Document:

Second Lien Shared Security Agreement Supplement

 Exhibit 10.12 
 SECOND LIEN SHARED SECURITY AGREEMENT SUPPLEMENT 
 August 24, 2005 
 Wells Fargo Bank, N.A., as Collateral Trustee 
 for the Secured Parties referred to in the 
 Second Lien Shared Security Agreement referred to below 
 Sixth and Marquette 
 MAC N9303-120 
 Minneapolis, MN 55479 
 Attn: Jeffery T. Rose 
 Dynegy Holdings Inc. 
 Ladies and Gentlemen: 
 Reference is made to (i) the Indenture dated as of August 11, 2003 (the “Indenture”), among Dynegy Holdings Inc., a
Delaware corporation, the guarantors party thereto, Wilmington Trust Company as trustee and Wells Fargo Bank, N.A. (as successor by consolidation to Wells Fargo Bank Minnesota, N.A.), as collateral trustee (as defined below), and (ii) the
Second Lien Shared Security Agreement dated August 11, 2003 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Second Lien Shared Security Agreement”) made by the Grantors from
time to time party thereto in favor of Wells Fargo Bank, N.A. (as successor by consolidation to Wells Fargo Bank Minnesota, N.A.), as collateral trustee (the “Collateral Trustee”) and (iii) the Intercreditor Agreement
dated August 11, 2003 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Intercreditor Agreement”) made by the Grantors from time to time party thereto in favor of the
Collateral Trustee, the Existing First Priority Collateral Agent (as defined therein) and the Existing First Priority Collateral Trustees (as defined therein). Terms defined in the Indenture or the Second Lien Shared Security Agreement and not
otherwise defined herein are used herein as defined in the Indenture or the Second Lien Shared Security Agreement. 
 SECTION 1. Grant of
Security. The undersigned hereby grants to the Collateral Trustee, for the ratable benefit of the Secured Parties, a security interest in, all of its right, title and interest in and to all of the Shared Collateral of the undersigned, whether
now owned or hereafter acquired by the undersigned, wherever located and whether now or hereafter existing or arising, including, without limitation, the property and assets of the undersigned set forth on the attached supplemental schedules to the
Schedules to the Second Lien Shared Security Agreement. 
 SECTION 2. Security for Obligations. The grant of a security interest in,
the Shared Collateral by the undersigned under this Second Lien Shared Security Agreement Supplement and the Second Lien Shared Security Agreement secures the payment of all Parity Lien Obligations, whether direct or indirect, absolute or
contingent, and whether for principal, reimbursement obligations, interest, premiums, penalties, fees, indemnifications, contract causes of action, costs, expenses or otherwise. 

 SECTION 3. Supplements to Second Lien Shared Security Agreement Schedules. The undersigned has
attached hereto supplemental Schedules I through VI to Schedules I through VI, respectively, to the Second Lien Shared Security Agreement, and the undersigned hereby certifies, as of the date first above written, that such supplemental schedules
have been prepared by the undersigned in substantially the form of the equivalent Schedules to the Second Lien Shared Security Agreement and are complete and correct in all material respects. 
 SECTION 4. Representations and Warranties. The undersigned hereby makes each representation and warranty set forth in Section 8 of the Second
Lien Shared Security Agreement (as supplemented by the attached supplemental schedules) to the same extent as each other Grantor. 
 SECTION
5. Obligations Under the Second Lien Shared Security Agreement. The undersigned hereby agrees, as of the date first above written, to be bound as a Grantor by all of the terms and provisions of the Second Lien Shared Security Agreement to the
same extent as each of the other Grantors. The undersigned further agrees, as of the date first above written, that each reference in the Second Lien Shared Security Agreement to an “Additional Grantor” or a “Grantor” shall also
mean and be a reference to the undersigned. 
 SECTION 6. Governing Law. This Second Lien Shared Security Agreement Supplement shall
be governed by, and construed in accordance with, the laws of the state of New York. 
  

 2 

			
	Very truly yours,
	
	DYNEGY MIDSTREAM HOLDINGS, INC.
	
	DYNEGY STORAGE TECHNOLOGY AND SERVICES, INC.
	
	DYNEGY GAS TRANSPORTATION, INC.
		
	By:	 	 /s/ Charles C. Cook

	Title:	 	Vice President and Assistant Treasurer
		
		 	          Address for notices:
		 	          c/o Dynegy, Inc.
		 	          1000 Louisiana Street, Suite 5800
		 	          Houston, TX 77002
		 	          Attn: Carol Graebner

  

 3SUMMARY OF TERMS OF 2006 EXECUTIVE MANAGEMENT BONUS PLAN

 Exhibit 10.1 
 Summary of Terms of 2006 Executive Bonus Plans 
 Overview of Plans.

 During 2006, Kevin M. Harris, Chief Financial Officer; Kirk Krappé, Executive Vice President, Worldwide Markets; and Robert G.
Schwartz, Jr., Vice President and General Counsel (each, an “Executive”) and other management-level employees will operate under individual bonus plans that provide the potential for an annual cash bonus based on objective performance
criteria approved by the Compensation Committee of the Board of Directors. In addition, each Executive will receive a non-refundable, quarterly advance against his annual cash bonus if quarterly targets based on the same criteria are achieved.
Quarterly advances are based on cumulative progress towards annual targets. If a quarterly target is missed and made up on a cumulative basis in a future period, any previously missed advances will be paid. Finally, each Executive is eligible to
receive a semi-annual cash bonus based on satisfaction of individual performance criteria measured over six-month periods. 
 Company-Wide Performance Metrics. 
 Each Executive’s annual bonus and quarterly advances will consist of separate
payouts for attaining targeted company-wide metrics in two areas: 
 (1) Company revenue bookings (including the license fees from new license
and subscription contracts signed during the period and up to one year of maintenance and support fees associated with new licenses), and 
 (2) Adjusted cash operating expenses (with targeted metrics that rewarded lower expenses). 
 The annual bonuses (but not the
quarterly advances) will be subject to downward adjustment for underperformance and upward adjustment for performance that exceeds targets, as described more fully below. 
 (1) Company revenue bookings component: 
  

	 	•	 	For performance at less than 80% of target, no award will be paid. 

  

	 	•	 	From 80% to 100% of target, 40% to 100% of the annual award will be paid, calculated roughly on a sliding scale. 

  

	 	•	 	From 101% to 120% of target or greater, 107% to 250% of the annual award will be paid, calculated roughly on a sliding scale. 

 (2) Cash operating expenses component: 
  

	 	•	 	For cash operating expenses greater than 105% of target,* no award will be paid. 

	 	•	 	From 105% to 100% of target,* 50% to 100% of the annual award will be paid, calculated roughly on a sliding scale. 

  

	 	•	 	From 99% to 90% of target or less,* 110% to 200% of the annual award will be paid, calculated roughly on a sliding scale. 

  

	*	For periods in which revenue bookings exceed targets, operating expense targets are adjusted upward 1% for every 2% increase in revenue performance above 100%.

 Individual Performance Metrics. 
 The Chief Executive Officer will determine whether an Executive has achieved the pre-defined goals for the semi-annual, individual performance component
of his bonus. These goals vary for each Executive and are, to the greatest extent possible, quantifiable. 
 If less than 80% of an
Executive’s individual performance goals are achieved, no bonus will be paid for this component. If 80% but less than 100% of individual performance goals are achieved, then 50% of this component will be paid. If 100% or more of individual
performance goals are achieved, then 100% of this component will be paid. No more than 100% of this component will be paid. 
 Payouts for Each Executive. 
 Kevin M. Harris, CFO 
 If the Company attains 100% of its annual revenue bookings and adjusted cash operating expense targets, and if Mr. Harris achieves 100% of his
individual performance goals, then Mr. Harris would receive an annual cash bonus, including quarterly advances, of $95,000. This would consist of 
  

			
	Revenue Bookings Component	  	$6,365 per quarter
		
	Revenue Bookings Component	  	$25,460 at year-end (in addition to quarterly payments)
		
	Cash Operating Expense Component	  	$3,135 per quarter
		
	Cash Operating Expense Component	  	$12,540 at year-end (in addition to quarterly payments)
		
	Individual Performance Metrics	  	$9,500 per six-month period

 Annual payouts are subject to adjustment as described above. 
 Kirk Krappé, EVP, Worldwide Markets 
 If the Company attains 100% of its annual revenue bookings and adjusted cash operating expense targets, and if Mr. Krappé achieves 100% of his individual performance goals, then Mr. Krappé would receive an annual
cash bonus, including quarterly advances, of $200,000. This would consist of 

			
	Revenue Bookings Component	  	$16,875 per quarter
		
	Revenue Bookings Component	  	$67,500 at year-end (in addition to quarterly payments)
		
	Cash Operating Expense Component	  	$3,125 per quarter
		
	Cash Operating Expense Component	  	$12,500 at year-end (in addition to quarterly payments)
		
	Individual Performance Metrics	  	$20,000 per six-month period

 Annual payouts are subject to adjustment as described above. 
 Robert G. Schwartz, Jr., VP and General Counsel 
 If the Company attains 100% of its annual revenue bookings and adjusted cash operating expense targets, and if Mr. Schwartz achieves 100% of his individual performance goals, then Mr. Schwartz would receive
an annual cash bonus, including quarterly advances, of $85,000. This would consist of 
  

			
	Revenue Bookings Component	  	$5,695 per quarter
		
	Revenue Bookings Component	  	$22,780 at year-end (in addition to quarterly payments)
		
	Cash Operating Expense Component	  	$2,805 per quarter
		
	Cash Operating Expense Component	  	$11,220 at year-end (in addition to quarterly payments)
		
	Individual Performance Metrics	  	$8,500 per six-month period

 Annual payouts are subject to adjustment as described above.

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