SHAREHOLDER AGREEMENT

SHAREHOLDER AGREEMENT, dated as of August 9, 2009 (this “ Agreement ”), among DYNEGY INC., a Delaware corporation (“ Dynegy ”), and LS POWER PARTNERS, L.P., LS POWER ASSOCIATES, L.P., LS POWER EQUITY PARTNERS, L.P., LS POWER EQUITY PARTNERS PIE I, L.P. and LSP GEN INVESTORS, L.P. (collectively, “ LS Power ”).

WHEREAS, Dynegy, LS Power, certain Affiliates of LS Power and certain subsidiaries of Dynegy (the “ Dynegy Sellers ”) have entered into a Purchase and Sale Agreement, dated as of the date hereof (the “ Purchase Agreement ”), pursuant to which LS Power and certain Affiliates of LS Power have agreed to purchase from Dynegy and the Dynegy Sellers, and Dynegy and the Dynegy Sellers have agreed to sell to LS Power and certain Affiliates of LS Power (the “ LS Power Buyers ”), (i) all of the Dynegy Sellers’ ownership interests in certain power generating facilities, as set forth in the Purchase Agreement, and (ii) $235   million principal amount of the Senior Notes, in each case upon the terms and subject to the conditions set forth in the Purchase Agreement, in exchange for (a)(1) $1.025 billion in cash (consisting, in part, of $175 million to be released to Dynegy from the Sandy Creek Restricted Account) and (2)   245 million Class B Shares (the “ Relinquished Shares ”), in each case upon the terms and subject to the conditions set forth in the Purchase Agreement, (b) the termination of the Existing Shareholder Agreement (as defined below), and (c) the execution of this Agreement   (collectively, the “ Transaction ”).

WHEREAS, Dynegy and LS Power are party to the Shareholder Agreement, dated as of September 14, 2006 (as heretofore amended, amended and restated, supplemented or otherwise modified, the “ Existing Shareholder Agreement ”), pursuant to which Dynegy’s and LS Power’s rights and obligations with respect to certain matters are governed.

WHEREAS, pursuant to Section 2.3   of the Purchase Agreement, and in accordance with Section 5.3(g)(iv) of the Certification of Incorporation, LS Power has agreed to convert all of LS Power’s remaining Class B Shares to Class A Shares effective as of the Closing.

WHEREAS, in connection with the Transaction, LS Power and Dynegy wish to   terminate the Existing Shareholder Agreement, effective as of the Closing, and   enter into this Agreement in order to set forth certain agreements relating to the ownership by the Shareholders of Common Stock.

NOW, THEREFORE, in consideration of the premises and the mutual and independent covenants hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

SECTION 1.01   Definitions .  Unless otherwise defined herein, terms defined in the Purchase Agreement and used herein have the meanings given to them in the Purchase Agreement.  The following terms shall have the following meanings:

“ Affiliate ” means a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, another Person; provided , however , that none of Dynegy or any of its subsidiaries shall be deemed an Affiliate of any Shareholder.  For purposes of this definition “control” means, as to any Person, the sole power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.  The term “ controlled ” has a correlative meaning.

“ Agreement ” has the meaning specified in the preamble to this Agreement.

“ Associate ”, when used in connection with any Person, means (a) any corporation, partnership, unincorporated association or other entity of which such Person is a director, officer or partner or is, directly or indirectly, the owner of greater than or equal to 20% of any class of voting stock, (b) any trust or other estate in which such Person has greater than or equal to 20% of the total beneficial interest, or of which such Person serves as a trustee or in a similar fiduciary capacity, (c) any relative or spouse of such Person, or any relative of the spouse of such Person, who, in any case, has the same residence as such Person, and (d) any heirs, executors, administrators, testamentary trustees, legatees or beneficiaries of such Person and any trust for the benefit of the heirs of such Person; provided , however , that none of Dynegy or any of its subsidiaries shall be deemed an Associate of any Shareholder.

“ Beneficially Own ” and “ Beneficial Owner ” each have the meaning referred to in Rule 13d-3 of the Exchange Act as in effect on the date hereof.

“ Board ” means the board of directors of Dynegy.

“ Business Day ” means any day other than a day which is a Saturday, Sunday or other day on which commercial banks in Houston, Texas are authorized or obligated, by law or executive order, to close.

“ Certificate of Incorporation ” means the Amended and Restated Certificate of Incorporation of Dynegy filed with the Secretary of State of the State of Delaware on March 30, 2007 and which became effective on April 2, 2007.

“ Change of Control ” means (i) any “person” or “group” of related Persons (as such terms are used in Section 13(d) and 14(d) of the Exchange Act), that is or becomes the Beneficial Owner (except that such Person or group shall be deemed to Beneficially Own all shares that any such Person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total voting securities of Dynegy (or its successor by merger, consolidation or purchase of all or substantially all of its assets), (ii) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of Dynegy taken as a whole to any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) other than in a reorganization or other transaction in which Dynegy shareholders after the transaction own 50% or more of the ultimate surviving entity, (iii) occupation of a majority of the seats on the Board by Persons who were neither (a) nominated by the Board nor (b) appointed by the Board, or (iv) the completion of the liquidation or dissolution of Dynegy.

“ Class A Shares ” means shares of Dynegy’s Class A common stock, par value $0.01.

“ Class B Shares ” means shares of Dynegy’s Class B common stock, par value $0.01.

“ Common Stock ” means Class A Shares, Class B Shares and/or any other class of common stock of Dynegy that may be issued after the date hereof.

“ Controlled Affiliate ” means, as to any Person (the “ Controlling Person ”), (a) any Affiliate that is consolidated with the financial statements of such Controlling Person, (b) any Affiliate in which the Controlling Person holds greater than or equal to 50% of the total combined voting power of its outstanding voting securities and (c) with respect to any specific matter, any Affiliate over which the Controlling Person has the power (by contract or otherwise) to prevent such entity from pursuing such matter.

“ Director ” means a member of the Board.

“ Distribution ” means, in a transaction or series of related transactions, the Transfer of all or a part of the Dynegy Equity Securities directly owned by a Shareholder to any of its direct or indirect owners, limited partners or other investors.

“ Dynegy ” has the meaning specified in the preamble to this Agreement.

“ Dynegy Equity Securities ” means Common Stock and other equity securities of Dynegy and its subsidiaries, including options, warrants, convertible or exchangeable securities, swaps and other rights to subscribe for or acquire any equity securities of Dynegy, and Hedges with respect to equity securities of Dynegy.

“ Dynegy Sellers ” has the meaning specified in the recitals to this Agreement.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ Existing Shareholder Agreement ” has the meaning specified in the recitals to this Agreement.

“ Governmental Authority ” means any governmental or regulatory authority or agency.

“ Hedge ” means to acquire any option or right or any equivalent contract to, directly or indirectly, sell or otherwise dispose of the economic interest in Common Stock, or to enter into any swap, hedge or any other agreement, including any short sales of Common Stock and equivalent derivative positions, that directly or indirectly Transfers, in whole or in part, the economic interest in Common Stock, including the establishment or increase of any “put equivalent position” or liquidation or a decrease of a “call equivalent position” in Common Stock within the meaning of Section 16 of the Exchange Act and rules promulgated thereunder.  When used as a noun, “ Hedge ” has a correlative meaning.

“ Lock-Up Period ” means the period commencing on the date hereof and ending on the earlier of (i) the termination of the Purchase Agreement and (ii) the Closing Date.

“ LS Power ” has the meaning specified in the preamble to this Agreement.

“ LS Power Buyers ” has the meaning specified in the recitals to this Agreement.

“ Luminus ” means, collectively, Luminus Management, LLC, its Controlled Affiliates and any of the assets or funds that they manage.

“ owner ”, with respect to any stock or other equity interest, means a Person that individually or with or through any of its Affiliates or Associates:

(a)   owns beneficially such stock or equity interest, whether directly or indirectly;

(b)   has (i) the right to acquire such stock or equity interest (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise; provided , however , that for purposes of this clause (b)(i) a Person shall be deemed the owner of stock or other equity interest tendered by other parties pursuant to a tender or exchange offer made by such Person or any of such Person’s Affiliates or Associates only when such tendered stock or equity interest is accepted for purchase or exchange by such Person or such Affiliate or Associate of such Person; or (ii) the right to vote such stock or equity interest pursuant to any agreement, arrangement or understanding; provided , however , that for purposes of this clause (b)(ii) a Person shall not be deemed the owner of any stock or equity interest if the agreement, arrangement or understanding to vote such stock or equity interest arises solely from a revocable proxy or consent given in response to a proxy or consent solicitation made to ten (10) or more Persons; or

(c)   has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except as pursuant to a revocable proxy or consent as described in clause (b)(ii) above), or disposing of such stock or equity interest with any other Person that owns beneficially, or whose Affiliates or Associates own beneficially, directly or indirectly, such stock or equity interest.

               For the avoidance of doubt, no owner, limited partner or investor of any Shareholder shall be deemed to be the owner of any stock or equity interests owned by such Shareholder solely by reason of such investment therein.

The terms “ own ” and “ owned ” have correlative meanings.

“ Period One ” means the first 120 calendar days following the Closing Date.

“ Person ” means a natural person, a corporation, a limited liability company, a partnership, an association, a trust or any other entity or organization, including a Governmental Authority.

“ Purchase Agreement ” has the meaning specified in the recitals to this Agreement.

“ Reference Date ” means the date that is the earlier of (i) the calendar day immediately following the date on which Period One expires and (ii) the first date following the Closing Date on which the Shareholders own, in the aggregate, less than 10% of all of the outstanding Class A Shares.

“ Relinquished Shares ” has the meaning specified in the recitals to this Agreement.

“ SEC ” means the Securities and Exchange Commission or any successor organization.

“ Shareholder ” means LS Power and each Shareholder Control Group member that becomes party to this Agreement.

“ Shareholder Control Group ” means LS Power, together with all of its Affiliates and Associates; provided , however , that notwithstanding the foregoing, Luminus shall at no time be a member of the Shareholder Control Group.

“ Shareholder Representative ” means LS Power Development, LLC, on behalf of the Shareholders.

“ Standstill Period ” means the period commencing on the Closing Date and ending on the earlier of (x) the date occurring thirty (30) months subsequent to the Closing Date and (y) the date of the occurrence of a Change of Control.

“ Transaction ” has the meaning specified in the recitals to this Agreement.

“ Transfer ” means (a) when used as a noun, any direct or indirect transf