be paid or reimbursed by it
pursuant to Section 5 and the respective obligations of the Issuers and the
Purchasers pursuant to Section 7 shall remain in effect and if any Offered
Securities have been purchased hereunder the representations and warranties in
Section 2 and all obligations under Section 5 shall remain in effect; provided,
that if this Agreement is terminated pursuant to Section 8 hereof, the Issuers
shall not be obligated to reimburse any defaulting Purchaser on account of any
expenses that otherwise would have been reimbursed hereunder. If the purchase of
the Offered Securities by the Purchasers is not consummated for any reason other
than solely because of the termination of this Agreement pursuant to Section 8
or the occurrence of any event specified in clause (iii), (iv), (v), (vi) or
(vii) of Section 6(b), the Issuers will reimburse the Purchasers for all
out-of-pocket expenses (including fees and disbursements of counsel) reasonably
incurred by them in connection with the offering of the Offered Securities.

     10. Notices. All communications hereunder will be in writing and, if sent
to the Purchasers will be mailed, delivered, faxed or sent by courier to the
Purchasers, c/o Credit Suisse First Boston LLC, Eleven Madison Avenue, New York,
New York 10010-3629, Attention: Transactions Advisory Group (Fax: 212-325-4296),
or, if sent to the Company or the Guarantor, will be mailed, delivered or
telegraphed and confirmed to it at 1000 Louisiana Street, Suite 5800, Houston,
Texas 77002 Attention: General Counsel (Fax: 713-507-6808); provided, however,
that any notice to a Purchaser pursuant to Section 7 will be mailed, delivered,
faxed or sent by courier and confirmed to such Purchaser.

     11. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the controlling
persons referred to in Section 7, and no other person will have any right or
obligation hereunder, except that holders of Offered Securities shall be
entitled to enforce

                                       23

<PAGE>

the agreements for their benefit contained in the second and third sentences of
Section 5(b) hereof against the Issuers as if such holders were parties hereto.

     12. Representation of Purchasers. CSFB will act for the several Purchasers
in connection with this purchase, and any action under this Agreement taken by
CSFB will be binding upon all the Purchasers.

     13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.

     14. Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York without regard to principles
of conflicts of laws.

     The Company and the Guarantor hereby submit to the non-exclusive
jurisdiction of the Federal and state courts in the Borough of Manhattan in The
City of New York in any suit or proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby.

                                       24

<PAGE>

     If the foregoing is in accordance with the Purchasers' understanding of our
agreement, kindly sign and return to the Company one of the counterparts hereof,
whereupon it will become a binding agreement among the Issuers and the several
Purchasers in accordance with its terms.

                                Very truly yours,

                                        Dynegy Inc.

                                        By: /s/ Robert T. Ray
                                           -------------------------------------
                                           Title:  Senior Vice President and
                                                   Treasurer

                                        Dynegy Holdings Inc.

                                        By: /s/ Robert T. Ray
                                           -------------------------------------
                                           Title:  Senior Vice President and
                                                   Treasurer

The foregoing Purchase Agreement is
 hereby confirmed and accepted as
 of the date first above written.

Credit Suisse First Boston LLC
Morgan Stanley & Co. Incorporated
J.P. Morgan Securities Inc.
Lehman Brothers Inc.
Credit Lyonnais Securities (USA) Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated

     By: Credit Suisse First Boston LLC

     By: /s/ Jamie Welch
        --------------------------------
        Title:  Managing Director

                                       25

<PAGE>

                                   SCHEDULE A

                                                               Principal Amount
                                                                  of Offered
          Purchasers                                              Securities
------------------------------------------------------------  ------------------

Credit Suisse First Boston LLC .............................  $     105,000,000
Morgan Stanley & Co. Incorporated ..........................         33,250,000
J.P. Morgan Securities Inc. ................................         14,000,000
Lehman Brothers Inc. .......................................          8,750,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated .........          8,750,000
Credit Lyonnais Securities (USA) Inc. ......................          5,250,000
                                                              -----------------
   Total ...................................................  $     175,000,000
                                                              =================

                                       26

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