black stone group complaint 9.16.10

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Case 4:10-cv-03320 Document 1 Filed in TXSD on 09/16/10 Page 1 of 30

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF TEXASHOUSTON DIVISION

EDWARD TANSEY, Individually and On No.Behalf of A ll Others SimilarlySituated,

CLASS ACTIONPlaintiff,

COMPLAINT FOR BREACH OFv. FIDUCIARY DUTY AND VIOLAT IONS OF

14(a) AND 20(a) OF THE SECURITIESDYNEGY, INC., BRUCE A. EXCHANGE ACT OF 1934WILLIAMSON, HOLLI C. NICHOLS,DAVID W. BIEGLER, PATRICIA A.HAMMICK, WILLIAM L. TRUBECK,THOMAS D. CLARK, JR., VICTOR E.GRIJALVA, HOWARD B. SHEPPARD,BLACKSTONE GROUP L.P., DENALIPARENT INC., DENALI MERGER SUBINC., and NRG ENERGY INC.,

Defendants. DEMAND FOR JURY TRIAL

CLASS ACTION COMPLAINT

Plaintiff, Edward Tansey ("Plaintiff') by his attorneys hereby brings his original

complaint against defendants, allegingupon personal knowledge as to himself, and upon

information and belief as to all other allegations herein, as follows:

NATURE OF THE ACTION

This is a shareholder class action brought by plaintiff on behalf of both himself and

o n behalfof

allsimilarly

situated holders of c o m m o n stock ofDynegy ("Dynegy"

o r the

"Company") against Dynegy, certain of its officers and directors, Blackstone Group L.P.

("Blackstone"),NRG Energy Inc. ("NRG"), Denali Parent Inc. ("Denali"),and Denali Merger Sub

Inc. ("DenaliMerger Sub"). This action arises ou t of defendants' violations of state law and 14(a)

and 20(a) of the Securities Exchange Act of 1934 (the "1934 Act") and U.S. Securities and

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Case 4 :10-cv-03320 Document 1 Filed in TXSD on 09/16/10 Page 2 of 30

Exchange Commission ("SEC") Rule 14a-9 promulgated thereunder in connection with their

attempts to sell Dynegy via a n unfair process to Blackstone for $4.50 per share (the "Proposed

Acquisition"). Blackstone, in turn, is selling four of Dynegy's power plants to NRG for $1.36

billion. Further, a s part of their efforts to seek shareholder approval of the Proposed Acquisition,thedefendants have filed with the SEC a false and materiallymisleadingproxy statement.

2. In pursuing the unlawful plan to solicit shareholder approval of their proposed sale of

Dynegy, each of the defendants violated applicable law by directly breaching and/or aiding other

defendants' breaches of their fiduciaryduties of loyalty,due care, good faith and fair dealing. This

action seeks to enjoin the Individual Defendants, as defined herein, from further breaching their

fiduciary duties in th eir pursuit of a sale of the Company to Blackstone at an unfair price and

followinga n unfair and self-serving process.

3. Dynegy o w n s power plants around the country and sells electricity mostly to

wholesale markets in New York, California and the Midwest. During the recent recession, energy

prices fell dramatically. Dynegy's stock price fell along with the demand for energy, as shares have

tumbled nearly 80% over the past fifty-two weeks. With price increases and global energy demand

expected to surge over the nex t decade, however, Dynegy is well-positionedwith its substantial

energy capacity to take advantage of the increasing demand. In fact, defendant NRG, Dynegy's

competitor,ha s recently reported strong results and boosted its earnings target for the year showing

that the energy market is turning a c o r n e r .

4. Blackstone is now attempting to acquire the Company at this temporarilydepressed

stock price. Just a month before the Proposed Acquisitionw a s announced, the Company's stock

traded above the buyout price and as recently as January 25, 2010, the Company's stock traded at

over $9.00 per share, more than twice what Blackstone is offering. In fact, when the Proposed

Acquisitionw as announced o n August 13, 2010, Dynegy's stock w a s trading at i ts lowest price in

eight years. Blackstone w a s aware of the depressed stock price and e v e n at on e point during the

sales process offered to acquire the Company at $5.25 per share, 14% more than the Proposed

Acquisition. The stock market's reaction to the Proposed Acquisitionprice is also telling as

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throughout September 2010, the Company's stock price has consistently traded at above $5.00 per

share, indicating that Blackstone's offer undervalues the Company.

5. Before agreeing to the Proposed Acquisition,the Individual Defendants failed to

conduct a pre-signing market check, but did negotiate a go-shop period of forty days that allows

Dynegy to solicit superior proposals from third parties. The fortyday period is (and w a s designed to

be) too short for potentialbuyers to perform meaningfuldue diligence. Moreover, e v e n if Dynegy

did receive a superior proposalduring the go-shop, they would have to provideBlackstone a rightto

match any superior proposal within four days and while the go-shop period is ongoing. Given the

negligibletime frame and matching rights during the go-shop, the likelihood of superior rival bids

emerging is remote. In addition, even if Dynegy accepted a superior proposal duringthe go-shop

period, the Company would have to pay a $16.3 million termination fee to Blackstone, along with

another $6 million in expenses.

6. In order to e n s u r e that the Proposed Acquisitionis consummated, the Individual

Defendants also agreed to a number of preclusive and draconian deal protection devices in the

Agreement and Plan of Merger, dated August 13, 2010 (the "MergerAgreement"). In addition to the

go-shop period termination fee, the Individual Defendants also agreed to : (i) a termination fee of $50

million if the Company accepts a superior offer after the go-shop period; (ii) a no-solicitation clause

that prohibits the Company from seeking a superior offer for its shareholders beginning o n

September 23, 2010 after the go-shop period; and (iii) the right fo r Blackstone to match any

competing proposals followinga four day review and negotiation period.

7. Further, certain of the Individual Defendants will receive a financial windfall if the

Proposed Acquisition is consummated due to a provision accelerating the vesting of their stock

options, restricted stock, and phantom stock units. Defendant Bruce A. Williamson ("Williamson")

will receive benefits worth more than $14.3 million and defendant Holl i C. Nichols ("Nichols")will

receive benefits worth more than $6.8 million in restricted stock, phantom stock, performance units,

and change-in-controlbenefits.

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8. In a n attempt to s e cu r e shareholder approval for the unfair Proposed Acquisition,o n

September 3, 2010, the Individual Defendants and Dynegy issued a materially false and misleading

PreliminaryProxy Statement o n Form PREM14A (the "Proxy"). The Proxy, which recommends

that Dynegy shareholders vote in favor of the Proposed Acquisition,omits and/or misrepresentsmaterial information about the unfair sales process for the Company, the unfair consideration offered

in the Proposed Acquisition, and the actual intrinsic value of the Company. Among other

information, the Proxy omits and/or misrepresents the following material information in

contravention of 14(a) and 20(a) of the 1934 Act regarding:

(a) the fairness opinions provided by Dynegy's financial advisors, Greenhill &

Co., LLC("Greenhill")

and Goldman, Sachs & Co.("Goldman

Sachs"),including

the data and

inputs underlying the fairness analyses; and

(b) the sales process, includingthe r e a son s why the Board of Directors ("Board")

accepted a n offer that w a s below the amoun t that Blackstone had previously offered and

significantlylower than the Company's recent trading levels, and the other strategic alternatives

available to the Company other than the sale to Blackstone.

9. As explained herein, the foregoing information is material to the impendingdecision

of Dynegy's shareholders whether o r no t to vote in favor o f the Proposed Acquisition. As such,

defendants' violations of 14(a) and 20(a) of the 1934 Act threaten shareholders with irreparable

harm for which money damages a re no t a n adequate alternate remedy. Thus, plaintiff seeks

injunctive relief to e n s u r e that defendants cu r e their violations of fiduciary duty and 14(a) and

20(a) before Dynegy's shareholders a re asked to vote on the Proposed Acquisition and that

defendants a re no t permitted to seek shareholder support of the Proposed Acquisitionwithout

complyingwith their duty under the federal securities laws to provide shareholders with all material

information about the sales process, the proposed consideration, and the Company's intrinsic value.

10 . In short, the Proposed Acquisitionis designed to unlawfullydivest the Company's

public stockholders of their holdings without providingthem the maximized value to which they a re

entitled.

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11. To remedy defendantsbreaches of fiduciaryduty and other misconduct, plaintiff

seeks, inter alia: (i) injunctiverelief preventing consummation of the Proposed Acquisition,unless

and until the Company adopts and implements a procedure or process to obtain a transaction that

provides the best possible terms for shareholders; (ii) a directive to the Individual Defendants (asdefined herein) to exercise their fiduciaryduties to obtain a transaction which is in the best interests

of Dynegy's shareholders; and (iii) rescission of, to the extent already implemented. the Proposed

Acquisition'smerger agreement o r any of the terms thereof.

JURISDICTION AND VENUE

12. This Court has jurisdictiono v e r all claims asserted herein pursuant to 27 of the 1934

Act for violations of14(a)

and20(a)

of the 1934 Act and SEC Rule 14a-9promulgated

thereunder. This Court has jurisdictionover the subject matter of this action pursuant to 28 U.S.C.

1331.

13 . Venue is proper in this District because Dynegy has its principleplace of business in

this District. Plaintiffs claims a r o s e in this District, where mos t of the actionable conduct took

place, where most of the documents ar e electronically stored and where the evidence exists, and

where virtuallyall the witncsses a re located and available to testify at the jury trial permitted o n

these claims in this Court. Moreover, each of the Individual Defendants, as Company officers and/or

directors, ha s extensive contacts with this District.

PARTIES

14. Plaintiff Edward Tansey is a shareholder of Dynegy.

15 . Defendant Dynegy is a Delaware corporation that, through its subsidiaries, produces

and sells electric energy, capacity, and ancillary services in key U.S. markets. Dynegy's power

generation portfolio consists of approximately 12, 200 megawatts of baseload, intermediate, and

peaking power plants fueled by a mix of natural gas, coal, and fuel oil. Dynegy's principalexecutive

offices a re located at 1000 Louisiana, Suite 5800, Houston, TX 77002.

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16. Defendant Williamson is Dynegy's Chairman of the Board and has been since May

2004 and Chief Executive Officer and a director and has been since October 2002. Williamson is

also Dynegy's President and has been since December 2007.

17 . Defendant Nichols is Dynegy's Executive Vice President and Chief Financial Officerand has been since November 2005, Nichols w a s also Dynegy's Senior Vice President and Treasurer

from May 2004 to November 2005; Senior Vice President and Controller from June 2003 to May

2004; and Vice President, Assistant Corporate Controller and Senior Consultant from May 2000 to

June 2003.

18 . Defendant David W. Biegler ("Biegler")is a Dynegy director and has been since

April2003.

19 . Defendant Patricia A. Hammick ("Hammick")is a Dynegy director and has been

since April 2003.

20. Defendant William L. Trubeck ("Trubeck")is a Dynegy director and has been since

April2003.

21. Defendant Thomas D. Clark, Jr. ("Clark")is a Dynegy director and ha s been since

July 2003.

22. Defendant Victor E. Grijalva("Grijalva") is a Dynegy director and ha s been since

May 2006.

23. Defendant Howard B. Sheppard ("Sheppard") is a Dynegy director and has been since

January 2008.

24. Defendant Blackstone is a Delaware limited partnership that manages private capital

and provides financial advisory services globally. Blackstone's alternative asset management

businesses include the management of private equity funds, real estate funds, hedge funds, credit-

oriented funds, collateralized loan obligationvehicles, and closed-end mutual funds. Blackstone's

financial advisory services include corporate mergers and acquisitions, restructuring and

reorganization, and fund placement. Blackstone is managed and operated by its general partner,

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Blackstone Group Management, L. LC. Blackstone's principalexecutive offices a re located at 345

Park Avenue, New York, New York 10154.

25. Defendant Denali is a Delaware corporation and a n affiliate of Blackstone. Denali

w a s created solely for the purpose of entering into the Merger Agreement and completing the

Proposed Acquisition.

26. Defendant Denali Merger Sub is a Delaware corporation and a wholly-owned

subsidiary of Denali. Denali Merger Sub is also a n affiliate of Blackstone. Denali Merger Sub w a s

created solely for the purpose of entering into the Merger Agreement, completing the Proposed

Acquisition, and completing the transactions contemplated by the NRG agreement. Upon

consummation of theProposed Acquisition,

DenaliMerger

Sub willmerge

with and intoDynegy

and will cease its separate corporate existence.

27. Defendant NRG is a Delaware corporation that owns and operates a diverse portfolio

of power-generating facilities, primarilyin the United States. The Company's operations include

energy production and cogeneration facilities, thermal energy production,energy r e s o u r c e recovery

facilities, and the supply of electricityand energy services to retail electricitycustomers in the Texas

market. Blackstone and NRG have entered into a separate and exclusive agreement throughwhich

NRG will acquire four natural gas-fired assets currently owned by Dynegy for cash consideration of

approximately$1.36 billion. The consummation of the Proposed Acquisitionis contingentupon the

concurrent closing of the NRG agreement. NRG's principal executive offices ar e located at 211

Carnegie Center, Princeton, New Jersey 08540.

28. The defendants named above in 1116-23 a re collectivelyreferred to herein as the

"Individual Defendants."

INDIVIDUAL DEFENDANTS' FIDUCIARY DUTIES

29. Under Delaware law, in any situation where the directors of a publicly traded

corporation undertake a transaction that will result in a change in corporate control, the directors

have a n affirmative fiduciary obligationto obtain the highest value reasonably available for the

corporation's shareholders, includinga significantcontrol premium. This duty arises in at least the

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followingthree circumstances: (i) when a corporation initiates an active biddingprocess seeking to

sell itself o r to effect a business reorganization involving a clear break-up of the company;

(ii)where, in response to a bidder's offer, a target abandons its long-term strategy and seeks a n

alternative transaction involvingthe break-up of the company; o r (iii) when approval of a transactionresults in a sale o r change of control. To diligentlycomply with these dutics, neither the directors

n o r the officers may take any action that:

(a) adversely affects the value provided to the corporation's shareholders;

(b) will discourage, inhibit, o r deter alternative offers to purchase control of the

corporation o r its assets;

(c) contractually prohibitsthemselves from complyingwith their fiduciaryduties;

(d) will otherwise adversely affect their duty to s e cu r e the best value reasonably

available under the circumstances for the corporation's shareholders; or

(e) will provide the directors and/or officers with preferential t reatment o r

benefits at the expense of, o r which a re no t shared equally with, the public shareholders.

30. In accordance with their duties of loyaltyand good faith. the Individual Defendants,

as directors and officers of Dynegy, a re obligated under Delaware law to refrain from:

(a) participating in any transaction where the directors' or officers' loyalties a re

divided;

(b) participatingin any transaction where the directors or officers receive, or a re

entitled to receive, a personal financial benefit no t equally shared by the public shareholders of the

corporation;and

(c) unjustlyenriching themselves at the expense or to the detriment of the public

shareholders.

3 1. The Individual Defendants, separately and together, in connection with the Proposed

Acquisition,a re knowinglyor recklesslyviolatingtheir fiduciaryduties, and have aided and abetted

such breaches, including their duties of loyalty, good faith, and due c a r e owed to plaintiff and the

other public shareholders of Dynegy. Individual Defendants stand o n both sides of the transaction,8


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a re engaging in self-dealing, a re obtaining for themselves personal benefits no t shared equally by

Dynegy's public shareholder generally. As a result of the Individual Defendants' self-dealing and

divided loyalties,neither plaintiff nor the Class (as defined herein) will receive adequate or fair value

for their Dynegy c o mm o n stock in the Proposed Acquisition.32* The Individual Defendants have knowinglyor recklessly brcached their duties of

loyalty,good faith, and due ca r c in connection with the Proposed Acquisition. As such, the burden

of proving the inherent or entire fairness of the Proposed Acquisition,includingall aspects of its

negotiation, structure, price, and terms, is placed upon defendants as a mat te r of law.

THE FLAWED SALE PROCESS

33. In April 2010, Dynegy began discussing a potential sale o f the Company with NRG's

Executive Vice President, Strategy, Jonathan Baliff. On April 11, 2010, defendant Williamson met

with NRG representatives to discuss a stock acquisition of the Company by NRG. At the s am e

meeting, NRG disclosed that it would concurrentlyexplore selling the Company's coal generating

assets to Blackstone in connection with any acquisitionby NRG.

34. On May 28, 2010, NRG and the Company entered confidentialityagreements and

exchanged non-public information. Simultaneously,NRG and Blackstone entered confidentiality

agreements and Blackstone w a s given non-publicinfbrmation about Dynegy's coal generating assets

because NRG planned to sell Dynegy's coal generating assets to Blackstone. On June 14, 2010,

Dynegy's outside counsel, Sullivan & Cromwell,LLP ("Sullivan& Cromwell")received a draft

merger agreement from NRG. Later in June, however, NRG purportedly determined it would have

trouble selling the Company's coal generating facilities under terms suitable to NRG, and decided to

withdraw from discussions to acquire Dynegy.

35. The very next day, Blackstone contacted defendant Williamson in order to express its

interest in conducting due diligence to facilitate a n all-cash offer to acquire the Company. On June

25 , 2010, defendant Williamson informed the Board of Blackstone's interest in acquiring the

Company. After defendants Williamson and Nichols met with Blackstone o n July 28, 2010,Dynegy

gave Blackstone a c c e s s to non-public information as part of the due diligence process. On July 21,9


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Case 4:10-cv-03320 Document 1 Filed in TXSD o n 09/16/10 Page 10 of 30

2010, Blackstone offered $5 per share to acquire all of the Company's outstanding stock, $0.50 mo r e

than the consideration in the Proposed Acquisition.

36. On July 23, 2010, Greenhill and Goldman Sachs purportedly discussed strategic

alternatives with thc Board. The Proxy, however, fails to disclose the specifics regarding what

strategic alternatives were discussed and what third parties besides Blackstone mightbe interested in

acquiringDynegy.

37. On July 29, 2010, Blackstone raised its offeringprice for Dynegy to $5.25 per share

after conducting further due diligence o n the Company. The $5.25 per share offer wa s

approximately 14.3% higher than the final consideration in the Proposed Acquisition. Also,

Blackstone and NRG simultaneously discussed a sale agreement related to the Company's gas fired

asscts, which would take place in connection with the sale of Dynegy to Blackstone. Later that day,

the Company and Blackstone reached a n agreement o n conditions to closing.

38. As part of the sales process, Blackstone told the Company that it wished to u se the

proceeds from the sale of the gas fired assets to NRG to help pay for the Proposed Acquisition. On

August 3, 2010, the Company denied Blackstone's request for the option to u se the proceeds from

thc sale of the gas fired asscts to NRG, insisting that the consideration paid to shareholders be

guaranteed by Blackstone alone. The nex t day, Blackstone agreed to this provision, but lowered is

offer price to $5.00 per share, despite n o material change in the Company's assets, because it wanted

a n option to finance the deal differently. On August 5, 2010, the negotiations between NRG and

Blackstone purportedly stalled over the appropriate value of the gas fired assets.

39. On August 11, 2010, Blackstone informed representatives of the Company that it had

reached an agreement with NRG regarding the sale of those assets, and simultaneouslyreduced its

offer price for the Company to $4.50 per share. Without further discussions, the Company simply

acquiesced to the lower price and executed the Merger Agreemento n August 13, 2010.

THE PROPOSED ACQUISITION

40. On August 13, 2010, Dynegy issued thc followingpress release announcing that the

Individual Defendants had agreed to sell Dynegy to Blackstone:

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Dynegy Inc. today announced that it has entered into a definitive merger agreementpursuant to which it will be acquired by a n affiliate of The Blackstone Group L.P. ina transaction valued at approximately $4.7 billion, including the assumption ofexisting debt.

Under the terms of the merger agreement, Dynegy stockholders will receive

$4.50 in cash for each outstanding share of Dynegy common stock they own, whichrepresents a 62 percent premium to the closing share price o n August 12, 2010.

"Dynegy's Board of Directors believes the proposed transaction withBlackstone provides o u r stockholders with a significantpremium over the currentstock price and r em o v e s the risks to the existing stockholders associated with volatilecommodityprices, challenging capital markets and environmental and regulatoryuncertainties, said Bruce A. Williamson, Chairman, President and Chief ExecutiveOfficer of Dynegy Inc. "Blackstone is a world-class f irm with substantial r e s o u r c e sand investment experience in the power generation business, and w e believe they a rewell positioned to lead Dynegy going forward as a private company."

"We share Dynegy's commitment to safety, operational reliability andenvironmental responsibility, said David Foley, Senior Managing Director ofBlackstone. "We look forward to working together with Dynegy's employees torealize the full potential of the company's attractive portfolioo f power generationassets."

After careful analysis, Dynegy's Board o f Directors ha s approved the mergeragreement and recommended that Dynegy's stockholders adopt the merger agreementwith a n affiliate of Blackstone. A special meeting of Dynegy's stockholders will beheld followingthe preparation and filingof a proxy statement with the Securities and

Exchange Commission anda

subsequent mailingto stockholders. The company willu se its reasonable best efforts to file a preliminary proxy sta tement related to themerger within l 5 business days after the date of the merger agreement, and it iscurrently anticipated that the stockholder meeting will be held in the fourth quarter2010.

Under the merger agreement, Dynegy is permitted to solicit alternativeproposals from third parties fo r a period of 40 days after the date of the mergeragreement. There c a n be n o a s su r ance that the solicitation of alternative proposalswill result in Dynegy receiving a superior proposal from a third party.

The transaction isexpected

to closeby

the end of 2010.Completion

of thetransaction is subject to customary closing conditions, includingapprovalby Dynegystockholders and receipt of regulatory approvals. The transaction is no t subject to anyfinancingconditions, and a fund managed by Blackstone has committed to contributeall o f the equity necessary to complete the transaction.

In addition to the transaction discussed in this n e w s release, Blackstone andNRG Energy have entered into a separate and exclusive agreement through which


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NRG Energy will acquire four natural gas-fired assets currentlyowned by Dynegythe Casco Bay facility in Maine and the Moss Landing,Morro Bay and Oaklandfacilities in California for cash consideration o f approximately $1.36 billion. Theconsummation of the merger transaction between Dynegy and Blackstone iscontingent upon the concurrent closing of the Blackstone and NRG Energytransaction.

INADEQUATE CONSIDERATION

41. Defendants agreed to sell the Company to Blackstone at a time when Dynegy's stock

price w as n e a r all time lows due to weak U.S. economic conditions pressuring energy prices and

Dynegy's stock price. The energy market, however, has recently turned the c o r n e r as evidenced by

defendant NRG's own recent financial results and statements. On August2, 2010, NRG increased its

EBITDA guidance for the fiscal year 2010 by nearly 10% ($250 to S350 million) to $2.45 to $2.55

billion. Moreover, energy prices increased in July for consumers, the first increase since January.

The Company, with 12, 000 megawatts of power plants is well-positionedfor the expected high

demand for energy consumption. Also, with 45% of its power plants natural gas-fired, Dynegy has

substantial clean power creating abilities, as the general American public becomes m o r e

environmentallyconscious and state and federal regulation require mo r e stringent environmental

standards.

42. Nevertheless, the Individual Defendants have agreed to sell the Company now, at itslow point. Defendants claim that the Proposed Acquisition is at a substantial premium to the

Company's stock price, because they compare it to Dynegy's stock price on August 12, 2010, when it

hit a n eight-year low when accounting for stock splits. Compared to Dynegy's historical stock

prices, however, the consideration in the Proposed Acquisition is at a substantial discount. As

recently as June 28, 2010, the Company's stock traded as high as $4.68, $0.18 above Blackstone's

offer. The Company's stock has consistently traded above $9.00 per share, more than double the

Proposed Acquisitionprice per share, and did so as recently as January 25 , 2010. Further, the

Company's 52 week stock price high is $13.35, nearly threc times the consideration in the Proposed

Acquisition. The Company's average close price for the past year is $7.83.

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43. The Individual Defendants also sold ou t Dynegy's public shareholders to further their

own interests. Without e v e n protesting o r demanding fiirther negotiations, the Individual Defendants

permitted Blackstone to reduce its offer price from $5.25 to $4.50 solely to facilitate Blackstone's

ability to consummate the concurrent transaction between Blackstone and NRG for Dynegy's gasfired assets. Thus, Blackstone and NRG benefited from the Individual Defendants' actions while

Dynegy shareholders a re being forced to accept $0.75 less for their shares.

44. Under Delaware law, Dynegy's public shareholders deserve to receive the maximum

value for their shares in the Proposed Acquisition. The consideration reflected in the Proposed

Acquisition,however, falls short and does no t adequately value the Company's substantial assets. In

exchange for its low-ball offer, Blackstone and NRG stand to gain Dynegy's lucrative assets without

properly compensating the Company's shareholders.

DEAL PROTECTION DEVICES

45. Defendants agreed to the Proposed Acquisitionwithout making any attempt to

conduct a market check o r take any other actions to ascertain what another party might pay to

acquire Dynegy. Instead, the Merger Agreement provides for a post-announcement "go-shop"

period during which the Company ca n solicit third party interest in alternative transactions.

However, any party interested in bidding for Dynegy would be saddled with at least $22 million in

termination fees and expenses. Moreover, the proposed go-shop period of forty days is nowhere

enough time for another suitor to perform the due diligence, negotiate, and make a superior offer to

acquire the Company. Section 8.5 of the MergerAgreement, as summarized in the August 13, 2010

Form 8-K states that:

The Company may terminate the Merger Agreement if the Company receives atakeover

proposalthat the Board of Directors determines in

goodfaith constitutes a

Superior Proposal and that failure to terminate could be inconsistent with itsfiduciary duties. In connect ion with such a termination, the Company mus t payParent a $16.3 million fec and reimburse Parent expenses up to $6 million if thetermination is in connection with a takeover proposal from a party from whom theCompany has received (i) an alternative acquisitionproposal prior to the expirationo f the Go-Shop Period that the Board o f Directors has determined in good faithconstitutes a Superior Proposal o r could reasonably be expected to resu lt in aSuperior Proposal and (ii) by 11:59 p.m. o n September 29, 2010, an alternativeacquisitionproposal that the Board of Directors determines constitutes a Superior

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Proposal. The Company also may be obligated to pay a termination fee of up to $50million or up to $10 million of Parent's expenses under certain other circumstances.

46. The termination fees a re exorbitant and deprive shareholders of receiving the

maximum value for their shares in any superior offer obtained in the go-shop period. Even if a

superior offer is received, the termination fees represent consideration that should be paid to

shareholders and no t Blackstone. Defendants failure to embark o n a pre-signingmarket check now

makes that impossible. The chart below details thc exorbitant percentage of the termination fees and

amount per share:

Termination fee plus maximumexpenses $22, 300,000Fee per share $0.18Fees a s a percentage of total equityvalue 4.11%

Termination fee $50, 000, 000

Feeper share $0.41Fees a s a percentage of total equityvalue 9.21%

47. Even at the lower tier of termination fees and expenses, the per share cost to acquire

the Company is automatically increased $0.18 per share for any potential competing bidder.

Additionally,any information provided to a competing bidder is also required to be shared with

Blackstone while the go-shop process is on-going. And following the receipt of a superior proposal,

the Companymust then allow Blackstone four days to match that competingoffer before it makes a

change of recommendation regarding the Proposed Acquisition.

48. Once the illusorygo-shop period ends, the Company is subject to a no-solicitation

provision that prevents it from seeking a superior offer for its shareholders. As Section 6, 2(b)

details, the Company is subject to the followingo n c e the no-solicitation period begins:

[T]heCompany and its Subsidiaries and their respective officers and directors shall,and the Company shall instruct and cause its and its SubsidiariesotherRepresentatives to, (i) at 12:00 a.m on the 41st calendar day after the date of thisAgreement (the "No-Shop Period Start Date") immediatelyc e a s c any discussions ornegotiations with any Persons that may be ongoing with respect to a n AcquisitionProposal and (ii) from the No-Shop Period Start Date until the earlier of the EffectiveTime and the termination of this Agreement in accordance with Article VIII, no t (A)initiate, solicit o r knowinglyfacilitate o r encourage any inquiries o r the making ofany proposal or offer that constitutes an AcquisitionProposal, (B) engage in,continue o r otherwise participate in any discussions or negotiations regarding, or

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Case 4 :10-cv-03320 Documen t 1 Filed in TXSD o n 09/16/10 Page 15 of 30

provide any non-public information o r data concerning the Company o r itsSubsidiaries to any Person relating to, any AcquisitionProposal, (C) enter into anyagreement or agreement in principlewith respect to any AcquisitionProposal (otherthan a confidentialityagreement referred to in Section 6.2(a) or Section 6.2(c)) o r (D)otherwise knowinglyfacilitate any effort o r attempt to make an AcquisitionProposal.49. The provisionsabove, which will s e r v e to unreasonably deter and discourage superior

offers from other interested parties, we r e agreed to by the Individual Defendants to help s e cu r e the

personal benefits and unfair profits afforded to them through the Proposed Acquisition.

THE MATERIALLY MISLEADING PROXY

50. In order to s e cu r e shareholder approval of this unfair deal, defendants filed the

materiallymisleading Proxy o n September 3, 2010. The Proxy, which recommends that Dynegy's

shareholders vote in favor of the Proposed Acquisition, omits and/or misrepresents material

information about the unfair sale process, the unfair consideration, and the true intrinsic value of the

Company. Specificallythe Proxy omits/or misrepresents the material information se t forth below in

contravention of 14(a) and 20(a) of the 1934 Act.

51. The determination by NRG that it could no t sell the Company's coal generating

facilities. Page 30 of the Proxy indicates that NRG withdrew from negotiations to acquire Dynegy

because it could not resell the Company's coal generating facilities. This section is materially

misleading and omits materia l information. NRG had communicated and negotiated withBlackstone to sell the Company's coal generating facilities. Despite NRG's claim o n June 17, 2010

that it w a s having trouble findinga suitor to purchase the Company's coal generating facilities,only

o n e day after NRG declined to purchase the Company, Blackstone made a n offer to purchase the

Company and its coal generating facilities. The Proxy fails to disclose information concerning the

valuations discussed in those negotiations and why NRG believed it could not sell the coal

generating facilities to Blackstone despite Blackstone's obvious interest in acquiringit. Without this

information the shareholders c a n no t reasonably consider whether the acquisition appropriately

values the Company's shares and whether the sales process w a s legitimate.

52. The negotiations and consideration discussed between the Company and NRG for

the Company's gas fired assets prior to the ProposedAcquisition. The Individual Defendants and

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the Company fail to disclose in pages 29-30 of the Proxy what consideration and value w a s

discussed for the acquisitionof the Company's gas fired assets. This section is materiallymisleading

and omits material information because it does not disclose the valuation discussed between the

Company and NRG, which is information that provides shareholders with NRG's and the Company's

priorassessment of this asset's worth. Without this information the shareholders canno t reasonably

consider whether the acquisition is valuing the Company's assets appropriately.

53. The negotiations and consideration discussed between NRG and Blackstone for the

Company's coal generating assets. The description of the consideration being negotiated between

NRG and Blackstone for the Company's coal generating assets on pages 29-34 of the Proxy is

materiallymisleadingand omits material information because Blackstone lowered the

priceit wa s

willingto pay for Dynegy from $5.25 per share to $4.50 per share as a direct result of these

simultaneous negotiations. The value placed by the respectives parties on the coal generating assets

is material given that these assets we r e later purchased for $1.36 billion by NRG from Blackstone as

part of the Proposed Acquisition. Without this information the shareholders c a n not reasonably

consider whether the acquisition is valuing the Company's assets appropriately.

54. The strategic alternatives discussed by the Board o n June 17, 2010, July 14, 2010,

and July 23, 2010. The description in the Proxy o n pages 29-32 of the strategic alternatives

discussed by the Dynegy Board fails to disclose what options, other than a sale of the Company,

we r e considered by the Board. These statements omit material information because they attempt to

justifythe fact that Dynegy and its advisors made n o effort to ascertain the interest of other strategic

parties via a n auction process or s om e sort of market check. Without knowing the strategic

alternatives discussed, Dynegy shareholders have no way to determine whether the Dynegy Board

took all steps necessary to maximize shareholder value and conduct a fair process before agreeing to

the Proposed Acquisition.

55. Why the Individual Defendants agreed to the exorbitant termination fee. The Proxy

fails to explainwhy the Individual Defendants agreed to an exorbitant termination fee of $50 million

after the go-shop period ends. This information is material to shareholders because any termination

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fee paid by an entityprovidinga superior offer will be paid to Blackstone rather than the Company's

shareholders, which would deprive the shareholders of nearly $0.41 per share. Without this material

information shareholders lack context to se e why this fee w a s agreed to in spite of the limited

opportunitythe go-shop period will allow for a market check.

56 . WhyDynegy n e v e r demanded consideration more than the amoun t being offeredby

Blackstone. Pages 29-34 of the Proxy fail to disclose whether Dynegy e v e r attempted to negotiate a

higher price with Blackstone, after Blackstone twice reduced its offering price. This section is

materially misleadingand omits material information because the Individual Defendants sacrificed

shareholder value to facilitate the concurrent deal between Blackstone and NRG for Dynegy's gas

fired assets. Without this informationDynegy

shareholders cannot ascertain without it whether the

Individual Defendants took all necessary steps to maximize shareholder value.

57. The data and inputs underlyingthefinancial advisors' Illustrative Discounted Cash

Flow Analysis. In the descriptionof the DCF analysis o n page 48 of the Proxy, the defendants omit:

(i) the definition for unlevered free cash flow for the calendar years 2011 through 2015; (ii) how they

derived the multiplesranging from 6.5x to 8.5x; and (iii) how they derived the present values using

illustrative discount rates ranging from 8% to 12%. This information is material because the

Illustrative Discounted Cash Flow Analysissupplies a range of values for the Company's stock, and

without the information set forth above, shareholders a re unable to assess whether the analysis w as

performed properly, and in turn, what weight, if any, to place on the financial advisors' fairness

opinion.

58. The data and inputs underlying the financial advisors' Selected Companies

Analysis. In the description of the financial advisors' Selected Companies Analysis o n pages 45-46

of the Proxy, defendants fail to disclose the individual multiples and rent-adjusted enterprise value

for each company used in their analysis, includingCalpineCorporation,RRI Genera, Inc., and NRG.

This information is material because the Selected Companies Analysis assesses the consideration

offered in the Proposed Acquisitionas compared to similar companies, and, without the information

set forth above, shareholders a re unable to independently assess whether the analysis se t forth in the

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Proxy is a n adequate mea s u r e o f this value, and in turn, what weight, if any, to place on the financial

advisors' fairness opinion.

59. The data and inputs used in the financial advisors' Selected Transactions Multiples

Analysis. In the description of the financial advisors' Selected Transactions MultiplesAnalysis on

pages 46-47 of the Proxy, defendants omit: (i) how the selected representative multipleranges we r e

chosen for each transaction; and (ii) the particular financial multiples observed for each of the

comparable transactions. Without the information se t forth above, shareholders a re also unable to

independently assess whether the Selected Transactions MultiplesAnalysis is a n adequate me a s u r e

of the value the public places on comparable transactions, and in turn, what weight, if any, to place

o n the financial advisors' fairnessopinion.

60. The data and inputs used in the Selected Transaction Premiums Analysis. In the

description of the financial advisors' Selected Premiums Analysis o n page 47 of the Proxy, the

defendants omit the specific premiums paid in the six general and vague categories of acquisitions.

The defendants should have disclosed the specific premiums for each transaction. Without this

material information shareholders lack context to se e the range from which the advisors derived their

Selected Transactions Premium Analysis and the relative strengths and weaknesses of the selected

and subject transactions. Without the information set forth above, shareholders a re unable to

independently assess whether the Selected Transactions Premium Analysis is a n adequate me a s u r e

of the value the premiumspaid in comparable transactions, and in turn, what weight, if any, to place

o n the financial advisors' fairness opinion.

61. The data and inputs used in the Illustrative Sum-of-the-Parts Analysis. In the

description of the financial advisors' Illustrative Sum-of-the-Parts Analysis o n pages 48-50 of the

Proxy, the defendants omits the standalone enterprise value of the applicable coal or natural gas

assets as a multiple EK/VW"). The defendants should have disclosed the specific EK/VW for the

twenty-two natural gas transactions. Without this material information shareholders lack context to

compare this transaction to comparable transactions. Without the information se t forth above,

shareholders a re unable to independently assess whether the Illustrative Sum-of-the-Parts Analysis18


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set forth in the Proxy is a n adequate mea s u r e of this transaction, and in turn, what weight, if any, to

place o n the financial advisorsfairness opinion.

62. The thirteen equity research analysts used in the Research Analysts Stock Price

Targets. In the description o f the financial advisors' Research Analysts Stock Price Targets on pages

50-51 of the Proxy, defendants failed to disclose material information regarding: (i) the thirteen

equity research analysts the financial advisors utilized; and (ii) what the target prices were for each

analyst. The defendants should have disclosed this information because it is needed by shareholders

in order to determine whether their stock is worth mo r e if the Company continues o n a stand-alone

basis o r if they should accept the consideration in the Proposed Acquisition.Moreover, without the

information se t forth above, shareholdersa re

unableto

independentlyassess

whether the

consideration received and whether the average of the Research Analysts Stock Price Targets set

forth in the Proxy is an adequate mea s u r e of the Company's future public market trading price.

63. Possible ConflictsAmong the Financial Advisers. The Proxy fails to disclose the

compensation paid by Blackstone and/or Dynegy for the services rendered o n their behalf ov e r the

past tw o years by Goldman Sachs, Greenhill, and Credit Suisse Securities, TIC. This information

about its previous work experience is material because a financial advisor may have favored

Blackstone and/or NRG due to this previous work.

64 . The Individual Defendants we r e awa r e of their duty to disclose the foregoingmaterial

information in the Proxy, and acted with at least negligence in failing to e n s u r e that this material

information w a s disclosed in the Proxy. Absent disclosure of this material information,shareholders

a re unable to make a n informed decision about whether to vote in favor of the Proposed Acquisition,

and are, thus, threatened with irreparable harm.

SELF-DEALING

65. Because thc Individual Defendants dominate and control the business and corporate

affairs of Dynegy and have a c c e s s to material nonpublic information concerning Dynegy's financial

condition and business prospects, there exists an imbalance and disparity of knowledge and

economic power between them and the public shareholders o f Dynegy. Therefore, it is inherently19


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unfair for the Individual Defendants to execute and pursue any merger or acquisitionunder which

they will reap disproportionate benefits to the exclusion of obtaining the best reasonable shareholder

value. Nonetheless, instead of attempting to negotiate a contract reflecting thc best consideration

reasonably available for the Dynegy shareholders whom they a re duty-bound to serve, the Individual

Defendants disloyallyplaced their ow n interest first, and tailored the terms and conditions of the

Proposed Acquisitionto meet their own personnel needs and objectives.

66. The proposed sale is wrongful,unfair, and harmful to Dynegy'spublic shareholders,

and represents an effort by defendants to aggrandize their own financial position and interests at the

expense of and to the detriment of Class (as defined herein) members. Specifically,defendants a re

attempting to deny plaintiffand the

Classtheir shareholder

rightsvia the sale of

Dynegyo n

terms

that do no t adequately value the Company. Accordingly,the Proposed Acquisitionwill benefit

defendants and Blackstone at the expense of Dynegy shareholders.

67. The Individual Defendants stand to be enriched at the expense o f the Company's

c o mm o n shareholders should the Proposed Acquisition be consummated. Specifically, under

Section 4.3 of the Merger Agreement, all s tock options, restricted stock, and phantom stock units

held by the Individual Defendants will immediately vest upon consummation of the Proposed

Acquisition.The Individual Defendants, s o m e of who hold hundreds of thousands of stock options,

restricted shares, and/or phantom stock units that will accelerate, a re in line to reap millions of

dollars if the Proposed Acquisition is completed.

68. In particular, defendant Williamson will receive benefits worth mo r e than $14.3

million and defendant Nichols will receive benefits worth mo r e than $6.8 million upon a change of

control. The charts below detail the specifics of these payments:

Medical,Pro-rated Dental, VisionCash Outplacement Tax Gross -Short-term and Life Total

Severance Services UpIncentive Bonus InsuranceBenefits

Bruce A.Williamson $5, 980, 000 $917, 808 $37, 008 $25, 000 $6, 959, 816Holli C.Nichols $2,625, 000 $481, 849 $10, 290 $25, 000 $1, 773, 447 $4, 915, 586

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Value of Value of Value ofRestrictedPhantom Stock Performance Total

CommonUnits UnitsStock

Bruce A. Williamson $596, 255 $1, 433, 628 $5,400, 000 $7, 429, 883Ho lli C. Nichols

$155,309

$358,407

$1, 380,000

$1,893,716

69. The Company's directors a re also going to receive a windfall through their

participation in the Company's Deferred Compensation Plan for Certain Directors. Defendants

Biegler,Hammick,Trubeck, Clark,Grijalva,and Sheppard will receive the followingcompensation:

Shares Payable under Dynegy Deferred Value of Shares at AcquisitionPriceCompensation Plan for Certain Directors

David W. Biegler 28, 429 $127, 930.50Patricia A. Hammick 28, 429 $127,930.50William L. Trubeck 28, 429 $127,930.50Thomas D. Clark, Jr 27, 833 $125,248.50Victor E. Grijalva 20, 985 $94, 432.50Howard B. Sheppard 18, 054 $81,243.00

THE UNFA IR AND INADEQUATE PROCESS

70. In order to meet their fiduciaryduties, the Individual Defendants a re obligated to

explore transactions that will maximize shareholder value, and no t s tr u ct u re a preferential deal for

themselves. Due to the Individual Defendants' eagerness to enter into a transaction with Blackstone,

they failed to implement a process to obtain the maximum value for Dynegy shareholders.

71. As a result of defendantsconduct, Dynegy's public stockholders have been and will

continue to be denied the fair process and arm's-length negotiated terms to which they a re entitled in

a sale of their Company. The consideration reflected in the Proposed Acquisitiondoes no t reflect the

true inherent value of the Company that w as known only to the Individual Defendants, as directors

and officers of Dynegy, and Blackstone at the time the Proposed Acquisitionw a s announced.

72. In light of the foregoing, the Individual Defendants must, as their fiduciary

obligations require:

Withdraw their consent to the sale of Dynegy and allow the shares to trade freelywithout impediments including the termination fees;

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Act independently so that the interests of Dynegy's public shareholders will beprotected; and

Adequately en su r e that n o conflicts o f interest exist between Individual Defendants'own interests and their fiduciaryobligationto maximize shareholder value or , if suchconflicts exist, to en su r e that all conflicts be resolved in the best interests o f Dynegy'spublic shareholders.

CLASS ACT ION ALLEGAT IONS

73. Plaintiff brings this action on his own behalf and as a class action o n behalf of all

holders of Dynegy stock who a re being and will be hamied by defendantsactions described hercin

(the "Class"). Excluded from the Class ar e defendants herein and any person, firm, trust,

corporation, o r other entity related to o r affiliated with any defendants.

74. This action is properly maintainable as a class action.

75 . The Class is so n um e r o u s that joinder of all members is impracticable. Accordingto

the Merger Agreement, there we r e mo r e than 120 million shares of Dynegy c o mm o n stock

outstanding as of August 10, 2010.

76. There a re questions of law and fact which ar e c o mm o n to the Class and which

predominate ov e r questions affecting any individual Class member, The common questions include,

inter alia, the following:

(a) whether the Individual Defendants have breachcd their fiduciaryduties of

undivided loyalty, independence, or due c a r e with respect to plaintiff and the other members of the

Class in connection with the Proposed Acquisition;

(b) whether the Individual Defendants a re engaging in self-dealing in connection

with the Proposed Acquisition;

(c) whether the Individual Defendants have breached their fiduciary duty to

secure and obtain the best valuereasonably

available under the circumstances for the benefit of

plaintiffand the other members of the Class in connection with the Proposed Acquisition;

(d) whether the Individual Defendants a re unjustlyenriching themselves and other

insiders o r affiliates of Dynegy;

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(e) whether the Individual Defendants have breached any of their other fiduciary

duties to plaintiffand thc other members of the Class in connection with the Proposed Acquisition,

including the duties of good faith, diligence, honesty, and fair dealing;

(0 whether the Individual Defendants have breached their fiduciary duties of

candor to plaintiff and the other members of the Class in connection with the Proposed Acquisition

by solicitingshareholder vote in favor of the Proposed Acquisitioncontract based upon inadequate

disclosures;

(g) whether the Individual Defendants, in bad faith and for impropermotives,

have impeded or erected barriers to discourage other offers for the Company or its assets;

(h) whether plaintiff and the other members of the Class would be irreparablyharmed we r e the transactions complained of herein consummated; and

(i) whether Dynegy, Blackstone, NRG, Denali, and Denali Merger Sub have

aided and abetted the Individual Defendants in breaching their fiduciaryduties.

77. Plaintiffs claims a re typical of the claims o f the other members of the Class and

plaintiff does no t have any interests adverse to the Class.

78. Plaintiff is a n adequate representative o f the Class, has retained competent counsel

experienced in litigation of this nature and will fairly and adequately protect the interests of the

Class.

79. The prosecution of separate actions by individual members o f the Class would create

a risk of inconsistent or varyingadjudicationswith respect to individual members of the Class which

would establish incompatible standards of conduct for the party opposing the Class.

80. Plaintiff anticipates that there will be n o difficulty in the management of this

litigation. A class action is superior to other available methods for the fair and efficient adjudication

of this controversy.

8 1. Defendants have acted o n grounds generally applicable to the Class with respect to

the matters complained of herein, thereby makingappropriate the relief sought herein with respect to

the Class as a whole.

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COUNT I

Against the Individual Defendants and Dynegy fo r Violations of14(a) of the 1934 Act and SEC Rule 14a 9 Promulgated Thereunder

82. Plaintiff repeats and realleges each and every allegation contained above as iffully set

forth herein.

83. The Individual Defendants and Dynegy disseminated the false an d misleadingProxy

specified above, which failed to disclose material facts necessary in order to make the statements

made, in lightof the circumstances under which they we r e made, not misleading.

84. The Proxy w as prepared, reviewed, and/or disseminated by the Individual Defendants

and Dynegy. It misrepresented and/or omitted material facts, includingmaterial information about

the unfair sales process for the Company, the unfair consideration offered in the Proposed

Acquisition,and the actual intrinsic value of the Company's assets.

85. In so doing, the Individual Defendants and Dynegy made untrue statements of

material facts and omitted to state material facts necessary to make the statements that we r e made

no t misleading in violation of 14(a) of the 1934 Act and SEC Rule 14a-9 promulgated thereunder.

By virtue of their positionswithin the Company, the Individual Defendants and Dynegywe r e awa r e

of this information and of their duty to disclose this information in the Proxy.86. The Individual Defendants and Dynegy we r e at least negligent in filing the Proxy

with these materially false and misleading statements.

87. The omissions and false and misleading statements in the Proxy a re material in that a

reasonable shareholder would consider them important in deciding how to vote o n the Proposed

Acquisition. In addition, a reasonable investor would view a full and accurate disclosure as

significantlyaltering the "total mix" of information made available in the Proxy and in other

info, illation reasonably available to shareholders.

88. By r e a s o n of the foregoing, the Individual Defendants and Dynegy have violated

14(a) of the 1934 Act and SEC Rule 14a-9(a) promulgated thereunder.

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89. Because of the false and misleading statements in the Proxy, plaintiff is threatened

with irreparable harm, rendering money damages inadequate. Therefore, injunctive relief is

appropriate to e n s u r e defendantsmisconduct is corrected.

COUNT H

Against the Individual Defendants and Dynegy fo rViolation of 20(a) o f the 1934 Act

90 . Plaintiff repeats and realleges each and every allegation contained above as if fullyset

forth herein.

91. The Individual Defendants acted as controlling persons o f Dynegy within the

meaning of 20(a) of the 1934 Ac t as alleged herein. By virtue o f their positions as officers and/or

directors of Dynegy, and participation in and/or awa r e n e s s of the Company's operations and/or

intimate knowledge o f the false statements contained in the Proxy filed with the SEC, they had the

power to influence and control and did influence and control, directly o r indirectly, the decision-

making of the Company, includingthe content and dissemination of the various statements which

plaintiff contends is false and misleading.

92 . Each of the Individual Defendants and Dynegy wa s providedwith or had unlimited

a c c e s s to copies of the Proxy and other statements alleged by plaintiff to be misleading prior to

and/or shortly after these statements we r e issued and had the ability to prevent the issuance o f the

statements or c au s e the statements to be corrected.

93. In particular, each of the Individual Defendants had direct and supervisory

involvement in the day-to-day operations o f the Company, and, therefore, is presumed to have had

the power to control or influence the particulartransactions givingrise to the securities violations as

alleged herein, and exercised the s am e . The Proxy at issue contains the unanimous recommendationof each of the Individual Defendants to approve the Proposed Acquisition.They were, thus, directly

involved in the making of this document.

94. Dynegy also had direct supervisory control over composition of the Proxy and the

information disclosed therein, as well as the information that w a s omitted and/or misrepresented in

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the Proxy. Dynegy, in fact, disseminated the Proxy and is, thus, directlyresponsible for materially

misleading shareholders because it permitted the materiallymisleading Proxy to be published to

shareholders.

95. In addition, as the Proxy sets forth at length, and as described herein, the Individual

Defendants and Dynegy we r e each involved in negotiating,reviewing, and approving the Proposed

Acquisition. The Proxy purports to describe the various issues and information that they reviewed

and considered, descriptions which had input from both the directors and Dynegy.

96. By virtue o f the foregoing, the Individual Defendants and Dynegy have violated

20(a) of the 1934 Act.

97. As set forth above, the Individual Defendants andDynegy

had theability

to exercise

control o v e r and did control a person o r persons who have each violated 14(a) and SEC Rule 14a-9,

by their acts and omissions as alleged herein. By virtue of their positions as controllingpersons,

these defendants a re liable pursuant to 20(a) of the 1934 Act. As a direct and proximate result of

defendants' conduct, Dynegy will be irreparably harmed.

COUNT III

Claim fo r Breach ofFiduciary

DutiesAgainst

the Ind iv idua l Defendants

98. Plaintiff incorporates by reference and realleges each and every allegationcontained

above as though fully set forth herein.

99. The Individual Defendants have violated the fiduciaryduties of care, loyalty, good

faith, and independence owed to the public shareholders of Dyncgy and have acted to pu t their

personal interests ahead o f the interests of Dynegy's shareholders.

100. By the acts, transactions, and c o u r s e s of conduct alleged herein, defendants,

individuallyand acting as a part of a c o mm o n plan, ar e attempting to unfairlydeprive plaintiff and

other members of the Class of the true value inherent in and arising from Dynegy.

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101. The Individual Dcfendants have violated their fiduciaryduties by entering Dynegy

into the Proposed Acquisitionwithout regard to the effect of the proposed transaction on Dynegy's

shareholders.

102. As demonstrated by the allegations above, the Individual Defendants failed to

exercise the care required, and breached their duties of loyalty,good faith, and independence owed

to the shareholders of Dynegy because, among other r e a son s :

(a) they failed to take steps to maximize the value of Dynegy to its public

shareholders;

(b) they failed to properlyvalue Dynegy and its various assets and operations; and

(c) they ignored o r did not protect against the n um e r o u s conflicts of interest

resulting from the Individual Defendantsown interrelationshipso r connection with the Proposed

Acquisition.

103. Because the Individual Defendants dominate and control the business and corporate

affairs of Dynegy, have a c c e s s to private corporate information concerning Dynegy's assets,

business, and future prospects, there exists a n imbalance and disparityof knowledge and economic

power between them and the public shareholders of Dynegy which makes it inherently unfair for

them to pursue and recommend any proposed transaction wherein they will reap disproportionate

benefits to the exclusion of maximizingshareholder value.

104. By r e a s o n of the foregoing acts, practices, and cou r s e of conduct, the Individual

Defendants have failed to exercise ordinary care and diligence in the exercise of their fiduciary

obligations toward plaintiff and the other members of the Class.

105. The Individual Defendants a re engaging in self-dealing, a re no t acting in good faith

toward plaintiff and the other members of the Class, and have breached and a re breaching their

fiduciaryduties to the members of the Class.

106. As a result of the Individual Defendants' unlawful actions, plaintiff and the other

members of the Class will be irreparablyharmed in that they will not receive their fair portionof the

value of Dynegy's assets and operations. Unless the Proposed Acquisitionis enjoined by the Court,27


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the Individual Defendants will continue to breach their fiduciaryduties owed to plaintiff and the

members of the Class, will not engage in arm's-length negotiations on the Proposed Acquisition

terms, and may consummate the Proposed Acquisition,all to the irreparable harm of the members of

the Class.

107. Plaintiff and the members of the Class have n o adequate remedy at law. Only

through the exercise of this Court's equitable powers c a n plaintiff and the Class be fully protected

from the immediate and irreparable injurywhich defendants' actions threaten to inflict.

COUNT IV

Claim fo r Aiding and Abetting Breaches o f Fiduciary Duty AgainstDynegy

108. Plaintiff incorporates by reference and realleges each and every allegation contained

above as though fully set forth herein.

109. The Individual Defendants owed to plaintiff and the members of the Class certain

fiduciaryduties as fully set out herein.

110. By committing the acts alleged herein, the Individual Defcndants breached their

fiduciaryduties owed to plaintiff and the members of the Class.

111. Dynegy colluded in or aided and abetted the Individual Defendantsbreaches of

fiduciaryduties, and wa s an active and knowingparticipant in the Individual Defendants' breaches of


112. Plaintiff and the members of the Class shall be irreparably injured as a direct and

proximate result of the aforementioned acts.

COUNT V

Claim fo r Aiding and Abetting Breaches of Fiduciary Duty AgainstBlackstone, NRG, Denali, an d Denali Merger Sub

113. Plaintiff incorporates by reference and realleges each and every allegation contained

above as though fullyset forth herein.

114, The Individual Defendants owed to plaintiff and the members of the Class certain

fiduciaryduties as fully se t ou t herein.

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115. By committing the acts alleged herein, the Individual Defendants breached their


116. Blackstone, NRG, Denali, and Denali Merger Sub colluded in or aided and abetted

the Individual Defendants' breaches of fiduciaryduties, and were active and knowingparticipants inthe Individual Defendantsbreaches of fiduciary duties owed to plaintiff and the members of the

Class.

117. Blackstone, NRG, Denali, and Denali Merger Sub participated in the breach of the

fiduciary duties by the Individual Defendants for the purpose o f advancing their own interests.

Blackstone, NRG, Denali, and Denali Merger Sub obtained and will obtain both direct and indirect

benefits fromcolluding

in or

aidingand

abettingthe Individual Defendant's breaches. Blackstone,

NRG, Denali, and Denali Merger Sub will benefit, inter alio, from the acquisitionof the Company at

an inadequate and unfair consideration if the Proposed Acquisitionis consummated.

118. Plaintiff and the members of the Class shall be irreparably injured as a direct and

proximate result of the aforementioned acts.

PRAYER FOR RELIEF

WHEREFORE, plaintiff demands injunctiverelief, in his favor and in favor of the Class and

against defendants as follows:

A. Declaring that this action is properlymaintainable as a class action;

B. Declaringand decreeing that the Proposed Acquisitionagreement w a s entered into in

breach of the fiduciaryduties of Individual Defendants and is therefore unlawful and unenforceable;

C. Enjoining defendants, their agents, counsel, employees and all persons acting in

concert with them from consummating the Proposed Acquisition,unless and until the Company

adopts and implements a procedure o r process reasonably designed to enter into a merger agreement

providing the best possible value for shareholders;

D. Directing defendants to exercise their fiduciaryduties to c o mm e n c e a sale process

that is reasonably designed to s e cu r e the best possible consideration for Dynegy and obtain a

transaction which is in the best interests of Dynegy's shareholders;

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E. Rescinding, to the extent already implemented any agreement to consummate the

Proposed Acquisition;

F. Imposition of a constructive trust, in favor of plaintiffand members of the Class,

upon any benefits improperlyreceived by defendants as a result of their wrongful conduct;

G. Awardingplaintiff the costs and disbursements of this action, includingreasonable

attorneysand experts' fees; and

H. Granting such other and further equitable relief a s this Court may deem just and

proper.

JURY DEMAND

Plaintiff demands a trial by jury o n all issues so triable.

DATED: September 16, 2010 THE WARNER LAW FIRM

/s / Paul T. Warner

PAUL T. WARNERTEXAS BAR NO. 0079188411123 McCracken Lane, Suite ACypress, TX 77429Telephone: (281) 664-7777

Facsimile: (281) 664-7774ROBBINS UMEDA LL PBRIAN J. ROBBINSSTEPHEN J. ODDOREBECCA A. PETERSONJAY N. RAZZOUK600 B Street, Suite 1900San Diego, CA 92101Telephone: (619) 525-3990Facsimile: (619) 525-3991

Attorneys for Plaintiff

526365

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(Pacean X in On e Box

Oy

JS 44 (Rev. 12/07)Case 4:10-cv-03320 Dgt 6~'~~V~1~~JD on 09/16/10 Page 1 of 2

he JS 44 civil cover sheet and the information contained hereinneither replace nor supplement the filing and service ofpleadingsor other papers as requiredby law, except as pry local rules of court. This form, approved by the Judicial Conference of the United States in September 1974, is required for the us e of the Clerk of Court for the purpose of inhe civil docket sheet. (SEE INSTRUCTIONS ON THE REVERSE OF THE FORM.)

(a) PLAINTIFFS DEFENDANTS

(b) County of Residence of First Listed Plaintiff County of Residence of First Listed Defendant(EXCEPT IN U.S. PLAINTIFF CASES) (IN U.S. PLAINTIFF CASES ONLY)

NOTE: IN LAND CONDEMNATION CASES, USE THE LOCATION OF THELAND INVOLVED.

(c) Attorneys (FirmName, Address, and Telephone Number) Attorneys (If Known)

I . BAS IS OF JURISDICTION (Place an X in One Box Only) III . CITIZENSHIP OF PRINCIPAL PARTIES(Place an X in One Box for P(For DiversityCases Only) and One Box for Defendant

1 U.S. Government 3 Federal Quesfion PTF DEF PTF DEFPlaintiff (U.S. Government No t a Party) Citizen of This State 1 1 Incorporated or Principal Place 4

of Business In This State

2 U.S. Government 4 Diversity Citizen of Another State 2 2 Incorporated and Principal Place 5Defendant

(Indicate Citizenship of Parties in Item III)of Business In Another State

Citizen or Subject of a 3 3 Foreign Nafion 6Foreign Country

V N AT U R E O F S U I T 1 nl

CONTRACT TORTS FORFEITURE /PENALTY BANKRUPTCY OTHERSTATUTES

110 Insurance PERSONAL INJURY PERSONAL INJURY 610 Agriculture 422 Appeal28USC 158 400 State Reapportionm120 Marine 310 Airplane 362 Personal Injury 620 Other Food & Drug 423 Withdrawal 410 Antitrust130 Miller Ac t 315 AirplaneProduct Med. Malpractice 625 Drug Related Seizure 28 USC 157 430 Banks and Banking140 Negotiable Instrument Liability 365 Personal Injury of Propert y 21 USC 881 450 Commerce150 Recovery of Overpayment 320 Assault, Libel & Product Liability 630 LiquorLaws PROPERTY RIGHTS 460 Deportation

&EnforcementofJudgment Slander 368 Asbestos Personal 640 R.R. & Truck 820 Copyrights 470 Racketeer Influenced151 Medicare Act 330 Federal Employers InjuryProduct 650 Airline Regs. 830 Patent CorruptOrganization152 Recovery of Defaulted Liability Liability 660 Occupational 840 Trademark 480 Consumer Credit

Student Loans 340 Marine PERSONAL PROPERTY Safety/Health 490 Cable/Sat TV(Excl.Veterans) 345 Marine Product 370 Other Fraud 690 Other 810 Selective Service

153 Recovery of Overpayment Liability 371 Truth in Lending LABOR SOCIAL SECURITY 850 Securities/Commodities/of Veterans Benefits 350 Motor Vehicle 380 Other Personal 710 Fair Labor Standards 861 HI A (1395ff) Exchange

160 Stockholders Suits 355 Motor Vehicle Propert y Damage Act 862 Black Lung (923) 875 Customer Challenge190 Other Contract Product Liability 385 PropertyDamage 720 Labor/Mgmt.Relations 863 DIWC/DIW W(405(g)) 12 USC 3410195 Contract Product Liability 360 Other Personal Product Liability 730 Labor/Mgmt.Reporting 864 SSID Title XVI 890 Other StatutoryActio196 Franchise Injury & Disclosure Ac t 865 RSI (405(g)) 891 AgriculturalActs

REALPROPERTY CIVIL RIGHTS PRISONER PETITIONS 740

RailwayLabor Ac t

F EDERAL TAXSUITS 892 Economic Stabilization

210 Land Condemnation 441 Voting 510 Motions to Vacate 790 Other Labor Litigation 870 Taxes (U.S. Plaintif f 893 Environmental Matte220 Foreclosure 442 Employment Sentence 791 Empl. Ret. Inc. or Defendant) 894 Energy Allocation A230 Rent Lease & Ejectment 443 Housing/ Habeas Corpus: Security Act 871 IRSThird Party 895 Freedom of Informatio240 Torts to Land Accommodations 530 General 26 USC 7609 Ac t245 Tort Product Liability 444 Welfare 535 Death Penalty IMMIGRATION 900Appeal of Fee Determi290 Al l Other Real Property 445 Amer. w/Disabilities 540 Mandamus & Other 462 Naturalization Application Under Equal Access

Employment 550 Civil Rights 463 Habeas Corpus to Justice446 Amer. w/Disabilities 555 Prison Condition Alien Detainee 950 Constitutionalityof

Other 465 Other Immigration State Statutes440 Other Civil Rights Actions

V. ORIGIN (Place an X in One Box Only) Appeal to DTransferred from Judge from1 Original 2 Removed from 3 Remanded from 4 Reinstated or 5 another district 6 Multidistrict 7 MagistrateProceeding State Court Appellate Court Reopened (specify) Litigation Judgment

Cite the U.S. Civil Statute under which you are filing (Do not cite jurisdictional statutes unless diversity):

VI. CAUSE OF ACTION Brief descriptionof cause:

VII. REQUESTED IN CHECK IF THIS IS A CLASS ACTION DEMAND CHECK YES only if demanded in complaintCOMPLAINT: UNDER F.R.C.P. 23 JURY DEMAND: Yes No

VII I . RELATED CASE(S)IF A NY

(See instructions):JUDGE DOCKET NUMBER

ATE SIGNATURE OF ATTORNEY OF RECORD

OR OFFICE USE ONLY

RECEIPT AMOUNT APPLYING IFP JUDGE MAG. JUDGE


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44 Reverse (Rev. 12/07)Case 4 :10-cv-03320 Document 1-1 Filed in TXSD on 09/16/10 Page 2 of 2

INSTRUCTIONS FOR ATTORNEYS COMPLETING CIVIL COVER SHEET FORM JS 44

AuthorityFor Civil Cover Sheet

The JS 44 civil c o v e r sheet and the information contained hereinneither replaces nor supplements the filingsand service of pleading o r other papers as reqy law, except as provided by local rules o f court. This form,approved by the Judicial Conference of the United States in September 1974, is required for ththe Clerk o f Court for the purpose o f initiatingthe civil docket sheet. Consequently, a civil c o v e r sheet is submitted to the Clerk o f Court for each civil com

led. The attorney filinga case should complete the form as follows:

(a) Plaintiffs-Defendants. Enter n am e s (last, first,middle initial)ofplaintif f and defendant. If the plaintiff o r defendantis a government agency, us ee full n a m e o r standard abbreviations. If the plaintiff o r defendant is an official within a government agency, identifyfirst the agency and thenthe official,goth n am e and title.

(b) County o f Residence. For each civil case filed, except U.S. plaintiff cases, enter the n am e o f the county where the first listed plaintiffresidesat thefiling. In U.S. plaintiff cases, enter the n a m e o f the county in which the first listed defendant resides at the time o f filing. (NOTE: In land condemnation

e county o f residence o f the defendant is the location o f the tract o f land involved.)

(c) Attorneys. Enter the firm name, address, telephone number, and attorney of record. If there ar e several attorneys, list them o n an attachment, nthis section (see attachment).. Jurisdiction. The basis o f jurisdictionis set forth under Rule 8(a), F.R.C.P., which requires that jurisdictionsbe shown in pleadings. Place an X the boxes. If there is mo r e than on e basis o f jurisdiction,precedence is given in the order shown below.

nited States plaintiff. (1) Jurisdiction based o n 28 U.S.C. 1345 and 1348. Suits by agencies and officers of the United States ar e included here.

nited States defendant. (2) When the plaintiff is suing the United States, its officers o r agencies, place an X in this box.

ederal question. (3) This refers to suits under 28 U.S.C. 1331, where jurisdiction arises under the Constitution o f the United States, an amendmentonstitution, an act o f Congress o r a treaty o f the United States. In cases where the U.S. is a party, the U.S. plaintiff o r defendant code takes precedence, ando r 2 should be marked.

iversity o f citizenship. (4)This refers to suits under 28 U. S.C. 1332, where parties ar e citizens o f different states. When Bo x 4 is checked, the citizenshipfferent parties must be checked. (See Section II I below; federal question actions take precedence o v e r diversitycases.)I. Residence (citizenship) of Principal Parties. This section ofthe JS 44 is to be completed if diversityo f citizenship w as indicated above. Mark this sr each principalparty.

V . Nature of Suit. Place an X in the appropriate box. If the nature o f suit cannot be determined, be su re the c a u s e o f action, in Section VI below, is suffienable the deputy clerk o r the statistical clerks in the Administrative Office to determine the nature o f suit. If the c a u s e fits mo r e than on e nature o f suit,

e most definitive.

Origin. Place an X in o ne o f the s e v e n boxes.

riginalProceedings. (1) Cases which originate in the United States district courts.

emoved from State Court. (2) Proceedings initiated in state courts may be removed to the district courts under Title 28 U.S.C., Section 1441. When the per removal is granted, check this box.

emanded from Appellate Court. (3) Check this box for cases remanded to the district court for further action. Use the date of remand as the filingdate.einstated o r Reopened. (4) Check this box for cases reinstated o r reopened in the district court. Use the reopening date as the filingdate.ransferred from Another District. (5) For cases transferred under Title 28 U.S.C. Section 1404(a). Do no t us e this for within district transfers o r multiditigationtransfers.

ultidistrict Litigation. (6) Check this box when a multidistrict case is transferred into the district under authorityof Title 28 U.S.C. Section 1407. When thischecked, do no t check (5) above.

ppeal to District Judge from Magistrate Judgment. (7) Check this box for an appeal from a magistrate judges decision.

I. Cause of Action. Report the civil statute directlyrelated to the c a u s e o f action and give a brief description of the cause . Do no t cite jurisdictional stanless diversity. Example: U.S. Civil Statute: 47 USC 553

Brief Description: Unauthorized reception o f cable service

II. Requested in Complaint. Class Action. Place an X in this box if you ar e filing a class action under Rule 23, F.R.Cv.P.emand. In this space enter the dollar amount (in thousands o f dollars) being demanded o r indicate other demand such as a preliminaryinjunction.

ury Demand. Check the appropriate box to indicate whether o r no t a jury is being demanded.I I I . Related Cases. This section o f the JS 44 is used to reference related pending cases if any. If there ar e related pending cases, insert the docket numnd the corresponding judge n am e s for such cases.

at e and AttorneySignature. Date and sign the civil c o v e r sheet.

black stone group complaint 9.16.10

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