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Exhibit 10.5

Execution Version

LETTER OF CREDIT REIMBURSEMENT AND COLLATERAL AGREEMENT, dated as of August 5, 2011, between DYNEGY MIDWEST GENERATION, LLC, as account party (the “ Account Party ”) and CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, (“ Credit Suisse ”) as issuing lender (in such capacity, together with its successors and assigns in such capacity, the “ Issuing Lender ”).

STATEMENT OF PURPOSE:

WHEREAS, the Issuing Lender (or one or more of its Affiliates) has issued the letters of credit referred to on Schedule A hereto (the “ Existing Letters of Credit ”) under the Fifth Amended and Restated Credit Agreement dated as of April 2, 2007 (as amended prior to the date hereof, the “ Existing Credit Agreement ”) among Dynegy Holdings Inc., as the borrower, Dynegy Inc., a Delaware corporation, as the parent, Dynegy Inc., an Illinois corporation, as the intermediate parent, the other guarantors party thereto, the lenders party thereto, Citicorp USA, Inc. and JPMorgan Chase Bank, N.A., as administrative agents, Citicorp USA, Inc., as payment agent, JPMorgan Chase Bank, N.A., as collateral agent, and each letter of credit issuer party thereto and such Existing Letters of Credit remain outstanding as of the date hereof;

WHEREAS, on the Effective Date (as herein defined), the Existing Credit Agreement will be terminated, all indebtedness outstanding thereunder (other than certain existing outstanding letters of credit) will be repaid, all commitments will be terminated and all liens in respect thereof will be released; and

WHEREAS, the Account Party has requested that (i) the Issuing Lender maintain (either itself or through one or more of its Affiliates) the Existing Letters of Credit under this Agreement and (ii) the Issuing Lender provide a letter of credit facility to the Account Party, and the Issuing Lender is willing to maintain (either itself or through one or more of its Affiliates) the Existing Letters of Credit under this Agreement and provide the letter of credit facility to the extent that the obligations of the Account Party with respect to the Existing Letters of Credit and any other letter of credit issued hereunder are cash collateralized by the Account Party upon the terms and subject to the conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the premises and to induce the Issuing Lender to enter into this Agreement, the Account Party hereby agrees with the Issuing Lender as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1.  Defined Terms . (a) The following terms shall have the following meanings:

Account Balance ”: shall mean, at any time, the aggregate Dollar amount of Collateral on deposit in the Collateral Account.

Account Collateral ”: the collective reference to the Collateral and the Collateral Account.

Account Control Agreement ”: as defined in Section 5.2(e).


Account Party ”: as defined in the preamble to this Agreement.

Affiliate ”: with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified means any other Person which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person. For the purposes of this definition, “Control” (including, with correlative meanings, the terms “Controlling”, “Controlled by” and “under common Control with”), means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise.

Agreement ”: this Letter of Credit Reimbursement and Collateral Agreement, as the same may be amended, supplemented or otherwise modified from time to time.

Applicable Margin ”: 7.75% per annum; provided that all past due amounts shall bear interest at 9.75% per annum.

Application ”: an application, in such form as the Issuing Lender may specify as the form customarily used by the Issuing Lender for Letters of Credit from time to time, requesting the Issuing Lender to issue, extend or amend a Letter of Credit.

Bankruptcy Code ”: the Bankruptcy Reform Act of 1978, as heretofore and hereafter amended, and codified as 11 U.S.C. §§101 et seq.

Base Rate ”: for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greater of (i) the Prime Rate in effect on such day and (ii) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. If the Issuing Lender shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, including the inability or failure of the Issuing Lender to obtain sufficient quotations in accordance with the terms of the definition thereof, the Base Rate shall be determined without regard to clause (ii) of the first sentence of this definition until the circumstances giving rise to such inability no longer exist. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, as the case may be.

Business Day ”: a day other than a Saturday, Sunday or other day on which the commercial banks in New York City are authorized or required by law to close.

Change in Law ”: as defined in Section 3.8(a).

Code ”: means the Uniform Commercial Code as in effect from time to time in the State of New York; provided that, if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interests in any Account Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than New York, “Code” means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection.

Collateral ”: the collective reference to all cash and funds deposited from time to time in the Collateral Account and all interest and other property received in respect of, or as proceeds of, or in substitution or exchange for, any of the foregoing.

 

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Collateral Account ”: Dynegy - Credit Suisse Cash Collateral Account - Account No: 334674 established with The Bank of New York Mellon and any substitute or successor account.

Commitment Period ”: the period from and including the Effective Date to August 5, 2014.

Credit Agreement ”: the Credit Agreement, dated as of the Effective Date, among the Account Party, as borrower, Intermediate Holdings, the lenders party thereto, Credit Suisse AG, Cayman Islands Branch, as Administrative Agent and Collateral Trustee, Credit Suisse Securities (USA) LLC and Goldman Sachs Lending Partners LLC, as Joint Syndication Agents, and Credit Suisse Securities (USA) LLC and Goldman Sachs Lending Partners LLC, as Co-Documentation Agents.

Credit Documents ”: this Agreement, all Applications relating to the Letters of Credit, any Letter of Credit and the Account Control Agreement.

Debtor Relief Laws ” shall mean the Bankruptcy Code of the United States of America, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States or other applicable jurisdictions from time to time in effect.

Default ”: any of the events specified in Section 4.4 whether or not any requirement set forth therein for the giving of notice, the lapse of time, or both, has been satisfied.

Dollars ”, “ $ ” and “ US$ ”: dollars in lawful currency of the United States of America.

Effective Date ”: the date of satisfaction of the conditions set forth in Section 5.2, which date is August 5, 2011.

Equity Interests ”: shares of capital stock, partnership interest, membership interest in a limited liability company, beneficial interests in a trust or other equity interest in any Person, and any option, warrant or other right entitling the holder thereof to purchase or otherwise acquire any such equity interests.

Event of Default ”: as defined in Section 4.4.

Excluded Taxes ”: with respect to the Issuing Lender or any other recipient of any payment to be made by or on account of any obligation of the Account Party hereunder or pursuant to any Credit Document, (a) income or franchise taxes imposed on or measured by its net income or net profits, however denominated, by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Issuing Lender, in which its applicable lending office is located, or that are imposed by reason of any connection between the Issuing Lender or other recipient and any taxing jurisdiction other than a connection arising solely by executing or entering into any Credit Document, receiving payments thereunder or having been a party to, performed its obligations under, or enforced, any Credit Documents, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction described in clause (a) above, (c) in the case of a Foreign Issuing Lender, any U.S. federal withholding tax or backup withholding that is imposed pursuant to laws in effect at the time such Foreign Issuing Lender or other recipient becomes a party to this Agreement (or designates a new lending office), except to the extent that such Foreign Issuing Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts with respect to such withholding tax pursuant to Section 3.10(a), (d) in the case of a Foreign Issuing Lender, any U.S. federal withholding tax or backup withholding that is

 

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attributable to such Foreign Issuing Lender’s failure to comply with Section 3.10(e), (e) any U.S. federal withholding tax imposed pursuant to FATCA and (f) all penalties and interest on the foregoing amounts.

Existing Credit Agreement ”: as defined in the Statement of Purpose.

Existing Letters of Credit ”: as defined in the Statement of Purpose.

FATCA ”: Sections 1471 through 1474 of the U.S. Internal Revenue Code of 1986, as amended from time to time (as of the date hereof or any amended or successor provision that is substantively comparable and not materially more onerous to comply with) and any regulations or the official interpretations thereof.

Federal Funds Effective Rate ”: for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Issuing Lender from three Federal funds brokers of recognized standing selected by it.

Financial Institution ”: The Bank of New York Mellon, or its permitted successor or assigns, as party to the Account Control Agreement.

Foreign Issuing Lender ”: an Issuing Lender that is not a “United States person” within the meaning of Section 7701(a)(30) of the U.S. Internal Revenue Code of 1986, as amended.

GAAP ”: those generally accepted accounting principals in the United States as in effect from time to time.

Governing Documents ”: collectively, as to any Person, the articles or certificate of incorporation and bylaws, any shareholders agreement, certificate of formation, limited liability company agreement, partnership agreement, trust indenture or other formation or constituent documents of such Person.

Governmental Authority ”: the government of the United States of America or any other nation, or any political subdivision thereof, whether state or local, and any agency authority, instrumentality, regulatory board, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of, or pertaining to, government (including any supra-national bodies such as the European Union or the European Central Bank).

Immaterial Subsidiary ”: any Subsidiary that has assets with a book value not in excess of $50,000,000 in the aggregate for all Immaterial Subsidiaries.

Indemnified Taxes ”: (a) Taxes other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of the Account Party hereunder or under any other Credit Document and (b) to the extent not otherwise described in (a), Other Taxes.

Intermediate Holdings ”: Dynegy Coal Investments Holdings, LLC.

Issuing Lender ”: as defined in the preamble to this Agreement.

 

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L/C Disbursement ”: a payment or disbursement made by the Issuing Lender pursuant to a Letter of Credit.

L/C Fee Payment Date ”: the last Business Day of each March, June, September and December and the Termination Date.

L/C Obligation ”: as defined in Section 3.3(a).

Letters of Credit ”: any standby letter of credit issued pursuant to Section 3.1 (which in any event shall include the Existing Letters of Credit), as any such letter of credit may be amended, renewed or extended from time to time in accordance with the terms hereof.

Letter of Credit Commitment ”: as of the Effective Date, $100,000,000, as the same may be decreased in accordance with Section 3.1.

Lien ” with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, encumbrance, charge or security interest in or on such asset and (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset.

Material Adverse Effect ”: (a) materially adverse effect on the business, assets, liabilities, operations, condition (financial or otherwise) or operating results of the Account Party and its Subsidiaries, taken as a whole, (b) a material impairment of the ability of the Account Party or its Subsidiaries to perform any of their material obligations under any Credit Document or (c) a material impairment of the rights and remedies of or benefits available to the Issuing Lender under any Credit Document.

Material Indebtedness ”: as defined in Section 4.4(e).

Obligations ”: (a) the L/C Obligations and (b) all other reasonable and document out of pocket expenses (including reasonable attorney’s fees, disbursements and other charges of the Issuing Lender), charges, obligations, covenants and duties owing by the Account Party to the Issuing Lender which may arise under, out of, or in connection with this Agreement, the Letters of Credit, any of the other Credit Documents or any other document made, delivered or given in connection herewith or therewith or in any way relating to the Account Collateral, of every kind, nature and description, direct or indirect, absolute or contingent, due or to become due, now existing or hereafter incurred, liquidated or unliquidated.

Other Taxes ”: any and all present or future stamp or documentary Taxes or any other excise or property Taxes, charges or similar levies arising from any payment made under any Credit Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Credit Document (except any such Taxes imposed with respect to an assignment, other than an assignment made at the Account Party’s request).

Outside Date ”: the earlier of (x) the last day of the Commitment Period and (y) the date upon which the Letter of Credit Commitment shall have been terminated by the Account Party pursuant to either Section 3.1(c) or by the Issuing Lender following the exercise of remedies pursuant to Section 4.4.

Outstanding Amount ”: shall mean, at any time, the sum of, without duplication, (a) the Dollar amount of the aggregate Stated Amount of all outstanding Letters of Credit at such time plus (b)

 

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the Dollar amount of the aggregate principal amount of all L/C Disbursements at such time for which the Issuing Lender has not been reimbursed.

Person ”: any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

Prime Rate ”: the rate of interest per annum determined from time to time by Credit Suisse as its prime rate in effect at its principal office in New York City and notified to the Account Party. The prime rate is a rate set by Credit Suisse based upon various factors including Credit Suisse’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such rate.

Property ”: of any Person means, any right or interest in or to any type of real, personal, tangible, intangible or mixed property or asset of any kind whether or not included in the most recent consolidated balance sheet of such Person and its Subsidiaries under GAAP, including Equity Interests.

Register ”: as defined in Section 7.14.

Related Person ”: each of the Issuing Lender’s Affiliates, Issuing Lender’s successors and assigns and the partners, directors, officers, employees, agents, members, Controlling Persons, trustees, administrators, managers and representatives of Issuing Lender and of Issuing Lender’s Affiliates.

Requirement of Law ”: as to any Person, the Governing Documents of such Person, and any law, statute, treaty, rule, regulation, official directive, order, decree, or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its Property or to which such Person or any of its Property is subject.

Responsible Officer ”: of any Person shall mean any executive officer or chief financial officer of such Person and any other officer or similar official thereof responsible for the administration of the obligations of such Person in respect of this Agreement.

Stated Amount ”: of any Letter of Credit shall mean the maximum Dollar amount from time to time available to be drawn thereunder, determined without regard to whether any conditions to drawing could then be met.

Subsidiary ”: with respect to any Person, with respect to any Person (herein referred to as the “ parent ”), any corporation, partnership, limited liability company, association or other business entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership interests are, at the time any determination is being made, owned, owned or held (directly or indirectly through one or more subsidiaries) or (b) which is a partnership with respect to which such parent is the sole general partner of and Controls such partnership. Unless otherwise qualified all reference to a “Subsidiary” or to “Subsidiaries” in this Agreement shall refer to a Subsidiary or Subsidiaries of the Account Party.

Taxes ”: any and all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

 

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Termination Date ”: the later of (x) the Outside Date and (y) the date upon which the Obligations have been indefeasibly paid in full in cash (other than contingent indemnification obligations) and the Outstanding Amount is $0.

(b) Rules of Interpretation .

(i) The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and section and paragraph references are to this Agreement unless otherwise specified.

(ii) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

ARTICLE II

COLLATERAL ACCOUNT

SECTION 2.1.  Establishment of Collateral Account . (a) The Account Party agrees that, as a condition to maintaining the Existing Letters of Credit and issuing Letters of Credit hereunder and as security for the payments of its obligations under this Agreement, it shall, on the Effective Date (i) establish the Collateral Account for the purpose of holding the Collateral to be deposited into the Collateral Account by or on behalf of the Account Party and (ii) deposit into the Collateral Account, Dollars in immediately available funds, in an amount equal to $103,000,000. After the Effective Date, the Account Party agrees that at all times thereafter that it shall promptly cause additional funds to be deposited and held in the Collateral Account from time to time in order that the Account Balance shall at least equal 103% of the Outstanding Amount.

(b) The Collateral Account shall be maintained until the Termination Date.

(c) The Account Collateral shall be subject to the exclusive dominion and control of the Issuing Lender, which shall hold the Collateral and administer the Collateral Account subject to the terms and conditions of the Account Control Agreement. Except as expressly set forth in Section 2.5(b), the Account Party shall have no right of withdrawal from the Collateral Account nor any other right or power with respect to the Account Collateral, nor any right to convey or encumber any of the Account Collateral, except as expressly provided therein.

(d) All funds on deposit in the Collateral Account will be maintained by Bank of New York Mellon (or another financial institution acceptable to the Issuing Lender and the Account Party) and will bear interest at the rate from time to time applicable to “The Bank of New York Mellon Cash Reserve”. Funds on deposit therein shall not be invested in any investments. Any interest received in respect of the Collateral Account shall accrue for the benefit of the Account Party and shall be deposited into the Collateral Account.

(e) The Issuing Lender shall have no responsibility for any loss of funds or liability arising out of the Collateral Account, except to the extent such losses are found by a court of competent jurisdiction in a final non-appealable judgment to have resulted from the gross negligence, bad faith or willful misconduct of the Issuing Lender.

SECTION 2.2.  Grant of Security Interest . As collateral security for the prompt and complete payment and performance when due (whether by acceleration or otherwise) of the Obligations,

 

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the Account Party hereby grants to the Issuing Lender, a continuing security interest in and to all of the Account Party’s right, title and interest in and to the Account Collateral and all proceeds of the foregoing.

SECTION 2.3.  Covenants as to Account Collateral . The Account Party covenants and agrees with the Issuing Lender that:

(a) The Account Party will not (i) sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to, the Account Collateral (except as otherwise permitted hereunder), or (ii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Account Collateral, or any interest therein, except for the Lien created by this Agreement, the Lien in favor of the Collateral Agent in connection with the Credit Agreement and the banker’s lien and right of setoff of The Bank of New York Mellon in the Collateral Account.

(b) The Account Party will maintain the Lien created by this Agreement as a first priority, perfected security interest and defend the right, title and interest of the Issuing Lender in and to the Account Collateral against the claims and demands of all Persons whomsoever. At any time and from time to time, upon the written request of the Issuing Lender, and at the sole expense of the Account Party, the Account Party will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Issuing Lender may reasonably request for the purposes of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including without limitation, the filing of financing statements under the Code.

(c) If at any time the Issuing Lender determines that the Account Balance is less than 103% of the Outstanding Amount, the Account Party will cause to be deposited into the Collateral Account, as additional funds to be held in the Collateral Account, an amount, in Dollars and in funds immediately available to the Issuing Lender, equal to the Dollar amount of any such deficiency and shall do so not later than the Business Day immediately following the day that the Account Party receives such notice.

SECTION 2.4.  Remedies; Application of Collateral . (a) In addition to the rights of the Issuing Lender provided in Section 3.3(b) with respect to reimbursements of L/C Disbursements and the provisions of Section 4.4, during the continuance of an Event of Default, the Issuing Lender shall without notice of any kind, except for notices required by law which may not be waived, apply or allocate the Account Collateral, for the payment in whole or in part of the Obligations then due and payable, and any other amount required by a provision of law, including, without limitation, Section 9-608(a)(1)(C) of the UCC. The Issuing Lender agrees to notify the Account Party promptly after such application or allocation of the Account Collateral.

(b) In addition to the rights, powers and remedies granted to it under this Agreement and in any other Credit Document, the Issuing Lender shall have all the rights, powers and remedies available at law, including, without limitation, the rights and remedies of a secured party under the Code. To the extent permitted by law, the Account Party waives presentment, demand, protest and all notices of any kind, except for notices referred to in this Section, and all claims, damages and demands it may acquire against the Issuing Lender arising out of the exercise by either of them of any rights hereunder on or after the Effective Date.

(c) The Account Party shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Account Collateral are insufficient to pay the Obligations.

SECTION 2.5.  Release of Collateral . (a) This Agreement shall remain in effect from the Effective Date through and including the Termination Date. Upon the Termination Date, (i) the Liens

 

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granted on the Account Collateral hereby shall terminate and all rights to the Account Collateral shall revert to the Account Party, (ii) the Issuing Lender shall promptly assign, release, transfer and deliver to the Account Party the Account Collateral held by it hereunder, all instruments of assignment executed in connection therewith, together with all monies held by the Issuing Lender hereunder, free and clear of the Liens hereof and (iii) the Issuing Lender will promptly execute and deliver to the Account Party such documents and instruments (including but not limited to appropriate Code termination statements) as the Account Party shall reasonably request to evidence such termination in each such case at the sole expense of the Account Party.

(b) In addition, so long as no Event of Default shall have occurred and be continuing, upon at least three Business Days’ prior written notice to the Issuing Lender, the Account Party may, request the release of and payment to the Account Party (and the Issuing Lender agrees to release and pay to the Account Party) any Collateral on deposit in the Collateral Account so long as after giving effect to any such release the Account Balance shall equal or exceed 103% of the Outstanding Amount. Upon any such release, the Issuing Lender shall promptly assign, release, transfer and deliver to the Account Party the Account Collateral so released and all instruments of assignment executed in connection therewith, free and clear of the Liens hereof.

(c) All payments to the Account Party under paragraphs (a) and (b) of this Section 2.5 shall be paid to the account specified in writing to the Issuing Lender by the Account Party.

(d) The Account Party agrees that it will not request or be entitled to a release of Collateral, except as expressly provided for herein.

SECTION 2.6.  Issuing Lender’s Appointment as Attorney-in-Fact . (a) After the occurrence and during the continuance of an Event of Default under this Agreement, to permit the Issuing Lender to exercise it rights and remedies under this Agreement, the Account Party hereby irrevocably constitutes and appoints the Issuing Lender and any officer of the Issuing Lender, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Account Party and in the name of the Account Party or in the Issuing Lender’s own name, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or reasonably desirable to accomplish the purposes of this Agreement, including without limitation, any financing statements, endorsements, assignments or other instruments of transfer; provided that in no event shall any such appointment extend beyond the Termination Date.

(b) The Account Party hereby ratifies all that said attorneys shall lawfully do or cause to be done pursuant to the power of attorney granted in Section 2.6(a). All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until the Termination Date.

SECTION 2.7.  Duty of Issuing Lender . The Issuing Lender’s sole duty with respect to the custody, safekeeping and physical preservation of the Account Collateral in its possession, under Section 9-207 of the Code or otherwise, shall be to comply with the specific duties and responsibilities set forth herein. The powers conferred on the Issuing Lender in this Agreement are solely for the protection of the Issuing Lender’s interests in the Account Collateral and shall not impose any duty upon the Issuing Lender to exercise any such powers. Neither the Issuing Lender nor any of its Related Persons shall be liable for any action lawfully taken or omitted to be taken by any of them on or after the Effective Date under or in connection with the Account Collateral or this Agreement, except to the extent of losses to the Account Party found by a court of competent jurisdiction in a final non-appealable judgment to have resulted from the gross negligence, bad faith or willful misconduct of the Issuing Lender.

 

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SECTION 2.8.  Authorization of Financing Statements . Pursuant to the Code, the Account Party authorizes the Issuing Lender to file financing statements without the signature of the Account Party in such form and in such filing offices as the Issuing Lender reasonably determines appropriate to perfect the Liens in the Collateral of the Issuing Lender under this Agreement.

ARTICLE III

LETTERS OF CREDIT

SECTION 3.1.  Letters of Credit . (a) Subject to the terms and conditions hereof, the Issuing Lender agrees to issue, amend, renew or extend Letters of Credit denominated in Dollars during the Commitment Period (i) in a minimum amount of $10,000 on the date of such issuance, amendment, renewal or extension and (ii) for the account of the Account Party on any Business Day during the Commitment Period in such forms as may be approved from time to time by the Issuing Lender; provided that the Issuing Lender shall not issue, amend, renew or extend any Letter of Credit if, after giving effect to such issuance, amendment, renewal or extension, (i) the Stated Amount of which, when added to the Outstanding Amount at such time, would exceed the Letter of Credit Commitment at such time or (ii) the Account Balance would be less than 103% of the Outstanding Amount at such time. Each Letter of Credit shall (i) be denominated in Dollars, and (ii) expire on the earlier of (x) one year after the date of issuance and (y) the last day of the Commitment Period; provided that any Letter of Credit with a one year term may provide for the renewal thereof for additional one year periods (which shall in no event extend beyond the date referred to in clause (y) above).

(b) Any Letter of Credit, which by its terms is automatically renewable for a given period of time will provide that notice from the Issuing Lender may be given to the beneficiary thereof that such Letter of Credit will not be renewed at its maturity upon, at Issuing Lender’s discretion, 60 days prior written notice. On the Outside Date, the Account Party shall pay in cash all Obligations that are then due and payable and, if any obligations under any Letter of Credit, whether or not then due and payable, are outstanding on such date, the Account Party will cause all such Letters of Credit to either be (i) cancelled and returned on or prior to the Outside Date or (ii) cash collateralized or otherwise backstopped in a manner satisfactory to the Issuing Lender in its reasonable discretion.

(c) The Account Party shall have the right, upon not less than three Business Days’ notice to the Issuing Lender, to terminate the Letter of Credit Commitment or, from time to time, to reduce the aggregate amount of the Letter of Credit Commitment; provided that no such termination or reduction of the Letter of Credit Commitment shall be permitted if, after giving effect thereto, (i) the Account Balance would be less than 103% of the Outstanding Amount at such time or (ii) the Stated Amount would exceed the Letter of Credit Commitment. Any such reduction shall be in a minimum amount equal to $500,000, or any whole multiple of $1,000,000 in excess thereof, and shall reduce permanently the Letter of Credit Commitment then in effect.

(d) Letters of Credit shall be used solely to fund the working capital needs and general corporate purposes of the Account Party and its Subsidiaries (including, without limitation, to support any interest rate, currency, commodity or other hedging agreements or other derivative obligations of such Persons).

(e) The Issuing Lender shall not at any time be obligated to issue any Letter of Credit hereunder if such issuance would conflict with, or cause the Issuing Lender to exceed any limits imposed by, any applicable Requirement of Law.

SECTION 3.2.  Procedure for Issuance of Letter of Credit . (a) The Account Party may from time to time request that the Issuing Lender issue, amend, renew or extend a Letter of Credit on

 

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behalf of the Account Party or its Subsidiaries by delivering to the Issuing Lender at its address for notices specified herein an Application therefor, completed to the reasonable satisfaction of the Issuing Lender, and such other certificates, documents and other papers and information as the Issuing Lender may reasonably request. Upon receipt of any Application, the Issuing Lender will process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue, amend, extend or renew the Letter of Credit requested thereby (but in no event shall the Issuing Lender be required to issue, amend, extend or renew any Letter of Credit earlier than two Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto unless the Issuing Lender agrees in its sole discretion) by issuing, amending, renewing, or extending the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed to by the Issuing Lender and the Account Party. The Issuing Lender shall furnish a copy of such Letter of Credit to the Account Party promptly following the issuance thereof.

(b) On the Effective Date, the Existing Letters of Credit will be deemed to be Letters of Credit issued hereunder for all purposes hereof.

(c) The Issuing Lender may, in its discretion, arrange for one or more Letters of Credit to be issued by one or more of its Affiliates (and such Affiliate shall be deemed to be the “Issuing Lender” for all purposes of this Agreement and the Credit Documents),

(d) This Section shall not be construed to impose an obligation upon the Issuing Lender to issue, amend, extend or renew any Letter of Credit that is inconsistent with the terms and conditions of this Agreement.

SECTION 3.3.  L/C Obligations of the Account Party . (a) The Account Party agrees to reimburse the Issuing Lender no later than 1:00 p.m.(New York City time) on the next Business Day after which the Issuing Lender notifies the Account Party of the date and amount of an L/C Disbursement for the amount of (x) the draft so paid and (y) any documented taxes, fees, charges or other reasonable costs or expenses incurred by the Issuing Lender in connection with such L/C Disbursement (the amounts described in the foregoing clauses (x) and (y) in respect of any L/C Disbursement, collectively, the “L/C Obligation”); provided that any failure to give or delay in giving such notice shall not relieve the Account Party of its obligation to reimburse the Issuing Lender with respect to such L/C Obligations. Each such payment shall be made to the Issuing Lender either (i) at its address for notices specified herein (or via wire transfer instructions provided by the Issuing Lender as set forth on Schedule B, as such Schedule may be updated from time to time by the Issuing Lender) in Dollars and in immediately available funds or (ii) so long as after giving effect to the withdrawal the Account Balance equals or exceeds 103% of the Outstanding Amount, by instructing the Account Party to withdraw from the Collateral Account the Dollar Amount of L/C Disbursement for the period from the date such L/C Disbursement is made until the date of withdrawal. Until an L/C Obligation shall have been reimbursed in full, interest shall be payable on such unreimbursed L/C Obligation at the rate per annum equal to the Base Rate plus the Applicable Margin. All such interest shall be payable on demand.

(b) If the Issuing Lender makes any L/C Disbursement in respect of a Letter of Credit, then, unless the Account Party shall reimburse all L/C Obligations in full on the date reimbursement thereof is required in accordance with paragraph (a) above, the Issuing Lender, without prior notice to the Account Party (with any such prior notice being expressly waived by the Account Party) shall be entitled to withdraw from the Collateral Account the Dollar amount of the L/C Obligation plus any interest payable on such L/C Disbursement for the period from the date such L/C Disbursement is made until the date of withdrawal. The Issuing Lender agrees to notify the Account Party promptly after such withdrawal.

 

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(c) The responsibility of the Issuing Lender to the Account Party in connection with any draft presented for payment under any Letter of Credit shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under su


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