TERMINATION AGREEMENT AND RELEASE

Exhibit 10.1

Execution Copy

TERMINATION AGREEMENT AND RELEASE

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

RECITALS

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

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

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

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

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

ABA: 053000196

Account Number: 000687649253

Account Name: Ouachita Power Revenue

Reference: Dynegy Power Marketing

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

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

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

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

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

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

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

TP = $370,000,000.00 – (CP – [X × D])

Where:

2

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

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

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

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