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Authorized Officer

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Wqy0QZIVUgjv++bilRtYpCso/2ZJpdZYpFnoVnoUx8mv6QCODkaOKfxiD3q9fLFg HIZlON75VsziRvQfUFq+zQ== 0000891618-05-000439.txt : 20050623 0000891618-05-000439.hdr.sgml : 20050623 20050623112930 ACCESSION NUMBER: 0000891618-05-000439 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20050617 ITEM INFORMATION: Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050623 DATE AS OF CHANGE: 20050623 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALPINE CORP CENTRAL INDEX KEY: 0000916457 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 770212977 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12079 FILM NUMBER: 05911763 BUSINESS ADDRESS: STREET 1: 50 WEST SAN FERNANDO ST CITY: SAN JOSE STATE: CA ZIP: 95113 BUSINESS PHONE: 4089955115 MAIL ADDRESS: STREET 1: 50 W SAN FERNANDO STREET 2: SUITE 500 CITY: SAN JOSE STATE: CA ZIP: 95113 8-K 1 f10195e8vk.htm FORM 8-K e8vk

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): June 17, 2005

CALPINE CORPORATION

(Exact name of registrant as specified in its charter)

Delaware
(State or Other Jurisdiction of Incorporation)

Commission File Number: 001-12079

I.R.S. Employer Identification Number: 77-0212977

50 West San Fernando Street
San Jose, California 95113
Telephone: (408) 995-5115
Address of principal executive offices and telephone number)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS


	ITEM 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year
	ITEM 8.01 Other Events
	ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
SIGNATURES
EXHIBIT 1.1
EXHIBIT 4.4
EXHIBIT 5.1
EXHIBIT 10.1
EXHIBIT 99.1
EXHIBIT 99.2
EXHIBIT 99.3

ITEM 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year

On June 20, 2005, Calpine Corporation (the “Company”), filed with the Secretary of State of the State of Delaware an amendment to its Certificate of Incorporation. The amendment, which was effective upon such filing, was adopted by the Board of Directors of the Company and approved by the shareholders of the Company at its 2005 annual meeting, declassifies the Company’s Board of Directors. A copy of the amendment is filed herewith as Exhibit 3.1.

ITEM 8.01 Other Events

Public Offering of Contingent Convertible Notes Due 2014

On June 20, 2005, the Company announced an offering of $650 million aggregate principal amount of 7.75% Contingent Convertible Notes Due June 1, 2015 (the “Convertible Notes”), in an underwritten offering registered under the Securities Act of 1933, as amended (the “Securities Act”). A press release regarding the offering is filed herewith as Exhibit 99.1.

The Convertible Notes, upon issuance, will bear interest at the rate of 7.75% per annum on the principal amount thereof, payable on June 1 and December 1, beginning December 1, 2005. The Convertible Notes will be convertible by the holders into cash and shares of the Company’s common stock at an initial conversion price of $4.00 per share. Upon conversion of the Convertible Notes, the portion of the conversion value equal to the then-current principal amount of the Convertible Notes will be paid to the holder in cash and the remainder of the conversion value will be paid in shares of the Company’s common stock valued at the then-current market price. The terms of the Convertible Notes are set forth in the Third Supplemental Indenture, dated as of June 23, 2005, which is filed herewith as Exhibit 4.4, which supplements the Indenture, dated as of August 10, 2000, as supplemented by the First Supplemental Indenture, dated as of September 28, 2000, and the Second Supplemental Indenture, dated as of September 30, 2004, between the Company and Wilmington Trust Company, as trustee.

The Convertible Notes will be issued pursuant to the terms and subject to the conditions set forth in the Underwriting Agreement, dated as of June 20, 2005, between the Company and Goldman, Sachs & Co., as Underwriter. The Underwriting Agreement is filed herewith as Exhibit 1.1. The closing of the offering and sale of the Convertible Notes is scheduled to occur on June 23, 2005. The Company expects to realize, after deduction of the underwriting discount of 2.25% but before the deduction of other offering expenses, net proceeds of approximately $635,375,000.

Sale of Saltend Energy Centre

Attached as Exhibit 10.1 hereto is the Share Sale and Purchase Agreement, made as of May 28, 2005, among Calpine UK Holdings Limited, the Company, Quintana Canada Holdings, LLC, Normantrail (UK CO 3) Limited, International Power plc and Mitsui & Co., Ltd., regarding the sale of the Company’s Saltend Energy Centre cogeneration plant, as more fully described in the Company’s Form 8-K, filed with the SEC on June 3, 2005, and incorporated by reference herein.

Miscellaneous

We are also filing herewith as Exhibit 99.2 and Exhibit 99.3 the press releases issued by the Company on June 21, 2005, and June 17, 2005, respectively.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements of Businesses Acquired.

Not Applicable

(b) Pro Forma Financial Information.

Not Applicable


1.1		Underwriting Agreement, dated June 20, 2005, between the Company and Goldman, Sachs & Co.

4.1		Indenture dated as of August 10, 2000, between the Company and Wilmington Trust Company, as Trustee.(a)

4.2		First Supplemental Indenture dated as of September 28, 2000, between the Company and Wilmington Trust Company, as Trustee.(b)

4.3		Second Supplemental Indenture dated as of September 30, 2004, between the Company and Wilmington Trust Company, as Trustee.(c)

4.4		Third Supplemental Indenture, dated as of June 23, 2005, between the Company and Wilmington Trust Company.

5.1		Opinion of Covington & Burling, dated June 23, 2005.

10.1		Share Sale and Purchase Agreement, made as of May 28, 2005, among the Company, Calpine UK Holdings Limited, Quintana Canada Holdings, LLC, International Power PLC, Mitsui & Co., Ltd. and Normantrail (UK CO 3) Limited. Approximately four pages of this Exhibit 10.1 have been omitted pursuant to a request for confidential treatment. The omitted language has been filed separately with the SEC.

23.1		Consent of Covington & Burling (contained in Exhibit 5.1 hereto).

99.1		Press Release dated June 20, 2005

99.2		Press Release dated June 21, 2005

99.3		Press Release dated June 17, 2005

(a) Incorporated by reference to the Company’s Registration Statement on Form S-3 (Registration No. 333-76880) filed with the SEC on January 17, 2002.

(b) Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000, filed with the SEC on March 15, 2001.

(c) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on September 30, 2004.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

CALPINE CORPORATION

By: /s/ Charles B. Clark, Jr.
Charles B. Clark, Jr.
Senior Vice President and Controller
Chief Accounting Officer

Date: June 23, 2005

EXHIBITS


1.1		Underwriting Agreement, dated June 20, 2005, between the Company and Goldman, Sachs & Co.

4.1		Indenture dated as of August 10, 2000, between the Company and Wilmington Trust Company, as Trustee.(a)

4.2		First Supplemental Indenture dated as of September 28, 2000, between the Company and Wilmington Trust Company, as Trustee.(b)

4.3		Second Supplemental Indenture dated as of September 30, 2004, between the Company and Wilmington Trust Company, as Trustee.(c)

4.4		Third Supplemental Indenture, dated as of June 23, 2005, between the Company and Wilmington Trust Company.

5.1		Opinion of Covington & Burling, dated June 23, 2005.

10.1		Share Sale and Purchase Agreement, made as of May 28, 2005, among the Company, Calpine UK Holdings Limited, Quintana Canada Holdings, LLC, International Power PLC, Mitsui & Co., Ltd. and Normantrail (UK CO 3) Limited. Approximately four pages of this Exhibit 10.1 have been omitted pursuant to a request for confidential treatment. The omitted language has been filed separately with the SEC.

23.1		Consent of Covington & Burling (contained in Exhibit 5.1 hereto).

99.1		Press Release dated June 20, 2005

99.2		Press Release dated June 21, 2005

99.3		Press Release dated June 17, 2005

EX-1.1 2 f10195exv1w1.htm EXHIBIT 1.1 exv1w1

Exhibit 1.1

EXECUTION COPY

CALPINE CORPORATION

$650,000,000 7.75% Contingent Convertible Notes Due 2015

UNDERWRITING AGREEMENT

June 20, 2005

Goldman, Sachs & Co.
85 Broad St.
New York, New York 10004

Dear Sirs:

1. Introductory. Calpine Corporation, a Delaware corporation (the “Company”), proposes, subject to the terms and conditions stated herein, to issue and sell to Goldman, Sachs & Co. (“Goldman Sachs” or the “Underwriter”) $650,000,000 aggregate principal amount of the Company’s 7.75% Contingent Convertible Notes due 2015 (the “Securities”), which are convertible into cash and shares of the Company’s common stock, par value $.001 per share (the “Stock”), upon the occurrence of certain circumstances under the terms of a supplemental indenture (the “Supplemental Indenture”), to be dated as of the Closing Date (as defined herein), to the Indenture, dated August 10, 2000, and amended as of September 28, 2000 (as so amended, the “Base Indenture”), between the Company and Wilmington Trust Company, as trustee (the “Trustee”). The Supplemental Indenture and the Base Indenture are hereinafter together called the “Indenture”.

The Company has filed with the Securities and Exchange Commission (the “Commission”) a registration statement (No. 333-76880), including a prospectus (the “Base Prospectus”), relating to various securities of the Company (including the Securities) and has filed with, or transmitted for filing to, or shall promptly hereafter file with or transmit for filing to, the Commission a prospectus supplement (the “Prospectus Supplement”) specifically relating to the Securities pursuant to Rule 424 under the Securities Act of 1933, as amended (the “Securities Act”). The term “Registration Statement” means the registration statement (No. 333-76880), including the exhibits thereto, as amended to the date of this Agreement. The term “Prospectus” means the Base Prospectus together with the Prospectus Supplement. The term “Preliminary Prospectus” means a preliminary prospectus supplement specifically relating to the Securities, together with the Base Prospectus. As used herein, the terms “Base Prospectus,”

“Prospectus” and “Preliminary Prospectus” shall include in each case the documents, if any, incorporated by reference therein. The terms “supplement,” “amendment” and “amend” as used herein shall include all documents deemed to be incorporated by reference in the Prospectus that are filed subsequent to the date of the Base Prospectus by the Company with the Commission pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

The Company agrees with the Underwriter as follows:

2. Representations and Warranties of the Company. The Company represents and warrants to, and agrees with, the Underwriter that:

(a) The Registration Statement has become effective; no stop order suspending the effectiveness of the Registration Statement is in effect, and no proceedings for such purpose are pending before or, to the knowledge of the Company, threatened by the Commission. No document has been or will be prepared or distributed in reliance on Rule 434 under the Securities Act.

(b) On the effective date of the Registration Statement, such Registration Statement conformed in all material respects to the requirements of the Securities Act, the Trust Indenture Act of 1939 (“Trust Indenture Act”) and the rules and regulations of the Commission thereunder (“Rules and Regulations”) and did not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; and on the date hereof, the Registration Statement and Prospectus, conform in all material respects to the requirements of the Securities Act, the Trust Indenture Act and the Rules and Regulations, and neither of such documents includes any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the foregoing does not apply to (A) statements in or omissions from any of such documents based upon written information furnished to the Company by the Underwriter specifically for use therein or (B) to that part of the Registration Statement that constitutes the Statement of Eligibility (Form T-1) under the Trust Indenture Act.

(c) Each Preliminary Prospectus complied when filed in all material respects with the Securities Act and the Rules and Regulations.

(d) The Company has been duly incorporated and is an existing corporation in good standing under the laws of the State of Delaware, with power and authority (corporate and other) to own its properties and conduct its business as described in the Registration Statement and the Prospectus; and the Company is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification.

(e) Each subsidiary of the Company listed on Schedule A hereto (each a “Scheduled Subsidiary” and, collectively, the “Scheduled Subsidiaries”)

(x) other than those Scheduled Subsidiaries specified in clause (y) of this subparagraph, has been duly incorporated and is an existing corporation in good standing under the laws of the jurisdiction of its incorporation, with power and authority (corporate and other) to own its properties and conduct its business as described in the Prospectus; or (y) that is not a corporation is a limited liability company, has been duly formed and is validly existing as a limited liability company in good standing under the laws of the jurisdiction of its formation, and has full power and authority to own its properties and conduct its business as described in the Prospectus. Each Scheduled Subsidiary is duly qualified to do business as a foreign corporation or limited liability company in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification. All of the issued and outstanding shares of capital stock or membership or other ownership interests of each subsidiary of the Company has been duly authorized and validly issued (in accordance with the organizational documents of such subsidiary) and, with respect to subsidiaries that are corporations, are fully paid and nonassessable (except for (i) directors’ qualifying shares, if applicable, (ii) unissued shares of Stock underlying unvested stock options granted to its employees and (iii) as set forth on Schedule B hereto). The capital stock and membership or other ownership interests of each subsidiary owned by the Company, directly or through subsidiaries, is owned free from liens, encumbrances and defects, except as shall be disclosed in the Prospectus and as set forth on Schedule B hereto; and the Company is not a general partner in any partnership. For purposes of this agreement, “subsidiary” means, as applied to any person, any corporation, limited or general partnership, trust, association or other business entity of which an aggregate of at least 50% of the outstanding voting shares or an equivalent controlling interest therein, of such person is, at any time, directly or indirectly, owned by such person and/or one or more subsidiaries of such person, including with respect to the Company. For purposes of the definition of “subsidiary,” “voting shares” means with respect to any corporation, the capital stock having the general voting power under ordinary circumstances to elect at least a majority of the board of directors (irrespective of whether or not at the time stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).

(f) The Company has an authorized capitalization as set forth in the Prospectus; all of the issued and outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid and non-assessable; and the shares of Stock initially issuable upon conversion of the Securities under the terms of the Indenture have been duly authorized and reserved for issuance upon such conversion and, when issued and delivered in accordance with the provisions of the Securities and the Indenture, will be validly issued, fully paid and non-assessable, free and clear of any liens or preemptive rights or any similar rights, and will conform in all material respects to the description of the Stock contained in the Prospectus.

(g) The Supplemental Indenture has been duly authorized by the Company and, when executed and delivered by the Company and the Trustee, the Supplemental Indenture and the Base Indenture will both constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,

moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles. The Base Indenture conforms, and the Supplemental Indenture when executed and delivered will conform, to the descriptions thereof contained in the Prospectus.

(h) The Securities have been duly authorized by the Company and, when executed and issued by the Company, authenticated by the Trustee in accordance with the terms of the Indenture and delivered to and paid for by the Underwriter pursuant to this Agreement on the Closing Date (as defined below), the Securities will constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles, and will be entitled to the benefits of the Indenture. The Securities, when executed, issued and delivered, will be convertible into Stock in accordance with the Indenture and will conform to the description thereof contained in the Prospectus.

(i) Except as shall be disclosed in the Prospectus, there are no contracts, agreements or understandings between the Company and any person that would give rise to a valid claim against the Company or the Underwriter for a brokerage commission, finder’s fee or other like payment in connection with this offering.

(j) Except as (i) set forth on Schedule B hereto and (ii) provided for in this Agreement, there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company owned or to be owned by such person or to require the Company to include such securities with any other securities being registered pursuant to any other registration statement filed by the Company under the Securities Act.

(k) No consent, approval, authorization, or order of, or filing with, any governmental agency or body or any court is required for the consummation of the transactions contemplated by this Agreement or the Indenture or otherwise in connection with the issuance and sale of the Securities by the Company, except (i) such consents, approvals, authorizations and orders as have already been obtained under the Securities Act or the Trust Indenture Act, (ii) such consents, approvals, authorizations and orders as may be required under state securities or Blue Sky laws, and (iii) such other consents, approvals, authorizations and orders, of which the failure to obtain or file would not reasonably be expected to have, in the aggregate, a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and its subsidiaries taken as a whole (any such event, a “Material Adverse Effect”).

(l) The execution, delivery and performance of this Agreement and the Indenture by the Company; the issuance and sale of the Securities by the Company and the issuance of the Stock by the Company under the terms of the Indenture; and the compliance with the terms and provisions of each of the foregoing by

the Company and the consummation by the Company of the transactions contemplated herein and therein will not result in a breach or violation of any of the terms and provisions of, or conflict with or constitute a default under, or result in the imposition or creation of (or the obligation to create or impose) a lien under, (i) any statute, any rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Company or any Scheduled Subsidiary or any of their properties, or (ii) any agreement or instrument to which the Company or any such Scheduled Subsidiary is a party or by which the Company or any such Scheduled Subsidiary is bound or to which any of the properties of the Company or any such Scheduled Subsidiary is subject, or (iii) the charter, by-laws or other organizational document of the Company or any Scheduled Subsidiary, except, in the case of (i) and (ii) above, as would not reasonably be expected to have a Material Adverse Effect, and the Company has full power and authority to authorize, issue and sell the Securities as contemplated by this Agreement.

(m) This Agreement has been duly authorized, executed and delivered by the Company.

(n) Except as shall be disclosed in the Prospectus, the Company and its subsidiaries have good and marketable title to all real properties and all other properties and assets owned by them, in each case free from liens, encumbrances and defects except (i) such as do not materially affect the value thereof or materially interfere with the use made or to be made thereof by them or (ii) such as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; and except as shall be disclosed in the Prospectus, the Company and its subsidiaries hold any leased real or personal property under valid and enforceable leases with no exceptions to the Company’s title to its leasehold interests except (i) such as do not materially interfere with the use made or to be made thereof by them or (ii) such as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(o) The Company and its subsidiaries possess adequate certificates, authorities or permits issued by appropriate governmental agencies or bodies necessary to conduct the business now operated by them as described in the Prospectus, except where the failure to possess the same would not reasonably be expected to have a Material Adverse Effect, and have not received any written notice of proceedings relating to the revocation or modification of any such certificate, authority or permit that, if determined adversely to the Company or any of its subsidiaries, would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(p) No labor dispute with the employees of the Company or any subsidiary exists or, to the knowledge of the Company, is imminent that would reasonably be expected to have a Material Adverse Effect.

(q) The Company and its subsidiaries own, possess or can acquire on reasonable terms, adequate trademarks, trade names and other rights to inventions, know-how, patents, copyrights, confidential information, and other

intellectual property (collectively, “Intellectual Property Rights”) necessary to conduct the business now operated by them, or presently employed by them, and have not received any notice of infringement of or conflict with asserted rights of others with respect to any intellectual property rights that, if determined adversely to the Company or any of its subsidiaries, would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(r) Except as shall be disclosed in the Prospectus, neither the Company nor any of its subsidiaries (i) is in violation of any statute, any rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, “Environmental Laws”), (ii) owns or operates any real property contaminated with any substance that is subject to any Environmental Laws, (iii) is liable for any off-site disposal or contamination pursuant to any Environmental Laws, or (iv) is subject to any claim relating to any Environmental Laws, which violation, contamination, liability or claim would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; and the Company is not aware of any pending investigation which might lead to such a claim.

(s) Except as shall be disclosed in the Prospectus, there are no pending actions, suits or proceedings against or affecting the Company, any of its subsidiaries or any of their respective properties that, if determined adversely to the Company or any of its subsidiaries, would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, or would materially and adversely affect the ability of the Company to perform its obligations under, or contemplated by, this Agreement or the Indenture or which are otherwise material in the context of the sale of the Securities; and, to the knowledge of the Company, no such actions, suits or proceedings are threatened.

(t) The financial information included in the Prospectus will present fairly in all material respects the financial position of the Company and its consolidated subsidiaries as of the dates shown and their results of operations and cash flows for the periods shown, in each case, on a consolidated basis, and, except as otherwise shall be disclosed in the Prospectus, such financial statements shall have been prepared in conformity with generally accepted accounting principles in the United States applied on a consistent basis throughout the periods covered thereby; and the assumptions used in preparing the pro forma financial information and the related notes thereto included in the Prospectus shall provide a reasonable basis for presenting the significant effects directly attributable to the transactions or events described therein, and will be prepared in accordance with the rules and guidelines of the Commission with respect to pro forma financial statements, and will be properly compiled on the bases described therein; and the adjustments used therein shall be appropriate to give effect to the transactions and circumstances referred to therein.

(u) The statistical and market-related data (other than market-related data and statistical data provided by the Company) included in the Registration

Statement, any Preliminary Prospectus and the Prospectus has been based on or derived from sources which the Company believes to be reliable and accurate, it being understood, however, that the Company has conducted no independent investigation of the accuracy thereof.

(v) Except as shall be disclosed in the Prospectus, since the date of the latest audited financial statements that shall be included or incorporated by reference in the Prospectus there shall have been no material adverse change, nor any development or event involving a prospective material adverse change, in the condition (financial or other), business, properties or results of operations of the Company and its subsidiaries taken as a whole, and, except as disclosed in or contemplated by the Prospectus, since the date of the March 31, 2005 unaudited financial statements that are incorporated by reference in the Prospectus, there has been no change in the capital stock of the Company or long-term debt of the Company or any of its consolidated subsidiaries other than issues of capital stock pursuant to equity incentive plans, and no dividend or distribution of any kind has been declared, paid or made by the Company on any class of its capital stock.

(w) The Company is not and, solely after giving effect to the offering, the sale of the Securities and the application of the proceeds thereof as shall be described in the Prospectus, and the consummation of the transactions contemplated by this Agreement and the Indenture, will not be an “investment company” as defined in the Investment Company Act of 1940, as amended (the “Investment Company Act”).

(x) Neither the Company nor any “subsidiary company,” as that term is defined in the Public Utility Holding Company Act of 1935 (“PUHCA”), of the Company is, or after giving effect to the issuance and sale of the Securities, will be, subject to regulation as a “holding company,” a “subsidiary company” of a holding company or a “public-utility company,” as those terms are defined in PUHCA (except that Androscoggin Energy LLC, which is a QF (as defined herein) and Acadia Power Partners, LLC, which is an EWG (as defined herein) are “subsidiary companies” of holding companies).

(y) Each of the power generation projects in which the Company or its subsidiaries has an interest is either (i) subject to the requirements of the Public Utility Regulatory Policies Act of 1978, as amended (“PURPA”), and the regulations of the Federal Energy Regulatory Commission (“FERC”) promulgated thereunder, as amended from time to time, and meets the requirements thereunder necessary for each such facility to be a “qualifying cogeneration facility” and/or a “qualifying small power production facility” (“QF”) under PURPA, except where the failure to meet such requirements would not reasonably be expected to have a Material Adverse Effect, or (ii) an Eligible Facility within the meaning of Section 32 of PUHCA.

(z) Each of the Company’s subsidiaries that is a public utility under the Federal Power Act, as amended (“FPA”), has validly-issued orders from the FERC, not subject to invalidation based on changed facts or circumstances regarding its ownership or operation since issuance of such orders or to any pending challenge,

investigation, or proceeding (i) authorizing such subsidiary to engage in wholesale sales of electricity, ancillary services and, to the extent permitted under its market-based rate tariff, other services at market-based rates, and (ii) granting such waivers and blanket authorizations, including authorization to issue securities or assume obligations or liabilities, as are customarily granted to entities with market-based rate authority, except where the failure to have such orders would not reasonably be expected to have a Material Adverse Effect.

(aa) With respect to each of the Company’s subsidiaries that is a public utility under the FPA, the FERC has not imposed any rate caps or mitigation measures other than rate caps and mitigation measures generally applicable to similarly situated marketers or generators selling electricity, ancillary services or other services at wholesale in the geographic market where such subsidiary conducts its business.

(bb) Each of the Company’s subsidiaries that owns and/or operates an Eligible Facility within the meaning of Section 32 of PUHCA, has received a determination from FERC, not subject to any pending challenge or appeal, that it is an Exempt Wholesale Generator (“EWG”), within the meaning of Section 32 of PUHCA and such determination is not subject to invalidation based on changed facts or circumstances regarding its ownership or operation since issuance of such determination.

(cc) Each of the Company’s subsidiaries providing electric service in the Electric Reliability Council of Texas, Inc. (“ERCOT”) (i) has all authorizations, filings, registrations, notices, consents, agreements or orders from, with or to, the Texas Public Utilities Commission (“TPUC”) and ERCOT, as applicable, necessary for such subsidiary to engage in sales of electricity under the laws of the State of Texas, except where the failure to have such orders would not reasonably be expected to have a Material Adverse Effect, and each such authorization, filing, registration, notice, consent, agreement or order is not subject to any pending challenge, investigation, or proceeding, authorizing or to invalidation based on changed facts or circumstances regarding its ownership or operation since the issuance, execution, submittal or grant of such authorization, filing, registration, notice, consent, agreement or order and (ii) has not had imposed on it by TPUC or ERCOT, as applicable, any specific rate cap or mitigation measures.

(dd) Each of the Company’s subsidiaries providing retail energy services has full authorization to provide retail energy services to retail industrial, commercial and residential customers in its applicable states under the applicable Energy Laws, except as would not reasonably be expected to have a Material Adverse Effect. “Energy Laws” shall mean any state and local energy laws and regulations, in each of the states, regions or other applicable jurisdictions in which the Company and its subsidiaries are organized or otherwise conduct business, applicable to: (i) the ownership, operation, or control of electric generation, transmission, and distribution facilities; (ii) the purchase, sale, transmission, distribution, marketing or trading of electric energy; and (iii) organizational, financial and rate regulation of entities engaged in (i) and (ii) above.

(ee) Except as shall be disclosed in the Prospectus, there are no material pending complaints filed with the FERC, TPUC or ERCOT seeking abrogation or modification, or otherwise investigating the terms of a contract for the sale of power by the Company or any of its subsidiaries.

(ff) The Company is subject to Section 13 or 15(d) of the Exchange Act.

(gg) None of the transactions contemplated by this Agreement (including, without limitation, the use of the proceeds from the sale of the Securities) will violate or result in a violation of Section 7 of the Exchange Act, or any regulation promulgated thereunder, including, without limitation, Regulations T, U and X of the Board of Governors of the Federal Reserve System.

(hh) Prior to the date hereof, neither the Company nor any of its affiliates has taken any action which is designed to or which has constituted or which might have been expected to cause or result in stabilization or manipulation of the price of any security of the Company in connection with the offering of the Securities.

(ii) Neither the Company nor any of the Scheduled Subsidiaries is (i) in violation of its Certificate of Incorporation, By-laws or other organizational documents or (ii) in default in the performance or observance of any material obligation, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, lease or other material agreement or instrument to which it is a party or by which it or any of its properties may be bound, except, in relation to this clause (ii), as would not reasonably be expected to have a Material Adverse Effect.

(jj) The statements set forth in the Prospectus under the captions “Description of the Notes” and “Description of Capital Stock,” and the statements set forth under the caption “Legal Proceedings” contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004, filed with the Commission on March 31, 2005 (the “2004 10-K”), as updated or superceded by the statements set forth under the caption “Legal Proceedings” contained in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, filed with the Commission on May 11, 2005 (the “First Quarter 10-Q”), which are incorporated by reference in the Prospectus, and as any of the foregoing shall be updated or superceded by statements contained in the Prospectus, insofar as such statements and descriptions purport to describe the provisions of the laws and documents referred to therein, are accurate, complete and fair in all material respects.

(kk) Each of Netherland, Sewell & Associates Inc. and Gilbert Laustsen Jung Associates Ltd. is an independent petroleum engineering firm and nothing has come to the Company’s attention to cause it to believe that either such firm is not qualified to pass on questions relating to the reserves and production of the Company’s oil and gas properties as set forth or incorporated by reference in the Prospectus.

(ll) The present fair saleable value of the assets of the Company and each of the Scheduled Subsidiaries exceeds the amount required to pay the probable liability on its and their existing debts, respectively (whether matured or unmatured, liquidated or unliquidated, absolute, fixed or contingent), as they become absolute and matured, and as a result of consummation of the transactions contemplated herein and in the Prospectus, will continue to exceed such amount.

(mm) The Company, does not, and, as a result of consummation of the transactions contemplated herein and in the Prospectus, will not, have unreasonably small capital for it to carry on its business as proposed to be conducted.

(nn) Neither the Company nor any of the Scheduled Subsidiaries are incurring obligations or making transfers under any evidence of indebtedness with the intent to hinder, delay or defraud any entity to which it is or will become indebted.

(oo) PricewaterhouseCoopers LLP, who have expressed an opinion as to certain financial statements of the Company and its consolidated subsidiaries, and have audited the Company’s internal control over financial reporting and management’s assessment thereof, and Deloitte & Touche LLP, who have expressed an opinion as to certain financial statements of the Company and its consolidated subsidiaries, are each independent public accountants as required by the Securities Act and the rules and regulations of the Commission thereunder.

(pp) Except as shall be disclosed in the Prospectus, the Company maintains a system of internal control over financial reporting (as such term is defined in Rule 13a-15(f) of the Exchange Act) designed by the Company’s principal executive officer and principal financial officer, or under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Except as shall be disclosed in the Prospectus, the Company’s internal control over financial reporting was effective in all material respects to perform the functions for which it was established as of the end of the fiscal year ended December 31, 2004, and the Company was not aware of any material weaknesses in its internal control over financial reporting at such time. As of the date hereof, except as shall be disclosed in the Prospectus, the Company is not aware of any material weakness in its internal control over financial reporting, it being understood that the management of the Company has not conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting for any period after December 31, 2004.

(qq) Since the date of the latest audited financial statements that shall be included or incorporated by reference in the Prospectus, except as shall be disclosed in the Prospectus, there has been no change in the Company’s internal control over financial reporting that has materially adversely affected, or is reasonably likely to materially adversely affect, the Company’s internal control over financial reporting.

(rr) Except as shall be disclosed in the Prospectus, the Company maintains disclosure controls and procedures (as such term is defined in Rule

13a-15(e) of the Exchange Act) that have been designed to ensure that material information relating to the Company and its consolidated subsidiaries is made known to the Company’s principal executive officer and principal financial officer by others within those entities; except as shall be disclosed in the Prospectus, such disclosure controls and procedures were effective in all material respects to perform the functions for which they were established as of the end of the quarter ended March 31, 2005 and, as of the date hereof, the Company is not aware of any material weaknesses in such disclosure controls and procedures other than as shall be disclosed in the Prospectus, it being understood that the management of the Company has not conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures for any period after March 31, 2005.

3. Purchase, Sale and Delivery of Securities. Subject to the terms and conditions herein set forth, (a) the Company agrees to issue and sell to the Underwriter, and the Underwriter agrees, to purchase from the Company, at a purchase price of 97.75% of the principal amount thereof, all of the Securities.

The Company will deliver against payment of the purchase price the Securities in the form of one or more global Securities in definitive form (the “Global Securities”) deposited by or on behalf of the Company with The Depository Trust Company (“DTC”) and registered in the name of Cede & Co., as nominee for DTC. Interests in any Global Securities will be held only in book-entry form through DTC, except in the limited circumstances that shall be described in the Prospectus and the Indenture.

Payment for the Securities shall be made by the Underwriter in Federal (same day) funds by official bank check or checks or wire transfer to an account at a bank acceptable to the Underwriter drawn to the order of Calpine Corporation at the office of Covington & Burling, 1330 Avenue of the Americas, New York, New York, at 10:00 A.M. (New York time), on June 23, 2005 or at such other time thereafter as the Underwriter and the Company may agree upon in writing, such time being herein referred to as the “Closing Date,” against delivery to the Trustee as custodian for DTC of the Global Securities representing all of the Securities. The Global Securities representing the Securities will be made available for checking at the above office of Covington & Burling (or such other location as the Underwriter may direct) at least 24 hours prior to the Closing Date.

4. Certain Agreements of the Company. The Company agrees with the Underwriter that:

(a) The Company will file the Prospectus Supplement with the Commission pursuant to and in accordance with Rule 424(b)(2) (or, if applicable and if consented to by the Underwriter, subparagraph (5) thereof) not later than the second business day following the date of this Agreement.

(b) So long as a prospectus relating to the Securities is required to be delivered under the Securities Act in connection with sales of the Securities by the Underwriter or any dealer, the Company will advise the Underwriter promptly of any

proposal to amend or supplement the Registration Statement or the Prospectus and will afford the Underwriter a reasonable opportunity to comment on any proposed amendment or supplement thereto; and the Company will advise the Underwriter promptly of the effectiveness of any such amendment or supplement and of the institution by the Commission of any stop order proceedings in respect of the Registration Statement or of any part thereof and will use its best efforts to prevent the issuance of any such stop order and to obtain as soon as possible its lifting, if issued. If, at any time when a prospectus relating to the Securities is required to be delivered under the Securities Act in connection with sales of the Securities by the Underwriter or any dealer, any event occurs as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary at any time to amend the Prospectus to comply with the Securities Act, the Company promptly will notify the Underwriter of such event and promptly will prepare and file with the Commission, at its own expense, an amendment or supplement which will correct such statement or omission or effect such compliance. Neither the Underwriter’s consent to, nor the Underwriter’s delivery to offerees or investors of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in Section 5.

(c) The Company will furnish to the Underwriter copies of the Registration Statement (two of which will be signed and will include all exhibits), any related Preliminary Prospectus, the Prospectus and all amendments and supplements to such documents, in each case in such quantities as the Underwriter requests, so long as a prospectus relating to the Securities is required to be delivered under the Securities Act in connection with sales of the Securities by the Underwriter or any dealer. The Prospectus shall be so furnished on or prior to 3:00 P.M., New York time, on the business day following the date of this Agreement. All other documents shall be so furnished as soon as available. The Company will pay the expenses of printing and distributing to the Underwriter all such documents.

(d) The Company will arrange for the qualification of the Securities and the shares of Stock issuable upon conversion of the Securities under the terms of the Indenture for sale and the determination of their eligibility for investment under the laws of such jurisdictions as the Underwriter designates and will continue such qualifications in effect so long as required for the distribution of the Securities, provided that the Company will not be required (i) to qualify as a foreign corporation, (ii) to file a general consent to service of process in any such state or (iii) to take any action that would subject itself to taxation in any jurisdiction if it is not otherwise so subject.

(e) During the period of two years hereafter, the Company will furnish to the Underwriter as soon as practicable after the end of each fiscal year, a copy of its annual report to stockholders for such year; and the Company will furnish to the Underwriter (i) as soon as available, a copy of each such report and any definitive proxy statement of the Company filed with the Commission under the Exchange Act or mailed to stockholders, and (ii) from time to time, such other information concerning the

business and financial condition of the Company as the Underwriter may reasonably request.

(f) During the period of two years after the Closing Date, the Company will not be or become an open-end investment company or unit investment trust or face amount certificate company that is or is required to be registered under Section 8 of the Investment Company Act.

(g) The Company will pay all expenses incident to the performance of its obligations under this Agreement, including (i) all expenses in connection with the execution, issue, authentication, packaging and initial delivery of the Securities, the preparation and printing of this Agreement, the Securities and amendments and supplements thereto, and any other document relating to the issuance, offer, sale and delivery of the Securities; (ii) any expenses (including fees and disbursements of counsel) incurred in connection with qualification of the Securities for sale under the laws of such jurisdictions in the United States and Canada as the Underwriter designates and the printing of memoranda relating thereto; (iii) any fees charged by investment rating agencies for the rating of the Securities; (iv) expenses incurred in distributing the Prospectus and the Preliminary Prospectus (including any amendments and supplements thereto) to the Underwriter; (v) the fees and expenses of the Trustee and any agent of the Trustee and the fees and disbursements of counsel for the Trustee in connection with the Indenture and the Securities; (vi) the cost of registering and qualifying the Stock for trading on The New York Stock Exchange or other applicable exchange; and (vii) all other costs and expenses incident to the performance of its obligations hereunder which are not otherwise specifically provided for in this Section 4. The Company will reimburse the Underwriter for all travel expenses of the Underwriter and the Company’s officers and employees and any other expenses of the Underwriter and the Company in connection with attending or hosting meetings with prospective purchasers of the Securities.

(h) In connection with the offering, until the Underwriter shall have notified the Company of the completion of the distribution of the Securities, neither the Company nor any of its affiliates has or will, either alone or with one or more other persons, bid for or purchase for any account in which it or any of its affiliates has a beneficial interest, any Securities or the Company’s common stock; and neither it nor any of its affiliates will make bids or purchases for the purpose of creating actual, or apparent, active trading in, or of raising the price of, the Securities or the Company’s common stock.

(i) As soon as practicable, but not later than 16 months, after the date hereof, the Company will make generally available to their security holders an earnings statement covering a period of at least 12 months beginning after the later of (i) the effective date of the Registration Statement relating to the Securities, (ii) the effective date of the most recent post-effective amendment to the Registration Statement to become effective prior to the date hereof, and (iii) the date of the Company’s 2004 10-K, which will satisfy the provisions of Section 11(a) of the Act.

(j) Between the date hereof and the Closing Date, the Company shall not do or authorize any act or thing that would have resulted in an adjustment of the conversion price of the Securities if the Securities had been issued on the date hereof.

(k) The Company shall reserve and keep available at all times, free of preemptive rights, sufficient shares of Stock for the purpose of enabling the Company to satisfy any obligations to issue shares of its Stock upon conversion of the Securities under the terms of the Indenture.

(l) The Company will use its best efforts to list, subject to notice of issuance, the shares of Stock issuable upon conversion of the Securities under the terms of the Indenture on The New York Stock Exchange.

(m) The Company will use the net proceeds received by it from the sale of the Securities pursuant to this Agreement in the manner specified in the Prospectus under the caption “Use of Proceeds” within 30 days after the Closing Date.

(n) During the period from the date hereof to 90 days after the Closing Date (the “Company Lock-Up Period”), the Company will not sell or cause to be offered, sold or contracted to sell, or otherwise dispose of, except as provided hereunder, any Stock or convertible securities that are convertible into shares of Stock without the prior written consent of Goldman Sachs (which consent shall be in its sole discretion), except that no such consent shall be necessary for (i) grants of employee stock options or other stock awards pursuant to the terms of Company option plans existing on the date of this Agreement or hereafter (provided that, during the Company Lock-Up Period, any change to such plans does not provide for an increase in the aggregate number of shares of Stock available for grant thereunder) and issuances of shares of Stock pursuant to the exercise of such options, (ii) issuances of shares of Stock pursuant to the terms of the Company’s employee stock purchase plan existing on the date of this Agreement or hereafter (provided that, during the Company Lock-Up Period, any change to such plans does not provide for an increase in the aggregate number of shares of Stock available to be issued thereunder), (iii) issuances of shares of Stock pursuant to the exercise of any other employee stock options outstanding as of the date of this Agreement, (iv) issuances of shares of Stock upon the conversion or exchange of convertible or exchangeable securities of the Company outstanding as of the date of this Agreement, and (v) issuances of shares of Stock upon the conversion of the Securities under the terms of the Indenture. Notwithstanding the foregoing, it is understood that the Company may issue additional shares of Stock pursuant to Section 3(a)(9) of the Securities Act in connection with the exchange of shares of Stock for the Company’s outstanding Contingent Convertible Notes due 2014 (except that such issuances are limited to an aggregate of 29,000,000 shares of Stock).

5. Conditions of the Obligations of the Underwriter. The obligation of the Underwriter to purchase and pay for the Securities on the Closing Date will be subject to the accuracy of the representations and warranties on the part of the Company herein on the date hereof and on the Closing Date, to the accuracy of the statements of officers

of the Company made pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder and to the following additional conditions precedent:

(a) The Underwriter shall have received on each of the date hereof and the Closing Date “comfort” letters, in form and substance satisfactory to the Underwriter, from each of Deloitte & Touche LLP (with respect to periods ending on or before December 31, 2002) and PricewaterhouseCoopers LLP (with respect to the period beginning after December 31, 2002). The comfort letter delivered by PricewaterhouseCoopers LLP shall include, among other items, a SAS No. 100 review of the three month period ended March 31, 2005 and customary “tick mark” procedures addressing numbers included in or incorporated by reference in the Prospectus, including the Company’s 2004 10-K and First Quarter 10-Q, included or incorporated by reference therein.

(b) The Prospectus shall have been filed with the Commission in accordance with the Rules and Regulations and Section 4(a) of this Agreement. No stop order suspending the effectiveness of the Registration Statement or of any part thereof shall have been issued and no proceedings for that purpose shall have been instituted or, to the knowledge of the Company or any Underwriter, shall be contemplated by the Commission.

(c) The Chief Financial Officer of the Company shall have furnished a certificate, dated the Closing Date, in form and substance satisfactory to the Underwriter, stating to the effect that:

(i) The Company does not intend to or believe that it has incurred or will incur debts that will be beyond its ability to pay as they mature;

(ii) The present fair saleable value of the assets of the Company exceeds the amount that will be required to pay the probable liability on its existing debts (whether matured or unmatured, liquidated or unliquidated, absolute, fixed or contingent) as they become absolute and matured;

(iii) The Company does not have unreasonably small capital for it to carry on its businesses as proposed to be conducted; and

(iv) The Company is not incurring obligations or making transfers under any evidence of indebtedness with the intent to hinder, delay or defraud any entity to which it is or will become indebted.

(d) Subsequent to the execution and delivery of this Agreement and prior to the Closing Date, there shall not have occurred (i) any change, or any development or event involving a prospective change, in the condition (financial or other), business, properties or results of operations of the Company and its subsidiaries taken as a whole which, in the judgment of the Underwriter, is material and adverse and makes it impractical or inadvisable to proceed with completion of the public offering or the sale of and payment for the Securities; (ii) any downgrading in the current rating

accorded any debt securities or preferred stock of the Company; (iii) any suspension or material limitation of trading in securities generally on The New York Stock Exchange, or any setting of minimum prices for trading on such exchange, or any suspension of trading of any securities of the Company on any exchange or in the over-the-counter market; (iv) a general moratorium on commercial banking activities declared by either Federal or New York State authorities or a material disruption in commercial banking or securities settlement or clearance services in the United States which, in the judgment of the Underwriter, makes it impracticable or inadvisable to proceed with the completion of the offering of the Securities; or (v) any outbreak or escalation of major hostilities in which the United States is involved, any declaration of war by Congress or any other substantial national or international calamity or emergency if, in the judgment the Underwriter, the effect of any such outbreak, escalation, declaration, calamity or emergency makes it impractical or inadvisable to proceed with the completion of the offering or the sale of and payment for the Securities.

(e) The Underwriter shall have received an opinion, in form and substance reasonably satisfactory to the Underwriter, dated the Closing Date, of Covington & Burling, counsel for the Company, to the effect that:

(i) The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has the corporate power and authority to own its properties and conduct its business as described in the Prospectus and to issue the Securities and the shares of Stock issuable upon conversion of the Securities;

(ii) All conditions precedent (including any covenants the compliance with which constitutes a condition precedent) provided for in the Indenture with respect to the authentication and delivery of the Securities have been complied with, the form and terms of the Securities have been established in conformity with the provisions of the Indenture, and the Securities will be entitled to the benefits of the Indenture; the Supplemental Indenture is authorized or permitted by the Base Indenture;

(iii) (A) the Company has duly authorized, executed and delivered this Agreement, the Securities and the Indenture (collectively, the “Company Agreements”); the Indenture constitutes the valid and binding obligation of the Company, enforceable in accordance with its terms, and, when duly executed, authenticated, issued and delivered in the manner provided in the Indenture, the Securities will constitute the valid and binding obligations of the Company, enforceable in accordance with their terms, in each case subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws of general applicability relating to or affecting creditors’ rights and to general equity principles; and the Indenture has been duly qualified under the Trust Indenture Act;

(iv) The Securities will be convertible into shares of Stock in accordance with the terms of the Securities and the Indenture. The shares of Stock initially issuable upon such conversion have been duly authorized and reserved for

issuance upon such conversion by the Company and, when issued upon such conversion in accordance with the terms of the Securities and the Indenture, will be validly issued, fully paid and non-assessable. The shares of Stock issued upon such conversion will not be subject to any preemptive rights, or to such counsel’s knowledge, any similar rights, under the law of the State of New York, the Federal law of the United States of America or the Company’s certificate of incorporation or by-laws;

(v) Except as set forth on Schedule B hereto, there are no contracts, agreements or understandings known to such counsel between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company owned or to be owned by such person or to require the Company to include such securities in any other registration statement filed by the Company under the Securities Act;

(vi) The Company is not and, after giving effect to the offering and sale of the Securities and the application of the proceeds thereof as described in the Prospectus, will not be an “investment company” within the meaning of the Investment Company Act;

(vii) No consent, approval, authorization, license, permit or order of, or filing with, any governmental agency or body or any court under the law of the State of New York, the Delaware General Corporation Law or the Federal law of the United States of America is required for the consummation by the Company of the transactions contemplated by the Company Agreements in connection with the issuance or sale of the Securities by the Company, except for (a) such as have been obtained and made under the Securities Act and the Trust Indenture Act and the respective rules and regulations thereunder and (b) any of the foregoing as may be required with respect to the Securities under State securities or blue sky laws and the rules and regulations promulgated thereunder;

(viii) Except such as are set forth in the Prospectus, to such counsel’s knowledge, there are no pending or threatened actions, suits or proceedings against or affecting the Company, any Scheduled Subsidiary or any of their respective properties that, if determined adversely to the Company or any such Scheduled Subsidiary, would individually or in the aggregate have a Material Adverse Effect or would materially and adversely affect the ability of the Company to perform its obligations under the Company Agreements;

(ix) The execution, delivery and performance by the Company of the Company Agreements; the issuance and sale of the Securities; and the consummation of the transactions contemplated by the Company Agreements, will not (A) violate or conflict with any law of the State of New York, the Delaware General Corporation Law, or any Federal law of the United States of America having applicability to the Company or the Scheduled Subsidiaries, or any rule, regulation or order known to such counsel of any governmental body or any court having jurisdiction over the Company, any Scheduled Subsidiary or any of their respective properties, (B) except as

set forth in the Prospectus, to such counsel’s knowledge, breach the provisions of, or cause a default, or result in the imposition or creation of (or the obligation to create or impose) a lien under any agreement or instrument listed in Schedule D hereto, which agreements the Company has certified to such counsel are the only agreements of the Company which are material to the Company and its subsidiaries on a consolidated basis taken as a whole, or (C) violate any provision of the charter, by-laws or any other constitutive document of the Company or any such Scheduled Subsidiary;

(x) The Securities and the Indenture conform in all material respects to the respective descriptions thereof contained in the Prospectus; the statements in the Prospectus under the captions “Description of the Notes,” “Description of Capital Stock” and “Material United States Federal Income Tax Consequences,” insofar as such statements constitute summaries of the laws, regulations, legal matters, agreements or other legal documents referred to therein, are accurate in all material respects and fairly summarize the matters referred to therein; and

(xi) The Registration Statement was declared effective under the Securities Act as of the date and time specified in such opinion, the Prospectus was filed with the Commission pursuant to the subparagraph of Rule 424(b) specified in such opinion on the date specified therein, and, to such counsel’s knowledge, no stop order suspending the effectiveness of the Registration Statement or any part thereof has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the Securities Act, and the Registration Statement, as of its effective date, and the Prospectus, as of its date, complied as to form in all material respects with the requirements of the Securities Act and the Rules and Regulations (except that such counsel need express no opinion or belief as to the financial statements and the notes related thereto and other financial data included or incorporated by reference in the Registration Statement or the Prospectus, or as to that part of the Registration Statement that constitutes the Statement of Eligibility (Form T-1) under the Trust Indenture Act).

In addition to the matters set forth above, such opinion shall also include a statement to the effect that, based on the procedures set forth in said opinion, nothing which came to such counsel’s attention in the course of such procedures, considered in the light of such counsel’s understanding of the applicable law and the experience gained by such counsel through its practice under the Federal securities laws, has caused such counsel to believe that the Registration Statement, as of its effective date, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus, as of its date and as of the Closing Date, contained or contains any untrue statement of a material fact or omitted or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (except that such counsel need express no opinion or belief as to the financial statements and the notes thereto and other financial data included or incorporated by reference in the Registration Statement or the Prospectus, or to that part of the Registration Statement that constitutes the Statement of Eligibility (Form T-1) under the Trust Indenture Act).

(f) The Underwriter shall have received an opinion, in form and substance reasonably satisfactory to the Underwriter, dated the Closing Date, of senior in-house counsel of the Company, to the effect that:

(i) The Company has an authorized capitalization as set forth in the Prospectus, and all of the issued and outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid and non-assessable;

(ii) Each Scheduled Subsidiary of the Company (x) other than those Scheduled Subsidiaries specified in clause (y) below has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, and has corporate power and authority to own its property and to conduct its business as described in the Prospectus and (y) that is not a corporation is a limited liability company, has been duly formed and is validly existing as a limited liability company in good standing under the laws of the jurisdiction of its formation, and has full power and authority to own its property and to conduct its business as described in the Prospectus;

(iii) The Company and each of the Scheduled Subsidiaries possess adequate certificates, authorities, licenses or permits issued by appropriate governmental agencies or bodies necessary to conduct the business as now operated by them as described in the Prospectus, except where the failure to possess the same would not reasonably be expected to have a Material Adverse Effect, and such counsel is not aware of the receipt of any notice of proceedings relating to the revocation or modification of any such certificate, authority, license or permit that, if determined adversely to the Company or any of the Scheduled Subsidiaries, would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

(iv) The contracts and agreements of the Company and the Scheduled Subsidiaries and affiliates incorporated by reference in the Prospectus (including in any reports filed by the Company pursuant to the Exchange Act which are incorporated by reference in the Prospectus, the “Exchange Act Reports”) conform in all material respects to the descriptions thereof contained in the Prospectus (or such Exchange Act Reports), and the statements under the captions “Summary — Recent Developments” in the Prospectus and “Business — Recent Developments,” “Executive Compensation,” “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” and “Certain Relationships and Related Transactions” in the Company’s 2004 10-K, as well as the statements under the caption “Legal Proceedings” in the Company’s 2004 10-K, as updated or superceded by the statements under the caption “Legal Proceedings” in the Company’s First Quarter 10-Q, and as any of the foregoing shall be updated or superceded by statements contained in the Prospectus, insofar as such statements constitute summaries of the legal matters, documents and governmental proceedings referred to therein, are accurate in all material respects and fairly summarize and present the information referred to therein;

(v) Except as set forth in the Prospectus, to such counsel’s knowledge, the Company and each of its subsidiaries (i) is in material compliance with any and all applicable Environmental Laws, (ii) has received all permits, licenses or other approvals required of it under applicable Environmental Laws to conduct its business and (iii) is in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

(vi) To such counsel’s knowledge, based on the conduct of the Company’s businesses described in the Prospectus, neither the Company nor any “subsidiary company,” as that term is defined in PUHCA, of the Company is (i) a “holding company” or a “subsidiary company” of a holding company or (ii) a “public utility company” under Section 2(a) of PUHCA (except that Androscoggin Energy LLC, which is a QF, and Arcadia Power Partners, which is an EWG, are subsidiary companies of holding companies);

(vii) Each of the power generation projects in which the Company or its subsidiaries has an interest is either (i) subject to the requirements of PURPA and the regulations of the FERC promulgated thereunder, as amended from time to time, and meets the requirements thereunder necessary to be a “qualifying cogeneration facility” and/or a “qualifying small power production facility,” under PURPA except where the failure to meet such requirements would not reasonably be expected to have a Material Adverse Effect or (ii) is an Eligible Facility within the meaning of Section 32 of PUHCA;

(viii) Each of the Company’s subsidiaries that is a public utility under the FPA has validly-issued orders from the FERC, not subject to invalidation based on changed facts or circumstances regarding its ownership or operation since issuance of such orders or to any pending challenge, investigation, or proceeding, (i) authorizing such subsidiary to engage in wholesale sales of electricity, ancillary services and, to the extent permitted under its market-based rate tariff, other services at market-based rates, and (ii) granting such waivers and blanket authorizations, including authorization to issue securities or assume obligations or liabilities, as are customarily granted to entities with market-based rate authority, except where the failure to have such orders would not reasonably be expected to have a Material Adverse Effect;

(ix) With respect to each of the Company’s subsidiaries that is a public utility under the FPA, the FERC has not imposed any rate caps or mitigation measures other than rate caps and mitigation measures generally applicable to similarly situated marketers or generators selling electricity, ancillary services or other services at wholesale in the geographic market where such subsidiary conducts its business;

(x) Each of the Company’s subsidiaries that owns and/or operates an Eligible Facility within the meaning of Section 32 of PUHCA, has

received a determination from FERC, not subject to any pending challenge or appeal, that it is an EWG within the meaning of Section 32 of PUHCA and such determination is not subject to invalidation based on changed facts or circumstances regarding its ownership or operation since issuance of such determination;

(xi) To such counsel’s knowledge, each of the Company’s subsidiaries providing electric service in the ERCOT (i) has all authorizations, filings, registrations, notices, consents, agreements, or orders from, with or to, the TPUC and ERCOT, as applicable, necessary for such subsidiary to engage in sales of electricity at retail under the laws of the State of Texas, except where the failure to have such orders would not reasonably be expected to have a Material Adverse Effect, and each such authorization, filing, registration, notice, consent, agreement or order is not subject to any pending challenge, investigation, or proceeding, authorizing or to invalidation based on changed facts or circumstances regarding its ownership or operation since the issuance, execution, submittal or grant of such authorization, filing, registration, notice, consent, agreement or order and (ii) has not had imposed on it by TPUC or ERCOT, as applicable, any specific rate cap or mitigation measures; and

(xii) The execution, delivery and performance of this Agreement and the Indenture and the issuance and sale of the Securities and the Stock contingently issuable upon conversion thereof, and compliance by the Company with the terms and provisions hereof and thereof, and the consummation of the transactions contemplated hereby and thereby, will not (A) violate any statute, rule, regulation or order of which such counsel is aware of any governmental agency or body or any court having jurisdiction over the Company or any Scheduled Subsidiary of the Company or any of their respective properties, (B) to such counsel’s knowledge, breach the provisions of, or cause a default, or result in the imposition or creation of (or the obligation to create or impose) a lien under any agreement or instrument to which the Company or any such Scheduled Subsidiary is a party or by which the Company or any such Scheduled Subsidiary is bound or to which any of the properties of the Company or any such Scheduled Subsidiary is subject, or (C) violate any provision of the charter, by-laws or any other constitutive document of the Company or any such Scheduled Subsidiary.

In giving such opinion, such counsel may rely, as to all matters governed by the laws of jurisdictions other than the law of the State of California, the federal law of the United States and the corporate law of the State of Delaware, upon opinions of other counsel, who shall be counsel reasonably satisfactory to counsel for the Underwriter, in which case the opinion of such other counsel shall also be addressed to the Underwriter.

(g) The Underwriter shall have received from Skadden, Arps, Slate, Meagher & Flom LLP, counsel to the Underwriter, such letters or opinions, dated the Closing Date, with respect to such matters as the Underwriter may require, and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters.

(h) The Underwriter shall have received a certificate, dated the Closing Date, of the President or any Vice President or a principal financial or accounting

officer of the Company in which such officer, to the best of his or her knowledge after reasonable investigation, shall state that the representations and warranties of the Company in this Agreement are true and correct as of the Closing Date; the Company has complied with all agreements and satisfied all conditions on their part to be performed or satisfied hereunder at or prior to the Closing Date; and, subsequent to the date of the most recent financial statements contained or incorporated by reference in the Prospectus, there has been no material adverse change, nor any development or event involving a prospective material adverse change, in the condition (financial or other), business, properties or results of operations of the Company and its subsidiaries taken as a whole, whether or not arising in the ordinary course of business, except as set forth in or contemplated by the Prospectus or as described in such certificate. In addition, the Chief Financial Officer of the Company shall have furnished a confirmation, in form and substance satisfactory to the Underwriter, of the Company’s compliance with the debt incurrence provisions of its existing indentures, attaching an analysis of the calculations, set forth in reasonable detail, used in providing such confirmation.

(i) The shares of Stock initially issuable upon conversion of the Securities under the terms of the Indenture shall have been duly listed, subject to notice of issuance, on The New York Stock Exchange.

(j) The Company shall have delivered executed copies of the Company Agreements to the Underwriter, in each case in form and substance reasonably satisfactory to the Company and the Underwriter.

(k) The Underwriter shall have received letters, in the Form of Annex I hereto, dated no later than the date hereof from the persons specified in Schedule C hereto.

(l) The Company will furnish the Underwriter with conformed copies of such other opinions and certificates, letters and documents as the Underwriter reasonably requests. The Underwriter may in its sole discretion waive compliance with any conditions to the obligations of the Underwriter hereunder.

6. Indemnification and Contribution. (a) The Company will indemnify and hold harmless the Underwriter, its affiliates participating in the distribution of the Securities, its partners, directors and officers and each person, if any, who controls the Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any losses, claims, damages or liabilities, joint or several, to which the Underwriter may become subject, under the Securities Act or the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, the Prospectus, or any amendment or supplement thereto, or any related Preliminary Prospectus or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and will reimburse the Underwriter for any legal or other expenses

reasonably incurred by the Underwriter in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with written information furnished to the Company by the Underwriter specifically for use therein.

(b) The Underwriter will indemnify and hold harmless the Company and its directors, officers and trustees and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act against any losses, claims, damages or liabilities to which the Company may become subject, under the Securities Act or the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, the Prospectus, or any amendment or supplement thereto, or any related Preliminary Prospectus or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by the Underwriter specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by the Company in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred.

(c) Promptly after receipt by an indemnified party under this Section 6 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under subsection (a) or (b) above, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve the indemnifying party from any liability which it may have to any indemnified party otherwise than under subsection (a) or (b) above. In case any such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement (i) includes an unconditional

release of such indemnified party from all liability on any claims that are the subject matter of such action and (ii) does not include a statement as to, or an admission of, fault, culpability or a failure to act by or on behalf of an indemnified party.

(d) If the indemnification provided for in this Section is unavailable or insufficient to hold harmless an indemnified party under subsection (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, on the one hand, and the Underwriter, on the other, from the offering of the Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, on the one hand, and the Underwriter, on the other, in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Underwriter, on the other, shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total discounts and commissions received by the Underwriter from the Company under this Agreement. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Underwriter and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding the provisions of this subsection (d), the Underwriter shall not be required to contribute any amount in excess of the amount by which the total price at which the Securities purchased by it were resold exceeds the amount of any damages which the Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

(e) The obligations of the Company under this Section shall be in addition to any liability which the Company may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls the Underwriter within the meaning of the Securities Act or the Exchange Act; and the obligations of the Underwriter under this Section shall be in addition to any liability which the Underwriter may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act.

7. Survival of Certain Representations and Obligations. The respective indemnities, agreements, representations, warranties and other statements of the Company or their officers and of the Underwriter set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation, or statement as to the results thereof, made by or on behalf of the Underwriter and the Company or any of their respective officers or directors or any controlling person, and will survive delivery of and payment for the Securities. If for any reason the purchase of the Securities by the Underwriter is not consummated, the Company shall remain responsible for the expenses to be paid or reimbursed by it pursuant to Section 4 and the respective obligations of the Company and the Underwriter pursuant to Section 6 shall remain in effect, and if any Securities have been purchased hereunder the representations and warranties in Section 2 and all obligations under Section 4 shall also remain in effect. If the purchase of the Securities by the Underwriter is not consummated for any reason other than solely because of the termination of this Agreement pursuant to a default by the Underwriter, the Company will reimburse the Underwriter for all out-of-pocket expenses (including fees and disbursements of counsel) reasonably incurred by them in connection with the offering of the Securities.

8. Acknowledgment. The Company acknowledges and agrees that (i) the purchase and sale of the Securities pursuant to this Agreement is an arm’s-length commercial transaction between the Company, on the one hand, and the Underwriter, on the other, (ii) in connection therewith the Underwriter is acting as a principal and not the agent or fiduciary of the Company, and (iii) the Underwriter has not assumed an advisory responsibility in favor of the Company with respect to the offering contemplated hereby or the process leading thereto (irrespective of whether the Underwriter has advised or is currently advising the Company on other matters) or any other obligation to the Company except the obligations expressly set forth in this Agreement.

9. Notices. All communications hereunder will be in writing and, if sent to the Underwriter, will be mailed, delivered, telegraphed and confirmed or faxed and confirmed to Goldman, Sachs & Co., 85 Broad St., New York, New York 10004, Attention: Registration Department; or, if sent to the Company, will be mailed, delivered, telegraphed and confirmed or faxed and confirmed to it at Calpine Corporation, 50 West San Fernando Street, San Jose, California 95113, Attention: General Counsel.

10. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers and directors and controlling persons referred to in Section 6, and no other person will have any right or obligation hereunder.

11. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement.

12. Applicable Law. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE

LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN.

The Company hereby submits to the non-exclusive jurisdiction of the Federal and state courts in the Borough of Manhattan in The City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

[Signature page follows.]

     If the foregoing is in accordance with the Underwriter’s understanding of our agreement, kindly sign and return to the Company one of the counterparts hereof, whereupon it will become a binding agreement between the Company and the Underwriter in accordance with its terms.

Very truly yours,

CALPINE CORPORATION

By:   /s/ Robert D. Kelly
Name:   Robert D. Kelly
Title:   Executive Vice President

S-1

The foregoing Underwriting Agreement is hereby confirmed and accepted as of the date first above written.

GOLDMAN, SACHS & CO.

/s/ Goldman, Sachs & Co.
(Goldman, Sachs & Co.)

S-2

SCHEDULE A

SCHEDULED SUBSIDIARIES

• Androscoggin Energy, Inc.

• Calpine Administrative Services Company, Inc.

• Calpine International Holdings, Inc.

• Calpine Finance Company

• Calpine Fuels Corporation

• Calpine Energy Services Holdings, Inc.

• Calpine Northbrook Corporation of Maine, Inc.

• Calpine Operating Management Company, Inc.

• Calpine Power Company

• Quintana Canada Holdings LLC

SCHEDULE B

CAPITAL STOCK MATTERS

I. Encumbrances, Liens and Defects.

“Permitted Liens,” as defined in the instruments or agreements governing the Company’s:

1. 9.625% First Priority Senior Secured Notes due 2014;
2. Second Priority Senior Secured Term Loan B Notes due 2007;
3. Second Priority Senior Secured Floating Rate Notes due 2007;
4. 8.5% Second Priority Senior Secured Notes due 2010;
5. 9.875% Second Priority Senior Secured Notes due 2011; and
6. 8.75% Second Priority Senior Secured Notes due 2013.

II. Registration Rights.

1. Stockholder Rights Agreement, dated as of October 12, 2000, among the Company and the parties listed therein, executed pursuant to the Stock and Note Purchase Agreement, dated as of June 23, 2000, among the Company, Michael P. Polsky, the Alan S. Polsky and Gabriel S. Polsky Trusts, Polsky Energy Corporation and SkyGen Energy Holdings LLC.

2. Registration Rights Agreement, dated November 14, 2003, between the Company and Deutsche Bank Securities, Inc. in connection with the offering of 4.75% Contingent Convertible Notes due 2023.

3. Share Lending Agreement, dated September 30, 2004, between the Company and Deutsche Bank AG London, acting through Deutsche Bank Securities Inc.

SCHEDULE C

PERSONS SUBJECT TO LOCK-UP AGREEMENT

Directors and Principal Executive Officers

Richard Barraza
Bulent A. Berligen
Lisa Bodensteiner
Peter Cartwright
Charles B. Clark
Ann B. Curtis
Kenneth Derr
Jeffrey E. Garten
Gerald Greenwald
Robert D. Kelly
E. James Macias
Thomas R. Mason
Eric N. Pryor
Susan C. Schwab
George J. Stathakis
Susan Wang
John O. Wilson

SCHEDULE D

MATERIAL AGREEMENTS

1. The documents identified by the following numbers on the Company’s Annual Report on Form 10-K for the year ended December 31, 2004 (filed with the Commission on March 31, 2005): 4.1.1 through 4.25.38 inclusive; and 10.1 through 10.3.14 inclusive.

ANNEX 1

CALPINE CORPORATION

LOCK-UP AGREEMENT

June 20, 2005

Calpine Corporation
50 West San Fernando Street
San Jose, California 95113

Goldman, Sachs & Co.
85 Broad St.
New York, New York 10004

Ladies and Gentlemen:

The undersigned understands that Goldman, Sachs & Co. (“Goldman Sachs” or the “Underwriter”), has entered into an Underwriting Agreement, dated June 20, 2005 (the “Underwriting Agreement”) with Calpine Corporation (the “Company”), providing for the offering of the Company’s Contingent Convertible Notes due 2015 (the “Securities”), convertible into cash and shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”).

In consideration of the agreement by the Underwriter to purchase and resell the Securities, and of other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the undersigned will not, directly or indirectly offer, sell, pledge, contract to sell, (including any short sale), grant any option to purchase or otherwise dispose of any shares of Common Stock (including, without limitation, shares of Common Stock which may be deemed to be beneficially owned by the undersigned on the date hereof in accordance with the rules and regulations of the Securities and Exchange Commission, shares of Common Stock which may be issued upon exercise of a stock option or warrant and any other security convertible into or exchangeable for Common Stock) or enter into any Hedging Transaction (as defined below) relating to the Common Stock (each of the foregoing referred to as a “Disposition”) for a period from the date of the Underwriting Agreement until and including the date that is 90 days after the date of the prospectus relating to the Securities (the “Lock-Up Period”). The foregoing restriction is expressly intended to preclude the undersigned from engaging in any Hedging Transaction or other transaction which is designed to or reasonably expected to lead to or result in a Disposition during the Lock-Up Period even if the securities would be disposed of by someone other than the undersigned. “Hedging Transaction” means any short sale (whether or not against the box) or any purchase, sale or grant of any right (including, without limitation, any put or call option) with respect to any security (other than a broad-based market basket or index)

that includes, relates to or derives any significant part of its value from the Common Stock.

Notwithstanding the foregoing, the undersigned may offer, sell, pledge, contract to sell, (including any short sale), grant any option to purchase or otherwise dispose of or enter into Hedging Transactions in respect of (a) shares of Common Stock acquired in open market transactions by the undersigned after the date of the prospectus relating to the Securities, and (b) any or all of the shares of Common Stock or other Company securities if the transfer is by (i) gift, will or intestacy, or (ii) distribution to partners, members or shareholders of the undersigned; provided, however, that in the case of a transfer pursuant to clause (b) above, it shall be a condition to the transfer that the transferee execute an agreement stating that the transferee is receiving and holding the securities subject to the provisions of this letter agreement. In addition, notwithstanding the foregoing, the undersigned may offer, sell, pledge, contract to sell, (including any short sale), grant any option to purchase or otherwise dispose of any shares of Common Stock or enter into any Hedging Transaction pursuant to plans under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended.

The undersigned (i) agrees and consents that with respect to any shares of Common Stock for which the undersigned is the record holder, stop transfer instructions may be entered with the Company’s transfer agent with respect to such Common Stock on the transfer books and records of the Company and (ii) with respect to any shares of Common Stock for which the undersigned is the beneficial holder but not the record holder, hereby instructs the record holder of such securities to cause the transfer agent for the Company to note stop transfer instructions with respect to such securities on the transfer books and records of the Company.

The undersigned hereby agrees that, to the extent that the terms of this letter agreement conflict with or are in any way inconsistent with any registration rights agreement to which the undersigned and the Company are a party during the Lock-Up Period, this letter agreement supersedes such registration rights agreement.

The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this letter agreement. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and any obligations of the undersigned shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned.

Notwithstanding anything herein to the contrary, if the closing of the above referenced offering has not occurred prior to June 24, 2005, this agreement shall be of no further force or effect.


		Signature:

		Print Name:

EX-4.4 3 f10195exv4w4.htm EXHIBIT 4.4 exv4w4

Exhibit 4.4

CALPINE CORPORATION

$650,000,000 PRINCIPAL AMOUNT
7.75% CONTINGENT CONVERTIBLE NOTES DUE 2015

THIRD SUPPLEMENTAL INDENTURE

Dated as of June 23, 2005

WILMINGTON TRUST COMPANY

Trustee

Table of Contents


		Page
ARTICLE I DEFINITIONS
Section 1.01	Definitions	1
Section 1.02	Other Definitions	6
ARTICLE II THE NOTES
Section 2.01	Form and Dating	7
Section 2.02	Registrar, Paying Agent and Conversion Agent	8
Section 2.03	Transfer and Exchange	8
ARTICLE III REDEMPTION AND PREPAYMENT
Section 3.01	Mandatory Redemption	9
Section 3.02	Optional Redemption Upon Conversion	9
Section 3.03	Purchase of Notes at Option of the Holder upon Change of Control	10
Section 3.04	Effect of Change of Control Purchase Notice	13
Section 3.05	Deposit of Change of Control Purchase Price	14
Section 3.06	Notes Purchased in Part	14
Section 3.07	Covenant to Comply With Securities Laws Upon Purchase of Notes	15
Section 3.08	Repayment to the Company	15
ARTICLE IV COVENANTS
Section 4.01	Compliance Certificate	15
Section 4.02	Taxes	16
Section 4.03	Stay, Extension and Usury Laws	17
Section 4.04	Corporate Existence	17
Section 4.05	Calculations in Respect of Notes	17
ARTICLE V MERGER AND CONSOLIDATION OF COMPANY
Section 5.01	Lease of Properties	18
ARTICLE VI DEFAULTS AND REMEDIES
Section 6.01	Events of Default	18
ARTICLE VII TRUSTEE
Section 7.01	Rights of Trustee	19
Section 7.02	Reports by Trustee to Holders of the Notes	19
Section 7.03	Eligibility; Disqualification	19


		Page
ARTICLE VIII DEFEASANCE
Section 8.01	No Defeasance	20
ARTICLE IX AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01	Without Consent of Holders of Notes	20
Section 9.02	With Consent of Holders of Notes	20
ARTICLE X CONVERSION
Section 10.01	Conversion Privilege	21
Section 10.02	Conversion Procedure	24
Section 10.03	Taxes on Conversion	25
Section 10.04	Company to Provide Stock	25
Section 10.05	Adjustment of Conversion Price	26
Section 10.06	Adjustment for Certain Changes of Control	29
Section 10.07	When No Adjustment Required	30
Section 10.08	When Adjustment May Be Deferred	31
Section 10.09	Successive Adjustments	31
Section 10.10	Notice of Adjustment	31
Section 10.11	Notice of Certain Transactions	32
Section 10.12	Effect of Reclassification, Consolidation, Merger, Share Exchange or Sale on Conversion Privilege	32
Section 10.13	Trustee’s Disclaimer	33
Section 10.14	Voluntary Reduction	34
Section 10.15	Conversion Value of Notes Tendered	34
ARTICLE XI SUBORDINATION
Section 11.01	Agreement to Subordinate	36
Section 11.02	Default On Senior Debt	36
Section 11.03	Liquidation; Dissolution; Bankruptcy	37
Section 11.04	Subrogation	38
Section 11.05	Trustee To Effectuate Subordination	39
Section 11.06	Notice By The Company	39
Section 11.07	Rights Of The Trustee; Holders Of Senior Debt	40
Section 11.08	Subordination May Not Be Impaired	41
ARTICLE XII MISCELLANEOUS
Section 12.01	No Adverse Interpretation of Other Agreements	42
Section 12.02	Severability	42
Section 12.03	Table of Contents, Headings, etc	42
Section 12.04	Ratification Of Original Indenture	42
Section 12.05	Trustee Not Responsible for Recitals	42
Section 12.06	Performance by Trustee	43
Section 12.07	Governing Law	43

EXHIBITS


Exhibit A Schedule A		Form of Note Table of Additional Shares

iii

THIRD SUPPLEMENTAL INDENTURE (the “Third Supplemental Indenture”) dated as of June 23, 2005, between Calpine Corporation (the “Company”), a Delaware corporation, and Wilmington Trust Company (the “Trustee”).

WITNESSETH:

WHEREAS, the Company and the Trustee have entered into an Indenture, dated as of August 10, 2000, as supplemented by the First Supplemental Indenture, dated as of September 28, 2000 (as so supplemented, the “Original Indenture” and, as further supplemented by the Second Supplemental Indenture, dated as of September 30, 2004, and this Third Supplemental Indenture, the “Indenture”) which provides, among other things, for unsecured debentures, notes or other evidences of indebtedness to be issued by the Company from time to time in one or more series under the Indenture;

WHEREAS, the Original Indenture provides that the Company and the Trustee may enter into an indenture supplemental to the Original Indenture to establish the form or terms of Securities (as defined in the Original Indenture) of any series as provided by Sections 2.1 and 2.3 of the Original Indenture;

WHEREAS, the Board of Directors of the Company has duly adopted resolutions authorizing the Company to execute and deliver this Third Supplemental Indenture;

WHEREAS, pursuant to the terms of the Original Indenture, the Company desires to enter into this Third Supplemental Indenture to provide for the establishment of a new Series of its Securities to be known as its 7.75% Contingent Convertible Notes Due 2015 (the “Notes”);

WHEREAS, the Company has requested that the Trustee execute and deliver this Third Supplemental Indenture and all things necessary to make (i) this Third Supplemental Indenture a valid instrument in accordance with its terms, and (ii) the Notes, when executed by the Company and authenticated and delivered by the Trustee, the valid obligations of the Company;

NOW THEREFORE, in consideration of the purchase and acceptance of the Notes by the Holders thereof, and for the purpose of setting forth, as provided in the Indenture, the form and terms of the Notes, the Company covenants and agrees with the Trustee as follows:

ARTICLE I

DEFINITIONS

Section 1.01 Definitions.

(a) Unless the context requires otherwise:

(i) a term defined in the Original Indenture has the same meaning when used in this Third Supplemental Indenture unless the definition of such term is amended and supplemented pursuant to this Third Supplemental Indenture;

(ii) a term defined anywhere in this Third Supplemental Indenture has the same meaning throughout;

(iii) the singular includes the plural and vice versa;

(iv) a reference to a Section or Article is to a Section or Article of this Third Supplemental Indenture; and

(v) headings are for convenience of reference only and do not affect interpretation.

(b) the following terms have the meanings given to them in this Section 1.01(b):

“Applicable Procedures” means, with respect to any transfer or transaction involving a Global Note or beneficial interests therein, the rules and procedures of the Depositary, for such Global Note, in each case to the extent applicable to such transaction and as in effect from time to time.

“Bid Solicitation Agent” means American Stock Transfer & Trust Company until the Company selects another bank, trust company or similar fiduciary agent, if any, to serve as Bid Solicitation Agent.

“Capital Stock” means:

(1) in the case of a corporation, corporate stock;

(2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

(3) in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and

(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.

“Change of Control” means the occurrence of any of the following:

(1) any Person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Exchange Act, acquires beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of transactions, of shares of the Company’s Capital Stock entitling the Person to exercise 50% or more of the total voting power of all shares of the Company’s Capital Stock that is entitled to vote generally in elections of directors, other than an acquisition by the Company, of any of its Subsidiaries or any of its employee benefit plans; or

(2) the Company merges or consolidates with or into any other Person, any merger of another Person into the Company, or the Company conveys, sells, transfers or leases all or substantially all of its assets to another Person, other than any transaction:

(a) that does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of the Company’s Capital Stock,

(b) pursuant to which the holders of the Company’s Common Stock immediately prior to the transaction have the entitlement to exercise, directly or indirectly, 50% or more of the total voting power of all shares of Capital Stock entitled to vote generally in the election of directors of the continuing or surviving corporation immediately after the transaction, or

(c) which is effected solely to change the Company’s jurisdiction of incorporation and results in a reclassification, conversion or exchange of outstanding shares of the Company’s Common Stock solely into shares of Common Stock of the surviving entity.

“Common Stock” means shares of the Company’s Common Stock, $0.001 par value per share, as they exist on the date of this Third Supplemental Indenture or any other shares of Capital Stock of the Company into which the Common Stock shall be reclassified or changed.

“Common Stock Price” on any date means the closing sale price per share (or if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on such date for the Company’s Common Stock as reported in composite transactions on the principal United States securities exchange on which the Company’s Common Stock is traded or, if its Common Stock is not listed on a United States national or regional securities exchange, as reported by the National Association of Securities Dealers Automated Quotation System (“NASDAQ”).

“Conversion Agent” means the Agent of the Company pursuant to Section 2.02 hereof.

“Conversion Date” shall have the meaning as specified in Section 10.02 hereof.

“Conversion Price” means $4.00 per share of Common Stock, subject to the adjustments described in Section 10.05 hereof.

“Conversion Rate” means an amount of shares of Common Stock equal to $1,000 principal amount of Notes divided by the Conversion Price, which shall be 250.0000 per $1,000 principal amount of Notes as of the date of this Third Supplemental Indenture, subject to the adjustments described in Section 10.05 hereof.

“Fair Market Value” means the value that would be paid by a willing buyer to a willing seller in a transaction not involving distress or necessity of either party, determined in good faith by the Board of Directors of the Company, whose determination shall be conclusive evidence of such determination (unless otherwise provided in this Indenture).

“Global Notes” means, individually and collectively, each of the Global Securities, substantially in the form of Exhibit A hereto.

“Market Price” means the average determined by the Company of the Common Stock Price of the shares for the five Trading Day period immediately preceding and including the third Trading Day prior to the applicable date fixed for the determination of stockholders entitled to receive any distribution described in Section 10.05, appropriately adjusted to take into account the occurrence, during the period commencing on the first of the Trading Days during such five Trading Day period and ending on such determination date, of any event described in Section 10.05; subject, however, to the conditions set forth in Section 10.07 and Section 10.08 hereof. If the shares of Common Stock are not listed on The New York Stock Exchange, then the Market Price shall be determined by the Company by reference to the Common Stock Price as reported by NASDAQ. In the absence of such quotations, the Company shall be entitled to determine in good faith the Market Price by reference to the Common Stock Price on any date on the basis of such quotations as it considers appropriate.

“Obligations” means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness (including the Notes).

“Permitted Investments” means the following investments:

(i) any direct obligations of, or obligations fully and unconditionally guaranteed by, the United States of America, or any agency or instrumentality of the United States of America, the obligations of which are fully and unconditionally backed by the full faith and credit of the United States of America;

(ii) demand and time deposits in, certificates of deposit of, bankers’ acceptances issued by, or federal funds sold by any depository institution or trust company incorporated under the laws of the United States of America or any state thereof

and subject to supervision and examination by federal and/or state authorities, or incorporated under the laws of any other jurisdiction, so long as at the time of such investment or contractual commitment providing for such investment the unsecured commercial paper or other unsecured short-term debt obligations of such depository institution or trust company have credit ratings of at least P-1 (or its equivalent) or higher from Moody’s and A-1 (or its equivalent) or higher from S&P;

(iii) repurchase obligations with respect to any security described in clauses (i) or (ii) above, in each case entered into with either (A) a depository institution or trust company (acting as principal) which in respect of its short-term unsecured debt has credit ratings of at least P-1 (or its equivalent) or higher from Moody’s and A-1 (or its equivalent) or higher from S&P or (B) a money market fund maintained by a broker which, in respect of its short-term unsecured debt, has credit ratings of at least P-1 (or its equivalent) or higher from Moody’s and A-1 (or its equivalent) or higher from S&P;

(iv) unsecured debt securities bearing interest or sold at a discount issued by any corporation incorporated under the laws of the United States of America or any state thereof which have, at the time of such investment, credit ratings of at least P-1 (or its equivalent) or higher from Moody’s and A-1 (or its equivalent) or higher from S&P;

(v) unsecured commercial paper which has, at the time of such investment, credit ratings of at least P-1 (or its equivalent) or higher from Moody’s and A-1 (or its equivalent) or higher from S&P; and

(vi) investments in money market funds or money market mutual funds which have, at the time of such investment, credit ratings of at least P-1 (or its equivalent) or higher from Moody’s and A-1 (or its equivalent) or higher from S&P (including such funds for which the Trustee or any of its Affiliates is investment manager or advisor and for which the Trustee or any of its Affiliates may receive a fee).

“Prospectus Supplement” means that Prospectus Supplement dated June 20, 2005 relating to the offering of the Notes.

“S&P” means Standard & Poor’s Ratings Group (or, if such entity ceases to rate the Notes for reasons outside of the control of the Company, the equivalent investment grade credit rating from any other “nationally recognized statistical rating organization” (or successor concept) within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act (or successor provision) selected by the Company as a replacement agency).

“Senior Debt” means (A) all of the existing and future secured Indebtedness of the Company; (B) all of the following series of the Company’s outstanding senior unsecured Indebtedness:

1. the Company’s 10 1/2% Senior Notes due 2006,

2. the Company’s 8 3/4% Senior Notes due 2007,

3. the Company’s 7 7/8% Senior Notes due 2008,

4. the Company’s 7 5/8% Senior Notes due 2006, and

5. the Company’s 7 3/4% Senior Notes due 2009; and

“Subsidiary” means, as applied to any Person, any corporation, limited or general partnership, trust, association or other business entity of which an aggregate of at least 50% of the outstanding Voting Stock, or an equivalent controlling interest therein, of such Person is, at the time, directly or indirectly, owned by such Person and/or one or more Subsidiaries of such Person.

“Trading Day” means any regular or abbreviated trading day of The New York Stock Exchange.

“Trading Price” of the Notes on any date of determination means the average of the secondary market bid quotations per $1,000 principal amount of Notes obtained by the Bid Solicitation Agent for $5,000,000 principal amount of the Notes at approximately 3:30 p.m., New York City time, on such determination date from three independent nationally recognized securities dealers the Company selects, which may include the Underwriter; provided that if at least three such bids cannot reasonably be obtained by the Bid Solicitation Agent, but two such bids are obtained, then the average of the two bids shall be used, and if only one such bid can reasonably be obtained by the Bid Solicitation Agent, this one bid shall be used. If the Bid Solicitation Agent cannot reasonably obtain at least one such bid or, in the Company’s reasonable judgment, the bid quotations are not indicative of the secondary market value of the Notes, then the Trading Price of the Notes will be determined in good faith by the Bid Solicitation Agent, taking into account in such determination such factors as it, in its sole discretion after consultation with the Company, deems appropriate.

“Underwriter” means Goldman, Sachs & Co.

“Underwriting Agreement” means the Underwriting Agreement between the Company and the Underwriter dated June 20, 2005 relating to the issuance and sale of the Notes.

“Voting Stock” of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the board of directors of such Person.

Section 1.02 Other Definitions.


Term	Defined in Section
“Additional Shares”		10.01
“Change of Control Notice”		3.03
“Change of Control Notice Date”		3.03
“Change of Control Purchase Date”		3.03
“Change of Control Purchase Notice”		3.03
“Change of Control Purchase Price”		3.03
“Conversion Value”		10.15
“Determination Date”		10.15
“Effective Date”		10.06
“Ex-Dividend Date”		10.01
“Expiration Time”		10.05
“Five Day Average Closing Stock Price”		10.15
“Net Shares”		10.15
“Net Share Amount”		10.15
“Payment Default”		11.02
“Pre-Dividend Sale Price”		10.15
“Principal Return”		10.15
“Principal Value Conversion”		10.01
“Purchased Shares”		10.05
“Quarter”		10.01
“Redemption Date”		3.02
“Redemption Price”		3.02
“Reference Date”		10.05
“Stock Price”		10.06

ARTICLE II

THE NOTES

Section 2.01 Form and Dating.

The Notes shall be in denominations of $1,000 principal amount and integral multiples thereof.

The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Third Supplemental Indenture and the Company and the Trustee, by their execution and delivery of this Third Supplemental Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Third Supplemental Indenture, the provisions of this Third Supplemental Indenture shall govern and be controlling.

The Notes shall initially be issued in the form of a Global Security attached as Exhibit A hereto deposited upon issuance with the Trustee as Custodian for

the Depositary and registered in the name of the Depositary or its nominee. Each Global Security shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it represents the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges, repurchases, redemptions or conversions. Any endorsement of a Global Security to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or the Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by the Indenture.

Section 2.02 Registrar, Paying Agent and Conversion Agent.

In addition to Section 2.4 of the Original Indenture, the Company shall maintain an office or agency where Securities may be presented for conversion (“Conversion Agent”). The term “Conversion Agent” includes any additional conversion agent.

The Company may change any Registrar, Paying Agent or Conversion Agent for the Notes without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Conversion Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Conversion Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Conversion Agent.

The Company initially appoints the Trustee to act as the Registrar, Paying Agent and Conversion Agent with respect to the Notes.

Section 2.03 Transfer and Exchange.

In addition to Section 2.7 of the Original Indenture, beneficial interests in a Global Security held by any beneficial owner of Notes may be exchanged by the Holder for Notes in definitive form upon request, but only upon at least 20 days’ prior written notice given to the Trustee by or on behalf of the Depositary in accordance with Applicable Procedures.

Neither the Company nor the Trustee will be liable for any delay by the Holder of any Global Note or the Depositary in identifying the beneficial owners of Notes and the Company and the Trustee may conclusively rely on, and will be protected in relying on, instructions from the Holder of any Global Note or the Depositary for all purposes.

ARTICLE III

REDEMPTION AND PREPAYMENT

Section 3.01 Mandatory Redemption.

The Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes.

Section 3.02 Optional Redemption Upon Conversion.

The Company shall have the right to redeem, at its option, any Notes tendered for conversion pursuant to Article 10 hereof if, on the date such Notes are tendered for conversion, the Company determines, in its sole judgment, that its then outstanding Indebtedness would prevent it from paying the Principal Return or delivering the Net Shares when due upon conversion as required by Section 10.02 hereof; provided that the Company shall not so redeem any Notes pursuant to this Section 3.02 if an Event of Default shall have occurred and be continuing (other than an Event of Default that would be cured by such redemption). The Company shall notify the Holder of such Notes of the Company’s election to redeem such Notes pursuant to this Section 3.02 no later than the Determination Date in respect of such Notes tendered for conversion. Upon any such notification of an optional redemption, the Company shall not be required to pay or deliver, as the case may be, the Principal Return and Net Shares or any cash in lieu of fractional shares as required by Section 10.02, and payment or delivery of such Principal Return and Net Shares or cash in lieu of fractional shares shall be governed by this Section 3.02.

The redemption price for any Notes so redeemed shall be an amount in cash equal to the Principal Return and an amount of shares of Common Stock equal to the Net Shares, together with cash in lieu of any fractional shares (collectively, the “Redemption Price”), in each case in respect of such Notes tendered for conversion as set forth in Section 10.15. The redemption date for any such redemption by the Company shall be the seventh Business Day following the Determination Date in respect of such Notes tendered for conversion (the “Redemption Date”).

No later than 10:00 a.m. (local time in the City of New York) on the Redemption Date in respect of such Notes, the Company shall deposit with the Conversion Agent money and shares of Common Stock sufficient to pay the Redemption Price on all Notes to be redeemed on that date. Upon such deposit of the Redemption Price, interest will cease to accrue on such Notes, such Notes will cease to be outstanding and all other rights of the Holder of such Notes will terminate. The Conversion Agent shall promptly return to the Company any money or shares of Common Stock deposited with the Conversion Agent by the Company in excess of the amounts necessary to pay the Redemption Price of all Notes to be redeemed on such date.

Section 3.03 Purchase of Notes at Option of the Holder upon Change of Control.

(a) If a Change of Control occurs, a Holder of Notes will have the right, at its option, to require the Company to repurchase all of its Notes, or any portion thereof at a purchase price equal to the aggregate principal amount of the Notes repurchased plus any accrued and unpaid interest to, but excluding, the date of repurchase (the “Change of Control Purchase Price”). The Company shall repurchase all such Notes on the date that is 45 days after the date of the Change of Control Notice (as defined below) delivered by the Company (the “Change of Control Purchase Date”), subject to satisfaction by or on behalf of the Holder of the requirements set forth in Section 3.03(c).

Notwithstanding the foregoing provisions of this Section 3.03, no Holder shall have the right to require the Company to purchase its Notes upon a Change of Control if:

(1) the Common Stock Price on The New York Stock Exchange for any five Trading Days within the period of 10 consecutive Trading Days ending immediately after the later of the Change of Control or the public announcement of such event, in the case of a Change of Control relating to an acquisition of Capital Stock, or the period of 10 consecutive Trading Days ending immediately before such event, in the case of Change of Control relating to a merger, consolidation or asset sale, equals or exceeds 105% of the Conversion Price of the Notes in effect on each of those Trading Days; or

(2) all of the consideration (excluding cash payments for fractional shares and cash payments made pursuant to dissenters’ appraisal rights) in a merger or consolidation otherwise constituting a Change of Control above consists of shares of common stock traded on a national securities exchange or quoted on the Nasdaq National Market (or will be so traded or quoted immediately following the merger or consolidation) and as a result of the merger or consolidation the Notes become convertible into such common stock.

For purposes of this Section 3.03,

(x) whether a person is a “beneficial owner” shall be determined in accordance with Rule 13d-3 under the Exchange Act; and

(y) “person” includes any syndicate or group that would be deemed to be a “person” under Section 13(d)(3) of the Exchange Act.

If the shares of Common Stock are not listed on The New York Stock Exchange at the relevant time, closing prices and Trading Days shall be calculated as reported by the NASDAQ.

At least three Business Days before the Change of Control Notice Date (as defined below), the Company shall deliver an Officer’s Certificate to the Trustee specifying:

(i) the information required by Section 3.03(b); and

(ii) whether the Company desires the Trustee to give the Change of Control Notice required by Section 3.03(b).

(b) No later than 30 days after the occurrence of a Change of Control, the Company shall mail a written notice of the Change of Control (the “Change of Control Notice” and the date of such mailing, the “Change of Control Notice Date”) by first-class mail to the Trustee and to each Holder (and to beneficial owners to the extent required by applicable law). The notice shall include a form of Change of Control Purchase Notice to be completed by the Holder that wishes to exercise rights under this Section 3.03 and shall state:

(1) briefly, the events causing a Change of Control and the date of such Change of Control;

(2) the date by which the Change of Control Purchase Notice pursuant to this Section 3.03 must be given, if a Holder has the right to require the Company to repurchase Notes pursuant to Section 3.03(a);

(3) the Change of Control Purchase Date, if a Holder has the right to require the Company to repurchase Notes pursuant to Section 3.03(a);

(4) the Change of Control Purchase Price, if a Holder has the right to require the Company to repurchase Notes pursuant to Section 3.03(a);

(5) the name and address of the Paying Agent and the Conversion Agent, if a Holder has the right to require the Company to repurchase Notes pursuant to Section 3.03(a);

(6) the Conversion Rate and any adjustments thereto;

(7) that Notes must be surrendered to the Paying Agent, at any time on or prior to the 30th day after the Company delivers its Change of Control Notice, to collect payment, if a Holder has the right to require the Company to repurchase Notes pursuant to Section 3.03(a);

(8) that the Change of Control Purchase Price for any Note as to which a Change of Control Purchase Notice has been duly given will be paid promptly following the Change of Control Purchase Date as described in (7), if a Holder has the right to require the Company to repurchase Notes pursuant to Section 3.03(a);

(9) briefly, the procedures the Holder must follow to exercise rights under this Section 3.03, if a Holder has the right to require the Company to repurchase Notes pursuant to Section 3.03(a);

(10) briefly, the conversion rights, if any, of the Notes;

(11) that, unless the Company defaults in making payment of such Change of Control Purchase Price, interest on Notes surrendered for purchase by the Company will cease to accrue on and after the Change of Control Purchase Date, if a Holder has the right to require the Company to repurchase Notes pursuant to Section 3.03(a); and

(12) the CUSIP numbers of the Notes.

Simultaneously with the delivery of the Change of Control Notice to Holders, the Company shall, or, if the Company has requested that Trustee deliver the Change of Control Notice to Holders pursuant to Section 3.03(a), shall cause the Trustee to, at the Company’s expense and in the Company’s name, disseminate a press release through any of Dow Jones & Company, Inc., Business Wire, Bloomberg Business News or Reuters (or if such organizations are not in existence at the time of issuance of such press release, such other news or press organization as is reasonably calculated to broadly disseminate the relevant information to the public) containing this information, and the Company shall publish the information on the Company’s Web site on the World Wide Web or through such other public medium as the Company may use at that time.

(c) A Holder may exercise its rights specified in Section 3.03(a) upon delivery of an irrevocable written notice of purchase (a “Change of Control Purchase Notice”) to the Paying Agent at any time on or prior to the 30th day after the Company delivers its Change of Control Notice, stating:

(1) the certificate number of the Note which the Holder will deliver to be purchased;

(2) the portion of the principal amount of the Note which the Holder will deliver to be purchased, which portion must be $1,000 principal amount or an integral multiple thereof; and

(3) that such Note shall be purchased pursuant to the terms and conditions specified in this Section 3.03.

The delivery of such Note to the Paying Agent with the Change of Control Purchase Notice (together with all necessary endorsements), at any time on or prior to the 30th day after the Company delivers its Change of Control Notice, at the offices of the Paying Agent shall be a condition to the receipt by the Holder of the Change of Control Purchase Price therefor; provided, however, that such Change of Control Purchase Price shall be so paid pursuant to this Section 3.03 only if the Note so delivered to the Paying Agent shall conform in all respects to the description thereof set forth in the related Change of Control Purchase Notice.

The Company shall purchase from the Holder thereof, pursuant to this Section 3.03, a portion of a Note if the principal amount of such portion is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to the purchase of all of a Note also apply to the purchase of such portion of such Note. Any purchase by the Company contemplated pursuant to the provisions of this Section 3.03 shall be consummated by the delivery of the consideration to be received by the Holder on the Change of Control Purchase Date.

(d) The Company shall deposit cash at the time and in the manner as provided in Section 3.05, sufficient to pay the aggregate Change of Control Purchase Price of all Notes to be purchased pursuant to this Section 3.03.

Section 3.04 Effect of Change of Control Purchase Notice.

Upon receipt by the Paying Agent of the Change of Control Purchase Notice and the Note specified in Section 3.03(c), the Holder of the Note in respect of which such Change of Control Purchase Notice was given shall thereafter be entitled to receive solely the Change of Control Purchase Price with respect to such Note. Such Change of Control Purchase Price shall be paid to such Holder, subject to receipts of funds by the Paying Agent, promptly following the Change of Control Purchase Date with respect to such Note (provided the conditions in Section 3.03(c) have been satisfied). If the Paying Agent holds money sufficient to pay the Change of Control Purchase Price of the Notes on the Business Day following the Change of Control Purchase Date, then:

(1) the Notes will cease to be outstanding;

(2) interest will cease to accrue; and

(3) all other rights of the Holder of the Notes will terminate.

This will be the case whether or not book-entry transfer of the Notes is made or whether or not the Notes are delivered to the Paying Agent.

Notes in respect of which a Change of Control Purchase Notice has been given by the Holder thereof may not be converted pursuant to the provisions hereof on or after the date of the delivery of such Change of Control Purchase Notice unless, such

Change of Control Purchase Notice has first been validly withdrawn as specified in the following paragraph.

A Change of Control Purchase Notice may be withdrawn by means of a written notice of withdrawal delivered to the office of the Paying Agent in accordance with the Change of Control Purchase Notice at any time prior to the close of business on the last Business Day prior to the Change of Control Purchase Date, specifying:

(1) the certificate number, if any, of the Note in respect of which such notice of withdrawal is being submitted;

(2) the principal amount of the Note with respect to which such notice of withdrawal is being submitted; and

(3) the principal amount, if any, of such Note which remains subject to the original Purchase Notice, and which has been or will be delivered for purchase by the Company.

There shall be no purchase of any Notes pursuant to Section 3.03 if there has occurred (prior to, on or after the giving, by the Holders of such Notes, of the required Change of Control Purchase Notice) and is continuing an Event of Default (other than a default in the payment of the Change of Control Purchase Price with respect to such Notes). The Paying Agent will promptly return to the respective Holders thereof any Notes (x) with respect to which a Change of Control Purchase Notice has been withdrawn in compliance with this Indenture, or (y) held by it during the continuation of an Event of Default (other than a default in the payment of the Change of Control Purchase Price with respect to such Notes) in which case, upon such return, the Change of Control Purchase Notice with respect thereto shall be deemed to have been withdrawn.

Section 3.05 Deposit of Change of Control Purchase Price.

Prior to 10:00 a.m. (local time in the City of New York) on the Change of Control Purchase Date, the Company shall deposit with the Trustee or with the Paying Agent (or, if the Company or a Subsidiary or an Affiliate of either of them is acting as the Paying Agent, shall segregate and hold in trust as provided in the Indenture) an amount of cash (in immediately available funds if deposited on such Business Day) sufficient to pay the aggregate Change of Control Purchase Price of all the Notes or portions thereof which are to be purchased as of the Change of Control Purchase Date.

Section 3.06 Notes Purchased in Part.

Any certificated Note which is to be purchased only in part shall be surrendered at the office of the Paying Agent (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to

the Company and the Trustee duly executed by, the Holder thereof or such Holder’s attorney duly authorized in writing) and the Company shall execute and the Trustee shall, upon receipt of a written order of the Company signed by two Officers, authenticate and deliver to the Holder of such Note, without service charge, a new Note or Notes, of any authorized denomination as requested by such Holder in aggregate principal amount equal to, and in exchange for, the portion of the principal amount of the Note so surrendered which is not purchased.

Section 3.07 Covenant to Comply With Securities Laws Upon Purchase of Notes.

When making any offers to purchase pursuant to the provisions of Section 3.03 hereof (if such offer or purchase constitutes an “issuer tender offer” for purposes of Rule 13e-4 (which term, as used herein, includes any successor provision thereto) under the Exchange Act at the time of such offer or purchase), the Company shall (i) comply with Rule 13e-4 and Rule 14e-1 (or any successor provision) under the Exchange Act, (ii) file the related Schedule TO (or any successor schedule, form or report) under the Exchange Act, and (iii) otherwise comply with all Federal and state securities laws so as to permit the rights and obligations under Section 3.03 to be exercised in the time and in the manner specified in Section 3.03.

Section 3.08 Repayment to the Company.

The Trustee and the Paying Agent shall return to the Company any cash that remains unclaimed, together with interest, if any, thereon held by them for the payment of the Change of Control Purchase Price; provided, however, that to the extent that the aggregate amount of cash deposited by the Company pursuant to Section 3.05 exceeds the aggregate Change of Control Purchase Price of the Notes or portions thereof which the Company is obligated to purchase as of the Change of Control Purchase Date, then, unless otherwise agreed in writing with the Company, promptly after the Business Day following the Change of Control Purchase Date, the Trustee shall return any such excess to the Company together with interest, if any, thereon. Prior to such return, any such excess funds held by the Paying Agent shall be invested in cash or Permitted Investments as may be directed by the Company from time to time.

ARTICLE IV

COVENANTS

Section 4.01 Compliance Certificate.

The following shall apply in lieu of Section 3.5 of the Original Indenture with respect to the Notes:

(a) The Company shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officer’s Certificate prescribed by the TIA stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default has occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto.

(b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 3.6 of the Original Indenture shall be accompanied by a written statement of the Company’s independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article 4 hereof or Article III or IV of the Original Indenture, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation.

(c) So long as any of the Notes are outstanding, the Company shall deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officer’s Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto.

Section 4.02 Taxes.

The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, all stamp taxes and other duties, if any, which may be imposed by the United States or any political subdivision thereof or taxing authority thereof or therein with respect to the issuance of the Notes. The Company shall not be required to make any payment with respect to any other tax, assessment or governmental charge imposed by any government or any political subdivision thereof or taxing authority thereof or therein.

Section 4.03 Stay, Extension and Usury Laws.

The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted.

Section 4.04 Corporate Existence.

Subject to Article IV of the Original Indenture and Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect:

(1) its corporate existence, and the corporate, partnership or other existence of each of its Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Subsidiary; and

(2) the rights (charter and statutory), licenses and franchises of the Company and its Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders of the Notes.

Section 4.05 Calculations in Respect of Notes.

The Company shall provide a schedule of all calculations called for under the Notes and this Indenture to the Trustee and the Conversion Agent, and each of the Trustee and Conversion Agent is entitled to rely upon the accuracy of the Company’s calculations without independent verification. The Trustee and/or the Conversion Agent shall forward the Company’s calculations to any Holder of Notes upon request of that Holder.

ARTICLE V

MERGER AND CONSOLIDATION OF COMPANY

Section 5.01 Lease of Properties.

Notwithstanding anything in the Original Indenture to the contrary, the Company shall not, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions, to any other Person.

ARTICLE VI

DEFAULTS AND REMEDIES

Section 6.01 Events of Default.

In addition to the Events of Default set forth in the Original Indenture, each of the following shall constitute an Event of Default with respect to the Notes:

(1) default in payment of accrued interest at maturity, when the same becomes due and payable;

(2) default in payment of the Change of Control Purchase Price or Redemption Price when the same becomes due and payable;

(3) default in the payment of the Principal Return (and cash in lieu of fraction shares) or failure to deliver the Net Shares, in each case when due, unless the Notes in respect of which such Principal Return (and cash in lieu of fractional shares) and Net Shares were due have been called for redemption in accordance with Section 3.02 hereof;

(4) default by the Company in the payment of the principal of any bond, debenture, note or other evidence of the Company’s Indebtedness, in each case for money borrowed, or in the payment of principal under any mortgage, indenture, agreement or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness of the Company for money borrowed, which default for payment of principal is individually or in an aggregate principal amount exceeding $50,000,000 (or its equivalent in any other currency or currencies) when such indebtedness becomes due and payable (whether at maturity, upon redemption or acceleration or otherwise), if such default shall continue unremedied or unwaived for

more than 30 days after the expiration of any grace period or extension of the time for payment applicable thereto.

The Company shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice of any event which with the giving of notice or the lapse of time or both would become an Event of Default under clause (c) of Section 5.1 of the Original Indenture or clause (4) of this Section 6.01. However, notwithstanding Section 5.1 of the Original Indenture, the Company need not deliver such written notice within 30 days after the occurrence thereof of any event which with the giving of notice or the lapse of time or both would become an Event of Default under clauses (e) or (f) of Section 5.1 of the Original Indenture.

ARTICLE VII

TRUSTEE

Section 7.01 Rights of Trustee.

(a) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company.

(b) In no event shall the Trustee be required to take notice of any default or breach hereof or any Event of Default hereunder, except for Events of Default specified in Section 6.01 hereof and/or Section 5.1(a) and/or 5.1(b) of the Original Indenture, unless and until the Trustee shall have received from a Holder of a Note or from the Company express written notice of the circumstances constituting the breach, default or Event of Default and stating that said circumstances constitute an Event of Default hereunder.

Section 7.02 Reports by Trustee to Holders of the Notes.

(a) The Trustee shall transmit by mail all reports as required by TIA Section 313(c).

Section 7.03 Eligibility; Disqualification.

Notwithstanding Section 6.10 of the Original Indenture, the Notes shall at all times have a Trustee that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by

federal or state authorities and that has a combined capital and surplus of at least $100.0 million as set forth in its most recent published annual report of condition.

In addition to Section 6.10 of the Original Indenture, the Notes shall at all times have a Trustee who satisfies the requirements of TIA Section 310(a)(1), (2) and (5).

ARTICLE VIII

DEFEASANCE

Section 8.01 No Defeasance.

Sections 7.2, 7.3 and 7.4 of the Original Indenture shall not apply to the Notes.

ARTICLE IX

AMENDMENT, SUPPLEMENT AND WAIVER

Section 9.01 Without Consent of Holders of Notes.

In addition to the purposes set forth in Section 8.1 of the Original Indenture, the Company and the Trustee may amend this Indenture or the Notes or enter into an indenture or indentures supplement hereto (which shall conform to the provisions of the Trust Indenture Act as then in effect) without notice to or the consent of any Holder of a Note:

(1) to provide for uncertificated Notes in place of certificated Notes or to provide for bearer Notes; or

(2) to conform the text of the Indenture or the Notes to any provisions of the Description of the Notes section of the Prospectus Supplement to the extent that such provision of the Description of the Notes section of the Prospectus Supplement was intended to be a verbatim recitation of a provision of the Indenture or the Notes.

Section 9.02 With Consent of Holders of Notes.

In addition to clauses (a) through (f) of Section 8.2 of the Original Indenture, without the consent of each Holder affected, an amendment or supplement under Section 8.2 of the Original Indenture may not:

(1) make any change in any conversion right to the detriment of a Holder; or

(2) make a change in the percentage of principal amount of the Notes necessary to waive compliance with any provision of the Indenture or to make any change in Section 8.2 of the Original Indenture, as supplemented by this provision, for modification.

ARTICLE X

CONVERSION

Section 10.01 Conversion Privilege.

(a) Subject to the provisions of this Article 10, a Holder of a Note may convert such Note into cash and Common Stock equal to the Conversion Value in accordance with Section 10.15, if any of the following conditions are satisfied and only during the periods set forth in this Section 10.01:

(1) during any calendar quarter (the “Quarter”) commencing after the date of issuance of the Notes, if the Common Stock Price for at least 20 Trading Days in the period of 30 consecutive Trading Days ending on the last Trading Day of the Quarter immediately preceding the Quarter in which the conversion occurs (appropriately adjusted to take into account the occurrence, during such 30 consecutive Trading Day period, of any event requiring adjustment of the Conversion Price under this Indenture) is more than 120% of the Conversion Price on such 30th Trading Day;

(2) at any time following May 31, 2014;

(3) (A) during the five Trading Day period immediately after a period of five consecutive Trading Days in which the Trading Price of $1,000 principal amount of Notes for each such Trading Day in such period was less than 95% of the product of (x) the Common Stock Price on such Trading Day multiplied by (y) the Conversion Rate on such Trading Day.

(B) Notwithstanding the foregoing, if on the date of any conversion pursuant to Section 10.01(a)(3)(A), the Common Stock Price on such date is greater than the Conversion Price on such date but less than 120% of the Conversion Price on such date, then the Conversion Value a Holder of Notes will be entitled to receive will be equal to the principal amount of the Notes held by such Holder as of the Conversion Date plus accrued

and unpaid interest to the Conversion Date (such a conversion, a “Principal Value Conversion”) and the number of Net Shares (and any cash in lieu of fractional shares) to be delivered upon a Principal Value Conversion will be determined in accordance with Section 10.15; and provided further that, in place of the Five Day Average Closing Stock Price, such number of Net Shares will be calculated using an amount equal to the greater of (i) the Conversion Price on the Conversion Date and (ii) the Common Stock Price on the Conversion Date;

(4) during the periods set forth in Section 10.01(c) upon (i) a distribution to all or substantially all holders of Common Stock of rights, warrants or options entitling them to subscribe for or purchase, for a period expiring within 60 days of the date of such distribution, shares of Common Stock at a price less than the Common Stock Price on the Trading Day immediately preceding the date of declaration of such distribution or (ii) a distribution to all or substantially all holders of Common Stock evidences of Company indebtedness, rights or warrants to purchase or subscribe for Capital Stock or other securities of the Company, or assets, which distribution has a per share value that exceeds 12.5% of the Common Stock Price on the Trading Day immediately preceding the declaration date of such distribution; provided that, the Holder shall have no right to convert any Note pursuant to Section 10.01(c) hereof if the Holder of a Note otherwise participates in the issuance or distribution described in this Section 10.01(a)(4) without conversion of such Holder’s Notes; or

(5) (A) during the period set forth in clause (B) below, if the Company is party to a consolidation, merger, share exchange, sale of all or substantially all of its assets or other similar transaction pursuant to which the Common Stock is subject to conversion into shares of stock (other than Common Stock), other securities or property (including cash) subject to Section 10.12; provided that if such conversion occurs after the effective date of such transaction, the Holder will receive on conversion the consideration determined in accordance with Section 10.12.

(B) The Notes shall be convertible pursuant to clause (A) above at any time from and after the date that is 15 days prior to the date of the anticipated effective time (as publicly announced by the Company) of such transaction until and including the date that is 15 days after the actual effective date of such transaction.

(C) If (i) a Holder elects to convert its Notes pursuant to this Article upon the occurrence of a transaction described clause (5)(A) above, (ii) such transaction also constitutes a Change of Control (regardless of whether a Holder has the right to require the repurchase of Notes pursuant to Section 3.03) and (iii) 10% or more of the consideration for the Common Stock (valued as set forth in Section 10.06 hereof) consists of cash, other property or securities that are not traded or scheduled to be traded or scheduled to be traded immediately following such transaction on a United States national securities exchange or the Nasdaq National Market, then, for purposes of determining the Conversion Value, the Conversion Price in respect of such Notes shall be decreased such that the Conversion Rate shall be increased by an additional number of shares of Common Stock (the “Additional Shares”) determined as set forth in Section 10.06.

(b) In the case of any distribution described in Section 10.01(a)(3), the Bid Solicitation Agent shall have no obligation to determine the Trading Price of the Notes unless the Company has requested such determination in writing, and the Company shall have no obligation to make such request unless a Holder of the Notes provides the Company with reasonable evidence that the Trading Price of the Notes on any date would be less than 95% of the product of (x) the Common Stock Price on such date and (y) the Conversion Rate then in effect. Upon receipt of such reasonable evidence, the Company shall instruct the Bid Solicitation Agent in writing to determine the Trading Price beginning on the next Trading Day and on each successive Trading Day until the Trading Price of the Notes is greater than or equal to 95% of the product of the Common Stock Price and the Conversion Rate. The Company shall make the calculations described in Section 10.01(a)(3) hereof, using the Trading Price of the Notes provided by the Bid Solicitation Agent and will advise the Trustee (or Conversion Agent, as the case may be) within a reasonable time (and, in any event, no later than three Business Days prior to the Conversion Date) of any determination of the Trading Price of the Notes. In the case of the foregoing Section 10.01(a)(4)(i) and Section 10.01(a)(4)(ii), the Company shall cause a notice of such distribution to be filed with the Trustee and the Conversion Agent and to be mailed to each Holder of Notes no later than 20 days prior to the Ex-Dividend Date for such distribution. Once the Company has given such notice, Holders may surrender their Notes for conversion by delivering the Notes to the Conversion Agent at any time thereafter until the earlier of the close of business on the Business Day prior to the Ex-Dividend Date or the Company’s announcement that such distribution will not take place; provided that, the Holder shall have no right to convert any Note pursuant to this Section 10.01(c) if the Holder of a Note otherwise participates in the distribution described in either Section 10.01(a)(4)(i) or Section 10.01(a)(4)(ii) without conversion of such Holder’s Notes. The “Ex-Dividend Date” for any such distribution means the date immediately prior to the commencement of “ex-dividend” trading for such distribution on The New York Stock Exchange or such other national

securities exchange or The Nasdaq Stock Market or similar system of automated dissemination of quotations of securities prices on which the Common Stock is then listed or quoted.

(c) A Holder may convert a portion of a Note equal to $1,000 principal amount or any integral multiple thereof. Provisions of this Indenture that apply to conversion of all of a Note also apply to conversion of a portion of a Note. A Note in respect of which a Holder has delivered a Change of Control Purchase Notice pursuant to Section 3.03 may not be converted unless such Change of Control Purchase Notice is withdrawn pursuant to Section 3.04.

(d) A Holder of Notes is not entitled to any rights of a holder of Common Stock until, and only to the extent that, such Holder has converted its Notes into Common Stock.

Section 10.02 Conversion Procedure.

(a) To convert a Note, a Holder must satisfy the requirements of this Article 10 and (i) complete and manually sign the irrevocable conversion notice on the back of the Note and deliver such notice to the Conversion Agent, (ii) if the Notes are in certificated form, deliver the Note to the Conversion Agent, (iii) furnish appropriate endorsements and transfer documents if required by the Registrar or the Conversion Agent, (iv) pay any transfer or other tax, if required by Section 10.03 and/or (v) if the Note is held in book-entry form, complete and deliver to the Depositary appropriate instructions pursuant to the Applicable Procedures. The later of (x) the date on which the Holder satisfies all of the foregoing requirements and (y) the Determination Date is the “Conversion Date.” As soon as practicable after the Conversion Date and in any event within four Business Days thereof, the Company shall deliver to the Holder through the Conversion Agent (1) cash in the amount calculated in accordance with Section 10.15 and (2) either (A) a certificate for or (B) a book-entry notation of the number of whole shares of Common Stock issuable upon the conversion and cash in lieu of any fractional shares pursuant to Section 10.15.

(b) The Person in whose name the Note is registered shall be deemed to be a stockholder of record on the Conversion Date; provided that no surrender of a Note on any date when the stock transfer books of the Company shall be closed shall be effective to constitute the Person or Persons entitled to receive the shares of Common Stock upon such conversion as the record holder or holders of such shares of Common Stock on such date, but such surrender shall be effective to constitute the Person or Persons entitled to receive such shares of Common Stock as the record holder or holders thereof for all purposes at the close of business on the next succeeding day on which such stock transfer books are open (subject to the provisions of the next paragraph of this Section 10.02); provided that such conversion shall be at the Conversion Price in effect on the date that such Note shall have been surrendered for conversion, as if the stock

transfer books of the Company had not been closed. Upon conversion of a Note, such Person shall no longer be a Holder of such Note.

(c) No payment or adjustment will be made for accrued interest, on a converted Note or for dividends or distributions on shares of Common Stock issued upon conversion of a Note, but if any Holder surrenders a Note for conversion between the record date for the payment of an installment of interest and the next interest payment date, then, notwithstanding such conversion, the interest, payable on such interest payment date shall be paid to the Holder of such Note on such interest payment date. In such event, such Note, when surrendered for conversion, must be accompanied by delivery of a check payable to the Conversion Agent in an amount equal to the interest, payable on such interest payment date on the portion so converted. If such payment does not accompany such Note, the Note shall not be converted; provided that no such check shall be required if such Note is surrendered for conversion on the interest payment date. If the Company defaults in the payment of interest, payable on the interest payment date, the Conversion Agent shall repay such funds to the Holder.

(d) Upon surrender of a Note that is converted in part, the Company shall execute, and the Trustee shall, upon receipt of a written order of the Company signed by two Officers, authenticate and deliver to the Holder, a new Note equal in principal amount to the unconverted portion of the Note surrendered.

Section 10.03 Taxes on Conversion.

If a Holder submits a Note for conversion, the Company shall pay any documentary, stamp or similar issue or transfer tax due on the issue of shares of Common Stock upon the conversion. However, the Holder shall pay any such tax which is due because the Holder requests the shares to be issued in a name other than the Holder’s name. The Conversion Agent may refuse to deliver the certificates representing the shares of Common Stock being issued in a name other than the Holder’s name until the Conversion Agent receives a sum sufficient to pay any tax which will be due because the shares are to be issued in a name other than the Holder’s name. Nothing herein shall preclude any income tax withholding required by law or regulations.

Section 10.04 Company to Provide Stock.

The Company has reserved shares of Common Stock to permit delivery of shares of Common Stock upon conversion of the Notes up to an assumed Five Day Average Closing Stock Price, and from time to time as may be necessary shall reserve out of its authorized but unissued shares of Common Stock a sufficient number of additional shares of Common Stock to permit delivery of shares of Common Stock upon the conversion of the Notes in full.

All shares of Common Stock delivered upon conversion of the Notes shall be newly issued shares or treasury shares, shall be duly and validly issued and fully paid and nonassessable, shall be free from preemptive rights and free of any lien or adverse claim, and shall have the same rights as all of the other outstanding shares of the Company’s Common Stock. The Company will endeavor promptly to comply with all federal and state securities laws regulating the offer and delivery of shares of Common Stock upon conversion of Notes, if any, and will list or cause to have quoted such shares of Common Stock on each national securities exchange or in the over-the-counter market or such other market on which the shares of Common Stock are then listed or quoted.

Section 10.05 Adjustment of Conversion Price.

The Conversion Price shall be adjusted (without duplication) from time to time by the Company as follows:

(a) In case the Company shall pay a dividend or make a distribution on the Common Stock payable exclusively in Common Stock, the Conversion Price in effect at the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be decreased by dividing such Conversion Price by a fraction of which the denominator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination and the numerator shall be the sum of (i) such number of shares and (ii) the total number of shares constituting such dividend or other distribution, such decrease to become effective immediately after the opening of business on the day following the date fixed for such determination. For the purposes of this paragraph (a), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company. In the event that such dividend or distribution is not so paid or made, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such dividend or distribution had not occurred.

(b) In case the Company shall pay or make a dividend or other distribution on its Common Stock consisting exclusively of, or shall otherwise issue to all holders of its Common Stock, rights, warrants or options, in each case entitling the holders thereof to subscribe for or purchase shares of Common Stock at a price per share less than the Market Price per share of the Common Stock on the date fixed for the determination of stockholders entitled to receive such rights, warrants or options, the Conversion Price in effect at the opening of business on the day following the date fixed for such determination shall be decreased by dividing such Conversion Price by a fraction of which the denominator shall be the sum of (i) the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus (ii) the number of shares of Common Stock which the aggregate of the offering price of the total number of shares of Common Stock so offered for subscription or purchase would purchase at such Market Price and the numerator shall be the sum of (i) the number of shares of Common Stock outstanding at the close of business on the date fixed for such

determination plus (ii) the number of shares of Common Stock so offered for subscription or purchase, such decrease to become effective immediately after the opening of business on the day following the date fixed for such determination; provided, however, that no adjustment shall be made if Holders of the Notes may participate in the transaction on a basis and with notice that the Company’s Board of Directors deems to be fair and appropriate. To the extent that rights are not so issued or shares of Common Stock are not so delivered after the expiration of such rights, warrants or options, the Conversion Price shall be readjusted to the Conversion Price which would then be in effect if such date fixed for the determination of stockholders entitled to receive such rights, warrants or options, had not been fixed. For the purposes of this paragraph (b), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company.

(c) In case the Company shall declare a cash dividend or distribution to all or substantially all of the holders of Common Stock, the Conversion Price shall be decreased so that the Conversion Price shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the record date for such dividend or distribution by a fraction,

(i) the numerator of which shall be the average of the Common Stock Prices for the three consecutive Trading Days ending on the date immediately preceding the Ex-Dividend Date for such dividend or distribution (the “Pre-Dividend Sale Price”), minus the full amount of such cash dividend or distribution, to the extent payable in cash, applicable to one share of Common Stock, and

(ii) the denominator of which shall be the Pre-Dividend Sale Price, such adjustment to become effective immediately after the record date for such dividend or distribution; provided, that no adjustment to the Conversion Price or the ability of a Holder of a Note to convert will be made pursuant to this Section 10.05(c) if the Company provides that Holders of Notes will participate in such cash dividend or distribution on an as-converted basis without conversion; provided further, that if the numerator of the foregoing fraction is less than $1.00 (including a negative amount), then in lieu of the foregoing adjustment, adequate provision shall be made so that each Holder shall have the right to receive upon conversion, in addition to the Common Stock issuable upon such conversion (and any cash in lieu of fractional shares), the amount of cash such Holder would have received had such Holder converted its Note on the record date for such dividend or distribution at the Conversion Rate and for the Conversion Value in effect on such record date. If such dividend or distribution is not so paid or made, the Conversion Price shall be adjusted to the Conversion Price that would then be in effect if such dividend or distribution had not been declared.

(d) Subject to the last sentence of this paragraph (d), in case the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock

evidences of its indebtedness, shares of any class or series of Capital Stock, cash or assets (including securities, but excluding any rights, warrants or options referred to in paragraph (b) of this Section 10.05 and any cash dividend or distribution referred to in paragraph (c) of this Section 10.05), the Conversion Price shall be decreased so that the same shall equal the price determined by dividing the Conversion Price in effect immediately prior to the effectiveness of the Conversion Price decrease contemplated by this paragraph (d) by a fraction of which the denominator shall be the Market Price per share of the Common Stock on the date fixed for the determination of stockholders entitled to receive such distribution (the “Reference Date”) less the Fair Market Value, on the Reference Date, of the portion of the evidences of indebtedness, shares of capital stock, cash and/or assets so distributed applicable to one share of Common Stock and the numerator shall be such Market Price per share of the Common Stock, such decrease to become effective immediately prior to the opening of business on the day following the Reference Date; provided that if the Fair Market Value of the portion of the evidences of indebtedness, shares of capital stock, cash and/or assets so distributed applicable to one share of Common Stock shall be greater than the Market Price per share of Common Stock, then in lieu of the foregoing adjustment, adequate provision shall be made so that each Holder shall have the right to receive upon conversion, in addition to the Common Stock issuable upon such conversion (and any cash in lieu of fractional shares), the amount of evidences of indebtedness, shares of capital stock, cash and/or assets so distributed that such Holder would have received had such Holder converted its Note on the record date for such dividend or distribution at the Conversion Rate and for the Conversion Value in effect on such record date; and provided, further, that no adjustment shall be made if all Holders of Notes are entitled to participate in such transactions. In the event that such dividend or distribution is not so paid or made, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such dividend or distribution had not occurred. For purposes of this paragraph (d), any dividend or distribution that includes shares of Common Stock or rights, warrants or options to subscribe for or purchase shares of Common Stock shall be deemed instead to be (i) a dividend or distribution of the evidences of indebtedness, shares of Capital Stock, cash and/or assets other than such shares of Common Stock or such rights or warrants (making any Conversion Price decrease required by this paragraph (d)) immediately followed by (ii) a dividend or distribution of such shares of Common Stock or such rights, warrants or options (making any further Conversion Price decrease required by paragraph (a) or (b) of this Section 10.05), except any shares of Common Stock included in such dividend or distribution shall not be deemed “outstanding at the close of business on the date fixed for such determination” within the meaning of paragraph (a) of this Section 10.05.

(e) In case outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the Conversion Price in effect at the opening of business on the Business Day following the day upon which such subdivision becomes effective shall be proportionately decreased and, conversely, in case outstanding shares of Common Stock shall each be combined into a smaller number of shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately increased, such increase or decrease, as the case may be, to become

effective immediately after the opening of business on the Business Day following the day upon which such subdivision or combination becomes effective.

(f) In case the Company pays to holders of Common Stock in respect of a tender or exchange offer, other than an odd-lot offer, by the Company or any of its Subsidiaries for Common Stock to the extent that the offer involves aggregate consideration that, together with (1) any cash and the Fair Market Value of any other consideration payable in respect of any tender offer by the Company or any of its Subsidiaries for shares of Common Stock consummated within the preceding 12 months not triggering a Conversion Price adjustment and (2) all-cash distributions to all or substantially all holders of the Company’s Common Stock made within the preceding 12 months not triggering a Conversion Price adjustment, exceeds an amount equal to 12.5% of the market capitalization of Common Stock on the expiration date of the tender offer, the Conversion Price shall be decreased so that the same shall equal the price determined by dividing the Conversion Price in effect immediately prior to the effectiveness of the Conversion Price decrease contemplated by this Section 10.05(f) by a fraction of which the denominator shall be the number of shares of Common Stock outstanding (including any tendered or exchanged shares) at the last time tenders of exchanges may be made pursuant to such tender or exchange offer (the “Expiration Time”) multiplied by the Market Price per share of the Common Stock on the Trading Day next succeeding the Expiration Time and the numerator shall be the sum of (x) the Fair Market Value (determined as aforesaid) of the aggregate consideration payable to stockholders based on the acceptance (up to any maximum specified in the terms of the tender or exchange offer) of all shares validly tendered or exchanged and not withdrawn as of the Expiration Time (the shares deemed so accepted, up to any such maximum, being referred to as the “Purchased Shares”) and (y) the product of the number of shares of Common Stock outstanding (less any Purchased Shares) at the Expiration Time and the Market Price per share of the Common Stock on the Trading Day next succeeding the Expiration Time, such decrease to become effective immediately prior to the opening of business on the Business Day following the Expiration Time.

In any case in which this Section 10.05 shall require that an adjustment be made immediately following a record date established for purposes of this Section 10.05, the Company may elect to defer (but only until five Business Days following the filing by the Company with the Trustee of the certificate described in Section 10.10) issuing to the holder of any Note converted after such record date the shares of Common Stock issuable upon such conversion over and above the shares of Common Stock issuable upon such conversion only on the basis of the Conversion Price prior to adjustment; and, in lieu of the shares the issuance of which is so deferred, the Company shall issue or cause its transfer agents to issue due bills or other appropriate evidence of the right to receive such shares.

Section 10.06 Adjustment for Certain Changes of Control.

The number of Additional Shares in connection with an adjustment of the Conversion Price as set forth in Section 10.01(a)(5)(C) shall be determined by reference to the table attached as Schedule A hereto, based on the date on which the corporate transaction becomes effective (the “Effective Date”) and the stock price paid per share of Common Stock (valued as set forth in the next paragraph) in the corporate transaction (the “Stock Price”); provided that if the Stock Price is between two Stock Price amounts in the table or the Effective Date is between two Effective Dates in the table, the number of Additional Shares will be determined by a straight-line interpolation between the number of Additional Shares set forth for the higher and lower Stock Price amounts and the two dates, as applicable, based on a 365-day year.

The Stock Price per share of Common Stock shall be valued as follows:

(i) if holders of the Common Stock receive only cash in the corporate transaction, the Stock Price shall be the cash amount paid per share of the Common Stock, and

(ii) in all other cases, the Stock Price shall be the average of the Common Stock Price on the five Trading Days prior to but not including the Effective Date.

Notwithstanding the foregoing, (i) if the Stock Price is equal to or greater than $20 or less than $3.10 (subject in each case to adjustment as described below), the number of Additional Shares shall be zero and (ii) in no event may the total number of shares of Common Stock issuable upon conversion exceed approximately 322.5806 per $1,000 principal amount of Notes, subject to adjustments in the same manner as the Conversion Price as set forth in Section 10.05. The maximum amount of Additional Shares payable shall be 72.5806 per $1,000 principal amount of Notes, subject to adjustments on the same basis.

The Stock Prices set forth in the first row of the table (i.e., column headers) in Schedule A hereto and set forth in the proviso at the first sentence of the first paragraph of this Section will be adjusted as of any date on which the Conversion Price of the Notes is adjusted pursuant to Section 10.05. The adjusted Stock Prices will equal the Stock Prices applicable immediately prior to such adjustment, multiplied by a fraction, the numerator of which is the Conversion Rate immediately prior to the adjustment giving rise to the Stock Price adjustment and the denominator of which is the Conversion Rate as so adjusted. The number of Additional Shares will be adjusted in the same manner as the Conversion Price as set forth in Section 10.05.

Section 10.07 When No Adjustment Required.

No adjustment of the Conversion Price shall be made:

(a) upon the issuance of any shares of Common Stock pursuant to any present or future plan providing for the reinvestment of dividends or interest

payable on securities of the Company and the investment of additional optional amounts in shares of Common Stock under any plan,

(b) upon the issuance of any shares of Common Stock or options or rights to purchase those shares pursuant to any present or future employee, director or consultant benefit plan or program of the Company,

(c) upon the issuance of any shares of Common Stock pursuant to any option, warrant, right or exercisable, exchangeable or convertible security outstanding as of the date the Notes were first issued,

(d) upon the issuance of any rights, any distribution of separate certificates representing the rights, any exercise or redemption of any rights or any termination or invalidation of the rights, pursuant to the Company’s stockholders rights plan, or

(e) for a change in the par value or no par value of the shares of Common Stock.

There shall also be no adjustment of the Conversion Price in case of the issuance of any Common Stock (or securities convertible into or exchangeable for Common Stock), except as specifically described above.

Section 10.08 When Adjustment May Be Deferred.

No adjustment in the Conversion Price need be made unless the adjustment would require an increase or decrease of at least 1% in the Conversion Price (other than an adjustment described in Section 10.05(f)). Any adjustments that are not made under this Section 10.08 shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article 10 shall be made to the nearest cent, with one-half cent rounded up, or to the nearest 1/1,000th of a share, with 1/500th of a share being rounded up, as the case may be.

Section 10.09 Successive Adjustments.

After an adjustment to the Conversion Price under this Article 10, any subsequent event requiring an adjustment under this Article 10 shall cause an adjustment to the Conversion Price as so adjusted.

Section 10.10 Notice of Adjustment.

Whenever the Conversion Price is adjusted, the Company shall promptly mail to Holders of Notes a notice of the adjustment and concurrently file with the Trustee and the Conversion Agent such notice and a certificate from the Company’s independent public accountants briefly stating the facts requiring the adjustment and the manner of computing such adjustment. The certificate shall be conclusive evidence that such adjustment is correct. Neither the Trustee nor any Conversion Agent shall be under any duty or responsibility with respect to any such notice and certificate (or the receipt of such notice and certificate or with the knowledge of any adjustment absent such notice and certificate) except to exhibit the same to any Holder desiring inspection thereof.

Section 10.11 Notice of Certain Transactions.

The Company shall mail to Holders of Notes and file with the Trustee and/or the Conversion Agent a notice stating the proposed record date for a dividend or distribution or the proposed effective date of a subdivision, combination, reclassification, consolidation, merger, binding share exchange, transfer, liquidation or dissolution, if any of the following occur:

(a) the Company takes any action that would require an adjustment in the Conversion Price pursuant to Section 10.05 (unless no adjustment is to occur pursuant to Section 10.06); or

(b) the Company takes any action that would require a supplemental indenture pursuant to Section 10.12; or

The Company shall file and mail such notice at least 15 days before the applicable date of any such transaction. Failure to file or mail the notice or any defect in it shall not affect the validity of the transaction.

Section 10.12 Effect of Reclassification, Consolidation, Merger, Share Exchange or Sale on Conversion Privilege.

If any of the following shall occur: (i) any reclassification or change of outstanding shares of Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination); (ii) any consolidation, combination, merger or share exchange to which the Company is a party other than a merger in which the Company is the continuing corporation and which does not result in any reclassification of, or change (other than a change in name, or par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination) in, outstanding shares of Common Stock; or (iii) any sale or conveyance of all or substantially all of the assets of the Company; then the Company, or such successor or purchasing corporation, as the

case may be, shall, as a condition precedent to such reclassification, change, consolidation, merger, share exchange, sale or conveyance, execute and deliver to the Trustee a supplemental indenture providing that the Holder of each Note then outstanding shall have the right to convert such Note into the kind and amount of shares of Capital Stock and other securities and property (including cash) receivable upon such reclassification, change, consolidation, merger, share exchange, sale or conveyance by a holder of the number of shares of Common Stock deliverable upon conversion of such Note immediately prior to such reclassification, change, consolidation, merger, share exchange, sale or conveyance. Such supplemental indenture shall provide for adjustments of the Conversion Price which shall be as nearly equivalent as may be practicable to the adjustments of the Conversion Price provided for in this Article 10. If, in the case of any such consolidation, merger, share exchange, sale or conveyance, the stock or other securities and property (including cash) receivable thereupon by a holder of Common Stock includes shares of Capital Stock or other securities and property of a corporation other than the successor or purchasing corporation, as the case may be, in such consolidation, merger, share exchange, sale or conveyance, then such supplemental indenture shall also be executed by such other corporation and shall contain such additional provisions to protect the interests of the Holders of the Notes as the Board of Directors of the Company shall reasonably consider necessary by reason of the foregoing. The provision of this Section 10.12 shall similarly apply to successive consolidations, mergers, share exchanges, sales or conveyances. Notwithstanding the foregoing, a distribution by the Company to all or substantially all holders of its Common Stock for which an adjustment to the Conversion Price or provision for conversion of the Notes may be made pursuant to Section 10.05 shall not be deemed to be a sale or conveyance of all or substantially all of the assets of the Company for purposes of this Section 10.12.

In the event the Company shall execute a supplemental indenture pursuant to this Section 10.12, the Company shall promptly file with the Trustee an Opinion of Counsel stating that such supplemental indenture is authorized or permitted by this Indenture and an Officer’s Certificate briefly stating (a) the reasons therefor, (b) the kind or amount of shares of stock or securities or property (including cash) receivable by Holders of the Notes upon the conversion of their Notes after any such reclassification, change, consolidation, merger, share exchange, sale or conveyance, (c) any adjustment to be made with respect thereto and (d) that all conditions precedent have been complied with.

Section 10.13 Trustee’s Disclaimer.

The Trustee has no duty to determine when an adjustment under this Article 10 should be made, how it should be made or what such adjustment should be made, but may accept as conclusive evidence of the correctness thereof, and shall be protected in relying upon, the Officer’s Certificate with respect thereto, which the Company is obligated to file with the Trustee pursuant to Section 10.10. The Trustee shall not be accountable for and makes no representation as to the validity or value of any securities or assets issued upon conversion of Notes, and the Trustee shall not be

responsible for the Company’s failure to comply with any provisions of this Article 10. Each Conversion Agent (other than the Company or an Affiliate of the Company) shall have the same protection under this Section 10.13 as the Trustee.

The Trustee shall not be under any responsibility to determine the correctness of any provisions contained in any supplemental indenture executed pursuant to Section 10.12, but may accept as conclusive evidence of the correctness thereof, and shall be protected in relying upon, the Officer’s Certificate with respect thereto, which the Company is obligated to file with the Trustee pursuant to Section 10.12 of this Indenture.

Section 10.14 Voluntary Reduction.

The Company from time to time may decrease the Conversion Price by any amount at any time for at least 20 days, so long as the decrease is irrevocable during such 20-day period. Whenever the Conversion Price is decreased, the Company shall mail to Holders of Notes and file with the Trustee and the Conversion Agent a notice of the decrease. The Company shall mail the notice at least 15 days before the date the decreased Conversion Price takes effect. The notice shall state the decreased Conversion Price and the period during which it will be in effect. A voluntary decrease of the Conversion Price does not change or adjust the Conversion Price otherwise in effect for purposes of Section 10.15.

Section 10.15 Conversion Value of Notes Tendered.

(a) Subject to certain exceptions described in Sections 10.01(a)(3) and 10.01(a)(4), Holders tendering the Notes for conversion shall be entitled to receive, upon conversion of such Notes, cash and shares of Common Stock, the value of which (the “Conversion Value”) shall be equal to the product of:

(1) (A) the aggregate principal amount of Notes to be converted divided by 1,000 multiplied by (B) the Conversion Rate (including Additional Shares, if any); and

(2) the average of the Common Stock Price for the five consecutive Trading Days (appropriately adjusted to take into account the occurrence during such period of stock splits and similar events) including and immediately following the second Trading Day following the day the Notes are tendered for conversion (the “Five Day Average Closing Stock Price”).

(b) Subject to certain exceptions described below and under Sections 10.01(a)(3) and 10.01(a)(4), the Company shall deliver the Conversion Value to converting holders as follows:

(1) an amount in cash (the “Principal Return”) equal to the lesser of (a) the aggregate Conversion Value of the Notes to be converted and (b) the aggregate principal amount of Notes to be converted as of the date tendered for conversion;

(2) subject to the exceptions described below, if the aggregate Conversion Value of the Notes to be converted is greater than the aggregate Principal Return of the Notes to be converted, an amount in shares (the “Net Shares”), determined as set forth below, equal to the difference between such aggregate Conversion Value and such aggregate Principal Return (the “Net Share Amount”); and

(3) an amount paid in cash, determined as set forth below, for any fractional shares of Common Stock.

The number of Net Shares to be paid shall be determined by dividing the Net Share Amount by the Five Day Average Closing Stock Price. Holders of Notes will not receive a fractional share upon conversion of a Note. Instead, the Holder will receive cash for the value of the fractional share. The cash payment for fractional shares shall be based on the Five Day Average Closing Stock Price.

The Conversion Value, Principal Return, number of Net Shares and Net Share Amount shall be determined by the Company at the end of the fifth consecutive Trading Day including and immediately following the second Trading Day after the day the Notes are tendered for conversion (the “Determination Date”).

(c) The Company shall pay the Principal Return and cash for fractional shares and deliver the Net Shares, if any, as promptly as practicable after the Conversion Date, but in no event later than four Business Days thereafter, subject to Section 3.02. Delivery of the Principal Return, Net Shares and cash in lieu of fractional shares shall be deemed to satisfy the Company’s obligation to pay the principal amount of the Notes, as well as accrued interest payable on the Notes, except as described below. Accrued interest shall be deemed paid in full rather than canceled, extinguished or forfeited. The Company shall not adjust the Conversion Price to account for the accrued interest. Except as described in the following sentence, upon conversion of any Notes on a date that is not an interest payment date, Holders will not be entitled to receive any additional cash payment representing accrued and unpaid interest for the period from the immediately preceding interest payment date to the Conversion Date with respect to the converted Notes and such interest will be deemed paid in full. Nonetheless, if Notes are converted after a regular record date and prior to the opening of business on the next interest payment date, including the date of maturity, Holders of such Notes, at the close of business on the next regular record date shall receive the interest payable on such Notes on the corresponding interest payment date notwithstanding the conversion. Such Notes, upon surrender for conversion, must be accompanied by funds equal to the amount of interest payable on that interest payment date on the Notes so converted.

(d) If an Event of Default as set forth in Section 5.1(e) or (f) of the Original Indenture has occurred and is continuing, the Company may not pay cash upon conversion of any Notes (other than cash in lieu of fractional shares) and instead will make payment only through the delivery of shares of Common Stock, provided that Holders shall receive an amount in cash in lieu of any fractional shares. The number of shares of Common Stock to be delivered will be equal to (A) the aggregate principal amount of Notes to be converted divided by 1,000 multiplied by (B) the Conversion Rate.

(e) Neither the Trustee nor the Conversion Agent has any duty to determine or calculate the Conversion Value, Principal Return, number of Net Shares, the Net Share Amount of any other computation required under this Article 10, all of which shall be determined by the Company (or the Bid Solicitation Agent, as the case may be) in accordance with the provisions of this Indenture and the Trustee and Conversion Agent shall not be under any responsibility to determine the correctness of any such determinations and/or calculations and may conclusively rely on the correctness thereof.

ARTICLE XI

SUBORDINATION

Section 11.01 Agreement to Subordinate.

The Company covenants and agrees, and each Holder of Notes by such Holder’s acceptance thereof likewise covenants and agrees, that all Notes shall be issued subject to the provisions of this Article 11; and each Holder of a Note, whether upon original issue or upon transfer or assignment thereof, accepts and agrees to be bound by such provisions. The payment by the Company of the principal of, premium, if any, interest and other Obligations with respect to all Notes issued hereunder shall, to the extent and in the manner hereinafter set forth, be subordinated and junior in right of payment to the prior payment in full in cash of principal of (and premium, if any), interest and all other Obligations with respect to all Senior Debt, whether outstanding at the date of this Third Supplemental Indenture or thereafter incurred; provided, however, that no provision of this Article 11 shall prevent the occurrence of any Default or Event of Default hereunder.

Section 11.02 Default On Senior Debt.

In the event and during the continuation of any default by the Company in the payment of principal, premium, if any, interest on or any other Obligation relating to, any Senior Debt when the same becomes due and payable (a “Payment Default”), whether at maturity or at a date fixed for prepayment or by declaration of acceleration or otherwise, and such Payment Default continues beyond the period of grace, if any, specified in the instrument evidencing such Senior Debt, then unless and until such Payment Default shall have been cured or waived or shall have ceased to exist or all

Senior Debt and all Obligations relating thereto have been paid in full in cash (and in the event that the maturity of any Senior Debt has been accelerated because of a default, the holders of all Senior Debt outstanding have been paid in full in cash), then no direct or indirect payment or distribution (in cash, property, securities, by set-off or otherwise) shall be made or agreed to be made with respect to the principal of (including redemption payments), premium, if any, or interest on, or any other Obligations relating to, the Notes or in respect of any redemption, repayment, retirement, purchase or other acquisition of any of the Notes.

In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee when such payment is prohibited by the preceding paragraph of this Section 11.02, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to the holders of Senior Debt, or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Debt may have been issued, as their respective interests may appear, but only to the extent that the holders of the Senior Debt (or their representative or representatives or a trustee) notify the Trustee in writing within 180 days of such payment of the amounts then due and owing to the holders of such Senior Debt and only the amounts specified in such notice to the Trustee shall be paid to the holders of such Senior Debt.

Section 11.03 Liquidation; Dissolution; Bankruptcy.

Upon any direct or indirect payment by or on behalf of the Company or direct or indirect distribution of assets of the Company of any kind or character, whether in cash, property or securities, by set-off or otherwise, to creditors upon any dissolution or winding up or liquidation or reorganization of the Company or assignment for the benefit of creditors or marshaling of assets, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or other proceedings, all amounts (including principal, premium, if any, and interest) due or to become due upon all Senior Debt shall first be paid in full in cash, or such payment thereof provided for in money in accordance with its terms, before any payment or distribution is made on account of the principal (and premium, if any), interest or any other Obligation relating to the Notes; and upon any such dissolution or winding up or liquidation or reorganization, any direct or indirect payment by the Company, or direct or indirect payment or distribution (in cash, property, securities, by set-off or otherwise) to which the Holders of the Notes or the Trustee would be entitled, except for the provisions of this Article 11, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders of the Notes or by the Trustee under this Indenture if received by them or it, directly to the holders of Senior Debt (pro rata to such holders on the basis of the respective amounts of Senior Debt held by such holders, as calculated by the Company) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Debt may have been issued, as their respective interests may appear, to the extent necessary to pay such Senior Debt in full, in cash, after giving effect to any concurrent

payment or distribution to or for the holders of such Senior Debt, before any such payment or distribution is made to the Holders of Notes or to the Trustee.

In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, by set-off or otherwise, prohibited by the foregoing, shall be received by the Trustee or the Holders of the Notes before all Senior Debt is paid in full in cash, or provision is made for such payment in cash in accordance with its terms, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of Senior Debt or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Debt may have been issued, and their respective interests may appear, as calculated by the Company, for application to the payment of all Senior Debt remaining unpaid to the extent necessary to pay such Senior Debt in full in cash in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Debt.

For purposes of this Article 11, the words, “cash, property or securities” shall not be deemed to include shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated at least to the extent provided in this Article 11 with respect to the Notes to the payment of all Senior Debt which may at the time be outstanding; provided that (i) such Senior Debt is assumed by the new corporation, if any, resulting from any such reorganization or readjustment, and (ii) the rights of the holders of such Senior Debt are not, without the consent of such holders, altered by such reorganization or readjustment. The consolidation of the Company with, or the merger of the Company with or into, another Person or the liquidation or dissolution of the Company following the conveyance or transfer of its properties and assets substantially as an entirety to another Person upon the terms and conditions provided for in Article IV of the Original Indenture and subject to Section 5.01 shall not be deemed a dissolution, winding up, liquidation or reorganization for the purposes of this Section 11.03 if such other Person shall, as a part of such consolidation, merger, conveyance, or transfer, comply with the conditions stated in Article IV of the Original Indenture. Nothing in Section 11.02 or this Section 11.03 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.7 of the Original Indenture.

Section 11.04 Subrogation.

Subject to the payment in full in cash of all Senior Debt, the rights of the Holders of the Notes shall be subrogated to the rights of the holders of such Senior Debt to receive payments or distributions of cash, property or securities of the Company, as the case may be, applicable to such Senior Debt until the principal of (and premium, if any) and interest on the Notes shall be paid in full; and, for the purposes of such subrogation, no payments or distributions to the holders of such Senior Debt of any cash, property or securities to which the Holders of the Notes or the Trustee would be entitled except for

the provisions of this Article 11, and no payment over pursuant to the provisions of this Article 11, to or for the benefit of the holders of such Senior Debt by Holders of the Notes or the Trustee, shall, as between the Company, its creditors other than holders of Senior Debt, and the Holders of the Notes, be deemed to be a payment by the Company to or on account of such Senior Debt. It is understood that the provisions of this Article 11 are and are intended solely for the purposes of defining the relative rights of the Holders of the Notes, on the one hand, and the holders of such Senior Debt on the other hand.

Nothing contained in this Article 11 or elsewhere in this Indenture or in the Notes is intended to or shall impair, as between the Company, its creditors other than the holders of Senior Debt, and the Holders of the Notes, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Notes the principal of (and premium, if any) and interest on the Notes as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders of the Notes and creditors of the Company, as the case may be, other than the holders of Senior Debt, nor shall anything herein or therein prevent the Trustee or the Holder of any Note from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article 11 of the holders of such Senior Debt in respect of cash, property or securities of the Company, as the case may be, received upon the exercise of any such remedy.

Upon any payment or distribution of assets of the Company referred to in this Article 11, the Trustee, subject to the provisions of Section 6.2 of the Original Indenture, and the Holders of the Notes, shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which such dissolution, winding up, liquidation or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of the Notes, for the purposes of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Debt and other indebtedness of the Company, as the case may be, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 11; provided that such court, trustee, receiver, agent or other Person has been apprised of, or the order, decree or certificate makes reference to, the provisions of this Article.

Section 11.05 Trustee To Effectuate Subordination

Each Holder of Notes by such Holder’s acceptance thereof authorizes and directs the Trustee on such Holder’s behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article 11 and appoints the Trustee as such Holder’s attorney-in-fact for any and all such purposes.

Section 11.06 Notice By The Company

The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment of monies to or by the Trustee in respect of the Notes pursuant to the provisions of this Article 11. Notwithstanding the provisions of this Article 11 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment of monies to or by the Trustee in respect of the Notes pursuant to the provisions of this Article 11, unless and until the Trustee shall have received written notice thereof at the Corporate Trust Office of the Trustee from the Company or a holder or holders of Senior Debt or from any trustee therefor or representative thereof; and before the receipt of any such written notice, the Trustee, subject to the provisions of Section 6.2 of the Original Indenture, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section 11.06 at least two Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (and premium, if any) or interest on any Security), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purposes for which they were received, and shall not be affected by any notice to the contrary which may be received by it within two Business Days prior to such date.

The Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Debt (or a trustee or representative on behalf of such holder) to establish that such notice has been given by a holder of such Senior Debt or a trustee or representative on behalf of any such holder or holders. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Debt to participate in any payment or distribution pursuant to this Article 11, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Debt held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the right of such Person under this Article 11, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment or distribution.

Section 11.07 Rights Of The Trustee; Holders Of Senior Debt

The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article 11 in respect of any Senior Debt at any time held by it, to the same extent as any other holder of Senior Debt, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. With respect to the holders of Senior Debt of the Company, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are set forth in this Article 11, and no implied covenants or obligations

with respect to the holders of such Senior Debt shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of such Senior Debt and, subject to the provisions of Section 6.2 of the Original Indenture, the Trustee shall not be liable to any holder of such Senior Debt if it shall pay over or deliver to Holders of Notes, the Company or any other Person money or assets to which any holder of such Senior Debt shall be entitled by virtue of this Article 11 or otherwise.

Section 11.08 Subordination May Not Be Impaired

(a) No right of any present or future holder of any Senior Debt to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof which any such holder may have or otherwise be charged with.

(b) Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Debt may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Notes, without incurring responsibility to the Holders of the Notes and without impairing or releasing the subordination provided in this Article 11 or the obligations hereunder of the Holders of the Notes to the holders of Senior Debt, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, such Senior Debt, or otherwise amend or supplement in any manner such Senior Debt or any instrument evidencing the same or any agreement under which such Senior Debt is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing such Senior Debt; (iii) release any Person liable in any manner for the collection of such Senior Debt; and (iv) exercise or refrain from exercising any rights against the Company and any other Person.

(c) The subordination provisions of this Article 11 shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Senior Debt is, pursuant to applicable law, avoided, recovered, or rescinded or must otherwise be restored or returned by any holder of Senior Debt, whether as a “voidable preference,” “fraudulent conveyance,” “fraudulent transfer,” or otherwise, all as though such payment or performance had not been made.

(d) If, upon any proceeding referred to in Section 11.03, the Trustee does not file a claim in such proceeding prior to fifteen Business Days before the expiration of the time to file such claim, the holders of Senior Debt or their agent may file such claim on behalf of the Holders of the Notes.

(e) The subordination provisions contained herein are solely for the benefit of the holders from time to time of Senior Debt and their representatives, assignees and beneficiaries and may not be rescinded, canceled, amended or modified in

any way other than, as to any holder of Senior Debt, pursuant to an amendment or modification that is permitted by the documentation relating to the Senior Debt applicable to such holder.

ARTICLE XII

MISCELLANEOUS

Section 12.01 No Adverse Interpretation of Other Agreements

This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture.

Section 12.02 Severability

In case any provision in this Third Supplemental Indenture or in the Notes is invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

Section 12.03 Table of Contents, Headings, etc

The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof.

Section 12.04 Ratification Of Original Indenture

The Original Indenture, as supplemented by this Third Supplemental Indenture, is in all respects ratified and confirmed, and this Third Supplemental Indenture shall be deemed part of the Original Indenture in the manner and to the extent herein and therein provided.

Section 12.05 Trustee Not Responsible for Recitals

The recitals herein contained are made by the Company and not by the Trustee, and the Trustee assumes no responsibility for the correctness thereof. The Trustee makes no representation as to the validity or sufficiency of this Third Supplemental Indenture.

Section 12.06 Performance by Trustee

The Trustee, for itself and its successors accepts the trusts under the Original Indenture as amended by this Third Supplemental Indenture, and agrees to perform the same, but only upon the terms and conditions set forth in the Original Indenture, including, without limitation, the terms and provisions defining and limiting the liability and responsibility of the Trustee.

Section 12.07 Governing Law

This Third Supplemental Indenture and each Note shall be governed by and construed in accordance with the laws of the State of New York.

[Signatures on following page]

SIGNATURES

Dated as of June 23, 2005

CALPINE CORPORATION

By:   /s/ Robert D. Kelly
Name:   Robert D. Kelly
Title:   Executive Vice President

WILMINGTON TRUST COMPANY

By:   /s/ James J. McGinley
Name:   James J. McGinley
Title:   Authorized Signer

[SIGNATURE PAGE TO THE THIRD SUPPLEMENTAL INDENTURE]

EXHIBIT A

[Face of Note]

THIS NOTE IS ISSUED IN GLOBAL FORM AND REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”) OR A NOMINEE THEREOF. UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC, TO THE COMPANY (AS DEFINED BELOW) OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO., OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE REGISTERED FORM IN ACCORDANCE WITH THE TERMS HEREOF AND OF THE INDENTURE (AS DEFINED BELOW), THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC OR BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.

A-1

CALPINE CORPORATION

$[ ] PRINCIPAL AMOUNT OF
7.75% CONTINGENT CONVERTIBLE NOTES DUE 2015


No.		principal amount $
		CUSIP: 131347BN5
		ISIN: US131347BN56

Calpine Corporation, a Delaware corporation, promises to pay to Cede & Co., or registered assigns, the principal amount in Dollars on June 1, 2015.

Interest Payment Dates: June 1 and December 1.

Record Dates: May 15 and November 15.

Additional provisions of this Note are set forth on the reverse hereof.

A-2

IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officers.

Date: June 23, 2005

CALPINE CORPORATION

By:
Name:
Title:

By:
Name:
Title:

Dated: June 23, 2005

TRUSTEE’S CERTIFICATE OF AUTHENTICATION:

Wilmington Trust Company, as Trustee, certifies that this is one of the Notes referred to in the Indenture.

A-3

[Back of Note]

$[ ] principal amount of 7.75% Contingent Convertible Notes due 2015

Capitalized terms used herein have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.

(1) INTEREST. Calpine Corporation, a Delaware corporation (such corporation and its successors and assigns under the Indenture referred to below, being herein called the “Company”), promises to pay interest on the principal amount of this Note at 7.75% per annum from June 23, 2005 until maturity. The Company shall pay interest semi-annually in arrears on June 1 and December 1 of each year, commencing December 1, 2005, or if any such day is not a Business Day, on the next succeeding Business Day (each, an “Interest Payment Date”), except as set forth in this paragraph. Interest on the Notes shall accrue (except as set forth in this paragraph) from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest shall be computed on the basis of a 360-day year of twelve 30-day months.

(2) METHOD OF PAYMENT. The Company shall pay interest on the Notes (except defaulted interest) to the Persons who are registered Holders of Notes at the close of business on the May 15 or November 15 next preceding the Interest Payment Date, even if such Notes are cancelled after such record date and on or before such Interest Payment Date, except as provided in Section 2.13 of the Original Indenture with respect to defaulted interest. Holders must surrender Notes to a Paying Agent to collect principal payments. The Notes shall be payable as to principal, premium, if any, and interest at the office or agency of the Company maintained for such purpose within or without the City and State of New York, or, at the option of the Company, payment of interest may be made by check mailed to the Holders at their addresses set forth in the register of Holders; provided that payment by wire transfer of immediately available funds shall be required with respect to principal of and interest, premium on, all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.

A-4

(3) PAYING AGENT, CONVERSION AGENT AND REGISTRAR. Initially, Wilmington Trust Company, the Trustee under the Indenture, shall act as Paying Agent, Conversion Agent and Registrar. The Company may change any Paying Agent, Conversion Agent or Registrar without prior notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity.

(4) INDENTURE. The Company issued the Notes under an Indenture dated as of August 10, 2000, as supplemented by the First Supplemental Indenture dated as of September 28, 2000, the Second Supplemental Indenture dated as of September 30, 2004 and the Third Supplemental Indenture dated as of June 23, 2005 (as so supplemented, the “Indenture”) between the Company and the Trustee. The Notes are unsecured general obligations of the Company. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling.

(5) MANDATORY REDEMPTION. The Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes.

(6) REPURCHASE AT OPTION OF HOLDER. If a Change of Control occurs, each Holder of Notes shall have the right to require the Company to repurchase all or any part (equal to $1,000 principal amount or an integral multiple of $1,000) of that Holder’s Notes pursuant to the terms set forth in the Third Supplemental Indenture. The Company shall deliver to each holder, that has delivered to the Paying Agent an irrevocable written notice of purchase and the Notes to be repurchased, a payment in cash equal the Change of Control Purchase Price as set forth in the Third Supplemental Indenture. Within 30 days following any Change of Control, the Company shall mail a notice to each Holder as required by the Third Supplemental Indenture.

(7) CONVERSION. Upon satisfaction of the conditions set forth in Section 10.01(a) of the Third Supplemental Indenture, a Holder of a Note may convert any portion of the principal amount of any Note that is an integral multiple of $1,000 into cash and fully paid and non-assessable shares (calculated as to each conversion to the nearest 1/1,000th of a share) of Common Stock in accordance with the provisions of Section 10.15 of the Third Supplemental Indenture. Such conversion right shall commence on the initial issuance date of the Notes and expire at the close of business on the Business Day immediately preceding the date of Maturity, subject, in the case of conversion of any Global Note, to any Applicable Procedures. The Conversion Price shall, as of the date of the Third Supplemental Indenture, initially be $4.00. The Conversion Rate shall, as of the date of the Third Supplemental Indenture, initially be 250.0000 per $1,000 principal amount of Notes. The Conversion Rate will be adjusted under the circumstances specified in the Third Supplemental Indenture.

A-5

(8) SUBORDINATION. The Notes shall be subordinated to Senior Debt to the extent and in the manner provided for in the Third Supplemental Indenture.

(9) DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 principal amount and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Notes during the period between a record date and the corresponding Interest Payment Date.

(10) DEFEASANCE. The Company may not terminate some or all of its obligations under the Notes and the Indenture as it pertains to the Notes.

(11) PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes, except that interest (other than defaulted interest) will be paid to the person that was the registered Holder on the relevant record date for such payment of interest.

(12) AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes voting as a single class, and any existing default or compliance with any provision of the Notes or the Indenture (with respect to the Notes) may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes voting as a single class. Without the consent of any Holder of a Note, the Indenture or the Notes may be amended or supplemented as set forth in the Indenture.

(13) DEFAULTS AND REMEDIES. Events of Default shall be as set forth in the Indenture. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes shall become due and payable without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture.

(14) TRUSTEE DEALINGS WITH COMPANY. Subject to the provisions of the Trust Indenture Act, the Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee.

A-6

(15) NO RECOURSE AGAINST OTHERS. A director, officer, employee or stockholder, of the Company as such, shall not have any liability for any obligations of the Company under the Notes, the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes.

(16) AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent.

(17) ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

(18) CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of repurchase as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.

The Company shall furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to:

     Calpine Corporation
     50 West San Fernando Street
     San Jose, California 95113
     Attention: Investor Relations

A-7

ASSIGNMENT FORM

To assign this Note, fill in the form below:

(I) or (we) assign and transfer this Note to:

(Insert assignee’s legal name)

(Insert assignee’s soc. sec. or tax I.D. no.)

(Print or type assignee’s name, address and zip code)

and irrevocably appoint to transfer this Note on the books of the Company. The agent may substitute another to act for him.

Date:

Your Signature:

(Sign exactly as your name appears on the face of this Note)

Signature Guarantee^*:

^* Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).

A-8

OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have only part of the Note purchased by the Company pursuant to Section 3.03 of the Third Supplemental Indenture, state the amount you elect to have purchased:

$_______________ principal amount

Date:

Your Signature:

(Sign exactly as your name appears on the face of this Note)

Tax Identification No.:

Signature Guarantee^*:

^* Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).

A-9

FORM OF CONVERSION NOTICE


TO:		CALPINE CORPORATION WILMINGTON TRUST COMPANY

The undersigned registered owner of the attached Note hereby irrevocably exercises the option to convert the attached Note, or the portion thereof below designated, into the Conversion Value in accordance with the terms of the Third Supplemental Indenture referred to in the attached Note. Capitalized terms used herein but not defined herein shall have the meanings ascribed to such terms in the Third Supplemental Indenture.

PLEASE NOTE: You may only convert the attached Note upon satisfaction of one of the conditions set forth in Section 10.01 of the Third Supplemental Indenture. If you are converting the attached Note upon satisfaction of the condition set forth in Section 10.01(a)(3), please provide, with this Conversion Notice, reasonable evidence that the Trading Price of the Note is less than 95% of the product of (x) the Common Stock Price and (y) the Conversion Rate in effect.

Upon conversion of your Note, you will receive the Conversion Value in cash and Common Stock of the Company in accordance with Article 10 of the Third Supplemental Indenture.

To convert only part of the attached Note, state the principal amount to be converted (which must be $1,000 or an integral multiple of $1,000):

$__________________

If you want the stock certificate (if any) made out in another person’s name, fill in the form below:

(Insert other person’s social security or tax I.D. no.)

(Print or type other person’s name, address and zip code)

Date: Signed:

(Sign exactly as your name appears on the other side of this Security. The Signature(s) must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Note registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Note registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended)

Signature Guarantee:

A-10

SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE^*

The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:


			principal amount of
			this Global Note	Signature of
	Amount of decrease	Amount of increase	following such	authorized officer
	in principal amount	in principal amount	decrease	of Trustee or
Date of Exchange	of this Global Note	of this Global Note	(or increase)	Custodian

^* This schedule should be included only if the Note is issued in global form.

A-11

Schedule A

Table of Additional Shares


	Stock Price ($)
Effective Date	3.10		3.50		4.00		4.50		5.00		5.50		6.00		6.50		7.00		7.50		10.00		15.00		20.00
June 23, 2005		72.58		63.00		53.82		46.74		41.12		36.57		32.80		29.64		26.96		24.64		16.71		9.15		5.63
June 1, 2006		72.00		62.44		53.27		46.23		40.65		36.12		32.40		29.26		26.59		24.31		16.46		9.00		5.53
June 1, 2007		71.58		61.97		52.79		45.74		40.19		35.69		31.97		28.88		26.24		23.96		16.22		8.86		5.44
June 1, 2008		71.11		61.35		52.15		45.10		39.55		35.08		31.41		28.32		25.73		23.50		15.86		8.66		5.32
June 1, 2009		70.47		60.61		51.24		44.20		38.66		34.23		30.58		27.56		24.99		22.80		15.37		8.38		5.14
June 1, 2010		69.67		59.56		50.05		42.87		37.38		32.95		29.39		26.39		23.92		21.78		14.62		7.96		4.89
June 1, 2011		68.78		58.10		48.28		41.01		35.40		31.09		27.56		24.70		22.27		20.26		13.51		7.35		4.52
June 1, 2012		67.70		56.09		45.63		38.13		32.51		28.15		24.79		22.03		19.79		17.90		11.81		6.42		3.97
June 1, 2013		66.59		53.12		41.47		33.47		27.76		23.53		20.30		17.78		15.81		14.17		9.19		5.02		3.15
June 1, 2014		65.05		47.84		33.91		25.03		19.24		15.38		12.68		10.74		9.30		8.20		5.24		2.96		1.90
June 1, 2015		0.00		0.00		0.00		0.00		0.00		0.00		0.00		0.00		0.00		0.00		0.00		0.00		0.00

A-12

EX-5.1 4 f10195exv5w1.htm EXHIBIT 5.1 exv5w1

EXHIBIT 5.1

[COVINGTON & BURLING LETTERHEAD]


		June 23, 2005

Calpine Corporation
50 West San Fernando Street
San Jose, CA 95113

Ladies and Gentlemen:

We have acted as counsel to Calpine Corporation, a Delaware corporation (the “Company”), in connection with the registration by the Company of (a) $650,000,000 in aggregate principal amount of the Company’s 7.75% Contingent Convertible Notes Due June 1, 2015 (the “Convertible Notes”), to be issued pursuant to the Indenture, dated as of August 10, 2000, as supplemented by the First Supplemental Indenture, dated as of September 28, 2000, the Second Supplemental Indenture, dated as of September 30, 2004, and the Third Supplemental Indenture, dated as of June 23, 2005 (as so supplemented, the “Indenture”), among the Company and Wilmington Trust Company, as Trustee (the “Trustee”), and (b) up to 209,677,390 shares of Common Stock of the Company, par value $.001 per share (the “Shares”), as may be issued from time to time upon conversion of the Convertible Notes, pursuant to the Registration Statement on Form S-3, File No. 333-76880, as amended to the date hereof (as so amended, the “Registration Statement”), filed with the Securities and Exchange Commission (the “SEC”), and the Prospectus Supplement, dated June 20, 2005 (the “Prospectus Supplement”), filed with the SEC pursuant to Rule 424(b)(2) under the Securities Act of 1933, as amended (the “Securities Act”). The Convertible Notes are being sold in accordance with the terms of an Underwriting Agreement, dated June 20, 2005, between the Company and Goldman, Sachs & Co. (the “Underwriting Agreement”).

We have reviewed such records, certificates and other documents, and such questions of law, as we have deemed necessary or appropriate for the purposes of this opinion. We have assumed that all signatures are genuine, that all documents submitted to us as originals are authentic, and that all copies of documents submitted to us conform to the originals

We have relied as to certain matters on information obtained from public officials, officers of the Company and other sources believed by us to be responsible.

Based upon the foregoing, and subject to the qualifications set forth below, we are of the opinion that (a) the Convertible Notes have been duly authorized for issuance and, when executed by the Company and authenticated by the Trustee in the manner provided in the Indenture and delivered against payment of the purchase price therefor set forth in the Underwriting Agreement, shall constitute the valid and binding obligations of the Company,

enforceable against the Company in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws of general applicability relating to or affecting creditors’ rights and to general equity principles and (b) the Shares have been duly authorized and reserved for issuance upon conversion of the Convertible Notes and, when issued upon such conversion in accordance with the terms of the Convertible Notes, and assuming compliance with the Securities Act, will be validly issued, fully paid and nonassessable.

The foregoing opinion is subject to the qualifications that we express no opinion as to (i) waivers of defenses or statutory or constitutional rights or waivers of unmatured claims or rights, (ii) rights to indemnification, contribution or exculpation to the extent that they purport to indemnify any party against, or release or limit any party’s liability for, its own breach or failure to comply with statutory obligations, or to the extent such provisions are contrary to public policy or (iii) rights to collection or liquidated damages or penalties on overdue or defaulted obligations.

We are members of the bar of the State of New York. We do not express any opinion herein on any laws other than the law of the State of New York and the Delaware General Corporation Law.

We hereby consent to the incorporation by reference of this opinion as Exhibit 5.1 to the Registration Statement and to the reference to our firm under the heading “Legal Matters” in the Prospectus contained in the Registration Statement and in the Prospectus Supplement. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act.

Very truly yours,

/s/ Covington & Burling

EX-10.1 5 f10195exv10w1.htm EXHIBIT 10.1 exv10w1

Exhibit 10.01

DATED 28 MAY 2005

CALPINE UK HOLDINGS LIMITED

CALPINE CORPORATION

QUINTANA CANADA HOLDINGS, LLC

NORMANTRAIL (UK CO 3) LIMITED

INTERNATIONAL POWER PLC

and

MITSUI & CO., LTD




		SHARE SALE AND PURCHASE AGREEMENT

Skadden, Arps, Slate, Meagher & Flom (UK) LLP

40 Bank Street

Canary Wharf

London

E14 5DS

CONTENTS


			Page
	1.	Interpretation		3
	2.	Sale and Purchase		22
	3.	Conditions Precedent		23
	4.	Consideration		26
	5.	Conduct of business before Completion		27
	6.	Completion		28
	7.	Completion Accounts		31
	8.	Seller’s Warranties		33
	9.	Purchaser parties’ Warranties		38
	10.	Undertakings		39
	11.	Effect of Completion		40
	12.	Remedies and Waivers		40
	13.	Conduct of Claims		40
	14.	Basis of Recovery		42
	15.	Trade Marks		43
	16.	Assignment and novation		43
	17.	Termination		44
	18.	Further Assurance		44
	19.	Notices		45
	20.	Announcements		46
	21.	Confidentiality		47
	22.	Costs and Expenses		48
	23.	Time of Essence		48
	24.	Interest		48
	25.	Invalidity		49
	26.	Several Guarantee from the Purchaser Guarantors		49
	27.	Guarantee from the Seller Guarantor		50
	28.	Third Party Rights		52
	29.	Counterparts		52
	30.	Entire Agreement		52
	31.	Withholding, Deductions and Set Off		53
	32.	Choice of Governing Law		53

SCHEDULE 1 CORPORATE INFORMATION				54
SCHEDULE 2 THE WARRANTIES				56
SCHEDULE 3 LIMITATION OF LIABILITY				69
SCHEDULE 4 COMPLETION ARRANGEMENTS				75
SCHEDULE 5 CONDUCT OF BUSINESS BEFORE COMPLETION				79
SCHEDULE 6 DATA ROOM LIST				84
SCHEDULE 7 BP AGREEMENTS				85
SCHEDULE 8 ENVIRONMENTAL COVENANT				86

APPENDIX I BALANCE SHEET DATED APRIL 2005

THIS AGREEMENT (the “Agreement”) is made on 28 May, 2005

BETWEEN:

(1) CALPINE UK HOLDINGS LIMITED, a company incorporated in England and Wales (Registered No. 4233113), whose registered office is at Saltend, Hedon Road, Hull, Yorkshire HU12 8GA (the “Seller”);

(2) CALPINE CORPORATION, a corporation organized and existing under the laws of Delaware, whose principal place of business is located at 50 West San Fernando Street, San Jose, California 95113, USA (“Calpine”);

(3) QUINTANA CANADA HOLDINGS, LLC, a limited liability company organized and existing under the laws of Delaware, whose principal place of business is located at 50 West San Fernando Street, San Jose, California 95113, USA (the “Seller Guarantor”, the Seller, Calpine and the Seller Guarantor collectively are referred to in this Agreement as the “Seller Parties”);

(4) NORMANTRAIL (UK CO 3) LIMITED, a company incorporated in England and Wales (Registered No. 5234591), with its registered office at Senator House, 85 Queen Victoria Street, London, EC4V 4DP (the “Purchaser”);

(5) INTERNATIONAL POWER PLC, a company incorporated in England and Wales (Registered No. 2366963), with its registered office at Senator House, 85 Queen Victoria Street, London, EC4V 4DP (“IPR”); and

(6) MITSUI & CO., LTD., a company incorporated in Japan, with its registered office at 2-1, Ohtemachi 1-chome, Chiyoda ku, Tokyo, Japan (“Mitsui” and, together with IPR, the “Purchaser Guarantors”; the Purchaser and the Purchaser Guarantors collectively are referred to in this Agreement as the “Purchaser Parties”).

WHEREAS

(A) The Seller has agreed to sell, and the Purchaser has agreed to purchase, the entire issued share capital of each of SCCL and UK OpCo for the Purchase Price.

(B) IPR is the indirect legal and beneficial owner of 70% of the Purchaser’s issued share capital and Mitsui is the indirect legal and beneficial owner of 30% of the Purchaser’s issued share capital.

(C) Each of the Purchaser Guarantors will benefit from the execution, delivery and performance of this Agreement and therefore each of the Purchaser Guarantors has agreed to guarantee (on a several basis) the Purchaser’s payment obligations under this Agreement on the terms set out in clause 26. Each of the Purchaser Guarantors intends that this Agreement shall have effect as a deed.

(D) As the indirect parent of the Seller, the Calpine will indirectly benefit from the execution, delivery and performance of this Agreement and therefore Calpine has agreed to provide certain warranties under this Agreement. Calpine intends that this Agreement shall have effect as a deed.

(E) As an Affiliate of the Seller, the Seller Guarantor will indirectly benefit from the execution, delivery and performance of this Agreement and therefore the Seller Guarantor has agreed to guarantee on the terms set out in clause 27 the payment by the Seller of amounts in respect of liabilities of the Seller in respect of all Claims under this Agreement other than Claims for breach of Warranty. The Seller Guarantor intends that this Agreement shall have effect as a deed.

WHEREBY IT IS AGREED as follows:

1. INTERPRETATION

1.1 In this Agreement and the Schedules to it:


“Accounts”		means the draft individual accounts (as that term is used in section 226 of the Act) and cash flow statement) of each of SCCL and UK OpCo for the financial period ended on 31 December 2004, together with the notes thereto in the Agreed Form and set out in Appendix 3 of the Disclosure Letter;

“Accounts Date”		means 31 December 2004;

“Accounting Principles”		means the accounting policies, principles, bases, assumptions and judgements adopted or used in the preparation of the Accounts;

“Accountant’s Report”		means a report to the directors of SCCL (as the same may be from time to time prior to, at or immediately after Completion) which satisfies the requirements of section 156(4) of the Act in connection with the statutory declarations to be given by such directors of SCCL pursuant to paragraph 2 of Part II of Schedule 4, and resolutions to be passed by the board of directors of SCCL pursuant to paragraph 1.7 of Part II of Schedule 4, in each case at Completion;

“Act”		means the Companies Act 1985, as amended;

“Affiliate”		a person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the person specified, where “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of a person, through the ownership of voting securities, by contract, as trustee, executor or otherwise;


“Aggregate Projected NWC”		has the meaning ascribed to such term in clause 4.1;

“Aggregate Unadjusted Purchase Price”		means £489,969,886 (four hundred eighty nine million nine hundred sixty nine thousand eight hundred eighty six pounds), being the sum of the Unadjusted SCCL Purchase Price and the Unadjusted UK OpCo Purchase Price;

“Agreed Form”		means in relation to any document, such document in a form which has been agreed by the Purchaser and the Seller contemporaneously with or prior to the execution of this Agreement and which has, for the purpose of identification only, been initialled by or on behalf of the Purchaser and the Seller;

“Allowance”		has the meaning ascribed to such term in the Greenhouse Gas Emissions Trading Scheme Regulations 2005;

“Audited Accounts”		means the individual accounts (as that term is used in section 226 of the Act) and cash flow statement of each of SCCL and UK OpCo for the financial year ended on 31 December 2004, together with the auditors’ report on those accounts, the directors’ report for that year and the notes thereto;

“Balancing and Settlement Code”		means the document, as modified from time to time, setting out electricity, balancing and settlement arrangements established by NGC pursuant to its transmission licence;

“BP Agreements”		means the agreements set out in Schedule 7, and a “BP Agreement” means any of them;

“BP Approval”		means the written approval of BP International in relation to the sale and transfer of the Shares or in relation to any other aspect of this transaction for which consent is required under the terms of the [*]¹ and in respect of any consequential amendments to the BP

[*] Throughout this document, this symbol indicates that material has been omitted pursuant to a request for confidential treatment. The request for confidential treatment and the omitted material have been filed separately with the Securities and Exchange Commission. Roughly four pages of material have been omitted pursuant to the request for confidential treatment.


		Agreements that are necessary to reflect the sale and transfer of the Shares to the Purchaser;

“BP Chemicals”		means BP Chemicals Limited, a company incorporated in England and Wales (Registered No. 00194971), whose registered office is at Chertsey Road, Sunbury On Thames, Middlesex TW16 7BP;

“BP Conditions”		has the meaning ascribed to it in clause 3.3;

“BP Director”		has the meaning ascribed to such term in the Participation Agreement;

“BP Gas”		means BP Gas Marketing Limited, a company incorporated in England and Wales (Registered No. 00908982), whose registered office is at Chertsey Road, Sunbury On Thames, Middlesex TW16 7BP;

“BP Group”		means BP International and any of its Affiliates, and a “member of the BP Group” or “BP Group member” shall mean any and all of BP International and its Affiliates;

“BP International”		means BP International Limited, a company incorporated in England and Wales (Registered No. 542515), whose registered office is at Chertsey Road, Sunbury On Thames, Middlesex TW16 7BP;

“Business”		means the business conducted by SCCL and UK OpCo, or either of them at the date of this Agreement, that includes the management and operation of the Facility and the supply of electricity and steam from the Facility and any business activities incidental to the foregoing;

“Business Day”		means a day (other than a Saturday or a Sunday) on which banks are generally open for business in London and (other than in clauses 4.1 and 6.1.2) Tokyo;


“Business Information Technology”		means information technology (including, without limitation, hardware, software, filmware, networks and connecting media) and documents relating thereto which are used in the Business, details of which are set out in the Disclosure Letter;

“Calpine Group”		means Calpine, the Seller Guarantor and each of their Affiliates, and a “member of the Calpine Group” or “Calpine Group member” shall mean any of Calpine, the Seller Guarantor or any of their respective Affiliates (in each case including the Sale Group prior to Completion and excluding the Sale Group at and following Completion);

“CCGT”		means the combined cycle gas turbine plant situated on the Property;

“Certificate of Title”		means the certificate of title and plans relating to the Property in the Agreed Form and addressed to the Purchaser and to the agent and security trustee under the Facility Agreement notified by the Purchaser to the Seller prior to Completion;

“CHP LECs”		has the meaning given in section 51B(8) of the Climate Change Levy (General) (Amendment) Regulations 2003 (S.1. 2003/604);

“Claim”		means any claim made by the Purchaser against or to any of the Seller Parties arising out of or in connection with this Agreement or the transactions contemplated hereby or referred to herein howsoever arising or out of or in connection with the Tax Covenant;

“Company Business Intellectual Property”		means all marks and service marks, rights in designs, trade or business names and copyrights (whether or not any of these is registered and including applications for registration or renewal of any such thing) and rights under licences and consents in relation to any such thing and all rights or forms of protection of a similar nature or having equivalent or similar effect to any of these which may subsist anywhere in the world which are used or enjoyed in connection with the Business;

“Company Business Know-how”		means the rights and interest in Know-how owned by a member of the Sale Group or which are used or enjoyed


		in connection with the Business;

“Competent Authority”		means any legal person having powers and/or authority at law and/or any court of law or tribunal and includes any government, governmental, supranational or trade agency, department, authority, court, regulatory body, the Environment Agency, the Tax Authority and any local authority;

“Completion”		means the completion of the sale and purchase of the Shares in accordance with clause 6;

“Completion Amount”		has the meaning ascribed to such term in clause 4.2;

“Completion Balance Sheet”		means, in relation to SCCL or UK OpCo, the balance sheet for such company immediately prior to Completion (in each case containing the same line items as shown in the Accounts for such company) prepared in accordance with the Accounting Principles from which the Net Working Capital for such company immediately prior Completion is to be calculated;

“Completion Date”		means the date on which Completion occurs;

“Completion Documents”		means the documents to be executed by the Seller, the Purchaser, the Purchaser Guarantors and/or Calpine or the Seller Guarantor (as the case may be) and delivered by the appropriate party at Completion in accordance with clause 6 and Schedule 4;

“Conditions Precedent”		means the conditions precedent set out in clause 3.1;

“Confidential Information”		means all information which is used in or otherwise relates to the business, customers or financial or other affairs of SCCL or UK OpCo prior to Completion including information relating to:

		(a) the marketing of electricity and/or gas including customer names and lists and other details of customers, sales targets, sales statistics, market share statistics, prices, market research reports and surveys and advertising or other promotional materials; or


		(b) future projections, business development or planning, commercial relationships and negotiations,

		but does not include:

		(i) information which is made public by or with the written consent of the Purchaser;

		(ii) information which enters the public domain other than by a breach of this Agreement; or

		(iii) information which is, or is derived from information that is in the public domain prior to the date of this Agreement;

“Data Room”		means those documents referred to in the list set out in Schedule 6;

“Deed of Adherence”		means the deed of adherence in the Agreed Form relating to the Participation Agreement to be entered into by the Purchaser and one or more Affiliates of the Purchaser that are acceptable to BP International as Shareholder Parents (as such term is defined in the Participation Agreement);

“Disclosure Letter”		means the letter dated the date of this Agreement from the Seller to the Purchaser in the Agreed Form and delivered to the Purchaser’s Solicitors immediately prior to the execution of this Agreement;

“Draft Completion Balance Sheets”		has the meaning ascribed to such term in clause 7;

“Electricity Trading Agreements”		means any and all electricity sales contracts, electricity capacity reservation contracts, contracts for differences, hedging agreements, options and other similar agreements, in each case relating to the electrical output or capacity of the Facility;

“Emergency”		means in relation to any environmental matter, any situation in which significant harm is being caused to the Environment or is likely to be caused to the Environment and in respect of which immediate action would be likely to be required in order to deal with the causes of such harm;


“Employee”		means the people employed by UK OpCo in the Business, all or any of them;

“Encumbrance”		means any mortgage, charge (whether fixed or floating), pledge, lien, hypothecation, option, assignment, security interest or other encumbrance of any kind exercisable by a third party securing or any right conferring a priority of payment in respect of any obligation of any person;

“Environment”		means living organisms including the ecological systems of which they form part and all or any part of the following media (alone or in combination): air (including without limitation the air within the buildings and the air within other natural or man made structures whether above or below ground); water (including without limitation sea, water under or within land or in drains or sewers and coastal and inland waters), and land (including without limitation land under water);

“Environment Agency”		means the body corporate established under the Environment Act 1995 and its successors from time to time;

“Environmental Approval”		means any licence, authorisation, consent, permit or any other approval (and any variation or modification thereto) required under or pursuant to Environmental Laws;

“Environmental Indemnity Claim”		has the same meaning as Environmental Claim in Schedule 8;

“Environmental Laws”		means any and all of the following to the extent that they have the force of law and are enforceable in England:

		(a) supranational, national, European Union, federal, state or local statutes, directives or other laws or legislation, secondary or subordinate legislation;

		(b) rules, regulations, orders, ordinances, notices, decrees, guidelines, guidance notes, codes of practice, circulars and the like made or issued under (a) above; and


		(c) common laws and equity,

		which have as a purpose or effect the protection of the Environment from pollution and/or contamination and/or which include or provide for remedies or compensation for pollution and/or contamination of the Environment and/or which regulate, restrict or prohibit the release, discharge, emission, keeping, treating, handling, storage, transfer, deposit or disposal of Hazardous Substances but shall exclude any such laws to the extent that they relate to town and country planning, occupational health and safety or consumer protection;

“EPC Contract”		means the Amended and Restated Turnkey Construction Agreement dated 26 May 2000 between SCCL, [*]

“Escrow Account”		means a separately designated interest bearing account opened by the Escrow Agent pursuant to the Escrow Agreement;

“Escrow Agent”		means the person appointed to act as such pursuant to the Escrow Agreement;

“Escrow Agreement”		means an agreement in the Agreed Form (save for any amendments required by the Escrow Agent and agreed to by each of the Seller and the Purchaser, such agreement not to be unreasonably withheld or delayed) pursuant to which, inter alia, the operation of the Escrow Account is regulated;

“Estimated SCCL Intergroup Debt”		has the meaning ascribed to such term in clause 4.1;

“Facility”		means the gas-fired cogeneration facility with an electrical generating capacity of 1200MW (nominal) including the CCGT situated on the Property and shall include any part thereof;

“Facility Agreement”		means the proposed [] secured term facility agreement between SCCL and certain banks and other financial institutions for the provision of funds for, inter alia*, the purpose of making the payments referred to in paragraph 3.2 of Part II of Schedule 4 in the form


		notified to SCCL prior to Completion;

“Financial Assistance Procedure”		means the procedure permitting the giving of financial assistance within the meaning of section 151 of the Act for the acquisition of the Shares as set out in sections 155 to 158 (inclusive) of the Act;

“Fundamental Claim”		means a Claim for or in respect of or in relation to the Warranties contained in paragraphs 1, 2 and 3 (excluding sub-paragraphs 3.5 to 3.7 inclusive) of Schedule 2 or in relation to the warranties given by Calpine and the Seller Guarantor in clause 8.6 (other than clause 8.6.5);

“Gas Line”		means the gas pipeline servicing the Property;

“Gas Supply Agreement”		means the gas supply agreement between SCCL [*] dated 14 December 1997, as amended;

“Gas Support Agreement”		means the amended and restated gas support agreement between SCCL and [*] dated 18 July 1997;

“Greenhouse Gas Emissions Permit”		has the meaning ascribed to such term in the Greenhouse Gas Emissions Trading Scheme Regulations 2005;

“Group”		means the Purchaser’s Group or the Calpine Group (as the case may be);

“GTMAs”		means the three grid trade master agreements between SCCL and:

		[*] dated 26 September 2003;

		[*] dated 13 March 2001; and

		[*] dated 15 April 2002;

“Hazardous Substance”		means any substance capable (whether alone or in combination with any other) of causing pollution or contamination of the Environment and shall include any waste;


“H&S Laws”		means any and all of the following to the extent that they have the force of law and are enforceable in England:

		(a) supranational, national, European Union, federal, state or local statutes, directives or other laws or legislation, secondary or subordinate legislation;

		(b) rules, regulations, orders, ordinances, notices decrees, guidelines, guidance notes, codes of practice, circulars and the like made or issued under paragraph (a); and

		(c) common law and equity, which relate to occupational health and safety;

“ICTA 1988”		means the Income and Corporation Taxes Act 1988;

“Incipient Claim”		has the meaning ascribed to such term in clause 8.10.1(c);

“Intellectual Property”		means any and/or all of the Business Information Technology, Company Business Intellectual Property, and Company Business Know-how;

“Know-how”		means confidential and proprietary industrial and commercial information and techniques in any form (including, without limitation, paper, electronically stored data, magnetic media, film and microfilm), including (without limiting the foregoing) drawings, formulae, recipes, test results, reports, project reports and testing procedures, instruction and training manuals, tables of operating conditions, operating procedures, market forecasts, specifications, quotations, tables, lists and particulars of customers and suppliers, marketing methods and advertising copy;

“Lease”		means the lease dated 23 September 2003 in respect of the Property between [*] and SCCL;

“Liabilities”		means any and all liabilities, duties and obligations of every description, including without limitation interest whether deriving from contract, common law, statute or otherwise, whether present or future, actual or contingent, ascertained or unascertained or disputed and


		whether owed or incurred severally or jointly and as principal or surety in each case which arise from or in relation to or are otherwise attributable to the Business and/or any member of the Sale Group;

“LIBOR”		means the London Interbank Offered Rate for six (6) months pounds quoted in the Financial Times in respect of any day or, if such day is not a business day in England, in respect of the immediately preceding Business Day or, if the Financial Times is no longer published or no longer quotes LIBOR, as announced or quoted by Barclays Bank Plc (or its successor for the time being);

“Long Stop Date”		means 7 August 2005, or such later date as may be agreed by the Seller and the Purchaser;

“Losses”		means all losses, liabilities, damages, costs, expenses or other liabilities (including all interest, penalties, legal and other professional fees, costs and expenses), charges, expenses, suits, actions, payments, proceedings, claims, enforcement processes and demands;

“Luxco”		means Calpine Energy Finance Luxembourg S.á.r.l.;

“Luxco Loan”		means the loan of an outstanding principal amount of US$360,000,000 (three-hundred and sixty million US dollars) plus accrued and unpaid interest, fees and expenses thereon under the terms of the Luxco Loan Agreement;

“Luxco Loan Agreement”		means the loan agreement dated 26 October 2004 among SCCL as borrower, Luxco and others;

“Material Adverse Effect”		means any material adverse effect after the date hereof on the business, assets, financial or trading condition or results of operations of the Sale Group taken as a whole, excluding, for this purpose, the effect of: (i) any change in financial markets; (ii) any change in commodity markets short of total market collapse (including without limitation forecasted and futures prices) (including the gas and electricity markets in the United Kingdom or the price of Allowances, CHP LECS, carbon credits, oil and petroleum products); (iii) any


		change in the cost or availability in the transmission of electricity or the transportation of fuel; and (iv) a change in any statute, rule, regulation or policy of a Competent Authority causing or resulting from a change in regulations of the energy market in the United Kingdom, including without limitation a change in the laws, rules and regulations, whether national or supranational, applicable to the allocation of carbon credits, which all cases, if such effect is capable of remedy, has not been remedied within 30 days of the occurrence of the event giving rise to such effect or, if later, the Long Stop Date;

“Material Contract”		means the BP Agreements, the Electricity Trading Agreements, the GTMAs and any other arrangement, understanding, commitment, agreement or contract (i) involving consideration, expenditure or liabilities or calling for payments by any party thereto in excess of £500,000 (five hundred thousand pounds) in any one (1) year or (ii) in relation to the sale or purchase of or the grant of any option or similar arrangement over any asset under which the amount payable or the value of the asset to which such arrangement, understanding, commitment, agreement or exceeds £500,000 (five hundred thousand pounds);

“Mitsubishi”		means Mitsubishi Corporation, and all its Affiliates, and Mitsubishi Heavy Industries and its Affiliates;

“Net Working Capital”		means, in relation to a Sale Group member, the aggregate of the following line items from the Completion Balance Sheet (subject to any specific exclusions noted below, which exclusions shall be calculated in accordance with the Accounting Principles) prepared in relation to such Sale Group member:

		(a) trade debtors (excluding any amounts receivable under any policy of insurance), stock, cash in bank and in hand (excluding the Settlement Works Fund and amounts payable under the Settlement Agreement) excluding, in each case, all amounts representing an Allowance, any deferred income, any prepayments and any amounts contributed by the Purchaser in furtherance of the undertaking in clause 10.3; and

		(b) less the sum of creditors falling due within one year (excluding any amount which comprises SCCL Intergroup Debt in relation to such Sale


		Group member and deferred income), creditors falling due after more than one year and provisions for liabilities and charges,

		PROVIDED THAT: if the sum of Net Working Capital of SCCL and the Net Working Capital of UK OpCo exceeds [] then SCCL’s Net Working Capital shall be reduced by an amount equal to the excess (so that the aggregate Net Working Capital of the Sale Group does not exceed []

“New Warranties”		means those Warranties set out in paragraphs 4.3, 4.4, 4.5, 5.3, 7.1, 8.1.1, 8.1.2, 8.1.3, 8.1.4, 9.1, 10.2(ii), 12.4, 12.5, 12.6, 12.7, 14.6, 14.7, 14.8, 14.9, 14.10, 14.11, 14.12, 14.13, 15.3, 15.5, 15.11, 15.12, 15.14, 15.17, 16.3, 16.4, 16.5, 16.6, 17.3 and 19 (Health and Safety), 20 (Climate Change) and 21 (Facility/Project Specific Warranties) of Schedule 2;

“NGC”		means National Grid Company plc, a company incorporated under the laws of England and Wales (Registered No. 2366977) or any successor thereto in its role under the agreements regulating the transmission of electricity in England and Wales;

“NWC Completion Statement”		has the meaning ascribed to such term in clause 4.1;

“O&M Guarantee”		means a guarantee to be provided by a member of the Purchaser’s Group pursuant to the [] in a form acceptable to []

“Participation Agreement”		means an agreement dated 18 July 1997 between [*] , certain other parties specified therein, and SCCL, as amended;

“payment account details”		means, in relation to any payment to be made under or pursuant to this Agreement, the name, account number, sort code, account location and other details specified by the payee and necessary to effect payment to the payee in accordance with this Agreement;

“Permitted Encumbrances”		means the right of first refusal or any similar right granted in favour of BP International under the Participation Agreement or any other right granted in favour of any member of the BP Group under a BP


		Agreement and any lien arising by operation of law;

“Preferred”		has the meaning ascribed to such term in the Luxco Loan Agreement;

“Proceedings”		means any proceeding, suit or action arising out of or in connection with this Agreement;

“Promissory Note”		has the meaning ascribed to such term in paragraph 2.14 of Part I of Schedule 4;

“Project”		means the design, development, construction, financing, commissioning, operation and maintenance of the Facility and all related and ancillary works on the Property and shall include any part thereof;

“Property”		means the combined cycle gas turbine plant site (formerly part of the Fleet site) at Saltend, Kingston upon Hull and which is registered in the name of SCCL at HM Land Registry under title number YEA30817 and shall include any part thereof and any building, structure and erection in, on, at or under it;

“Purchase Price”		means the purchase price payable in respect of the Shares as determined in accordance with clause 2.3;

“Purchaser’s Auditors”		means KPMG or such other firm of internationally recognised accountants nominated by the Purchaser;

“Purchaser’s Group”		means the Purchaser and its Affiliates and “member of the Purchaser’s Group” shall mean any and all of the Purchaser and its Affiliates and for the avoidance of doubt, from and after Completion shall include each member of the Sale Group;

“Purchaser’s Solicitors”		means Clifford Chance LLP of 10 Upper Bank Street, London E14 5JJ;

“Relevant Period”		means the period beginning on 24 August 2001 and, subject to clause 8.2, ending on the date of this Agreement;


“Relief”		has the same meaning ascribed to it in the Tax Covenant;

“Remedial Action”		means any works, steps, operations or measures to prevent, minimise, treat, remedy or contain the effect or potential effect of any Hazardous Substances on the Environment; and/or any works, steps, operations or measures to restore the Environment to its former state in each case to the extent required pursuant to any law, statute or regulation in force at the date of this Agreement;

“Reply Notice”		has the meaning ascribed to such term in clause 8.10.2;

“Reporting Accountants”		means the Seller’s Auditors;

“Response Notice”		has the meaning ascribed to such term in clause 8.10.1;

“Sale Group”		means UK OpCo and SCCL, and a “member of the Sale Group” or “Sale Group member” means either of them;

“SCCL”		means Saltend Cogeneration Company Limited, details of which are set out in Part B of Schedule 1;

“SCCL Intergroup Debt”		means the aggregate of the amount owing under the Luxco Loan, the Promissory Note and all other all amounts of indebtedness owed by SCCL to the Calpine Group or any Calpine Group member, in each case immediately prior to Completion, including any accrued and unpaid interest, fees and expenses thereon expressed in pounds. If any amount comprising an SCCL Intergroup Debt is denominated in a currency other than pounds, that amount shall be converted to pounds at the closing mid point pound spot rate applicable to that non-sterling currency on the Business Day immediately prior to the Completion Date as shown in the Financial Times (London edition), or if the Financial Times (London edition) is not published on that date, the closing mid-point pound spot rate applicable to that non-sterling currency quoted by Barclays Bank plc;

“Seller Guarantor Officer’s		means the Officer’s Certificate delivered by or on


Certificate”		behalf of the Seller Guarantor on the date of this Agreement;

“Seller’s Auditors”		means PricewaterhouseCoopers LLP;

“Seller’s Solicitors”		means Skadden, Arps, Slate, Meagher & Flom (UK) LLP located at 40 Bank Street, Canary Wharf, London E14 5DS;

“Settlement Agreement”		means the agreement between SCCL and [*] dated 21 October 2004;

“Settlement Works Fund”		means the amount standing to the credit of the JSS Account (as that term is defined in the Supplemental Agreement) from time to time;

“Shares”		means the entire issued share capital of each of UK OpCo and SCCL, as described in Parts A and B, respectively, of Schedule 1;

“Share Purchase Documents”		means this Agreement, the Tax Covenant, the Disclosure Letter, the Completion Documents and any other documents referred to in this Agreement to be entered into in connection with the consummation of the transactions contemplated hereby;

“Site Interface Agreement”		means the site interface agreement made between SCCL and [*] dated 18 July 1997, as amended;

“SPA”		means the steam purchase agreement between SCCL and [*] , as amended;

“Supplemental Agreement”		means the supplemental agreement between [*] and SCCL dated 21 October 2004;

“Supplemental Letter”		means the supplemental letter agreement in the Agreed Form;

“Tax” or "Taxation”		has the meaning ascribed to it in the Tax Covenant;


“Tax Authority”		has the meaning ascribed to it in the Tax Covenant;

“Tax Claim”		means a Tax Warranty Claim or a Claim under the Tax Covenant;

“Tax Covenant”		means the Tax Covenant by the Seller (and the Guarantor) in favour of the Purchaser in the Agreed Form to be executed by the Purchaser and the Seller and delivered at Completion;

“Tax Liability”		has the meaning ascribed to it in the Tax Covenant;

“Tax Warranties”		means the Warranties set out in paragraph 15 of Schedule 2;

“Tax Warranty Claim”		means a Claim under a Tax Warranty;

“TCGA 1992”		means the Taxation of Chargeable Gains Act 1992;

“Trade Marks”		means any trade marks, service marks, trade names or internet domain names, in each case whether registered or unregistered, and including any applications for the grant or renewal of any such rights and all rights or forms of protection having equivalent or similar effect anywhere in the world owned or used by the Seller or any member of the Calpine Group;

“UK OpCo”		means Calpine UK Operations Limited, details of which are set out in Part A of Schedule 1;

“Unadjusted SCCL Purchase Price ”		means [*]

“Unadjusted UK OpCo Purchase Price”		means [*]

“Unit”		means a module of the CCGT, including a gas turbine, steam turbine, electric generator, heat recovery steam generator and all directly related auxiliaries;


“VAT”		means Value Added Tax for the purposes of VATA;

“VATA”		means the Value Added Tax Act 1994;

“Warranties”		means the warranties set out in clause 8.6 and Schedule 2 and “Warranty” shall be construed accordingly;

“Warranted Replies”		means the replies given by or on behalf of the Seller in response due diligence questions raised by the Purchaser numbered D44, D124, D129, D133, D134, D148, D149, D181, D167, D238, D269, D274, D279, D286, D287, D290, D299, D300 and D334 in Appendix 1 of the Disclosure Letter;

“Waste”		means waste as defined in Environmental Laws including any substance, material, effluent or article constituting controlled waste, directive waste, special waste, hazardous waste, or refuse in each case as defined therein; and

“Working Hours”		means 9.30 a.m. to 5.00 p.m. on a Business Day.

1.2 In this Agreement, unless otherwise specified:

1.2.1 references to clauses, sub-clauses, paragraphs, sub-paragraphs, Schedules, and the Recitals are to clauses, sub-clauses, paragraphs, sub-paragraphs and the Recitals of, and the Schedules to this Agreement;

1.2.2 a reference to any statute or statutory provision shall be construed as a reference to the same as it may have been, or may from time to time be, amended, modified or re-enacted except to the extent that any amendment or modification made or coming into effect of any statute or statutory provision after the date of this Agreement would increase or alter the liability of the Seller under this Agreement;

1.2.3 headings to clauses and Schedules are for convenience only and do not affect the interpretation of this Agreement;

1.2.4 the Schedules and any attachments form part of this Agreement and shall have the same force and effect as if expressly set out in the body of this Agreement, and any reference to this Agreement shall include the Schedules;

1.2.5 references to this Agreement, or to any other document, or to any specified provision of this Agreement, or any other document, are to this Agreement, that document or provision as in force for the time being, as amended, modified, supplemented, varied, assigned or novated, from time to time;

1.2.6 references to a “company” shall be construed so as to include any company, corporation or other body corporate, wherever and however incorporated or established;

1.2.7 references to a “person” shall be construed so as to include any individual, firm, company, government, state or agency of a state or any joint venture, association or partnership (whether or not having separate legal personality), its successors and assigns;

1.2.8 words importing the singular include the plural and vice versa, words importing a gender include every gender;

1.2.9 references to a “party” or “parties” means a party or the parties to this Agreement;

1.2.10 references to “indemnify” and “indemnifying” any person against any circumstance include indemnifying and keeping that person harmless from all actions, claims and proceedings from time to time made against that person and all loss or damage and all payments, costs or expenses made or incurred by that person as a consequence of or which would not have arisen but for that circumstance;

1.2.11 references to writing shall include any modes of reproducing words in a legible and non-transitory form;

1.2.12 references to “pounds” or to “£” shall be construed as references to the lawful currency for the time being of England and Wales;

1.2.13 references to times of the day are to London time;

1.2.14 general words shall not be given a restrictive interpretation by reason of their being preceded or followed by words indicating a particular class of acts, matters or things;

1.2.15 where any statement is qualified by the statement “so far as the Seller is aware” or “to the Seller’s knowledge” or any similar expression or otherwise refers to the knowledge or awareness of the Seller, that statement shall be deemed to be made only on the basis of the actual knowledge of any of Zamir Rauf, Tayeb Tahir, Richard Hinks, Neil Cranswick and Vanessa Bustall having made reasonable enquiry; and

1.2.16 where any statement is qualified by the expression “the Purchaser’s actual knowledge” or “so far as the Purchaser is aware” or any similar expression or otherwise that refers to the knowledge or awareness of the Purchaser, that statement shall be deemed to be made only on the basis of the actual knowledge of any of Sean Neely, Christopher Trower, Paul Evans, Mark Craddock, Ken Oakley, Takashi Umezu, Owen Bannister and Grant Gillon, each of whom shall be deemed to be aware of the content of any written report in relation to the Sale Group provided by any Purchaser Party’s professional advisers and consultants (including legal, financial, environmental and accounting advisers and consultants) specifically in connection with the Purchaser’s due diligence investigation of and into SCCL, UK OpCo, the Business, and the transactions the subject of the Share Purchase Documents but for this

purpose such reports will not include (irrespective of any term of such report) any documents referred to therein save to the extent (i) the document is attached to such report; or (ii) the content of such document is repeated verbatim in such report, but without imputing to any such person the knowledge of any other person).

1.3 Where any indemnity contained in this Agreement is expressed to be on an after-tax basis, then in calculating the liability of the indemnifying party, there shall be taken into account having regard to the time value of money:

1.3.1 the amount by which any liability to Taxation of the party to be indemnified (or any member of the Group of which that party is a member) is actually reduced or extinguished as a result of the matter giving rise to the indemnity claim; and

1.3.2 the amount by which any liability to Taxation of the party to be indemnified (or any member of the Group of which that party is a member) is actually increased as a result of the payment by the indemnifying party in respect of the matter giving rise to the indemnity claim.

2. SALE AND PURCHASE

2.1 At Completion the Seller shall sell and the Purchaser shall purchase the Shares and each right attaching to the Shares at or after the date of this Agreement, including without limitation the right to receive all dividends, distributions or any return of capital paid or made on or after the date of this Agreement, with full title guarantee and free from Encumbrances.

2.2 Title to, beneficial ownership of, and any risk attaching to the Shares shall pass on Completion. Following Completion, the Purchaser shall be entitled to exercise all rights attached or accruing to the Shares.

2.3 The Purchase Price shall be the sum of the purchase price attributable to the SCCL shares to be acquired pursuant to this Agreement as determined in accordance with clause 2.3.1 and the purchase price attributable to the UK OpCo shares to be acquired pursuant to this Agreement as determined in accordance with clause 2.3.2.

2.3.1 That part of the Purchase Price attributable to the SCCL shares to be acquired pursuant to this Agreement is equal to the Unadjusted SCCL Purchase Price less an amount equal to the SCCL Intergroup Debt:

(a) plus the amount by which SCCL’s Net Working Capital exceeds zero; or

(b) less the amount by which SCCL’s Net Working Capital is less than zero.

2.3.2 That part of the Purchase Price attributable to the UK OpCo shares to be acquired pursuant to this Agreement is equal to the Unadjusted UK OpCo Purchase Price less any indebtedness owed by UK OpCo to the Calpine Group or any Calpine Group member, excluding in each case SCCL, at or immediately prior to Completion, including any interest which has accrued thereon and:

(a) plus the amount by which UK OpCo’s Net Working Capital exceeds zero; or

(b) less the amount by which UK OpCo’s Net Working Capital is less than zero.

The provisions of clause 7 shall apply in respect of the preparation of the Completion Balance Sheets and the agreement or determination of the Purchase Price.

2.4 The Seller waives all rights of pre-emption and other restrictions on transfer over the Shares conferred on it.

3. CONDITIONS PRECEDENT

3.1 Completion is conditional upon the satisfaction (or waiver in accordance with clause 3.8) of the following conditions precedent on or before the Long Stop Date:

3.1.1 the BP Approval having been received in a form satisfactory to the Seller and the Purchaser;

3.1.2 BP International confirming in a form satisfactory to the Seller and the Purchaser that BP International will not exercise its right of first refusal under and in accordance with the terms of the Participation Agreement, or expiry of the term during which BP International may exercise its right of first refusal without BP International having exercised any such right in accordance with the terms of the Participation Agreement, whichever is the earlier to occur or, if BP International exercises its right to make a lump sum cash offer under clause 4.2.3 of the Participation Agreement, the Seller having determined that such offer is not of equivalent value to that comprising the sale of the Shares pursuant to this Agreement and the transactions contemplated hereby;

3.1.3 the European Commission issuing a decision under Article 6(1)(b) of Council Regulation (EC) 139/2004 (the “Regulation”), or being deemed to have done so under Article 10(6) of the Regulation, declaring the acquisition of the Shares by the Purchaser pursuant to this Agreement (the “Transaction”) compatible with the Common Market without attaching to its decision any conditions or obligations and in the event that a request under Article 9(2) of the Regulation has been made by a Member State, the European Commission indicating that it has decided not to refer the Transaction (or any part thereof) or any matter arising therefrom to a competent authority of a Member State in accordance with Article 9(1) of the Regulation (the “Anti-Trust Condition”);

3.1.4 the banks and financial institutions which are to be party to the Facility Agreement and the relevant members of the BP Group having agreed upon a form of direct agreement which is to become effective upon Completion on terms reasonably satisfactory to the Purchaser;

3.1.5 the Reporting Accountants confirming in writing in a form satisfactory to the Seller and the Purchaser that they are not aware of any fact matter or circumstance as at the date of such confirmation that would prevent them from issuing the Accountants Report at Completion, such confirmation to be accompanied by a draft of the Accountants Report;

3.1.6 the Seller being satisfied in its sole and absolute discretion that the BP Director is likely to execute the statutory declaration and to vote in favour

of the resolution(s) each referred to in paragraph 1 of Part II of Schedule 4; and

3.1.7 the Seller having provided the Purchaser with the Audited Accounts.

3.2 The Seller shall promptly give notice to the Purchaser of the satisfaction of the Condition Precedent set out in clause 3.1.6.

3.3 The Seller hereby undertakes to use reasonable efforts to ensure satisfaction of the Condition Precedents in clauses 3.1.1, 3.1.2, 3.1.5 and 3.1.7 on or before the Long Stop Date. The Seller undertakes to keep the Purchaser informed as to progress towards satisfaction of the Conditions Precedent in clauses 3.1.1 and 3.1.2 (the “BP Conditions”) and undertakes to:

3.3.1 disclose in writing to the Purchaser immediately upon becoming aware of anything which may prevent one or both of the BP Conditions from being satisfied;

3.3.2 notify the Purchaser and (subject to law and any confidentiality obligations binding upon the Seller) provide copies of any communications from or on behalf of any BP Group member in relation to the satisfaction of the BP Conditions or either of them;

3.3.3 provide the Purchaser (or advisers nominated by the Purchaser) with draft copies of all submissions to and communications with any BP Group member in relation to the satisfaction of the BP Conditions or either of them. Provided that it is reasonably practicable for it to do so, the Seller shall provide such copies at such time as will allow the Purchaser a reasonable opportunity to provide comments on such submissions or communications before they are submitted or sent and provide the Purchaser (or such nominated advisers) with copies of all such submissions or communications in the form submitted or sent;

3.3.4 where requested by the Purchaser and where agreed to by the relevant BP Group member, allow persons nominated by the Purchaser to attend all meetings in relation to satisfaction of the BP Conditions or either of them with any BP Group member and, where applicable, to make oral submissions at such meetings; and

3.3.5 notify the Purchaser within 2 Business Days of a BP Condition being satisfied.

3.3A Without prejudice to its obligations under Schedule 5, other than an arrangement, understanding, commitment, agreement or contract:

3.3A.1 between SCCL and any BP Group member entered into in the ordinary course of the Business on arm’s length terms;

3.3A.2 with any BP Group member to which neither Sale Group member is a party and which imposes no obligation or liability (contingent or otherwise) upon either of them; or

3.3A.3 required under or contemplated by the Participation Agreement,

the Seller shall not enter into (and shall procure that neither Sale Group member enters into) any arrangement, understanding, commitment, agreement or contract with any BP Group member and shall not (and shall procure that neither Sale Group member shall) agree to any amendment to any of the BP Agreements, in each case without the prior written consent of the Purchaser.

3.4 The Purchaser hereby undertakes to use reasonable efforts to ensure the satisfaction of the Anti-Trust Condition and the Conditions Precedent set out in clauses 3.1.4 and 3.1.5 (the “Purchaser Conditions”) on or before the Long Stop Date. The Purchaser Conditions are given in favour of the Purchaser and, at any time before the Long Stop Date the Purchaser may, by notice in writing to the Seller, waive a Purchaser Condition on any terms the Purchaser may decide. The Purchaser undertakes to keep the Seller informed as to progress towards satisfaction of the Anti-Trust Condition and the Purchaser Conditions and undertakes to:

3.4.1 disclose in writing to the Seller immediately upon becoming aware of anything which may prevent the Anti-Trust Condition or the Purchaser Condition from being satisfied;

3.4.2 notify the Seller and (subject to law and any confidentiality obligations binding upon the Purchaser) provide copies of any communications from any governmental or regulatory body in relation to satisfaction of the Anti-Trust Condition or from BP in relation to the satisfaction of the Purchaser Conditions where such communications have not been independently or simultaneously supplied to the Seller;

3.4.3 provide the Seller (or advisers nominated by the Seller) with draft copies of all submissions and communications to governmental or regulatory bodies in relation to satisfaction of the Anti-Trust Condition or any submissions or communications to any BP Group member in relation to the satisfaction of the Purchaser Condition or either of them. The Purchaser shall provide such copies at such time as will allow the Seller a reasonable opportunity to provide comments on such submissions and communications before they are submitted or sent and provide the Seller (or such nominated advisers) with copies of all such submissions and communications in the form submitted or sent; provided, however that if the Seller does not provide its comments within the time frame required for the making of such communications or submissions, the Purchaser may nonetheless make such communications or submissions;

3.4.4 where requested by the Seller and where permitted by the governmental or regulatory body, allow persons nominated by the Seller to attend all meetings in relation to satisfaction of the Anti-Trust Condition (if any) with such governmental or regulatory bodies and, where appropriate, to make oral submissions at such meetings;

3.4.5 where requested by the Seller and where agreed to by the relevant BP Group member, allow persons nominated by the Seller to attend all meetings in relation to the satisfaction of the Purchaser Condition with any BP Group member and, where applicable, to make oral submissions at such meetings; and

3.4.6 notify the Seller within 2 Business Days of such condition being satisfied.

3.5 Each of the Seller and the Purchaser agrees that it shall, upon a request from the other, promptly co-operate with and provide all necessary information reasonably required by the other party or by BP International or by any Competent Authority in respect of all requests and enquiries in connection with this Agreement and the arrangements relating thereto (including, without limitation, in relation to the satisfaction of any or all of the Conditions Precedent) from BP International and/or any such Competent Authority.

3.6 The Purchaser may terminate this Agreement by notice in writing to the Seller if, at any time after the date of this Agreement and prior to Completion:

3.6.1 any event occurs which has a Material Adverse Effect; or

3.6.2 the Purchaser becomes aware of any fact or circumstance which would entitle it to make a Claim against a Warrantor for a breach of a Warranty given pursuant to clause 8.1 or which would, were Completion to occur, entitle it to make a Claim against a Warrantor pursuant to clause 8.2, where such breach gives or would give rise to a Material Adverse Effect, determined for this purpose only on the basis of the difference between (1) the business, assets, financial or trading condition or results of operations of the Sale Group taken as a whole as they would have been had the relevant Warranty been true and correct and (2) the actual position of the Sale Group in these same respects (for the avoidance of doubt having regard to the fact or circumstance which entitles or which would entitle the Purchaser to make a Claim against a Warrantor for a breach of clause 8.1 or clause 8.2 (as the case may be)).

3.7 The Seller shall promptly notify the Purchaser (providing reasonable details of such fact or circumstance (but without any obligation to provide quantum)) if it becomes aware of a fact or circumstance which would or might reasonably entitle the Purchaser to terminate this Agreement under clause 3.6.

3.8 Each of the Conditions Precedent in clauses 3.1.4 and 3.1.7 may be waived only by the Purchaser giving notice to the Seller in writing. The Condition Precedent set out in clause 3.1.6 may be waived only by the Seller giving notice to the Purchaser in writing. Each of the Conditions Precedent set out in clauses 3.1.1 through 3.1.3 (inclusive) and 3.1.5 may be waived only by the Purchaser and the Seller each giving notice to the other in writing.

4. CONSIDERATION

4.1 On or before the fifth (5th) Business Day prior to the date scheduled for Completion in accordance with clause 6.1, the Seller shall prepare and deliver to the Purchaser a statement (the “NWC Completion Statement”) setting out the projected Net Working Capital for each of SCCL and UK OpCo as at Completion (the sum of such amounts the “Aggregate Projected NWC”) and specifying the Seller’s estimate of the value of the SCCL Intergroup Debt at Completion expressed in pounds (the “Estimated SCCL Intergroup Debt”) and the relevant member(s) of the Calpine Group to which such amounts are due. For the purposes of determining the Estimated SCCL Intergroup Debt, if any amount comprising an SCCL Intergroup Debt is denominated in a currency other than pounds, that amount shall be converted to pounds at the closing mid-point pound spot rate applicable to that non-sterling currency on the date on which the NWC Completion Statement is prepared and delivered in accordance with this clause 4.1 as shown in the Financial Times (London edition), or if the Financial Times (London edition) is not published on that date, the closing mid-point pound spot rate applicable to that non-sterling currency quoted by Barclays Bank plc. The NWC Completion Statement shall be determined and prepared by the Seller in good faith.

4.2 At Completion and subject to clause 6, the Purchaser shall pay the Seller (on account of the Purchase Price) the Aggregate Unadjusted Purchase Price less the Estimated SCCL Intergroup Debt and:

4.2.1 if the Aggregate Projected NWC is a positive amount in excess of zero, plus the lesser of (i) such excess and (ii) [*] ; or

4.2.2 if the Aggregate Projected NWC is less than zero, less the amount (expressed as a positive number) equal to the deficit.

The amount payable at Completion as calculated under this clause 4 (the “Completion Amount”) is payable by the Purchaser to the Seller on Completion in accordance with clauses 6.3 and 6.4.

4.3 If any payment is made by the Seller to the Purchaser in respect of any Claim the Purchase Price shall be deemed to have been reduced by the amount of such payment but in no event shall the Purchase Price be deemed to be reduced below £10.00 by virtue of the operation of this clause 4.3.

4.4 Wherever in this Agreement provision is made for the payment by one party to another (or by or to SCCL), such payment shall be effected by crediting for same day value in immediately available funds to the account specified in the payment account details of the party entitled to the payment (or to SCCL, as the case may be) by way of wire transfer to such account or accounts as shall have been notified by the party entitled to the payment (or, in the case of a payment required to be made to SCCL after Completion, by the Purchaser) at least three (3) Business Days before the due date for payment.

5. CONDUCT OF BUSINESS BEFORE COMPLETION

5.1 Subject to clause 5.2, the Seller shall procure that between the date of this Agreement and Completion:

5.1.1 SCCL and UK OpCo shall, unless it has obtained the prior consent of the Purchaser to do otherwise (such consent not to be unreasonably withheld or delayed), comply with Part I of Schedule 5;

5.1.2 to the extent applicable thereto, (i) no member of the Sale Group knowingly or intentionally acts or omits to act where such act or omission would result in its being in material breach of any BP Agreement and (ii) each member of the Sale Group uses its reasonable endeavours to comply with its respective obligations under each of the BP Agreements to which it is a party.

5.2 Clause 5.1 shall not operate so as to restrict or prevent:

5.2.1 the entering into of any contract or commitment in the ordinary course of business and consistent with the relevant Sale Group member’s usual practices, which contract or commitment is terminable in accordance with its terms by written notice of six months or less and which is not material in relation to the Sale Group;

5.2.2 any matter reasonably undertaken by any member of the Sale Group in an emergency or disaster situation with the intention of minimising any

adverse effect thereof (and of which the Purchaser will be promptly notified);

5.2.3 the completion or performance of any obligations undertaken pursuant to any contract or arrangement entered into by any member of the Sale Group prior to the date of this Agreement provided such contract or arrangement has been disclosed to the Purchaser in the Data Room, or if the Seller is aware that such contract or arrangement is not so disclosed, such contract or arrangement is brought to the attention of the Purchaser and, where practicable, the Seller consults with the Purchaser in respect of the obligations to be performed pursuant to such contract or arrangement;

5.2.4 the payment of any principal, interest and other amounts due and payable by SCCL in accordance with the terms of the Luxco Loan Agreement, this Agreement or as required or contemplated by any contractual loan or financing arrangement to which SCCL or any of SCCL’s Affiliates is a party, in each case without prejudice to the Warranty set out in paragraph 5.6 of Schedule 2;

5.2.5 any matter required to be undertaken to comply with this Agreement; or

5.2.6 any matter undertaken at the written request of the Purchaser.

5.3 The Seller shall use its reasonable efforts to provide, and shall procure that the Sale Group members provide, the Purchaser and the Purchaser’s Auditors with such information concerning each of the Sale Group members as the Purchaser and the Purchaser’s Auditors shall reasonably require and allow the Purchaser and the Purchaser’s Auditors, and shall procure that each Sale Group members allows the Purchaser and the Purchaser’s Auditors, reasonable access during business hours (and upon reasonable notice) to each member of the Sale Group and its books and records, its employees and advisers, except for work product of, or privileged communications with, legal counsel, in each case insofar as is reasonably required for the analysis and verification of the net asset position of each of the Sale Group members; provided that access pursuant to this clause 5.3 and the exercise by the Purchaser of its rights under this clause 5.3 shall not interfere with the Seller’s or any member of the Sale Group’s Business operations or breach the terms of any confidentiality undertakings binding upon it.

5.4 As soon as reasonably practicable after the date on which it gives the NWC Completion Statement, the Seller will deliver a copy of the Supplemental Letter (duly executed by or on behalf of each of the Seller Parties) to the Purchaser.

6. COMPLETION

6.1 Completion shall take place at the offices of the Seller’s Solicitors at 40 Bank Street, Canary Wharf, London E14 5DS:

6.1.1 on the nineteenth (19^th) day after the day on which the last of the Conditions Precedent is satisfied, or, if such day is not a Business Day, the next Business Day; or

6.1.2 such earlier date notified by the Seller to the Purchaser as being the date on which the Luxco Loan and all amounts thereunder fall due for repayment or prepayment as a result of the redemption of the Preferred,

provided however that such date shall not be less than six (6) Business Days after the last of the Conditions Precedent are satisfied.

6.1A If:

6.1A.1 the Seller gives (or is deemed to give) a notice to the Purchaser under clause 8.9 on a date less than 4 Business Days prior to the date for Completion as determined in accordance with clause 6.1; and

6.1A.2 such notice does not contain a statement from the Seller indicating that the Seller wishes to disapply the provisions of clause 8.10, then the Completion Date determined under clause 6.1 shall be postponed to the first Business Day after the date on which Calpine gives (or is deemed to give) a Reply Notice in respect of the facts or circumstances described in the Seller’s notice referred to in clause 6.1A.1.

6.1B At Completion, all and not part only of the transactions contemplated by this Agreement to take place at Completion shall occur and such transactions shall be deemed to occur simultaneously.

6.2 Subject to the terms and conditions hereof (including for the avoidance of doubt, compliance by the Purchaser with its obligations in clause 6.3), at Completion the Seller shall do those things required of it in Part I of Schedule 4 (Completion Arrangements) with any amendments as may be agreed between the Purchaser and the Seller prior to Completion. The Purchaser may waive the delivery by the Seller of any document required under Part I of Schedule 4 for the purposes of proceeding with Completion, but without prejudice to its rights in respect of the failure by the Seller to deliver the same in accordance with this clause 6.2.

6.3 Subject to the terms and conditions hereof (including, for the avoidance of doubt, compliance by the Seller with its obligations under clause 6.2), at Completion the Purchaser shall:

6.3.1 do those things required of it in Part II of Schedule 4 (save to the extent that anything required of the Purchaser in Part II of Schedule 4 requires the BP Director to execute or deliver any document or to approve any resolution, it being acknowledged that the Purchaser cannot procure that the BP Director take any action) with any adjustments or amendments as may be agreed by the Seller and the Purchaser prior to Completion. The Seller may waive the delivery by the Purchaser of any document referred to in Part II of Schedule 4 for the purposes of proceeding with Completion, but without prejudice to its rights in respect of the failure by the Purchaser to deliver the same in accordance with this clause 6.3;

6.3.2 pay the Completion Amount to the Seller on account of the Purchase Price less an amount equal to [*] which amount shall be paid to the Escrow Account with the Escrow Agent; and

6.3.3 procure that SCCL pays to the Seller or to its order and to such accounts as it may direct, an amount equal to the Estimated SCCL Intergroup Debt.

Any payments required to be made under this clause 6.3 will be made in accordance with clause 4.4.

6.4 The Seller is not obliged to complete this Agreement unless the Purchaser complies with all its obligations under clause 6.3. The Purchaser is not obliged to complete this Agreement unless:

6.4.1 the Seller complies with all its obligations under clause 6.2; and

6.4.2 the sale of all the Shares is completed simultaneously.

6.5 If a party (the “Defaulting Party”) fails to comply with its obligations at Completion under this clause 6 then the Seller (if the Purchaser is the Defaulting Party) or the Purchaser (if the Seller is the Defaulting Party) may, by notice in writing to all other parties (i) postpone Completion by not less than 2 Business Days (to a date no later than [*] ); or (ii) terminate this Agreement forthwith.

6.6 Neither the Seller nor the Purchaser is obliged to complete this Agreement if:

6.6.1 the BP Director fails to deliver at Completion a duly executed statutory declaration referred to in Part II of Schedule 4 and approve those resolutions set out in paragraph 1 of Part II of Schedule 4;

6.6.2 immediately prior to the implementation of the transactions referred to in paragraph 3 of Part II of Schedule 4, SCCL does not have net assets; or

6.6.3 the Reporting Accountants fail to deliver the Accountants Report at Completion,

PROVIDED that clause 6.6.1 shall not operate if the BP Director resigns from the board of directors of SCCL and is not replaced prior to Completion unless the Purchaser provides to the Seller no later than 10 Business Days after being given notice of such resignation a certificate indicating that it has received notice from the finance parties under the Facility Agreement confirming that such financing parties are of the view, having sought the advice of a Queens Counsel, that the Financial Assistance Procedure intended to be carried out at Completion, as set out in Part II of Schedule 4, will be adversely affected by the resignation of the BP Director and that consequently the related condition precedent in the Facility Agreement is not satisfied (and the Purchaser shall provide to the Seller a copy of any opinion or memorandum from the leading counsel in the possession or control of the Purchaser that was obtained by such finance parties in respect of the resignation of the BP Director from the board of directors of SCCL). If Completion fails to take place as a result of any of the circumstances referred to in this clause 6.6 then (subject to clause 17.2) Completion will automatically be postponed to the day 5 Business Days after the date on which Completion was (but for this sentence) otherwise due to occur and that Business Day will be the Completion Date.

6.7 In the event that Completion does not take place and the appointments and resignations referred to in paragraph 1 of Part I of Schedule 4 are effective, then the Purchaser shall (to the extent that it is in its power to do so) procure that a meeting of the directors of each of UK OpCo and SCCL are immediately held at which resolutions are passed (i) approving the re-appointment of each of the directors who so resigned and (ii) accepting the resignation of each of the directors so appointed. The Purchaser shall procure that each of the directors resigning pursuant to this clause 6.7 delivers to the board of directors of UK OpCo or SCCL (as the case may be) a duly executed resignation letter in the Agreed Form. The Purchaser hereby indemnifies the Seller Parties for any and all actions undertaken by the directors appointed pursuant to paragraph 1 of Part I of Schedule 4 prior to their resignation in accordance with this clause 6.7.

6.8 The Seller and the Purchaser agree that such amounts standing to the credit of the Escrow Account shall only be applied in accordance with the provisions of the Escrow Agreement.

7. COMPLETION ACCOUNTS

7.1 The Purchaser shall procure that as soon as possible, and in any event within 60 calendar days of the Completion Date a draft Completion Balance Sheet (having the same line items as the balance sheet contained in the Accounts for the Sale Group member to which such draft Completion Balance Sheet relates and by way of example only, an illustrative calculation is set out in Appendix I) in respect of each of SCCL and UK OpCo (such Completion Balance Sheets together the “Draft Completion Balance Sheets”) are prepared and delivered to the Seller.

Each Draft Completion Balance Sheet shall include a draft statement of Net Working Capital for the company to which such Completion Balance Sheet relates. The Draft Completion Balance Sheet for SCCL shall specify the Purchaser’s calculation of the SCCL Intergroup Debt. The Purchaser shall prepare the Draft Completion Balance Sheets in accordance with the Accounting Principles.

7.2 The Seller and the Seller’s Auditors shall be entitled to review the Draft Completion Balance Sheets for a period of 60 calendar days following receipt from the Purchaser.

7.3 The Purchaser shall provide the Seller and the Seller’s Auditors with such information as the Seller and the Seller’s Auditors shall reasonably require or shall procure that such information is provided to the Seller and the Seller’s Auditors and allow the Seller and the Seller’s Auditors access to each member of the Sale Group and its books and records, its employees and advisers (at reasonable times and upon reasonable notice and subject to the Seller agreeing in favour of the Purchaser to keep all confidential information disclosed to it in accordance with this clause 7.3 confidential on the terms as set out in clause 21), and shall use its reasonable efforts to procure access to the Purchaser’s Auditors (if retained) and their working papers (or, if the Purchaser’s Auditors are not retained for the purposes of preparing the draft Completion Balance Sheet, the Purchaser’s own working papers or equivalent) in each case insofar as is reasonably required for the analysis and verification of the Draft Completion Balance Sheets (including the draft statements of Net Working Capital contained therein).

7.4 At or before the end of the period of 60 calendar days referred to in clause 7.2, the Seller shall either:

7.4.1 notify the Purchaser that it accepts each Draft Completion Balance Sheet in its entirety, in which case the Draft Completion Balance Sheets shall constitute the Completion Balance Sheets (and the amount of the Net Working Capital shall be the amount set out in the draft Net Working Capital statements contained therein) and such Draft Completion Balance Sheets shall be final and binding on the Seller and the Purchaser; or

7.4.2 deliver to the Purchaser written notice of those items and, where practicable, the amount in each Draft Completion Balance Sheet or draft statement of Net Working Capital, as appropriate, which it disputes, in which case only those items or amounts identified by the Seller (the “Disputed Items”) shall be in dispute and shall be agreed or determined in accordance with clause 7.5.

7.5 If the Seller delivers a notice under clause 7.4.2 then the Seller and the Purchaser shall use their respective reasonable endeavours to agree the Disputed Items within 30 calendar days, or such longer period as may be agreed between them. Any Disputed Items agreed between the Seller and the Purchaser within that 30 calendar day period shall be reflected in

amendments to the Draft Completion Balance Sheets. At the end of that 30 calendar day period, those Disputed Items which have not been agreed between the Seller and the Purchaser (if any) (“Unresolved Disputed Items”) shall be referred for final binding determination to such firm of independent accountants of international standing (the “Expert”) as the Seller and the Purchaser may agree or, in the absence of agreement within 10 Business Days following the expiry of such 30 day period, or longer period as agreed between the Seller and the Purchaser, as may be selected at the request of either the Seller or the Purchaser by the President of the Institute of Chartered Accountants in England and Wales, with instructions that the Expert render his decision on the Unresolved Disputed Items (and any matters specifically relating thereto) and notify it to the Seller and the Purchaser within 30 days of the Expert accepting such referral. In each case, the Expert so selected (either by agreement between the Seller and the Purchaser or otherwise in accordance with this clause 7.5) shall act as expert and not as arbitrator and the Unresolved Disputed Items in a Draft Completion Balance Sheet will be determined by the Expert in accordance with the Accounting Principles and such adjustments as are required to be made as a result of the Expert’s determination of such Unresolved Disputed Items shall be made to the Draft Completion Balance Sheet in which such Unresolved Disputed Items appear or to which such Unresolved Disputed Items relate which shall then constitute the Completion Balance Sheet (and the amount of the Net Working Capital shall be the amount set out in the statement of Net Working Capital as so adjusted) which shall be final and binding on the Seller and the Purchaser. Each of the Seller and the Purchaser shall respectively provide or procure the provision to the Expert of all such information as the Expert shall reasonably require including from their respective Auditors and, in the case of the Purchaser, such business records and accounts of the Sale Group in the possession, custody or control of the Purchaser which the Expert shall in its discretion consider necessary. The decision of the Expert shall, in the absence of fraud or manifest error, be final and binding on the Purchaser and the Seller. The Seller and/or the Purchaser shall pay the costs of the Expert as the Expert may direct failing which such costs shall be borne equally by the Seller and the Purchaser.

7.6 Within 7 Business Days of the agreement or final determination of the Completion Balance Sheets (and the Net Working Capital statements contained therein) as set out in this clause 7:

7.6.1 if the sum of the Net Working Capital of SCCL and the Net Working Capital of UK OpCo (the “Aggregate Actual NWC”) is greater than the Aggregate Projected NWC, the Purchaser shall pay to the Seller an amount equal to the excess, PROVIDED THAT the maximum amount payable under this clause 7.6.1 shall not, when added to the amount by which the Completion Amount is increased under clause 4.2.1 (if any), exceed [*] );

7.6.2 if the Aggregate Projected NWC is greater than the Aggregate Actual NWC, the Seller shall pay to the Purchaser an amount equal to the excess;

7.6.3 if the SCCL Intergroup Debt shown in the Completion Balance Sheets is less than the amount of the Estimated SCCL Intergroup Debt, then (a) the Seller shall pay (or procure that a Calpine Group member pays) to SCCL an amount equal to the deficit and (b) subject to and conditional upon the Seller’s compliance with sub-clause (a) of this clause 7.6.3, the Purchaser shall pay the Seller an amount equal to the deficit; and

7.6.4 if the SCCL Intergroup Debt shown in the SCCL Completion Balance Sheet is in excess of the amount of the Estimated SCCL Intergroup Debt, then (a) the Seller shall pay (or procure that a Calpine Group member pays) the Purchaser an amount equal to the excess and (b) subject to and

conditional upon the Seller’s compliance with sub-clause (a) of this clause 7.6.4, the Purchaser shall procure that SCCL pays an amount equal to the excess to the Seller which amount shall be in full and final settlement of the SCCL Intergroup Debt and the Seller shall (if requested to do so by the Purchaser) acknowledge the same in writing to the Purchaser.

Any payments required to be made under this clause 7.6 will be made in accordance with clause 4.4.

7.7 The Purchaser shall not be entitled to recover from the Seller in respect of any Warranty being breached or being inaccurate or misleading or in respect of any breach of any other provision of this Agreement (or any other agreement pertaining to this transaction) or in respect of any indemnity contained in any agreement pertaining to this transaction to the extent that the amount which the Purchaser seeks to recover from the Seller has been taken into account in the calculation of Net Working Capital for either SCCL or UK OpCo.

8. SELLER’S WARRANTIES

8.1 The Seller and Calpine (each a “Warrantor”, together the “Warrantors”) warrant to the Purchaser in the terms set out in Schedule 2 as at the date of this Agreement. The liability of the Seller and Calpine in relation to the Warranties shall be joint and several.

8.2 Immediately prior to Completion, the Warrantors shall be deemed to warrant to the Purchaser in the terms set out in Schedule 2 by reference to the facts and circumstances subsisting immediately prior to Completion. For the purposes of this clause 8.2 only, (a) where there is an express or implied reference in a Warranty to the “date of this Agreement”, that reference is to be construed as a reference to Completion and (b) the Relevant Period shall be deemed to end at Completion.

8.3 The Purchaser’s rights to make a Claim in respect of the Warranties, and the Warrantors’ liability in respect of any such Claim, shall be limited and/or excluded as set out in Schedule 3, save in relation to fraud.

8.4 The Warrantors acknowledge that the Purchaser has entered into this Agreement in reliance upon the Warranties. Each Warranty is separate and independent and shall not be limited by reference to or inference from any other Warranty, or any other term of this Agreement or any document referred to in it.

8.5 The only Warranties given:

8.5.1 in respect of Intellectual Property are those contained in paragraph 12 of Schedule 2 and, with the exception of the Warranties contained in paragraphs 7 and 10 of Schedule 2, each of the other Warranties shall be deemed not to be given in relation to Intellectual Property;

8.5.2 in respect of employment matters are those contained in paragraph 14 of Schedule 2 (other than paragraph 14.9 thereof) and, with the exception of the Warranties contained in paragraphs 7 and 10 of Schedule 2, each of the other Warranties shall be deemed not to be given in relation to employment matters;

8.5.3 in respect of Tax are those contained in paragraph 15 of Schedule 2 and each of the other Warranties shall be deemed not to be given in relation to Tax;

8.5.4 in respect of matters related to the Environment are those contained in paragraphs 16 and 20 and to the extent they relate to environmental matters paragraphs 4.4.1 and 4.5 of Schedule 2 and each of the other Warranties shall be deemed not to be given in relation to any matter relating to the Environment;

8.5.5 in respect of the Property are those contained in paragraph 17 of Schedule 2 and each of the other Warranties shall be deemed not to be given in relation to the Property, with the exception of the Warranties contained in paragraph 7 of Schedule 2 insofar as such Warranties relate to Property, excluding fixtures;

8.5.6 in respect of the dispersion of salt from the Facility’s cooling towers into the Environment is that contained in paragraph 21.11 of Schedule 2 and each of the other Warranties shall be deemed not to be given in relation thereto; and

8.5.7 in respect of occupational health and safety are those contained in paragraph 19 of Schedule 2 and each of the other warranties shall be deemed not to be given in relation to occupational health and safety.

8.6 Each of Calpine and the Seller Guarantor warrants to the Purchaser that:

8.6.1 it has the requisite capacity, power and authority to enter into and perform its obligations under this Agreement;

8.6.2 it has taken all necessary corporate action required by its articles of association (or like constitutional documents) to permit it to enter into and perform its obligations under this Agreement;

8.6.3 this Agreement constitutes a binding obligation on it in accordance with its terms;

8.6.4 the execution and delivery of, and the performance of its obligations under this Agreement will not:

(a) result in a breach of any provision of its constitutional or organisational documents; or

(b) result in a breach of any order, judgment or decree of any court or governmental agency to which it is a party or by which it is bound or any contractual commitment to which it is bound; or

(c) result in it being or becoming subject to or threatened by any procedures or steps which are analogous to those contained in paragraph 18 of Schedule 2 in any jurisdiction, including the United States of America;

8.6.5 it is not, in any jurisdiction (including the United States of America) subject to or threatened by any procedures or steps which are analogous

to those contained in paragraph 18 of Schedule 2, nor are any such procedures or steps pending; and

8.6.6 the Seller Guarantor Officer’s Certificate is true and accurate.

8.7 Save as set out in clause 3.6, a breach of Warranty by the Warrantors shall not entitle the Purchaser to rescind or terminate this Agreement, or any part of it, whether before or after Completion.

8.8 The Seller shall indemnify the Purchaser, and keep the Purchaser indemnified, on demand against each Loss which the Purchaser or any Sale Group member incurs arising (directly or indirectly) out of:

8.8.1 [*]

8.8.2 [*] .

8.9 The Seller shall promptly notify the Purchaser if it becomes aware of a fact or circumstance (providing reasonable details of such fact or circumstance (but without any obligation to provide quantum)) which would, if Completion were to occur, give rise to a Claim by the Purchaser under clause 8.2. Any notice given under clause 3.7 shall be deemed to have also been given under this clause 8.9.

8.10 In the event that the Seller provides (or is deemed to provide) a notice to the Purchaser pursuant to clause 8.9, then (unless the Seller states in such notice that it wishes to disapply the provisions of this clause 8.10 (such disapplication without prejudice to the Purchaser’s rights (if any) under this Agreement) in relation to the fact or circumstance referred to in the Seller’s notice:

8.10.1 the Purchaser shall within 2 Business Days of delivery of the notice referred to in clause 8.9, deliver to the Seller a notice (a “Response Notice”):

(a) whether or not the Purchaser believes that, if Completion were to occur, it would have a Claim against either of the Warrantors;

(b) the Purchaser’s good faith estimate of the amount of such Claim (which estimate shall be without prejudice to the Purchaser’s right to seek to recover some other amount in respect of such Claim); and

(c) if the Purchaser’s good faith estimate of the amount of such Claim exceeds £125,000 (one hundred and twenty five thousand pounds) (such Claim being referred to as an “Incipient Claim”), whether or not the Purchaser waives and forever discharges and releases the Warrantors from such Incipient Claim,

provided that if the Purchaser does not deliver to the Seller a Response Notice within 2 (two) Business Days in accordance with the terms of this clause 8.10.1, then the Purchaser shall be deemed not to have waived and forever discharged and released the Seller from such Incipient Claim; and

8.10.2 within 2 Business Days of receipt by the Seller of a Response Notice in respect of an Incipient Claim that is not waived (or deemed not to be waived) by the Purchaser, Calpine shall deliver to the Purchaser on behalf

of the Warrantors a notice (a “Reply Notice”) stating whether or not the Seller wishes to terminate this Agreement and, if such notice states that the Seller wishes to terminate this Agreement, then this Agreement shall terminate in accordance with clause 17.1 (provided that, for the avoidance of doubt, if the Seller fails to deliver a Reply Notice within such 2 Business Day period then it shall be deemed to have delivered a Reply Notice stating that it does not wish to terminate this Agreement). If the Seller delivers (or is deemed to deliver) a Reply Notice that indicates that it does not wish to terminate this Agreement pursuant to this clause 8.10.2, then Completion shall be without prejudice to the Purchaser’s rights against the Seller or Calpine (if any) in respect of the fact, matter or circumstance described in the notice given under clause 8.9.

All notices under this clause 8.10 shall be given by facsimile in accordance with the provisions of clause 19 and, in respect of any notice to be given to the Seller, a copy shall be sent to Calpine in accordance with clause 19.3.

8.11 Notwithstanding any provision of this Agreement to the contrary, Calpine shall have no liability under or in respect of this Agreement, the Share Purchase Documents or any of the transactions contemplated herein or therein (or in connection with the performance or non-performance of this Agreement or any Share Purchase Document) except contractual damages in respect of the Warranties expressly given or deemed repeated by it pursuant to this clause 8 and Schedule 2, and then subject to the terms and conditions of this Agreement, including Schedule 3.

8.12 Subject to clauses 8.13 and 8.14, the Seller shall indemnify the Purchaser as trustee for SCCL in respect of any losses, liabilities, damages and costs and expenses (including reasonable legal defence costs) incurred by SCCL to the extent that they arise from any claim or proceedings for damages or Remedial Action brought against SCCL by any member of the BP group or any Competent Authority within eighteen months of the date of this Agreement to the extent that such claim or proceedings relates to any alleged or actual emission of chlorides from the cooling towers of the Facility and any actual or alleged resulting deposition of any such chlorides on the Complex Site (as defined in the Lease of the Property dated 26 September 2003) or elsewhere prior to Completion.

8.13 The Seller shall not be liable for any claim under clause 8.12 to the extent that it arises from or is increased:

8.13.1 due to any failure by SCCL to operate the Facility in the manner of a reasonable and prudent operator after Completion;

8.13.2 by the worsening or aggravation by any person (other than the Seller or by any person authorised on its behalf) after Completion of any circumstances or states of affairs (including without limitation the condition of any plant or equipment at or any part of the Facility) comprising the subject matter of such claim;

8.13.3 by any change after Completion in the production capacity of the Facility;

8.13.4 by any change after Completion in any operations or maintenance (including without limitation their manner and intensity) at the Property or the Facility (in each case including any part thereof);

8.13.5 by any amendment or alteration to or extension or renewal after Completion of any deed, contract, lease or other agreement including without limitation the BP Agreements to the extent that such claim would not have arisen under such deed, contract, lease or other agreement in its form at the date of this Agreement;

8.13.6 by any development of, alteration to or extension of or addition to the Facility (including any part thereof) after Completion;

8.13.7 by any variation of or modification to any permit, consent, licence or other permission issued by a Competent Authority or an application for or issue of any such new permit, consent, licence or other permission; and/or

8.13.8 by any waiver, release, reduction or extinction of any of the rights of SCCL described in clause 8.14 below.

8.14 The Seller shall not be liable under clause 8.12 above, until SCCL has enforced and exhausted all its rights (including without limitation those arising under the EPC contract) against any relevant person (including without limitation Mitsubishi) insofar as they relate to or concern the subject matter of any claim which could be brought under clause 8.12 above. The Purchaser shall procure that SCCL shall promptly and diligently take all such action within SCCL’s power as is necessary to compel Mitsubishi to carry out or pay for all works and measures necessary to reduce the carry over of particles of water from the cooling towers of the Facility and any deposition of chlorides including without limitation and where relevant the commencement of any proceedings (save where the prospects of such proceedings being successful are low and the Seller has given its written consent to the Purchaser or SCCL not to pursue such proceedings (such consent not to be unreasonably withheld or delayed)). The Purchaser shall and shall procure that SCCL shall give the Seller all information which the Seller reasonably requests about such works and measures at all times and allow the Seller to monitor the progress of such works and to the extent that it is able to procure the same to participate in any relevant meetings with consultants or contractors.

8.15 No Claim can be brought under any of the Warranties to the extent that its subject matter falls within the scope of the indemnities in clause 8.12 above or would so fall if it were not for any limitations contained in clauses 8.12 to 8.14 above or the limitation on the total aggregate liability of the Seller contained in paragraph 2.4(a) of Schedule 3.

8.16 Promptly after SCCL or any other member of the Purchaser’s Group becomes aware of any matter which might reasonably be expected to give rise to a Claim by the Purchaser under clause 8.12 (whether at that time or in the future) it shall provide written details thereof to the Seller and thereafter keep the Seller reasonably informed as to the progress of such matter.

8.17 Each Seller Party shall indemnify the Purchaser, and keep the Purchaser indemnified, on demand against each Loss which the Purchaser incurs whether before or after the start of an action arising (directly or indirectly) out of:

8.17.1 the settlement of a Claim against such Seller Party for a breach of (in the case of the Seller) clause 8.1 or clause 8.2 or (in the case of the Seller Guarantor) clause 8.6 or (in either case) the enforcement of such a settlement; and

8.17.2 legal proceedings against such Seller Party in respect of a Claim against that Seller Party for a breach of (in the case of the Seller) clause 8.1 or

clause 8.2 or (in the case of the Seller Guarantor) clause 8.6 or (in either case) the enforcement of a judgment obtained in such proceedings.

8.18 Each Purchaser Party shall indemnify the Seller, and keep the Seller indemnified, on demand against each Loss which the Seller incurs whether before or after the start of an action arising (directly or indirectly) out of:

8.18.1 the settlement of a Claim against such Purchaser Party for a breach of clause 9 or the enforcement of such a settlement; and

8.18.2 legal proceedings against such Purchaser Party in respect of a Claim against that Seller Party for a breach of clause 9 or the enforcement of a judgment obtained in such proceedings.

8.19 Notwithstanding any provision of this Agreement to the contrary, none of the Warranties given or deemed repeated by any of Calpine, the Seller or the Seller Guarantor shall be breached or proved false in whole or in part by virtue of the actual or intended incurrence of indebtedness or the granting of security by SCCL at Completion as contemplated by Part II of Schedule 4.

9. PURCHASER PARTIES’ WARRANTIES

9.1 Each of the Purchaser Parties warrants to the Seller that:

9.1.1 it has the requisite capacity, power and authority to enter into and perform its obligations under this Agreement and the other Share Purchase Documents to which it is a party;

9.1.2 it has taken all necessary corporate action required by its articles of association (or like constitutional documents) to permit it to enter into and perform its obligations under this Agreement and the other Share Purchase Documents to which it is a party;

9.1.3 this Agreement constitutes, and the other Share Purchase Documents to which it is a party will, when duly executed by it and the other parties thereto, constitute binding obligations on them in accordance with their respective terms;

9.1.4 the execution and delivery of, and the performance of its obligations under this Agreement and the other Share Purchase Documents to which it is a party will not:

(a) result in a breach of any provision of its constitutional or organisational documents; or

(b) result in a breach of any order, judgment or decree of any court or governmental agency to which it is a party or by which it is bound or any contractual commitment by which it is bound;

9.1.5 Mitsui owns indirectly 30% of the issued share capital of the Purchaser and IPR owns indirectly 70% of the issued share capital of the Purchaser; and

9.1.6 it is not, in any jurisdiction (including the United States of America) subject to or threatened by any procedures or steps which are analogous to those contained in paragraph 18 of Schedule 2 and nor are any such procedures or steps pending.

9.2 The Purchaser warrants to the Seller that, so far as the Purchaser is aware:

9.2.1 the resources used to fund the purchase of the Shares or otherwise used by any member of the Purchaser’s Group in connection with, or in the performance of its obligations under this Agreement or any Completion Documents are not derived, in any country, either directly or indirectly, from drug trafficking, bribery, money laundering, terrorism, trafficking of arms, or any other activity, whether or not considered legal in the relevant country, if such activity would be illegal had it occurred in the United Kingdom; and

9.2.2 neither the Purchaser nor any other member of the Purchaser’s Group nor any person acting on its or their behalf has made, offered, promised or authorised any payment or given, offered promised or authorised the giving of anything of material value to any official or employee of any government or any department, agency or instrumentality thereof, any political party or candidate for political office, any officer or employee of any public international or multilateral organisation or any person who has done or may do any of the things mentioned in this clause 9.2.2 in connection with the Project, this Agreement or any Completion Documents or any transaction referred to herein or therein or supported, sponsored, facilitated or financed any act of terrorism or terrorist person or group in any way.

9.3 The Purchaser warrants to the Seller that:

9.3.1 it will have the necessary cash resources to meet its obligations at Completion under this Agreement; and

9.3.2 as at the date of this Agreement, it does not intend to bring any Claim against the Seller.

10. UNDERTAKINGS

10.1 The Seller agrees and undertakes that (in the absence of fraud) it has no rights against and shall not make any claim against any employee, director, agent, officer or adviser of the Sale Group or of any shareholder or Affiliate of the Sale Group, in each case on whom it may have relied before agreeing to any term of this Agreement or any other agreement or document referred to herein (including the Disclosure Letter) or entering into this Agreement or any other agreement or document referred to herein. The Purchaser agrees and undertakes that (in the absence of fraud) it has no rights against and shall not make any claim against any employee, director, agent, officer or adviser of the Calpine Group or of any shareholder or Affiliate of the Calpine Group, in each case on whom it may have relied before agreeing to any term of this Agreement or any other agreement or document referred to herein (including the Disclosure Letter) or entering into this Agreement or any other agreement or document referred to herein.

10.2 The Purchaser undertakes to the Seller that it shall, and shall procure that each member of the Sale Group shall, preserve for a period of at least seven (7) years (or any longer period as may

be required by law or relevant regulations from time to time) from Completion all books, records and documents of the Sale Group existing at Completion. The Purchaser shall permit and allow, and shall procure that the relevant member of the Sale Group shall permit and allow, upon reasonable written notice (and in any event within seven (7) days of written notice being given) and during Working Hours, the employees, agents and professional advisers of the Seller or any member of the Calpine Group specified in such notice reasonable access to such books, records and documents and the right to inspect the same and at the Seller’s expense, make copies thereof. The Seller hereby agrees (for itself and on behalf of any of its employees, agents and professional advisers) in favour of the Purchaser to keep confidential all confidential information disclosed to it or which it learns as a result of being given access to the books, records and documents under this clause 10.2 on the same terms as set out in clause 21.2.

10.3 The Purchaser undertakes to the Seller (for itself and for the benefit of SCCL) that, subject to the delivery of the Accountants Report at Completion, the net assets of SCCL will not be reduced as a result of the transactions contemplated by paragraph 3 of Part II of Schedule 4 and, if such a reduction would occur as a result of such transactions, then the Purchaser shall procure that, simultaneous with such transactions, SCCL’s net assets are increased by an amount at least equal to such reduction, provided that nothing in this clause 10.3 shall require the Purchaser to make good any reduction of net assets (whether by way of subscription for share capital or otherwise) occurring as a result of such transactions or incur any liability for an amount in excess of [*]

10.4 The Seller agrees that it shall (and that it will procure that SCCL shall) use all reasonable endeavours to procure the delivery of the Accountants Report at Completion and the Purchaser agrees to provide all assistance reasonably requested by the Seller in connection with the preparation of the Accountants Report.

11. EFFECT OF COMPLETION

11.1 Any provision of this Agreement and any other documents referred to herein which are capable of being performed after (but which has not been performed at or before Completion) and all Warranties and other undertakings contained in or entered into pursuant to this Agreement shall remain in full force and effect notwithstanding Completion.

12. REMEDIES AND WAIVERS

12.1 No delay or omission on the part of any party to this Agreement in exercising any right, power or remedy provided by law or under this Agreement or any other documents referred to herein shall impair such right, power or remedy, or operate as a waiver thereof.

12.2 The single or partial exercise of any right, power or remedy provided by law or under this Agreement shall not preclude any other or further exercise thereof or the exercise of any other right, power or remedy.

13. CONDUCT OF CLAIMS

13.1 Without prejudice to the provisions of clause 3.7.5 of the Participation Agreement (if applicable), upon the Purchaser or a member of the Sale Group becoming aware of any claim, action or demand against it by a third party or matter of which the Purchaser is aware is reasonably likely to give rise to any Claim by the Purchaser under this Agreement other than a Tax Claim or an Environmental Indemnity Claim (“Third Party Claim”), the Purchaser shall and shall procure that the relevant member of the Sale Group shall:

13.1.1 promptly, and in any event within 10 Business Days of becoming aware (i) of the claim, action or demand or (ii) that the relevant matter is reasonably likely to give rise to a Claim, notify the Seller by written notice;

13.1.2 at the request of the Seller and subject to the Seller indemnifying the Purchaser and the relevant member of the Sale Group against any reasonable liability, costs, damages or expenses which may be reasonably and properly incurred thereby, allow the Seller, subject to the directions and requirements of any relevant insurer (if the claim is covered by a valid policy of insurance) to take the sole conduct of such actions as the Seller may deem appropriate in connection with any such Third Party Claim in the name of the Purchaser or the relevant member of the Sale Group and in that connection the Purchaser shall give or cause to be given to the Seller all such assistance as the Seller may reasonably require in avoiding, disputing, resisting, settling, compromising, defending or appealing any such Third Party Claim. The Seller shall:

13.1.2.1 in response to reasonable requests from the Purchaser from time to time, keep the Purchaser informed of the progress of the Third Party Claim;

13.1.2.2 provide the Purchaser with copies of such documentation relating to the Third Party Claim as it may reasonably request subject to legal privilege (unless disclosure can be made without loss of privilege) and relevant duties of confidentiality; and

13.1.2.3 give the Purchaser such opportunities as it may reasonably request to make representations regarding the conduct of the Third Party Claim;

13.1.3 subject to the Seller indemnifying the Purchaser and the relevant member of the Sale Group against any reasonable liability, costs, damages or expenses which may be reasonably and properly incurred thereby, take such action and give such information and access to relevant personnel, premises, chattels, documents and records to the Seller and its professional advisers as the Seller may reasonably request (save, for the avoidance of doubt, to the extent that any information, documents or records: (i) constitute internal memoranda of the Purchaser’s Group which relate directly to a potential Claim which may be made against the Seller and not to the factual circumstances underlying such potential Claim, or (ii) are subject to legal privilege unless disclosure can be made without loss of privilege) or (iii) information which the Purchaser is obliged to keep confidential and the Purchaser and the relevant member of the Sale Group shall take (or procure the taking of) such action and give (or procure the giving of) such information and assistance in order to avoid, dispute, resist, mitigate, settle, compromise, defend or appeal any claim in respect a Third Party Claim or adjudication with respect thereto as the Seller may reasonably require;

13.1.4 make no admission of liability, agreement, settlement or compromise in relation to any such Third Party Claim or adjudication without the prior written consent of the Seller. If the Seller agrees with the third party to settle or compromise a Third Party Claim, and the Purchaser refuses to agree to such settlement or compromise then, if the amount for which the Seller subsequently becomes liable exceeds the figure at which it would

have so settled or compromised the relevant Third Party Claim, the Seller shall not be liable for the excess amount or any costs or liabilities incurred since the proposed date of settlement or compromise; and

13.1.5 take all necessary action to mitigate its loss to the extent it is within its power to do so.

13.2 Clause 9 (Conduct of Tax Claims) of the Tax Covenant shall apply to a Tax Warranty Claim.

14. BASIS OF RECOVERY

14.1 Where any payment is made pursuant to a claim for breach of this Agreement or under an indemnity given under this Agreement (but not under the Tax Covenant or in relation to the Tax Warranties) and the Losses incurred in relation to the claim give rise to a Relief in the hands of any member of the Calpine Group or the Purchaser Group (as the case may be), then to the extent that such Relief results in an actual saving of Tax, the Seller or the Purchaser (as the case may be) shall, on the date on which the Tax so saved would otherwise first have been due and payable, pay (or procure that the relevant member of the Calpine Group or the Purchaser Group shall pay) to the other party an amount equal to the Tax so saved provided that:

14.1.1 in determining when any such Relief has been utilised, any other Relief arising in the same or earlier accounting periods shall be deemed to take priority to such Relief and such Relief shall be deemed to take priority to any other Relief arising in subsequent accounting periods; and

14.1.2 to the extent that such Relief has not been utilised within seven (7) years of the date of this Agreement, no payment shall be required to be made pursuant to this clause.

14.2 The Seller or the Purchaser may (at its own cost and expense) at any time issue an instruction (the party issuing the instruction is referred to in this clause as the “Requesting Party”) to the other’s auditors (the party so notified is referred to in this clause as the “Notified Party”) to determine in writing the extent of any Relief referred to in clause 14.1 which has arisen. If such auditors determine in writing that a Relief has arisen and been utilised in accordance with clause 14.1 (as so determined in writing) the Notified Party shall pay to the Requesting Party the amount so determined by the relevant auditors within five (5) days of its receipt of a copy of the auditors written determination.

14.3 If a written determination has been issued as referred to in clause 14.2, the Seller or the Purchaser may on or before the third anniversary of such determination issue a request to the relevant company’s auditors:

14.3.1 to review (at the expense of the party requesting the review, or where a payment becomes due under clause 14.4, at the expense of the party which is required to make such payment under clause 14.4) such written determination in the light of all relevant circumstances at the time of the review; and

14.3.2 to determine in writing whether in the light of such circumstances the original written determination should be amended.

14.4 If the new written determination referred to in clause 14.3 states that the original written determination should be amended, an adjusting payment equal to the difference between the

sum in the original written determination and the sum in the amended written determination shall be made by the Requesting Party or the Notified Party (as appropriate) as soon as reasonably practicable.

15. TRADE MARKS

The Purchaser hereby undertakes to the Seller to procure that each member of the Sale Group ceases to use or display in any manner whatsoever the Trade Marks or any similar mark, name, design or logo as soon as reasonably practicable (and in any event within 90 days) following Completion.

16. ASSIGNMENT AND NOVATION

16.1 All (and not part only) of the benefits of this Agreement shall be assignable:

16.1.1 by the Purchaser to a member of the Purchaser’s Group, or

16.1.2 by the Seller to a member of the Calpine Group,

PROVIDED THAT, in either case, any assignment made to a person in accordance with clauses 16.1.1 or 16.1.2 (each such person a “Permitted Assignee”) is subject to the conditions that if such Permitted Assignee shall subsequently cease to be a member of the Purchaser’s Group or the Calpine Group, the Purchaser or the Seller (as the case may be) shall procure that prior to the Permitted Assignee ceasing to be an Affiliate thereof, the Permitted Assignee assigns the benefit of this Agreement back to the assigning party or to another member of the Purchaser’s Group or the Calpine Group (as the case may be).

16.2 The Purchaser (or any Permitted Assignee, including under clause 16.3) may charge or assign the benefit of this Agreement to any bank or financial institution or any other person by way of security for the purposes of or in connection with the financing (whether in whole or in part) by the Purchaser and/or SCCL of the acquisition of the Shares or any other transactions contemplated by this Agreement. Any such bank, financial institution or person (or any administrative receiver or other person appointed to enforce such security) may charge or assign such rights on, for the purpose of or in connection with, any enforcement of the security under such financing arrangements.

16.3 At any time prior to Completion the Purchaser Guarantors may give notice to the Seller Parties indicating that they wish the Seller Parties to agree to the novation of the obligations of the Purchaser under this Agreement to a Permitted Assignee and provided that:

16.3.1 the Permitted Assignee is an Approved Transferee within the meaning of the Participation Agreement;

16.3.2 such novation is conditional upon such Permitted Assignee remaining a member of the Purchaser’s Group at all times prior to Completion (failing which the obligations of the Purchaser as novated to the Permitted Assignee shall be novated to the Purchaser or another Permitted Assignee); and

16.3.3 the liability of the Seller Parties under this Agreement is not increased as a result of such novation,

then the Seller Parties will execute all such documents as may reasonably be required to novate the obligations of the Purchaser to the nominated Permitted Assignee and following

such novation each reference in this Agreement to the Purchaser (including in clause 26) shall be construed as a reference to the Permitted Assignee.

16.4 In the event of an assignment in accordance with clause 16.1 or clause 16.2 or a novation in accordance with clause 16.3, each of the Purchaser and the Seller (as the case may be) hereby agrees that the liability of the other party in respect of any Claim or any liability arising out of or in connection with this Agreement or the Tax Covenant howsoever arising shall be no greater than it would otherwise have been had any such assignment or novation not occurred.

16.5 Neither this Agreement (nor any part of it) is assignable by the Calpine or the Seller Guarantor without the prior written consent of the Purchaser. Neither this Agreement nor any part of it is assignable by either of the Purchaser Guarantors without the prior written consent of the Seller.

16.6 Except as expressly permitted by this clause 16, any assignment of this Agreement shall be void.

17. TERMINATION

17.1 This Agreement may be terminated as follows:

17.1.1 by mutual written consent of the Seller and the Purchaser;

17.1.2 upon notice by either the Seller or the Purchaser if any of the Conditions Precedent shall not have been satisfied (or, in the case of the Purchaser Conditions, waived by the Purchaser) prior to 3:00 p.m. on the Long Stop Date;

17.1.3 by the Purchaser in accordance with clause 3.6;

17.1.4 by the Purchaser or the Seller in accordance with clause 6.5; or

17.1.5 by the Seller in accordance with clause 8.10.2.

17.2 This Agreement will terminate automatically at 5:00 p.m. on 30 August 2005 unless Completion has occurred prior to that time.

17.3 If this Agreement is terminated in accordance with clause 17.1 or terminates in accordance with clause 17.2 and without limiting any party’s right to claim damages in respect of antecedent breaches, all obligations of the parties under this Agreement shall end (except for the provisions of clauses 19, 20, 21, 22 and 32) but all rights and liabilities of the parties which have accrued before termination shall continue to exist.

18. FURTHER ASSURANCE

18.1 Each of the Parties shall from time to time at its own cost, on being required to do so by any other party to this Agreement, now or at any time in the future, do or procure the doing of all such acts and/or execute or procure the execution of all such documents in a form satisfactory to the party concerned as they may reasonably consider necessary to transfer the Shares to the Purchaser and otherwise give full effect to this Agreement.

18.2 This Agreement may only be varied in writing signed by each of the parties.

19. NOTICES

19.1 Any notice or other communication given or made under or in connection with the matters contemplated by this Agreement shall be in writing.

19.2 Any such notice or other communication shall be delivered personally or sent by international recognised courier or by facsimile to the address or the facsimile number provided in clause 19.3 (marked for the attention of the person identified in the clause) and, if so delivered or sent, shall be deemed to have been duly given or made as follows:

19.2.1 if sent by personal delivery, upon delivery at the address of the party to whom such notice is addressed;

19.2.2 if sent by international recognised courier, two (2) Business Days after the date of posting; and

19.2.3 if sent by facsimile, when dispatched,

PROVIDED THAT if, in accordance with the above provisions, any such notice or other communication would otherwise be deemed to be given or made outside Working Hours, such notice or other communication shall be deemed to be given or made at the start of Working Hours on the next Business Day.

19.3 The relevant addressee and facsimile number of each party for the purposes of this Agreement, subject to clause 19.4, are:


Name of party:	For the attention of:	Facsimile No.:
Calpine UK Holdings Limited c/o Skadden Arps Slate Meagher & Flom (UK) LLP 40 Bank Street Canary Wharf London E14 5DS	Douglas Nordlinger	+44 (0) 20 7072 7030

with a copy to Calpine

Calpine Corporation 50 West San Fernando Street San Jose California 95113 USA	General Counsel	+1 408 794 2434

Quintana Canada Holdings, LLC 50 West San Fernando Street San Jose California 95113 USA	General Counsel	+1 408 794 2434

with a copy to Calpine
Normantrail (UK Co 3) Limited Senator House 85 Queen Victoria Street London EC4V 4DP	The Company Secretary	+44 (0) 20 7320 8770


Name of party:	For the attention of:	Facsimile No.:
with a copy to each of the Purchaser Guarantors

International Power plc Senator House 85 Queen Victoria Street London EC4V 4DP	The Company Secretary	+44 (0)20 7320 8770

with a copy to Mitsui

Mitsui & Co., Ltd 2-1, Ohtemachi 1-chome Chiyoda-ku Tokyo Japan with a copy to IPR	The General Manager Second Project Development Department Power & Infrastructure Project Development Division	+81 (0) 3 3285 9783

19.4 A party may notify the other parties to this Agreement of a change to its name, relevant addressee, address or fax number for the purposes of clause 19.3 PROVIDED THAT such notification shall only be effective on:

19.4.1 the date specified in the notification as the date on which the change is to take place; or

19.4.2 if no date is specified or the date specified is less than five (5) clear Business Days after the date on which notice under this clause 19.4 is given, the date falling five (5) clear Business Days after notice of any such change has been given.

20. ANNOUNCEMENTS

20.1 Subject to clause 20.2, no announcement concerning the sale of the Shares or any ancillary matter shall be made by any member of the Purchaser’s Group or any member of the Calpine Group without the prior written approval of the Seller or the Purchaser (respectively), such approval not to be unreasonably withheld or delayed.

20.2 Any party (or any of its Affiliates) may make an announcement concerning the sale of the Shares or any ancillary matter if and to the extent required by:

20.2.1 the law of any relevant jurisdiction;

20.2.2 existing contractual obligations; or

20.2.3 any securities exchange or regulatory or governmental body to which any party (or any of its Affiliates) is subject or submits, wherever situated, whether or not the requirement has the force of law,

in which case the party which is required to make the announcement shall take all such steps as may be reasonable and practicable in the circumstances to agree the contents of such announcement with the Purchaser (in the case of an announcement by a Seller Party or any of its Affiliates) or the Seller (in the case of an announcement by a Purchaser Party or any of its Affiliates) before making such announcement PROVIDED THAT any such announcement shall be made only after notice to the Purchaser or the Seller (as the case may be).

20.3 The restrictions contained in this clause shall continue to apply after Completion without limit in time.

21. CONFIDENTIALITY

21.1 Subject to clauses 21.3 and 21.4, the Purchaser undertakes to the Seller that it will (and that it will procure that each member of the Purchaser Group will) treat as strictly confidential all information received or obtained as a result of entering into or performing this Agreement which relates to:

21.1.1 the provisions of this Agreement;

21.1.2 the negotiations relating to this Agreement (or any other document referred to herein);

21.1.3 the subject matter of this Agreement (or any other document referred to herein); or

21.1.4 Calpine and each member of the Calpine Group.

21.2 Subject to clauses 21.3 and 21.4, the Seller undertakes to the Purchaser that it will (and that it will procure that each member of the Seller Group will) treat as strictly confidential all Confidential Information and all information received or obtained as a result of entering into or performing this Agreement which relates to:

21.2.1 the provisions of this Agreement;

21.2.2 the negotiations relating to this Agreement (or any other document referred to herein);

21.2.3 the subject matter of this Agreement (or any other document referred to herein); or

21.2.4 the Purchaser’s Group.

21.3 Information which would otherwise be confidential by virtue of clause 21.1 or clause 21.2 may be disclosed by the Purchaser (or a Purchaser Group member) or by the Seller (or by a Calpine Group member), as the case may be, if and to the extent:

21.3.1 it is required by the law of any relevant jurisdiction;

21.3.2 it is required by any securities exchange or regulatory or governmental body to which a party (or any of its Affiliates) is subject or submits, wherever situated, whether or not the requirement for information has the force of law;

21.3.3 it is disclosed on a strictly confidential basis to directors, employees, professional advisers, auditors, bankers or rating agency of that party or to directors, employees, professional advisers, auditors or bankers of its Affiliates;

21.3.4 the information has come into the public domain through no fault of that party or any of its Affiliates;

21.3.5 the Purchaser and the Seller have given their prior written approval to the disclosure, such approval not to be unreasonably withheld or delayed;

21.3.6 it is required to enable that party to enforce its rights under this Agreement or it is disclosed in connection with regulatory or judicial proceedings; or

21.3.7 it is required by the Gas and Electricity Markets Authority,

PROVIDED THAT (unless contrary to law or the direction of any governmental authority) any such information disclosed pursuant to clauses 21.3.1 or 21.3.2 above shall be disclosed only after notice to the Purchaser or the Seller (as the case may be).

21.4 The Seller may disclose this Agreement, the other Share Purchase Documents, and other information which would otherwise be confidential by virtue of clause 21.2 to any member of the BP Group to the extent required under or contemplated by the Participation Agreement.

21.5 The restrictions contained in this clause 21 shall continue to apply after the termination of this Agreement or Completion for five (5) years from the date hereof.

21.6 Calpine and IPR agree that the confidentiality undertaking entered into between them dated 7 February 2005 shall terminate at Completion without prejudice to any liability for breach of such agreement prior to Completion. Calpine and Mitsui agree that the confidentiality undertaking entered into between them dated 5 March 2005 shall terminate at Completion without prejudice to any liability for breach of such agreement prior to Completion.

22. COSTS AND EXPENSES

22.1 Each party shall pay its own costs and expenses in relation to the negotiations leading up to the sale of the Shares and to the preparation, execution and carrying into effect of this Agreement and all other documents referred to herein.

22.2 Without prejudice to clause 22.1, all stamp, transfer, registration and other similar taxes, duties and charges payable in connection with the sale or purchase of the Shares under this Agreement (if any) shall be paid by the Purchaser.

23. TIME OF ESSENCE

23.1 Any time, date or period referred to in any provision of this Agreement may be extended by mutual agreement of the parties, but, in relation to any payment obligations and any obligations relating to Completion, as regards any time, date or period originally fixed or any time, date or period so extended, time shall be of the essence.

24. INTEREST

24.1 If a party defaults in the payment when due of any sum payable under this Agreement (whether determined by agreement or pursuant to an order of a court or otherwise) the liability of such party shall be increased to include a payment of interest on such sum (subject to deduction or withholding of tax as required by law) from the date when such payment is due until the date of actual payment (before and after judgment) at a rate of two (2) per cent above LIBOR. Such interest shall accrue from day to day on the basis of a 360-day year.

25. INVALIDITY

25.1 If at any time any provision of this Agreement is or becomes illegal, invalid or unenforceable in any respect under the law of any competent jurisdiction, such provision shall not affect or impair:

25.1.1 the legality, validity or enforceability in that jurisdiction of any other provision of this Agreement; or

25.1.2 the legality, validity or enforceability under the law of any other jurisdiction of such provision or any other provision of this Agreement.

26. SEVERAL GUARANTEE FROM THE PURCHASER GUARANTORS

26.1 In consideration of the Seller entering into this Agreement and for other good and valuable consideration receipt of which is hereby acknowledged, subject to clause 26.2 the Purchaser Guarantors hereby unconditionally and irrevocably (i) guarantee to the Seller the full, due and punctual payment by the Purchaser of all amounts payable by the Purchaser under this Agreement or the Tax Covenant and the performance of the Purchaser’s obligations at Completion and (ii) indemnify the Seller immediately on demand against any cost, loss or liability suffered by it if any obligation guaranteed by the Purchaser Guarantors is or becomes unenforceable, invalid or illegal. The Purchaser Guarantors shall be liable for all such obligations arising under this clause 26.1 as if they were each a primary obligor. The guarantee in this clause 26.1 is a continuing guarantee and will extend to the ultimate balance of sums payable by the Purchaser or the Purchaser Guarantors to the Seller in respect of all amounts payable by the Purchaser under this Agreement or the Tax Covenant, regardless of any intermediate payment or discharge.

26.2 The obligations of the Purchaser Guarantors under this clause 26 are several (and not joint and several) and in respect of any liability under it, IPR shall be responsible for [*] of such liability and Mitsui shall be responsible for [*] of such liability.

26.3 The Purchaser Guarantors’ obligations under this clause 26 will not be affected by any act, omission, matter or thing which, but for this clause, would reduce, release or prejudice any of its obligations under this clause 26, including (without limitation and whether or not known to the Purchaser Guarantors or the Purchaser):

26.3.1 any time, waiver or consent granted to, or composition with, the Purchaser or the Purchaser Guarantors;

26.3.2 the release of the Purchaser or the Purchaser Guarantors or any other person under the terms of any composition or arrangement with any of their creditors;

26.3.3 the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, the Purchaser or a Purchaser Guarantor or any other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to release the full value of any security;

26.3.4 any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of the Purchaser or a Purchaser Guarantor or any other person;

26.3.5 any amendment (however, fundamental) or replacement of this Agreement or any of the Share Purchase Documents or any other document or security;

26.3.6 any unenforceability, illegality or invalidity of any obligation of any person under this Agreement or any of the Share Purchase Documents or any other document or security; or

26.3.7 any insolvency of any person or similar proceedings.

26.4 If and whenever the Purchaser defaults for any reason whatsoever in the performance of its obligation to pay all amounts payable by the Purchaser under any Share Purchase Document to which it is a party, the Purchaser Guarantors shall (on the several basis described in clause 26.2) forthwith unconditionally perform (or procure performance of) and satisfy (or procure the satisfaction of) such obligation in the manner prescribed by such Share Purchase Document so that the same benefits shall be conferred on the Seller as it would have received if such obligation had been duly performed and satisfied by the Purchaser.

26.5 The Seller shall not be obliged before exercising any of the rights, powers or remedies conferred upon it by this clause 26 or by law:

26.5.1 to make any demand of the Purchaser;

26.5.2 to take any action or obtain judgment in any court against the Purchaser;

26.5.3 to make or file any claim or proof in a winding-up or dissolution of the Purchaser; or

26.5.4 to enforce or seek to enforce any other security taken in respect of any of the obligations of the Purchaser hereunder.

26.6 Each Purchaser Guarantor agrees that, so long as any amounts are owed by the Purchaser under this Agreement or the Tax Covenant it shall not exercise any rights which it may at any time have by reason of performance by it of its obligations under this Agreement or the Tax Covenant:

26.6.1 to be indemnified by the Purchaser in respect of the obligations assumed by the Purchaser Guarantors under this Agreement or the Tax Covenant; and/or

26.6.2 to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Purchaser under this Agreement or the Tax Covenant or of any other security taken pursuant to, or in connection with, this Agreement or the Tax Covenant by the Purchaser.

27. GUARANTEE FROM THE SELLER GUARANTOR

27.1 In consideration of the Purchaser entering into this Agreement and for other good and valuable consideration receipt of which is hereby acknowledged, the Seller Guarantor hereby unconditionally and irrevocably (i) guarantees to the Purchaser the full, due and punctual payment by the Seller of amounts due in respect of liabilities of the Seller for all Claims under this Agreement (other than Claims for breach of a Warranty) and all Claims under the Tax Covenant, and (ii) indemnifies the Purchaser immediately on demand against any cost, loss or liability suffered by it if any obligation guaranteed by the Seller Guarantor is or becomes

unenforceable, invalid or illegal. The amount of the cost, loss or liability shall be equal to the amount that the Purchaser would otherwise have been entitled to. The Seller Guarantor shall be liable for all such obligations arising under this clause 27.1 as if it were a primary obligor. The guarantee in this clause 27.1 is a continuing guarantee and will extend to the ultimate balance of sums payable by the Seller in respect of all Claims under this Agreement (other than Claims for breach of a Warranty) and all Claims under the Tax Covenant and the ultimate balance of sums payable by the Seller Guarantor to the Purchaser, regardless of any intermediate payment or discharge.

27.2 The Seller Guarantor’s obligations under this clause 27 will not be affected by any act, omission, matter or thing which, but for this clause, would reduce, release or prejudice any of its obligations under this clause 27, including (without limitation and whether or not known to the Seller Guarantor or the Seller):

27.2.1 any time, waiver or consent granted to, or composition with, the Seller or the Seller Guarantor;

27.2.2 the release of the Seller or the Seller Guarantor or any other person under the terms of any composition or arrangement with any of their creditors;

27.2.3 the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, the Seller or the Seller Guarantor or any other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to release the full value of any security;

27.2.4 any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of the Seller or the Seller Guarantor or any other person;

27.2.5 any amendment (however, fundamental) or replacement of the Agreement or any of the Share Purchase Documents or any other document or security;

27.2.6 any unenforceability, illegality or invalidity of any obligation of any person under the Agreement or any of the Share Purchase Documents or any other document or security; or

27.2.7 any insolvency of any person or similar proceedings.

27.3 If and whenever the Seller defaults for any reason whatsoever in the performance of its obligation to pay a liability of the Seller in respect of a Claim (other than a Claim for breach of a Warranty) or a Claim under the Tax Covenant, the Seller Guarantor shall forthwith unconditionally perform (or procure performance of) and satisfy (or procure the satisfaction of) such obligation, commitment or undertaking in regard to which such default has been made in the manner prescribed by the relevant agreement so that the same benefits shall be conferred on the Purchaser as it would have received if such obligation, commitment or undertaking had been duly performed and satisfied by the Seller.

27.4 The Purchaser shall not be obliged before exercising any of the rights, powers or remedies conferred upon it by this clause 27 or by law:

27.4.1 subject to paragraph 8 of Schedule 3, to make any demand of the Seller;

27.4.2 to take any action or obtain judgment in any court against the Seller;

27.4.3 to make or file any claim or proof in a winding-up or dissolution of the Seller; or

27.4.4 to enforce or seek to enforce any other security taken in respect of any of the obligations of the Seller hereunder.

27.5 The Seller Guarantor agrees that, so long as any amounts are or may be owed by the Seller in respect of all Claims under this Agreement (other than Claims for breach of a Warranty) or a Claim under the Tax Covenant or under any of the Share Purchase Documents to which the Seller is party or the Seller is under any actual or contingent obligation under any such agreements, the Seller Guarantor shall not exercise any rights which the Seller Guarantor may at any time have by reason of performance by it of its obligations under any such agreements:

27.5.1 to be indemnified by the Seller in respect of the obligations assumed by the Seller Guarantor under any such agreements; and/or

27.5.2 to claim any contribution from any other Seller Guarantor of the Seller’s obligations under any such agreements; and/or

27.5.3 to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Seller under any such agreements or of any other security taken pursuant to, or in connection with, any such agreements by the Seller.

28. THIRD PARTY RIGHTS

28.1 The parties to this Agreement do not intend that any term of this Agreement (other than clause 10.3, which shall be enforceable by SCCL) should be enforceable by any person who is not a party to this Agreement by virtue of the Contracts (Rights of Third Parties) Act 1999 or otherwise. Notwithstanding the foregoing, if any benefits are conferred by this Agreement on any third party by virtue of such statute, the parties to this Agreement may agree to vary or rescind this Agreement without any such third party’s consent.

29. COUNTERPARTS

29.1 This Agreement may be executed in counterparts, and by the parties on separate counterparts, but shall not be effective until each party has executed at least one counterpart. Each counterpart shall constitute an original of this Agreement, but the counterparts shall together constitute but one and the same instrument.

30. ENTIRE AGREEMENT

30.1 This Agreement and the other Share Purchase Documents (and all other documents which are entered into by the parties or any of them in connection with this Agreement) contains the whole agreement between the parties relating to the subject matter of this Agreement at the date hereof to the exclusion of any terms implied by law which may be excluded by contract. Each party acknowledges that it has not been induced to enter this Agreement by and, in agreeing to enter into this Agreement, it has not relied on, any representations or warranties except as expressly stated or referred to in this Agreement and, so far as permitted by law (and except in the case of fraud) and each of the parties hereby waives any remedy in respect of (and acknowledges that no other party nor any of their agents, advisers, officers or

employees have given) any warranties, representations, indemnities or other statements whatsoever (written or oral) not expressly incorporated into this Agreement.

31. WITHHOLDING, DEDUCTIONS AND SET OFF

31.1 All sums payable under this Agreement (save amounts payable under clause 8.17 and 8.18) shall be made in full without any set-off or counterclaim and free and clear of all deductions or withholdings of any kind, save only as may be required by law, in which event such deduction or withholding shall not exceed the minimum amount required by law.

31.2 If any deduction or withholding is required by law from any payment made under this Agreement then, except in relation to payments of interest, the party making the payment shall pay the recipient such additional sum (the “Additional Sum”) as will, after such deduction or withholding has been made (and after taking into account any Tax payable in respect of the Additional Sum), leave the recipient with the same amount as it would have been entitled to receive in the absence of any such requirement to make a deduction or withholding.

31.3 If any Tax Authority brings into charge to Tax any sum paid by a party to any other party under this Agreement then, except in relation to payments of interest, the Purchase Price and any amounts paid pursuant to clauses 4.2, 6.3 and 7.6, the same obligation to pay an Additional Sum as is referred to in clause 31.2 above shall apply in relation to such Tax as if it were a deduction or withholding required by law; provided that if this clause 31.3 requires payment of an Additional Sum, if and to the extent that payment of such Additional Sum would cause the total sum paid by the Seller Parties under this Agreement to exceed an amount equal to the Purchase Price less £10 then such Additional Sum shall be deemed to be reduced so that the total sum paid by the Seller Parties under this Agreement does not exceed the Purchase Price less £10.

31.4 If any party pays an additional amount under this Agreement and the recipient receives, by virtue of the receipt of that additional amount (or in relation to the matter giving rise to the payment of that additional amount) a credit for, refund of or relief from any Tax or other monies payable by it or a similar benefit by reason of any deduction or withholding for or on account of Tax or by reason of any Tax charged in respect of which there is an additional amount under clause 31.3 or this clause 31.4, then that party shall reimburse to the other relevant parties the amount of such credit, refund, relief, or similar benefit.

31.5 If a party to this Agreement assigns the benefit of this Agreement, the other relevant parties shall only be liable to make additional payments pursuant to clauses 31.3 or 31.4 above to the extent that those other parties would have been liable to make those payments if no assignment had occurred.

32. CHOICE OF GOVERNING LAW

32.1 This Agreement shall be governed by and construed in accordance with English law.

32.2 Each party irrevocably agrees that the courts of England shall have exclusive jurisdiction to settle any Proceedings which may arise out of or in connection with this Agreement and that accordingly any Proceedings shall be brought in such courts.

32.3 Each party waives (and agrees not to raise) any objection, on the ground of forum non conveniens or on any other ground, to the taking of proceedings in the English courts. Each party also agrees that a judgment against it in Proceedings brought in England shall be conclusive and binding upon it and may be enforced in any other jurisdiction.

IN WITNESS whereof the parties have entered this Agreement the day and year first before written.

SCHEDULE 1

CORPORATE INFORMATION

PART A

Calpine UK Operations Limited


Registered number:		04241615

Date of incorporation:		26 June 2001

Place of incorporation:		England and Wales

Type of company:		Private limited by shares

Address of registered office:		Saltend Hedon Road Hull East Riding of Yorkshire HU12 8GA

Directors:		Lisa Marie Bodensteiner Peter Cartwright Ann B Curtis

Secretary:		Alycia Lyons Goody

Authorised share capital:		£1,000,000 comprised of 1,000,000 ordinary shares of £1 each

Issued share capital:		1 ordinary share

Shareholder:		Calpine UK Holdings Limited

Accounting reference date:		31 December

Auditors:		PricewaterhouseCoopers LLP

PART B

Saltend Cogeneration Company Limited


Registered number:		03274929

Date of incorporation:		1 November 1996

Place of incorporation:		England and Wales

Type of company:		Private limited by shares

Address of registered office:		Saltend Hedon Road Hull East Riding of Yorkshire HU12 8GA

Directors:		Peter Cartwright Ann B Curtis Christopher Bowlas Lisa Marie Bodensteiner

Secretary:		Alycia Lyons Goody

Authorised share capital:		£80,201,000 comprised of 80,201,000 ‘A’ ordinary shares of £1 each

Issued share capital:		80,201,000 ‘A’ ordinary shares

Shareholder Accounting reference date:		Calpine UK Holdings Limited 31 December

Auditors:		PricewaterhouseCoopers LLP

SCHEDULE 2
THE WARRANTIES

The Seller warrants to the Purchaser as follows:

1. Ownership of the Shares

The Seller is the sole legal and beneficial owner of the Shares.

2. Capacity of the Seller

2.1 The Seller has the requisite capacity, power and authority to enter into and perform its obligations under this Agreement and the Tax Covenant and each other Share Purchase Document to which it is expressed to be a party.

2.2 The Seller has taken all necessary corporate action required by constitutional documents to permit it to enter into and perform its obligations under this Agreement and the Tax Covenant and each other Share Purchase Document to which it is expressed to be a party.

2.3 This Agreement constitutes and the Tax Covenant and each other Share Purchase Document to which it is expressed to be a party will, when executed, constitute binding obligations of the Seller in accordance with their respective terms.

2.4 The execution and delivery of, the performance by the Seller of its obligations under this Agreement and the Tax Covenant and each other Share Purchase Document to which it is expressed to be a party will not (or with the giving of notice or lapse of time would not):

2.4.1 result in a breach of any provision of the constitutional or organisational documents of the Seller including its memorandum and articles of association;

2.4.2 result in a breach of any order, judgment or decree of any court or law or regulation of any government or governmental agency to which the Seller is a party or by which the Seller is bound or any agreement, arrangement or obligation by which the Seller or any member of the Sale Group is bound; or

2.4.3 save for those necessary in relation to the satisfaction of the BP Conditions and the Anti-Trust Condition, require it to obtain any consent or approval of, or give notice to or make any registration with, any Competent Authority which has not been obtained or made at the date hereof both on an unconditional basis and on a basis which cannot be revoked.

3. Company Structure, etc.

3.1 The Shares comprise the entire allotted and issued share capital of the members of the Sale Group and all Shares have been properly allotted and issued and are fully paid up.

3.2 The Shares are legally and beneficially owned by the Seller free from any Encumbrances, except for Permitted Encumbrances, and there is no agreement, arrangement or obligation to give or create an Encumbrance in relation to any of the Shares.

3.3 There is no agreement or commitment outstanding which calls for the allotment, issue or transfer of, or accords to any person the right to call for the allotment or issue of, any shares (including the Shares) or debentures in or securities of the any member of the Sale Group.

3.4 The information given in Schedule 1 in relation to each member of the Sale Group is true, accurate and not misleading, subject to any changes to the directors or secretary that have been notified to the Purchaser.

3.5 No member of the Sale Group has, and during the Relevant Period no member of the Sale Group has had, any interest in the share capital of any other company.

3.6 Neither SCCL nor UK OpCo carries on any business in partnership or through a joint venture with any other person and neither of them is a member of any corporate or unincorporated body, undertaking or association.

3.7 All registers of each member of the Sale Group contain an accurate record of the matters which are required to be dealt with there and, so far as the Seller is aware, no member of the Sale Group has received any application or request for rectification of its statutory registers or any notice or allegation that any of them is incorrect during the Relevant Period.

4. Compliance

4.1 Each member of the Sale Group has during the Relevant Period complied with all laws, statutes, regulations and other legal, procedural and administrative requirements applicable to it in the United Kingdom save where failure to comply with the foregoing would not have a material adverse effect on the Sale Group or the Business.

4.2 No member of the Sale Group has received any written notification during the Relevant Period that any non-routine investigation or inquiry is being conducted by any Competent Authority in respect of its affairs and where there is a likelihood that such investigation or inquiry will lead to Proceedings.

4.3 Neither the execution and delivery of this Agreement or the Tax Covenant or any of the other Share Purchase Documents, nor the consummation of the transactions contemplated thereby will result in a breach of, or constitute a default (or give rise to any right of termination, cancellation or acceleration) under, or (other than to the extent contemplated in the BP Conditions) require any consent (which has not been obtained) under, any indenture, licence, contract, agreement or other instrument or obligation to which the Seller or a member of the Sale Group is a party or by which any of them or their respective assets is bound or (other than to the extent contemplated in the BP Conditions and the Anti-Trust Condition) which requires the approval or consent of any third party which has not been obtained.

4.4 Each member of the Sale Group:

4.4.1 is in compliance in all material respect with each Material Contract to which it is a party to the extent that it has obligations thereunder (including obligations relating to the Environment); and

4.4.2 has not waived any material rights under any Material Contract to which it is a party.

4.5 So far as the Seller is aware, there is no material default on the part of any counterparty to any Material Contract to which a Sale Group member is a party and no counterparty to any such Material Contract has given notice of its intention to terminate such Material Contract.

5. Encumbrances/Borrowings

5.1 Details of all loans and all other financial facilities available to any member of the Sale Group

are set out in the Data Room or the Disclosure Letter. The amounts borrowed by each member of the Sale Group thereunder (if any) do not exceed any limitation on their respective borrowing power as contained in their Articles of Association or in any debenture or other deed or contractual commitment binding upon them.

5.2 No member of the Sale Group has outstanding any loan capital, nor have they factored any of their debts, nor engaged in any financing of a type which would not be required to be shown or reflected in the Accounts or borrowed any money which they have not repaid, save for borrowings disclosed in the Disclosure Letter.

5.3 During the Relevant Period, no member of the Sale Group has entered into any guarantee, indemnity, performance bond, suretyship, letter of credit or other security to secure an obligation of any person that is outstanding. So far as the Seller is aware, prior to the Relevant Period no member of the Sale Group entered into any guarantee, indemnity, performance bond, suretyship, letter of credit or other security to secure an obligation of any person that is outstanding. The Disclosure Letter sets out a complete list of all guarantees, letters of credit or other security granted by any person to secure the obligations of a Sale Group member.

5.4 No member of the Sale Group is party to or has any liability under any Material Contract which can be terminated by virtue of the transactions contemplated in this Agreement including any change in the ownership or control of SCCL or UK OpCo or both of them.

5.5 The Disclosure Letter sets out any current outstanding indebtedness (save for any indebtedness incurred in the ordinary course of business) owed by SCCL to the Calpine Group or any Calpine Group member. No amounts are owed by UK OpCo to the Calpine Group or any Calpine Group member (save for amounts that may be owing from UK OpCo to SCCL).

5.6 The aggregate of all amounts (including any interest that has accrued thereon) owed by SCCL to the Calpine Group is:

5.6.1 not less than the aggregate of [*] and

5.6.2 not in excess of the aggregate of [*]

6. Accuracy and Adequacy of information

6.1 The copies of the memorandum and articles of association of each member of the Sale Group in the Data Room and attached to the Disclosure Letter are complete and accurate.

6.2 The Seller has made available to the Purchaser in the Data Room copies of Material Contracts (other than the transactions entered into under the Electricity Trading Agreements) to which a Sale Group member is a party and the Disclosure Letter sets out the Data Room document references for accurate and complete copies of such documents and agreements.

6.3 During the Relevant Period, no member of the Sale Group has received written notice that it is in breach of any Material Contract.

6.4 None of the individuals identified in clause 1.2.15 are aware (having read and considered the Warranties but without any of them being required to make any further enquiry) of any document contained in the Data Room that is inconsistent in any material respect with any of the New Warranties (and for these purposes the Seller shall not be fixed with the knowledge of any other person or be treated as having any imputed or constructive knowledge).

7. Accounts

7.1 The Accounts have been prepared on a consistent basis in accordance with the law and applicable standards, principles and practices generally accepted in the United Kingdom.

7.2 The Accounts show a true and fair view of the assets and liabilities of each of SCCL and UK OpCo as at the Accounts Date and of the profits and losses of each of SCCL and UK OpCo for the financial year ended on the Accounts Date.

8. Events Since the Accounts Date

8.1 Since the Accounts Date:

8.1.1 the business of each Sale Group member has been operated in the ordinary course consistent with the relevant Sale Group member’s usual practices;

8.1.2 no Sale Group member has, other than in the ordinary course of its business consistent with its usual practices:

(a) acquired or disposed of, or agreed to acquire or dispose of, an asset; or

(b) assumed or incurred, or agreed to assume or incur, a liability, obligation or expense (actual or contingent); or

(c) factored, sold or agreed to sell a debt;

8.1.3 no Sale Group member has, other than under the Supplemental Agreement and/or the 2005 budget and plant improvement plan disclosed in the Data Room:

(a) made, or agreed to make, capital expenditure exceeding in total [*] ; or

(b) incurred, or agreed to incur, a commitment or commitments involving capital expenditure exceeding in total [*] and

8.1.4 no Sale Group member has declared, paid or made a dividend or distribution (including, without limitation, a distribution within the meaning of the ICTA 1988) except as provided in the Accounts.

9. Licences

9.1 The Sale Group has all licences (including statutory licences), authorisations, certificates and consents necessary to carry on the Business as presently conducted and, all such licences, authorisations, certificates and consents are valid and subsisting and are being complied with in all material respects. No member of the Sale Group has received written notice during the Relevant Period to the effect that, and nor is the Seller aware of any fact or circumstances which would reasonably:

9.1.1 constitute a breach of any of the terms or conditions of any such licence, authorisation, certificate or consent; or

9.1.2 result in any such licence, authorisation or consent being revoked, suspended or terminated.

10. Litigation

10.1 Other than as plaintiff in the collection of debts arising in the ordinary course of business, no member of the Sale Group is engaged in any litigation or arbitration, administrative, regulatory or criminal proceedings, whether as plaintiff, defendant or otherwise.

10.2 Save as disclosed in the Disclosure Letter, so far as the Seller is aware (i) no litigation or arbitration, administrative, regulatory or criminal proceedings as are referred to in paragraph 10.1 have been threatened or is pending and, (ii) no fact or circumstance has occurred which entitle any person to bring or commence such proceeding.

11. Ownership and Condition of Assets

11.1 Each asset included in the Accounts, or acquired by a Sale Group member since the Accounts Date (other than current assets sold, realised or applied in the ordinary course of trading and other than the Property) is owned both legally and beneficially by the relevant member of the Sale Group as the case may be.

11.2 There is no Encumbrance (other than a Permitted Encumbrance) on, over or affecting the whole or any part of the assets or undertaking of any member of the Sale Group (other than any asset acquired in the ordinary course of business on terms that the property does not pass until payment is made) and no member of the Sale Group is a party to an agreement, obligation or commitment to give or create any such Encumbrance.

12. Intellectual Property

12.1 All rights and interest in the Company Business Intellectual Property and Company Business Know-how that are used in the Business are legally and beneficially owned by a member of the Sale Group or the Sale Group has the benefit of them.

12.2 Particulars of all material Business Information Technology used in the Business are contained in the Data Room and attached to the Disclosure Letter.

12.3 The Company Business Intellectual Property is valid and enforceable and (if registered) has not been declared, and the Seller has no reason to believe that it will be declared, invalid or, if it is the subject of an application for registration or grant, the application has been duly made and is subsisting and all renewal fees payable in respect of any of the Company Business Intellectual Property have been paid to date during the Relevant Period.

12.4 Details of all material licences relating to the Company Business Intellectual Property and Company Business Know-how and all material particulars as to registration of (and application to register) the Company Business Intellectual Property, are set out in the Disclosure Letter.

12.5 So far as the Seller is aware, none of the Company Business Intellectual Property is currently being infringed or used without authorisation by any third party.

12.6 The Business Information Technology comprises all of the information technology (including, without limitation, hardware, software, firmware, networks and connecting media) and documents relating thereto which are used in the Business.

12.7 The Business Information Technology is owned and operated by and is under the control of a Sale Group member and is not wholly or partly dependant on any facilities which are not under the ownership, operation or control of a Sale Group member and is adequate for the needs of the Business as conducted as at the Completion Date.

13. Insurances

13.1 The Calpine Group has obtained and is maintaining the insurance cover for the Facility. Details of the insurance policies in respect of which each member of the Sale Group has an interest that are material to the Business are included in the Data Room and set out in the Disclosure Letter and so far as the Seller is aware, all such policies are in full force and effect and are not void or voidable and, save as disclosed, no claims are outstanding and, so far as the Seller is aware, no event has occurred giving rise to any claim which would have a material adverse affect on the ability of the Sale Group to carry on the Business.

14. Employment

14.1 A list of the names, positions, dates of birth, dates of commencement of continuous employment, salary of, and profits, and other benefits (other than those referred to in paragraph 14.8 below) available to, Employees as at the date of this Agreement are set out in the Disclosure Letter. Save as disclosed in the Disclosure Letter, no member of the Sale Group has made any representations, offers or promises to any of the Employees to vary any of the foregoing.

14.2 All contracts of employment with Employees provide [*]

14.3 SCCL does not have any employees. All persons employed in the Sale Group are employed by UK OpCo. So far as the Seller is aware, UK OpCo has complied in all material respects with all statutes and regulations (including for the avoidance of doubt Regulation 10 of the Transfer Regulations) relating to the terms and condition of employment of the Employees during the Relevant Period.

14.4 Copies of collective and recognition agreements (currently in force and applicable) in relation to the Employees are attached to the Disclosure Letter. There is no material dispute with any trade union, works counsel or representative body, or, so far as the Seller is aware, pending or threatened in relation to any member of the Sale Group.

14.5 No member of the Sale Group is involved in any litigation, arbitration, mediation, administration or criminal proceeding in connection with or arising with any Employee arising from their employment by UK OpCo and the performance of their duties in relation the Sale Group.

14.6 UK OpCo has no employees other than those engaged wholly in the Business and all of the employees engaged in the Business are employed by UK OpCo.

14.7 There are no consultants employed or engaged on a continuous basis in the Business.

14.8 No Employee will be entitled to any bonus, incentive payment, compensation or other benefit or payment as a consequence of the transactions contemplated by this Agreement.

14.9 Save for the group personal pension with Scottish Equitable (the “GPPP”), no member of the Sale Group has any liabilities or contingent liabilities in respect of any scheme or arrangement for the provision of pensions or other retirement or death benefits, or has announced any proposal to establish such a scheme or arrangement. So far as the Seller is aware, the Sale Group has complied with all its obligations in respect of the GPPP, and no employee or former employee of the Sale Group has been promised any particular level of benefits in respect of the GPPP.

14.10 None of the Sale Group, the Seller or any member of the Calpine Group has agreed or

proposed to provide any Employee with any benefit, compensation, damages, redundancy payment or other payment (save for payment in respect of the applicable notice period and/or a statutory redundancy payment) which might arise or be payable on or as a consequence of the termination of an Employee’s employment.

14.11 No member of the Sale Group has provided, or agreed to provide, a gratuitous payment or benefit to a director, officer or employee or to any of their dependants.

14.12 So far as the Seller and the Sale Group is aware there is no form of industrial action, strike or other dispute threatened or pending between any member of the Sale Group and any Employee or trade union or other representative of any of the Employees.

14.13 No Sale Group member operates any share incentive scheme, share option scheme, profit sharing, bonus or other incentive scheme.

15. Tax

15.1 Each member of the Sale Group has complied in all material respects with all its obligations under any applicable laws, rules and regulations relating to Tax (including withholding of taxes under any law) and has, within the time and the manner prescribed by law, withheld and paid over to the proper Tax Authority all amounts required to be so withheld and paid over under applicable laws.

15.2 All notices, returns, computations and registrations of each member of the Sale Group for any Tax purpose have been made within the requisite periods, on a proper basis and are true, correct and complete. Each member of the Sale Group has paid in full all Taxes that have become due for payment for all periods ending on or prior to the date of this Agreement.

15.3 None of the notices, returns, computations and registrations of any member of the Sale Group for the purposes of Taxation and nothing contained in any such notice, return, computation or registration is, nor, so far as the Seller is aware, is likely to be, the subject of any dispute with any Tax Authority and no member of the Sale Group is and no member of the Sale Group expects to be involved in any dispute in relation to Taxation. Each member of the Sale Group has duly submitted all claims and disclaimers which have been assumed to be made for the purposes of the Accounts.

15.4 No member of the Sale Group has been subject to any non-routine visit, audit, investigation, discovery or access order by any Tax Authority during any accounting period ending on or within three (3) years before the date hereof and, so far as the Seller is aware, there are no circumstances existing which make it likely that a non-routine visit, audit, investigation, discovery or access order will be made.

15.5 Each Sale Group member has properly operated the Pay As You Earn system (including in relation to national insurance contributions) and has complied with each reporting obligation in connection with benefits provided (whether by the Sale Group Member or by any other person) for a Sale Group member’s directors, other officers and employees and former directors, other officers and employees.

15.6 No member of the Sale Group has without the prior consent of the Treasury carried out or agreed to carry out any transaction under section 765 of ICTA 1988 which would be unlawful in the absence of such consent and each member of the Sale Group has, where relevant, complied with the requirements of section 765A(2) of ICTA 1988 (supply of information on movement of capital within the EU) and any regulations made or notice given thereunder.

15.7 Each member of the Sale Group has been only resident in the United Kingdom for Taxation purposes and has not been liable to corporation tax (or the equivalent thereto in any jurisdiction outside the United Kingdom) in any jurisdiction other than the United Kingdom, during the Relevant Period.

15.8 Each member of the Sale Group has sufficient records relating to past events to permit accurate calculation of the Taxation liability which would arise upon a disposal or realisation on Completion of each asset owned by it at the Accounts Date or acquired by it since that date but before Completion.

15.9 The Disclosure Letter gives details of every written agreement that a member of the Sale Group has entered into with any Calpine Group member for the claim or surrender of group relief under the provisions of Chapter IV of Part X of ICTA 1988. No member of the Sale Group will make or agree to make or accept any such surrender to or from a member of the Calpine Group after the date of this Agreement, save to the extent such surrender is made after Completion in accordance with the Tax Covenant.

15.10 No liability for Taxation will or may arise by reason of any member of the Sale Group ceasing to be a member of a group of companies (as defined in section 170 of TCGA 1992) in connection with the sale of the Shares contemplated by this Agreement.

15.11 Each member of the Sale Group is a taxable person duly registered for the purposes of VAT. Each member of the Sale Group has complied with all statutory provisions, rules, regulations, orders and directions in respect of VAT, has promptly submitted accurate returns and maintains full and accurate VAT records. No member of the Sale Group has ever been subject to any interest, forfeiture, surcharge or penalty nor been given any notice under section 59 or 64 of VATA nor been given a warning under section 76(2) of VATA nor has any member of the Sale Group been required to give security under paragraph 4 of Schedule 11 to VATA. No member of the Sale Group is or has been treated as a member of a group for the purposes of VAT, nor has any member of the Sale Group applied for such treatment.

15.12 No member of the Sale Group, nor a company of which a member of the Sale Group is a relevant associate within the meaning of paragraph 3(7) of Schedule 10 to the VATA (election to waive exemption), has elected to waive exemption under paragraph 2 of that Schedule 10 in relation to any land except as disclosed in the Disclosure Letter.

15.13 All documents to which any member of the Sale Group is a party made prior to the date hereof and which form part of the relevant member of the Sale Group’s title to any asset or in the enforcement of which the relevant member of the Sale Group is or may be interested and which are subject to stamp or similar duty, have been duly stamped and adjudicated (as the case may be).

15.14 No Sale Group member holds an asset that was transferred to it by an instrument which was executed in the three years ending on the date of this Agreement and to which section 111 or 113 of the Finance Act 2002 could apply. No Sale Group member holds or has held a chargeable interest that was acquired by it under a relevant transaction in the three years ending on the date of this Agreement and no Sale Group member holds or has held a chargeable interest that is or was derived from a chargeable interest so acquired. For the purposes of this warranty:

“chargeable interest” has the same meaning as in Part 4 of the Finance Act 2003;

“reconstruction relief” has the same meaning as in Part 2 of Schedule 7 to the Finance Act 2003; and

“relevant transaction” means a transaction: (a) that is exempt from stamp duty land tax by virtue of paragraph 1 of Schedule 7 to the Finance Act 2003 (group relief) or by virtue of reconstruction relief, or (b) that is subject to a reduced rate of stamp duty land tax by virtue of acquisition relief.

15.15 SCCL is a taxable person and is duly registered for the purposes of the Climate Change Levy (pursuant to Schedules 6 and 7 to the Finance Act 2000). SCCL has complied with all statutory provisions, rules, regulations, orders and directions made in respect of the Climate Change Levy, has promptly submitted accurate returns and maintains full and accurate records concerning the Climate Change levy. SCCL has never been, and, so far as the Seller is aware, is not likely to be, subject to any surcharge, interest, forfeiture or penalty under Schedules 6 or 7 to the Finance Act 2000.

15.16 The total capital expenditure for the Facility as at 31 December 2004 was [*] . This figure is the sum of capital expenditure of [*] as shown in the Accounts. The written down allowances to which the Sale Group was entitled as at 1 January 2005 are as follows:

15.16.1
in respect of plant and machinery, not less than [*] ;

15.16.2
in respect of long life assets, not less than [*] ;

15.16.3
in respect of industrial building allowances, not less than [*] .

15.17 Except as disclosed in the Disclosure Letter, to the best of the Seller’s knowledge, information and belief, no Sale Group member is or has been a party to or otherwise involved in any transaction, agreement or arrangement (other than a transaction, agreement or arrangement between Sale Group members) which was entered into otherwise than by way of a bargain at arm’s length, or any transaction, agreement or arrangement (other than a transaction, agreement or arrangement between Sale Group Members), whether or not entered into by way of a bargain at arm’s length, under which it has been or is or may be required to make any payment for any goods, services or facilities provided to it which is in excess of the market value of such goods, services or facilities or under which it has been, or is or may be required to provide goods, services or facilities for a consideration which is less than the market value of such goods, services or facilities, in each case in circumstances where Schedule 28AA Taxes Act applies or applied to the relevant transaction, agreement or arrangement by virtue of paragraph 1(1) of that Schedule.

15.18 [*]

16. Environmental

16.1 So far as the Seller is aware, the Sale Group currently complies with all Environmental Laws in all material respects insofar as they relate to the Business and, so far as the Seller is aware, has so complied during the Relevant Period.

16.2 Copies of material Environmental Approvals (excluding for the avoidance of doubt any approvals, consents or the permissions required under the Electricity Act 1989) held by the members of the Sale Group necessary for the carrying on of the Business as now carried on (“Environmental Approvals”) and commissioned during the Relevant Period are attached to the Disclosure Letter. So far as the Seller is aware, all such Current Environmental Approvals are in full force and effect and are being complied with in all material respects.

16.3 So far as the Seller is aware, all Environmental Approvals (excluding for the avoidance of doubt any approvals, consents or permissions required under the Electricity Act 1989)

necessary for the Business as now carried on have been obtained. No member of the Sale Group has received any written notice during the Relevant Period which is still outstanding from any third party (including any Competent Authority) nor is the Seller aware of any facts or circumstance:

16.3.1 indicating that there are investigations, enquiries or proceedings outstanding or pending against any member of the Sale Group that are likely to result in the suspension, cancellation, refusal, variation, amendment or revocation of any Current Environmental Approval;

16.3.2 alleging or claiming that any member of the Sale Group will be liable under Environmental Law to undertake or pay for any material remediation including any material remediation required to be undertaken at or in the vicinity of the Property; and/or

16.3.3 indicating that any litigation or arbitration, administrative, regulatory or criminal proceedings as are described in paragraph 16.4 are pending or threatened against the Sale Group or that such proceedings are likely to be brought against the Sale Group.

16.4 No member of the Sale Group is engaged in any litigation or arbitration, administrative, regulatory, or criminal proceedings involving any liability arising under or pursuant to any Environmental Law, whether as plaintiff, defendant or otherwise.

16.5 There are no material environmental audit reports or any material environmental assessments relating to the assets and business of the Sale Group prepared in the last twelve (12) months other than those which have been supplied in the Data Room or are attached to the Disclosure Letter.

16.6 So far as the Seller is aware, no physical works or physical upgrades to the Facility (other than as provided for in the Accounts or Completion Balance Sheet) are reasonably anticipated in the next 15 months in order to comply with Environmental Laws or to maintain or obtain any Environmental Approval.

17. Property

17.1 The factual information provided by the Seller for the purpose of the preparation of the Certificate of Title was true and complete in all material respects at the date upon which it was delivered to Addleshaw Goddard and remains so at the date of delivery of the Certificate of Title to the Purchaser on Completion.

17.2 The Property comprises all the land and buildings currently owned, used or occupied by the Sale Group

17.3 Other than in respect of the Property, the Sale Group has no actual or contingent liability to any third party in its capacity as present or formal freeholder, leaseholder or surety of any freehold or leasehold land.

18. Insolvency

18.1 No petition has been presented, no order has been made, or resolution passed for the winding up of the Seller or a Sale Group member or for the appointment of a liquidator or provisional liquidator to the Seller or a Sale Group member.

18.2 No administrator has been appointed in relation to the Seller or a Sale Group member. No notice has been given or filed with the court of an intention to appoint an administrator to the Seller or a Sale Group member. No petition or application has been presented or order made for the appointment of an administrator in respect of the Seller or a Sale Group member. No receiver or administrative receiver has been appointed, nor any notice given of the appointment of any such person, over the whole or part of the Seller’s or a Sale Group member’s business or assets.

18.3 No moratorium has been sought or has been granted under section 1A of the Insolvency Act 1986 in respect of the Seller or a Sale Group member. No voluntary arrangement has been proposed under section 1 of the Insolvency Act 1986 in respect of the Seller or a Sale Group member.

18.4 Neither the Seller nor any Sale Group member is unable to pay its debts within the meaning of section 123 of the Insolvency Act 1986. There are no unsatisfied written demands that have been served on the Seller or a Sale Group member pursuant to section 123 (1)(a) of the Insolvency Act 1986. There is no unsatisfied judgment or court order outstanding against the Seller or a Sale Group member.

18.5 No compromise or arrangement has been proposed, agreed to or sanctioned under section 425 of the Act in respect of the Seller or a Sale Group member, nor has any application been made to, or filed with, the court for permission to convene a meeting to vote on a proposal for any such compromise or arrangement. Neither the Seller nor any Sale Group member has proposed or agreed to a composition, compromise, assignment or arrangement with any of its creditors which would prevent the sale and purchase of the Shares pursuant to this Agreement.

18.6 No distress, execution, attachment, sequestration or other process has been levied on an asset of the Seller or a Sale Group member that remains undischarged.

18.7 So far as the Seller is aware, no action is being taken by the Registrar of Companies to strike the Seller or a Sale Group member off the register under section 652 of the Act.

18.8 So far as the Seller is aware, no Sale Group member has at any time during the two years immediately prior to the date of this Agreement:

18.8.1 entered into a transaction with any person at an undervalue (as referred to in section 238(4) of the Insolvency Act 1986); or

18.8.2 been given a preference by, or given a preference to, any person (as referred to in section 239(4) of the Insolvency Act 1986).

18.9 This Agreement, each Share Purchase Document to be entered into by the Seller or a Sale Group member and the transactions contemplated hereunder and thereunder are being entered into by the Seller and such Sale Group member in good faith and, so far as the Seller is aware, do not constitute:

18.9.1 a transaction with any person at an undervalue (as referred to in section 238(4) of the Insolvency Act 1986 or the equivalent or analogous provisions of law in any other jurisdiction); or

18.9.2 a preference by, or given to a person (as referred to in section 239(4) of the Insolvency Act 1986 or the equivalent or analogous provisions of law in any other jurisdiction).

18.10 Neither the Seller nor any Sale Group member is, in any jurisdiction, subject to any other procedures or steps which are analogous to those set out above in this paragraph 18. The execution and delivery of this Agreement and each Share Purchase Document by the Seller, and the performance of its obligations under this Agreement and each Share Purchase Document will not result in the Seller or any Sale Group member being or becoming subject to any other procedures or steps which are analogous to those set out in sub-paragraphs 18.1, 18.2, 18.4 and 18.6 above in any jurisdiction.

19. Health and Safety

19.1 So far as the Seller is aware, the Sale Group currently complies in all material respects with all H&S Laws insofar as they relate to the Business and, so far as the Seller is aware, has so complied during the Relevant Period.

19.2 So far as the Seller is aware there are no facts or circumstances indicating that any litigation or arbitration, administrative, regulatory or criminal proceedings as are described in paragraph 19.3 are pending or threatened against the Sale Group.

19.3 No member of the Sale Group is engaged in any litigation or arbitration, administrative, regulatory or criminal proceedings involving any liability arising under or pursuant to any H&S Law whether as plaintiff, defendant or otherwise.

19.4 There are no material health and safety audit reports or material health and safety assessments relating to the assets and business of the Sale Group prepared in the last twelve months other than those which have been supplied in the Data Room or are attached to the Disclosure Letter.

20. Climate Change

20.1 SCCL has obtained a CHPQA Certificate (as defined in The Climate Change Levy (Combined Heat and Power Stations) Prescribed Conditions and Efficiency Percentages Regulations 2001 SI 2001 No 1140) in relation to the Facility and has complied with all obligations necessary to maintain such certification.

20.2 SCCL has in full force and effect in relation to the Facility a valid Secretary of State (Combined Heat and Power) Exemption Certificate issued pursuant to paragraph 148 of Schedule 6 to the Finance Act 2000 and has done nothing, nor omitted to do anything, that may result in that certificate becoming invalid, varied or otherwise ineffective.

20.3 SCCL has claimed all CHP LECs made available to it in relation to the Facility and has done nothing nor omitted to do anything that may lead to the validity of any CHP LECs being restricted or CHP LECs not being issued in the period following the Completion Date.

21. Facility/Project specific warranties

21.1 A complete and accurate copy of the Supplemental Agreement dated 21 October 2004 between SCCL and [*] has been made available in the Data Room.

21.2 A complete and accurate copy of the letter of credit provided by or on behalf of [*] to SCCL as security in respect of its completion of the [*] at the Facility ( [*] ) has been made available in the Data Room.

21.3 A complete and accurate copy of the Settlement Agreement dated 21 October 2004 between SCCL and [*] has been made available in the Data Room.

21.4 So far as the Seller is aware, no Remedy Event (as that term is defined in the Site Interface Agreement) has occurred at any time during the Relevant Period and the Seller is not aware of any fact or circumstance which would result in a Remedy Event.

21.5 As at the date of this Agreement, [*]

21.6 As at the date of this Agreement, [*]

21.7 The list of spare parts disclosed in the Data Room shows a complete and accurate record of the spare parts available at the Facility as at 18 May 2005.

21.8 The Disclosure Letter sets out a true, complete and accurate list of SCCL’s outstanding transactions under the GTMAs as at 23 May 2005.

21.9 The Facility has Trading Unit Status (as that term is defined in the Balancing and Settlement Code dated 14 August 2000).

21.10 The maintenance programme due to be carried out on the Facility during 2005 has been commenced by SCCL and, so far as the Seller is aware, neither any member of the Sale Group nor any Seller Party intends to [*]

21.11 So far as the Seller is aware, SCCL has not, since receipt of the letter addressed to SCCL [*]

21.12 So far as the Seller is aware (without having made any enquiry) the Warranted Replies were, when given, true and accurate in all material respects.

SCHEDULE 3
LIMITATION OF LIABILITY

1. Application of this Schedule

1.1 Subject to paragraph 1.2 of this Schedule 3, the parties intend that the provisions of this Schedule 3 apply to this Agreement and, where so stated to the other Share Purchase Documents.

1.2 Paragraphs 2.1, 2.3 and 2.4 of this Schedule 3 shall not apply to Fundamental Claims. Paragraphs 2.7, 3, 4, 5.4, 5.6 and 6 shall not apply to Tax Claims save that paragraphs 2.7, 4 and 6 shall apply to Tax Warranty Claims.

2. Limitation of Liability

2.1 The Purchaser shall not be entitled to bring any Claim against any of the Seller Parties and the Seller Parties shall not be liable in respect of any Claim unless the relevant Seller Party receives notice of such Claim from the Purchaser (such notice to contain so far as is reasonably practicable having regard to, amongst other things, the information available to the Purchaser information concerning the matter giving rise to the Claim, the nature of the Claim and the amount of the Claim or an estimate of the amount of such Claim), such notice to be received on or before:

(a) in respect of Claims (other than Tax Claims or Claims under clause 8.12), the date falling 18 months immediately following Completion;

(b) in respect of Claims under clause 8.12, the later of (i) the date falling 18 months immediately following Completion, and (ii) the date falling 9 months after the date the Purchaser is first entitled pursuant to the provisions of clause 8.14 to claim under clause 8.12; and

(c) in respect of Tax Claims, the date falling seven years after the Completion Date.

2.2 The liability of a Seller Party for a Claim in respect of which a notice is given by the Purchaser to such Seller Party in accordance with paragraph 2.1 of this Schedule 3 shall (if such Claim has not been previously satisfied, settled or withdrawn) absolutely determine and any Claim made therein be deemed to have been withdrawn (and no new Claim may be made in respect of the facts, event, matter or circumstance giving rise to such withdrawn Claim) unless legal proceedings in respect of such Claim shall have been commenced within 12 months of the date of service of such notice (or such other period as may be agreed by the Purchaser and the Seller in writing) or, if the Purchaser is using its reasonable efforts to enforce a claim against its insurers in accordance with paragraph 5.5 of this Schedule 3, 18 months of the date of service of such notice. For the purpose of this paragraph 2.2, proceedings shall not be deemed to have commenced unless they shall have been properly issued and validly served upon the Seller.

2.3 The Purchaser shall not be entitled to damages in respect of any Claim under this Agreement or under any other Share Purchase Documents, and the Seller shall have no liability in respect of any Claim by the Purchaser unless:

(a) [*] ;

(b) [*] ;

2.4 Subject to paragraph 1.2 of this Schedule 3,

(a) without prejudice to paragraph 2.4(b) of this Schedule 3, the total aggregate liability of the Seller in respect of all Claims under or in respect of clause 8.12 and all Environmental Indemnity Claims [*]

(b) the total aggregate liability of the Seller, the Seller Guarantor and Calpine under or in connection with this Agreement and the other Share Purchase Documents shall not [*]

2.5 The total aggregate liability of Seller Parties under or in connection with a Fundamental Claim shall not exceed the Unadjusted Aggregate Purchase Price.

2.6 For the purposes of sub-paragraphs 2.3 and 2.4:

(a) Claims arising directly from the same fact or event (and, in the case of a Claim under the Tax Covenant or Tax Warranty Claims relating to, or derived from the application of the same section, chapter or part of the Taxes Acts to the same subject matter) shall be treated as one individual Claim rather than a series of individual Claims; and

(b) the Seller shall be “finally liable” for a Claim only if the amount of such Claim is agreed between the Purchaser and the Seller, or is the subject of a judgment of a court of competent jurisdiction that is not appealable.

2.7 Nothing in this Agreement shall obviate any duty of the Purchaser to mitigate all and any Losses howsoever arising in respect of any Claim (other than a Tax Claim under the Tax Covenant).

3. Seller Party Exclusions

3.1 No Seller Party shall be liable for any Claim (other than a Tax Claim, to which clause 3.1 of the Tax Covenant shall apply) as follows:

(a) if and to the extent that the matter is specifically allowed, provided or reserved for in the Accounts;

(b) if and to the extent that the same occurs, is attributable to, or is increased as a result of, any legislation not in force at Completion or any change of law, regulation, rule, directive, requirement of administrative practice or any change in rates of Tax or the published practice of any Tax Authority or any change of any Competent Authority’s interpretation or application of any legislation, which in each case is not in force or effect at Completion or which takes effect retrospectively. This paragraph shall not apply to changes in Environmental Law (as defined in Schedule 8) for the purpose of any Environmental Indemnity Claim under Schedule 8;

(c) if and to the extent that the amount of any Claim (other than a Tax Claim) is increased by any delay in the Purchaser making any Claim (other than a Tax Claim);

(d) in respect of any matter resulting from a change in the accounting policies or practices of the Purchaser or any member of the Purchaser’s Group introduced or having effect after Completion;

(e) to the extent that the Claim (other than a Tax Claim) would not have arisen but for (or to the extent the same is increased by reason of) a breach by the Purchaser of any of its obligations under this Agreement or the Share Purchase Documents; or

(f) in respect of any liability which is contingent unless and until such contingent liability becomes an actual liability and is due and payable.

3.2 The Seller shall not be liable in respect of any Claim other than a Tax Claim, to which clause 3.1 of the Tax Covenant shall apply) to the extent that such Claim (other than a Tax Claim) is caused or increased by:

(a) any voluntary act, omission, transaction, or arrangement carried out by or at the written request of the Purchaser before Completion or is required under the terms of this Agreement or the Share Purchase Documents;

(b) any voluntary act, omission, transaction, or arrangement carried out by the Purchaser or by a member of the Purchaser’s Group after Completion otherwise than (a) in the ordinary course of business of the Sale Group as the same was conducted prior to Completion; (b) pursuant to a legally binding commitment entered into before Completion; (c) in order to mitigate, avoid or discharge a liability relating to or arising in respect of a period prior to Completion provided that in the case of an Environmental Indemnity Claim, such mitigation complies with paragraph 5 of Schedule 8; (d) in order to comply with any applicable law or regulation; or (e) at the written request or with the written consent of the Seller;

(c) any admission of liability made in breach of the provisions of this Schedule or Schedule 8 after the date hereof by the Purchaser or on its behalf or by a member of the Purchaser’s Group or on its behalf on or after Completion; or

(d) any reorganisation or change in ownership of the Purchaser or any member of the Purchaser’s Group other than in accordance with the transactions the subject of this Agreement.

3.3 The Purchaser shall not be entitled to claim or be paid under any Claim relating to any Environmental Approval, Environmental Laws or Environmental matters or in respect of any Environmental Indemnity Claim to the extent that the relevant Claim would not have resulted but for the Purchaser or any member of the Purchaser’s Group or any person on their behalf making a notification or disclosing any information or matter to any Competent Authority or any other person after Completion, except where such notification or disclosure is expressly required under Environmental Law or is a condition of an Environmental Approval or is required to avoid or abate an Emergency or having regard to prudent environmental practice, is made with the prior consent of the Seller (such consent not to be unreasonably withheld or delayed).

4. Disclosure

4.1 The Purchaser shall not be entitled to claim that any fact, matter or circumstance which would otherwise give rise to a Claim in respect of the Warranties (other than a Claim under the Tax Covenant) where, in relation to any fact, matter or circumstance forming the basis of the Claim:

(a) the Purchaser had actual knowledge of it on or before the date of this Agreement;

(b) such fact matter or circumstance was fairly disclosed in the Disclosure Letter (which in respect of the New Warranties only, shall be deemed to include all the documents comprising the Data Room save that, in respect only of the New Warranties in paragraphs 16.3 and 16.4 of Schedule 2, the Disclosure Letter shall not be deemed to include all the documents comprising the Data Room to the extent that such fact, matter or circumstance is material in the context of the Business taken as a whole), and for this purpose “fairly disclosed” means disclosed in such manner and in such detail as to enable a reasonable purchaser in the same position as the Purchaser to make an informed assessment of the fact, matter or circumstance concerned;

(c) was a matter specifically provided for in this Agreement; or

(d) was a matter or thing hereafter required to be done or required to be omitted to be done pursuant to this Agreement (or any other Share Purchase Document or any other subsequent agreement in writing between the Purchaser and the Seller) or otherwise done at the express request in writing or with the express approval in writing of, or on behalf of, the Purchaser.

4.2 Other than as provided in paragraph 4.1, no other knowledge relating to SCCL or UK OpCo (actual, constructive or imputed) shall prevent or limit a Claim made by the Purchaser in respect of the Warranties.

5. Double Recovery

5.1 Neither the Purchaser nor those deriving title from the Purchaser on or after Completion shall be entitled to recover damages or obtain payment, reimbursement or restitution more than once in respect of any Claim or under the provisions of any Share Purchase Documents.

5.2 The Seller shall not be liable under any of the Warranties to the extent that the Purchaser or the relevant member of the Purchaser’s Group has recovered any amount in respect of the fact, matter or event that gives rise to a breach of thereof any would otherwise be the subject matter of a Claim or under any of the Share Purchase Documents and vice versa.

5.3 The Purchaser shall, subject to paragraph 2 of this Schedule 3, be entitled to bring Claims under one or more applicable Warranties in respect of the same matter fact or circumstance but any liability in respect of such matter fact or circumstance shall be calculated without duplication of recovery by reason of such matter fact or circumstance constituting a breach of more than one Warranty.

5.4 Where the Purchaser or any member of the Purchaser’s Group is at any time entitled to recover from some other person any sum in respect of any matter giving rise to a Claim (other than a Tax Claim, to which clause 6 of the Tax Covenant shall apply) the Purchaser shall, and shall procure that the relevant member of the Purchaser’s Group shall, use all reasonable endeavours to enforce such recovery and, in the event that the Purchaser or any member of the Purchaser’s Group recovers any amount from such other person, the amount of any Claim against the Seller shall be reduced by the amount recovered, less all reasonable costs (including all legal costs), charges and expenses reasonably incurred by the Purchaser or such member of the Purchaser’s Group in recovering that sum from such other person or if that

sum is greater than the amount of the relevant Claim, the Claim shall be extinguished PROVIDED THAT the Purchaser shall not be required to commence any legal proceedings where the Purchaser has validly assigned all of its rights in relation to the relevant Claim to the Seller in a manner which entitles the Seller to the same benefits in respect of such rights as the Purchaser had.

5.5 If, in respect of any matter which would give rise to a breach of the Warranties, the Purchaser or the relevant member of the Purchaser’s Group is entitled to claim under any policy of insurance, then the Purchaser shall make such a claim against its insurers and use all reasonable endeavours to enforce such claim. The amount actually recovered from any such insurance claim shall then be applied to reduce or extinguish any Claims for breach of the Warranties in the manner described in clause 14.

5.6 If at any time a Seller Party pays to the Purchaser or any member of the Purchaser’s Group an amount pursuant to a Claim (other than a Tax Claim, to which clause 6 of the Tax Covenant shall apply) and the Purchaser or a member of the Purchaser’s Group subsequently recovers from some other person any sum in respect of any matter giving rise to such Claim (other than a Tax Claim) the Purchaser shall pay, or shall procure that the relevant member of the Purchaser’s Group pays, to the Seller an amount equal to the lesser of (i) the amount paid by the Seller to the Purchaser or member of the Purchaser’s Group in respect of such Claim and (ii) the sum (including interest (if any)) recovered from such other person, in each case after deduction of any reasonable costs (including all legal costs), charges and expenses reasonably incurred in obtaining such recovery.

5.7 Nothing in this paragraph 5 shall oblige the Purchaser to seek to recover any amounts from a third party in respect of any matter giving rise to a Claim before or as a condition to bringing a Claim against any Seller Party.

6. Remedy

6.1 Without limitation to the Purchaser’s rights under clause 3.6 and except in relation to a Claim in an action for damages brought under the Tax Covenant, the Purchaser shall have no rights or remedy whatsoever in respect of any fact, matter or circumstance constituting a breach of Warranty except pursuant to a Claim for such breach under this Agreement (or any Claim under any other provision of this Agreement or any claim under any provision of the Share Purchase Documents in each case) in an action for damages, and the Purchaser hereby irrevocably waives, releases, discharges and acquits the Seller from any other causes of action under or in connection with Share Purchase Documents and the transactions contemplated thereby whether based on statute, regulation or common law, under or in connection with Share Purchase Documents and the transactions contemplated thereby in respect of the fact, matter or circumstance giving rise to the breach except for breach of contract under or otherwise as provided in the Share Purchase Documents and other than in the case of fraud or fraudulent misrepresentation.

6.2 Without limitation to the Purchaser’s rights under clause 3.6, no party to this Agreement shall be entitled to rescind or repudiate this Agreement and the Seller shall not be liable (in equity or tort, under the Misrepresentation Act 1967 or in any other way) in respect of any misrepresentation provided nothing herein shall affect either party’s rights in respect of fraud or a fraudulent misrepresentation.

6.3 The Seller shall have no liability in respect of a breach of Warranty notified to the Seller pursuant to paragraph 2 if such breach is remedied within 30 days of the date such notice is served and no loss is suffered by the Purchaser in respect thereof.

7. Tax Claims

Clauses 3.1 and 6 of the Tax Covenant shall apply to Tax Warranty Claims.

8. Priority of Payments in respect of Claims

8.1 All amounts due under this Agreement in respect of Claims for breach of Warranty shall be paid to the Purchaser in the following manner:

(a) [*]

(b) [*]

(c) [*]

8.2 All amounts due under this Agreement or the Tax Covenant in respect of Claims for anything other than breach of Warranty shall be paid to the Purchaser in the following manner:

(a) [*]

(b) [*]

(c) [*]

(d) [*]

8.3 The Purchaser undertakes to seek all payments in respect of Claims in accordance with the priority set out in paragraphs 8.1 and 8.2. Nothing in this paragraph 8 shall restrict the ability of the Purchaser to serve a Withholding Notice (as defined in the Escrow Agreement) in accordance with the terms of the Escrow Agreement.

SCHEDULE 4
COMPLETION ARRANGEMENTS

PART I

1. The Seller shall procure that the following board meetings of the Sale Group are held to pass, inter alia, resolutions in relation to the following matters:

1.1 each of the persons nominated by the Purchaser in writing to the Seller prior to Completion be appointed as directors, as the Purchaser shall direct, such appointments to take effect immediately;

1.2 the resignations of each the directors proposed by the Purchaser in writing to the Seller prior to Completion be tendered and accepted so as to take effect immediately;

1.3 the transfer(s) relating to the Shares be approved, subject to Completion, for registration and (subject only to the transfer being duly stamped) the Purchaser registered as the holder of the Shares concerned in the register of members; and

1.4 the resignation of the existing auditors and appointment of new auditors nominated by the Purchaser to be effective immediately after Completion.

2. Following the performance by the Purchaser of its obligations under paragraphs 1 and 2 of Part II of this Schedule 4 and simultaneously with the Purchaser performing its obligations under paragraphs 3, 4 and 5 of Part II of this Schedule 4, the Seller shall deliver (or procure the delivery of) to the Purchaser or the Purchaser’s Solicitors:

2.1 a copy (certified by the secretary of the Seller to be a true copy of a resolution in force at Completion) of the resolution of the directors of the Seller which authorised the execution and delivery of, and the performance by the Seller of its obligations under, this Agreement and each of the other documents to be executed by the Seller pursuant to this Agreement (unless previously delivered);

2.2 duly executed transfers in respect of the Shares in favour of the Purchaser (or such person as the Purchaser may nominate), share certificates for the Shares in the name of the relevant transferors and any power of attorney under which any transfer is executed on behalf of the Seller;

2.3 a counterpart of the Tax Covenant duly executed by the Seller and the Seller Guarantor;

2.4 a counterpart of the Escrow Agreement duly executed by the Seller;

2.5 a counterpart of the [*] duly executed by the relevant members of the Calpine Group;

2.6 the Certificate of Title and the title deeds, if any, for the Property;

2.7 irrevocable powers of attorney executed by the Seller in favour of the Purchaser, enabling the Purchaser to exercise all voting and other rights attaching to the Shares pending registration of the transfers of the Shares;

2.8 the letters of resignation in the Agreed Form executed as a deed by each of the persons (other than the BP Director) designated by the Purchaser in writing to the

Seller prior to Completion to retire as a director or secretary of a member of the Sale Group and presented to the board meetings referred to in paragraph 1 of this Part I;

2.9 a letter of resignation in the Agreed Form executed by the existing auditors of each member of the Sale Group with a statement, so far as applicable, that there are no circumstances connected with such resignation which they consider should be brought to the attention of the members or creditors of such member of the Sale Group and presented to the board meetings referred to in paragraph 1 of this Part I;

2.10 a legal opinion from Skadden, Arps, Slate, Meagher & Flom (UK) LLP relating to the due execution by the Seller Guarantor of the Share Purchase Documents to which it is a party;

2.11 certified copies of the minutes of the duly held board meetings of the members of the Sale Group (as referred to in paragraph 1 of this Part I of Schedule 4);

2.12 all the statutory (duly written up to date) and other books and records of each member of the Sale Group in its possession or under its control;

2.13 evidence in a form satisfactory to the Purchaser acting reasonably that all amounts under the Luxco Loan Agreement will be prepaid on the Completion Date;

2.14 a release duly executed by the Seller releasing SCCL from its obligations under the promissory note dated 24 August 2004 (as amended) issued by SCCL in favour of the Seller (the “Promissory Note”) in a form satisfactory to the Purchaser acting reasonably;

2.15 a release duly executed by Luxco releasing SCCL from its obligations under the Luxco Loan Agreement in a form satisfactory to the Purchaser acting reasonably;

2.16 evidence of releases (in a form satisfactory to the Purchaser acting reasonably) of any and all security over the Shares or the assets of UK OpCo or SCCL including any such security arrangement referred to in the Disclosure Letter (and the Purchaser will provide all such assistance as the Seller may reasonably request to procure such releases); and

2.17 a duly executed equitable assignment (in a form satisfactory to the Purchaser acting reasonably) of the benefit of all the confidentiality undertakings given by any other potential acquirer of the Shares or the shares in the Seller or the Business (to the extent such undertakings relate to information concerning the Sale Group and/or the Business) and confirmation in writing that it has required each counterparty to any such confidentiality undertaking to return or destroy (i) all Confidential Information (as defined in the relevant confidentiality undertaking) disclosed to such counterparty; and (ii) all other material in such counterparty’s possession containing or reflecting all such Confidential Information (to the extent such Confidential Information is information concerning the Sale Group and/or the Business), in accordance with the terms of the relevant confidentiality undertaking.

PART II

1. Following the appointment and resignation of directors referred to in paragraph 1 of Part I of this Schedule 4, the Purchaser will procure the holding of a meeting of the directors of SCCL at which the following resolutions will be considered and

approved:

1.1 a resolution to approve SCCL’s entry into the Facility Agreement (and the granting of security by SCCL in respect of amounts due thereunder as required under the terms of the Facility Agreement), a loan facility agreement between SCCL and the Purchaser (the “Upstream Loan Agreement”) and the deed of release referred to in paragraph 3.1 of this Part II of Schedule 4;

1.2 a resolution to approve drawing [*] under the Facility Agreement;

1.3 a resolution to approve the payment by SCCL so as to enable the Purchaser to satisfy its obligations under clause 6.3.3 of amounts to Luxco and the Seller to discharge the indebtedness and other amounts owing by SCCL to such entities (as a result of which, inter alia, the releases referred to in paragraphs 2.14 and 2.15 of Part I of this Schedule 4 will be given);

1.4 a resolution to approve, subject to the Purchaser giving a notice of drawdown under the Upstream Loan Agreement, SCCL making an advance to the Purchaser under the Upstream Loan Agreement of an amount equal to the amount by which the amount drawn under the Facility Agreement exceeds the amount paid to Luxco and the Seller pursuant to clause 6.3.3;

1.5 if any of the actions performed pursuant to the resolutions referred to in this paragraph 1 constitute the giving of financial assistance for the purposes of Section 151 of the Act, a resolution to approve the giving of such financial assistance subject to compliance with the Financial Assistance Procedure, such resolution to be passed unanimously; and

1.6 a resolution to approve the form of the statutory declaration pursuant to section 155(6) of the Act relating to the performance of those actions pursuant to the resolutions referred to in this paragraph 1 (to the extent those actions constitute the giving of financial assistance for the purposes of Section 151 of the Act) to be sworn by each director of SCCL.

2. The Purchaser shall subject to (i) SCCL having net assets immediately prior to implementation of the transactions described in paragraph 3 of this Part II and (ii) delivery of the Accountants Report, procure the execution and delivery to the Registrar of Companies of a statutory declaration pursuant to section 155(6) of the Act relating to the performance of those actions pursuant to the resolutions referred to in paragraph 1 of this Part II (to the extent those actions constitute the giving of financial assistance for the purposes of Section 151 of the Act) sworn by each director of SCCL.

3. After complying with its obligations under paragraph 2 of this Part II and simultaneously with the performance by the Seller of its obligations under paragraph 2 of Part I of this Schedule 4, the Purchaser shall:

3.1 procure that SCCL executes and delivers a deed of release to the Seller in a form satisfactory to the Seller (acting reasonably) in respect of the “keep well” letter given by the Seller in favour of SCCL dated 19 October 2004; and

3.2 comply with the provisions of clauses 6.3.2 and 6.3.3 in their entirety.

4. Simultaneously with the performance by the Seller of its obligations under paragraph 2 of Part I of this Schedule 4, the Purchaser shall deliver to the Seller or the Seller’s Solicitors:

4.1 if not already provided, a copy (certified by the secretary of relevant company to be a true copy of a resolution in force at Completion) of the resolution of the board of the directors of the Purchaser and a committee of the board of directors of IPR authorising the execution and delivery of, and the performance by the Purchaser and IPR of their respective obligations under, this Agreement and each of the other documents to be executed by the Purchaser and/or IPR pursuant to this Agreement or directly or indirectly in connection with the transactions contemplated hereunder (unless previously delivered);

4.2 a counterpart of the [*] duly executed as a deed by the Purchaser and by the Purchaser Guarantors in such a form as may be acceptable to [*] ;

4.3 a counterpart of the Tax Covenant in the Agreed Form duly executed by each of the Purchaser Parties;

4.4 a counterpart of the Escrow Agreement duly executed by the Purchaser; and

4.5 the O&M Guarantee duly executed by the Purchaser or by an Affiliate of the Purchaser as the same may be acceptable to [*] .

5. Simultaneously with the delivery of those documents referred to in paragraph 4 of this Part II, the Purchaser shall deliver:

5.1 to NGC, a letter of credit or other security in replacement of the £758,131 (seven hundred and fifty eight thousand one hundred and thirty one pounds) letter of credit dated 24 August 2001 (extended on 26 January 2004 and on 10 February 2005) provided in support of SCCL’s obligations to pay the Balancing Services Use of System Charges under the CUSC and the CUSC Bilateral Connection Agreement;

5.2 to Elexon Clear Limited, a letter of credit or other security in replacement of the £1,000,000 (one million pounds) letter of credit dated 24 August 2001 (extended on 26 July 2004) issued in favour of Elexon in support of SCCL’s payment obligations under the Balancing and Settlement Code;

5.3 to BP Gas, a letter of credit (if required) to secure the obligations of the members of the Sale Group under the Gas Supply Agreement and the Gas Support Agreement; and

5.4 any replacement credit support or comfort letters provided by a member of the Calpine Group in relation to SCCL or UK OpCo as may be notified by the Seller to the Purchaser not less than two (2) Business Days prior to Completion.

SCHEDULE 5
CONDUCT OF BUSINESS BEFORE COMPLETION

Part I

Each Sale Group member (save in respect of paragraphs 24 to 28 (inclusive)) of this Part I, which shall not apply to UK OpCo) shall, from the date of this Agreement up to and including the date of Completion:

Operation of business; maintenance of assets and undertaking

1. operate its business in ordinary course consistent with past practice;

Material contracts

2. not enter into an onerous or unusual agreement, arrangement or obligation or enter into any Material Contract or any other contract that is not in the ordinary course of its business consistent with past practice;

3. not amend or terminate a Material Contract to which it is a party;

Acquisition or disposal of assets, etc

4. not acquire or dispose of, or agree to acquire or dispose of, any revenues, assets, business or undertakings except in the ordinary course of its business consistent with past practice or assume or incur, or agree to assume or incur, a liability, obligation or expense (actual or contingent) except in the ordinary course of its business consistent with past practice.

Share and/or loan capital; interests in bodies corporate

5. not create, allot, issue, acquire, repay or redeem any share or loan capital or agree, arrange or undertake to do any of those things or acquire or agree to acquire, an interest in a corporate body or merge or consolidate with a corporate body or any other person, enter into any demerger transaction or participate in any other type of corporate reconstruction;

Borrowings and indebtedness; guarantees and other security

6. not amend, or agree to amend, the terms of its borrowing or indebtedness in the nature of borrowing or create, incur, or agree to create or incur, borrowing or indebtedness in the nature of borrowing (except pursuant to (i) overdraft facilities of an amount equal to £125,000, or similar borrowings created or incurred in the ordinary course of its business consistent with past practice or (ii) facilities disclosed in the Disclosure Letter where the borrowing or indebtedness in the nature of borrowing does not exceed the amount available to be drawn by the relevant Sale Group member under those facilities);

7. not give, or agree to give, a guarantee, indemnity or other agreement to secure, or incur financial or other obligations with respect to, another person’s obligation outside the ordinary course of business consistent with past practice or in any event in

excess of £125,000;

8. not make, or agree to make, capital expenditure exceeding in total [*] (or its equivalent at the time) or incur, or agree to incur, a commitment or commitments involving capital expenditure exceeding in total [*] (or its equivalent at the time);

Insurance

9. continue, without amendment, each of the insurance policies which have been disclosed in the Data Room (the “Disclosed Insurance Policies”) and not knowingly do, or omit to do, anything which would:

(a) make any of the Disclosed Insurance Policies void or voidable; or

(b) entitle any of the insurers under any of the Disclosed Insurance Policies to refuse indemnity in relation to particular claims in whole or in part,

PROVIDED THAT nothing in this paragraph shall prevent the notification to insurers of claims in circumstances which might give rise to claims under any of the Disclosed Insurance Policies in accordance with the terms of the relevant Disclosed Insurance Policies;

Dividends

10. not declare, pay or make a dividend or distribution;

Share capital

11. not reduce its share capital or purchase its own shares;

Tax claims

12. not make a claim under section 152 or 153 of TCGA 1992 which affects an asset owned by a Sale Group member;

Accounting policies

13. not make any change to the accounting policies, procedures and principles by reference to which its statutory accounts are drawn up;

Property

14. in relation to the Property:

(a) not change its existing use;

(b) not terminate, or give a notice to terminate, a lease, tenancy or licence;

(c) not agree a new rent or fee payable under a lease, tenancy or

licence;

Employment; benefits

15. not amend the terms and conditions of employment or engagement (including any increase in emoluments) of a director, other officer or employee (except in the usual course of its business) or provide, or agree to provide, a gratuitous payment or benefit to a director, officer or employee (or any of their dependants) or, except in the ordinary course of its business consistent with past practice, employ, engage or (except for cause) terminate the employment or engagement of, a person;

16. not establish a Personal Pension Scheme or an Occupational Pension Scheme (in each case as such term is defined in section 1 of the Pensions Act 1993) or other arrangement providing benefit on retirement, cessation of employment, ill-health, injury or death (each a “Pension Scheme”) or amend or discontinue (wholly or partly) a Pension Scheme or communicate to an Employee a plan, proposal or an intention to establish a Pension Scheme or amend, discontinue (wholly or partly), or exercise a discretion, in relation to a Pension Scheme;

Litigation; compliance with law

17. not start litigation or arbitration proceedings where the amount sought is in excess of [*]

18. with respect to any litigation or arbitration proceedings or any action, demand or dispute in existence on the date of this Agreement, consult and provide the Purchaser reasonable opportunity to make representations or comments in respect thereof;

19. with respect to any litigation or arbitration proceedings or any action, demand or dispute, not waive any right;

20. not release, discharge or compound any liability or claim other than any such liability or claim in existence as at the date of this Agreement;

21. conduct its business in all material respects in accordance with all applicable legal and administrative requirements in any jurisdiction;

Transactions with the Calpine Group

22. other than as required under this Agreement, not enter into an agreement, arrangement or obligation (whether legally enforceable or not) in which a Calpine Group member, a director or former director of a Sale Group member, or a person connected with any of them is interested;

Intellectual property

23. protect, defend, enforce, maintain and renew each of the Company Business Intellectual Property and continue any pending application for the Company Business Intellectual Property;

Cooperation with the Purchaser

24. co-operate (at the Purchaser’s expense) with the Purchaser to:

(a) facilitate the efficient continuation of management and operations of the Sale Group after Completion;

(b) prepare for the introduction of the Purchaser’s normal working procedures in readiness for Completion; and

(c) prepare for the implementation (after Completion) of trading and hedging strategies and policies consistent with the Purchaser’s trading and hedging strategies and policies,

and shall provide such information as the Purchaser may reasonably request in connection with the provision of finance under the Facility Agreement to enable the lenders thereunder to satisfy their internal compliance requirements;

Emissions Trading

25. [*]

Hedging Arrangements

25A. [*]

25B. [*]

(i) [*] ;

(ii) [*] ;

(iii) [*] .


[*]		[*]
Period	[*] MWh	(MW)
[*]	[*]	[*]
[*]	[*]	[*]
[*]	[*]	[*]
[*]	[*]	[*]
[*]	[*]	[*]

Prepayment of Debt

26. Without prejudice to the Warranty contained in paragraph 5.6 of Schedule 2, not to voluntarily prepay, repay or capitalise in whole or in part any amount outstanding under the SCCL Intergroup Debt except:

(a) for payments of interest, fees and other amounts as the same fall due for payment under the terms of the LuxCo Loan Agreement;

(b) for refinancings or replacements of all or any portion of SCCL Intergroup Debt where the amount outstanding immediately after giving effect to such refinancing or replacement is substantially

equivalent (having regard to costs, expenses and fees, as well as to changes in interest rates, in respect of such refinancing or replacement on an arms’ length basis) to the amount outstanding immediately prior to such refinancing or replacement or as otherwise contemplated pursuant to the terms of this Agreement;

(c) for the purposes permitted, required or contemplated by the terms of the LuxCo Loan Agreement (including clause 18.5 thereof) or of any other loan or financing agreement to which SCCL or any of its Affiliates is a party (including payments by SCCL to enable Calpine European Funding (Jersey) Holdings Limited (“Calpine Jersey”) to meet its obligations under the Intercompany Loan Agreement dated 31 January 2005 among Calpine Jersey and Calpine European Funding (Jersey) Limited),

provided that (without prejudice to the Warranty contained in paragraph 5.6 of Schedule 2) nothing in this Schedule 5 shall prohibit the Seller, or any member of the Sale Group or any of their respective Affiliates from complying with any of their respective obligations under the LuxCo Loan Agreement or any other loan or financing agreement or arrangement to which any of them is a party.

Operational spare parts

27. not sell, transfer or otherwise dispose of or contract to sell, transfer or otherwise dispose of any operational spare parts in respect of 2 years of operation of the Facility that are owned by any member of the Sale Group and are used during a 2 year operational cycle;

Part II

The Seller shall not without the Purchaser’s prior written consent (such consent not to be unreasonably withheld, delayed or rendered subject to conditions):

1. alter the provisions of any Sale Group member’s Memorandum or Articles of Association (or like constitutional document) or adopt or pass further regulations or resolutions inconsistent therewith; or

2. pass any resolutions in general meeting or by way of written resolution, including, without limitation, any resolution for winding-up, or to capitalise any profits or any sum standing to the credit of share premium account or capital redemption reserve fund or any other reserve of any Sale Group member.

SCHEDULE 6
DATA ROOM LIST

SCHEDULE 7
[*]


1.		[*]
2.		[*]
3.		[*]
4.		[*]
5.		[*]
6.		[*]
7.		[*]
8.		[*]
9.		[*]
10.		[*]
11.		[*]
12.		[*]
13.		[*]
14.		[*]
15.		[*]
16.		[*]
17.		[*]

SCHEDULE 8
ENVIRONMENTAL COVENANT

1. Definitions

1.1 In this Schedule:


“ Credible Environmental Risk”		means a risk of such seriousness in relation to a matter that if a Competent Authority in relation to that matter or other relevant third party as appropriate was aware of all relevant information as to the matter, the likelihood of it occurring and seriousness of the likely consequences, such person would be more likely than not to commence Purchaser Environmental Proceedings for the purpose of removing or lessening that risk;

“Environment”		means living organisms including the ecological systems of which they form part and all or any part of the following media (alone or in combination): air (including without limitation the air within the buildings and the air within other natural or man made structures whether above or below ground); water (including without limitation sea, water under or within land or in drains or sewers and coastal and inland waters), and land (including without limitation land under water);

“Environmental Approval”		means any licence, authorisation, consent, permit or any other approval (and any variation or modification thereto) required under or pursuant to Environmental Laws;

“Environmental Claim”		means a claim made under paragraph 2.1(a) or (b) of this Schedule;

“Environmental Condition”		means:

		(a) the presence prior to Completion of any Hazardous Substance in, on or under the land at the Property where the presence of any such Hazardous Substance first arose or occurred after 31 March 1998; and

		(b) any release or migration of any Hazardous Substance described in (a) above into the Environment; or

		(c) any release or migration of any Hazardous Substance from the Gas Line into the


		Environment after 31 March 1998 but before Completion;

“Environmental Deed”		means the Environmental Deed of Indemnity dated 18 July 1997 between BP Chemicals and SCCL (as subsequently amended);

“Environmental Laws”		means any and all of the following to the extent that they have the force of law and are enforceable in England:

		(a) supranational, national, European Union, federal, state or local statutes, directives or other laws or legislation, secondary or subordinate legislation;

		(b) rules, regulations, orders, ordinances, notices, decrees, guidelines, guidance notes, codes of practice, circulars and the like made or issued under (a) above; and

		(c) common law and equity,

		which (a) have as a purpose or effect the protection of the Environment from pollution and/or contamination and/or which include or provide for remedies or compensation for pollution and/or contamination of the Environment; and/or (b) regulate, restrict or prohibit the generation, release, discharge, emission, keeping, treating, handling, storage, transfer, transport, spillage, deposit or disposal of Hazardous Substances, but shall exclude any such laws to the extent that they relate to town and country planning, consumer protection, human health and safety or worker protection;

[*]		[*]

“Gas Line”		means the gas pipeline servicing the Property;

“Hazardous Substance”		means any substance capable (whether alone or in combination with any other) of causing pollution or contamination of the Environment;

“Landlord’s Action”		means any proceedings, claim, action, notice or demand brought by the Landlord against the Tenant under clause 3.2 or clauses 4.1 or 4.2 of the Environmental Deed;


“Landlord’s Action Losses”		means any Losses incurred by any member of the Purchaser’s Group to the extent that they arise from or relate to any Landlord’s Action to the extent that it arises from an event which occurred or circumstances which first arose during the Relevant Period;

“Losses”		means all losses, liabilities, damages, reasonable costs or expenses (including reasonable legal and other professional costs or expenses and the costs of Remedial Works) or charges but excluding any indirect or consequential losses, and any lost income or profits or business interruption costs save where they are awarded to a third party in Successful Environmental Proceedings;

“Purchaser Environmental Proceedings”		means any civil, criminal, regulatory or administrative proceedings, claim, action, notice or demand which is brought, taken or threatened against any member of the Purchaser’s Group under Environmental Laws;

“Remedial Works”		means any or all of the following:

		(a) the carrying out of such works as are reasonably necessary to prevent, minimise, remedy or mitigate the effects of any harm to the Environment caused by Hazardous Substances;

		(b) the making of subsequent inspections from time to time for the purpose of keeping under review to the extent reasonably required the sufficiency of the works under (a) above; and

		(c) the carrying out of any investigative work as is reasonably required in relation to (a) and (b);

“Successful Environmental Proceedings”		means any Purchaser Environmental Proceedings or Landlord’s Action to the extent that a final, unappealable and legally enforceable finding of liability is obtained by any third party against a relevant member of the Purchaser’s Group or the liability which is the subject of the Purchaser Environmental Proceedings or Landlord’s Action is admitted or otherwise settled or agreed in accordance with paragraph 4.1 of this Schedule.

2. Seller’s Environmental Covenant

2.1 Subject to the provisions of this Schedule the Seller covenants as follows:

(a) the Seller covenants with the Purchaser for the Purchaser itself and as trustee for any relevant member of the Purchaser’s Group to pay to the Purchaser an amount equal to the amount of all Environmental Losses; and

(b) the Seller covenants with the Purchaser for the Purchaser itself and as trustee for any relevant member of the Purchaser’s Group to pay to the Purchaser an amount equal to the amount of all Landlord’s Action Losses.

3. Other Limitations on Seller’s Liability

3.1 In addition to the Seller’s protections contained in Schedule 3, the Seller shall not be liable under paragraph 2 of this Schedule to the extent that any Environmental Claim:

(a) arises from or is increased by the worsening or aggravation by any person (other than the Seller or by any person authorised on its behalf) after Completion of any Environmental Condition or of any other circumstances, states of affairs or condition comprising the subject matter of any Environmental Claim or any part thereof;

(b) arises from or is increased by any change after Completion of the use of the Property of the Facility (including without limitation any closure or mothballing of the Facility or the Property) (or in each case any part thereof);

(c) is increased by any redevelopment of the Property or Facility (or in each case any part thereof) or the carrying out of any building, engineering or mining works or operations at the Facility or the Property (or in each case any part thereof) or the demolition of or a substantial alteration to a building or of a structure at the Property after Completion but for the avoidance of doubt except for such Losses which would have arisen if the relevant Environmental Condition had been discovered in the absence of such redevelopment, building, engineering, demolition etc.;

(d) arises from or is increased by any breach of any applicable provision of this Schedule by any member of the Purchaser’s Group;

(e) arises from or is increased by the carrying out of any intrusive investigations after Completion other than intrusive investigations carried out to comply with any Environmental Law or any Environmental Approval or are such intrusive investigations that would be carried out by a reasonable and prudent operator;

(f) arises from or is increased by any change in any Environmental Law after Completion in circumstances where such Losses or increase in Losses would not have arisen under Environmental Laws in force at the date hereof. For the avoidance of doubt the application of the Pollution Prevention and Control Regulations 2000 in the form they are in at the date hereof (but not otherwise) shall not constitute a change in law for the purpose of this paragraph;

(g) arises from or is increased by any variation or modification to any Environmental Approval (save where such variation or modification directly concerns the remediation of any relevant Environmental Condition and could have been imposed pursuant to Environmental Laws in force at the date hereof) or the application for or the issue of any new Environmental Approval after Completion (except for the application for and first issue of a permit under the Pollution Prevention and Control Regulations 2000); and/or

(h) arises from or is increased by any amendment or alteration to the Environmental Deed where such Losses or increase in Losses would not have arisen under the Environmental Deed in its form at the date hereof.

3.2 In addition to the Seller’s protections contained in Schedule 3 and subject to paragraph 4.6 of this Schedule, the Seller shall not be liable under paragraph 2 of this Schedule in respect of any Environmental Claim for Remedial Works which exceed (in nature, scope, specification or extent) what is reasonably required by applicable Environmental Laws (and for the avoidance of doubt and without limitation, subject to the limitation on the Seller’s liability in paragraph 3.1(f) of this Schedule).

4. Environmental Proceedings and Remedial Works

4.1 The Purchaser shall ensure that in relation to any matter, written claim or demand or Purchaser Environmental Proceedings or Landlord’s Action which gives rise or may reasonably give rise to an Environmental Claim by it that neither it, nor any other member of the Purchaser’s Group, nor any person on their behalf shall make any settlement, compromise or admission of liability without the prior written consent of the Seller such consent not to be unreasonably withheld or delayed.

4.2 The Seller shall have conduct of any Purchaser Environmental Proceedings and Landlord’s Action (Proceedings).

4.3 The Purchaser shall have conduct of any Remedial Works whether relating to Proceedings or a Credible Environmental Risk.

4.4 The Seller in its conduct of Proceedings and the Purchaser in its conduct of Remedial Works as the case may be shall ensure that (subject to implementing appropriate arrangements to maintain commercial confidentiality and privilege):

(a) reasonably frequent and detailed reports shall be provided to the other regarding the progress of the matter;

(b) copies of all correspondence and documents passing between the parties to any Proceedings shall be provided to the other;

(c) they consult with the other in relation to the matter and take into account the other’s reasonable concerns provided that the other shall respond promptly to such consultation;

(d) allow the other person to attend any relevant court, regulatory or other hearing, site visit or meeting; and

(e) allow the other to participate in discussions with any relevant counsel, consultants or contractors concerning the scope, nature, specification and extent of any Remedial Works as the case may be to be carried out and to attend any meeting with such counsel, consultants or contractors.

4.5 In conducting any Remedial Works pursuant to this Schedule the Purchaser shall:

(a) obtain the Seller’s prior written consent to the scope, nature, specification and extent of the Remedial Works to be carried out (such consent not to be unreasonably withheld or delayed);

(b) give the Seller reasonable access to the Property and the Facility so that the Seller can monitor the progress of such Remedial Works;

(c) not prejudice the conduct of any Environmental Proceedings and comply with the requirements of any relevant judgment, decision or award of any court, arbitrator or other tribunal or settlement agreement; and

(d) use cost-effective methods for such Remedial Works.

4.6 For the avoidance of doubt, in conducting any Remedial Works the Purchaser shall be entitled to implement or undertake any Remedial Works which exceed (in nature, scope, specification or extent) what is reasonably required by applicable Environmental Laws provided that it shall be responsible for paying for any increased costs and expenses arising from or relating to so doing.

5. Mitigation

5.1 The Purchaser shall and shall procure that each member of the Purchaser Group shall mitigate its Losses as if a claim under paragraph 2 of this Schedule was a claim for breach of contract rather than indemnification.

5.2 If the Purchaser (whether on behalf of itself or another member of the Purchaser’s Group) is seeking to mitigate its Losses it shall consult with and obtain the Seller’s written consent (such consent not to be unreasonably withheld or delayed) to the nature, scope and extent of such mitigation. Where it is not clear that the mitigation relates to a valid claim, the Seller is entitled to consent in principle to such mitigation pending resolution of the validity of the claim.

6. Matters Disclosed or Known/Relationship with Warranties

6.1 The covenants under this Schedule shall apply whether or not any Environmental Claim under it relates to any matter disclosed in the Disclosure Letter or the Data Room or was otherwise disclosed or known to the Purchaser or other member of the Purchaser’s Group.

6.2 The Purchaser acknowledges and confirms that no Claim can be brought under the Warranties to the extent that its subject matter falls within the scope of any indemnities contained in this Schedule or the limitation on the total aggregate liability of the Seller contained in paragraph 2.4(a) of Schedule 3.

7. General Limitations of Liability

For the avoidance of doubt, the provisions of Schedule 3 shall apply to Environmental Claims under this Schedule as provided for in Schedule 3.

8. Exclusion of Salt Carry Over Issue

The Seller shall not be liable under this Schedule in respect of any Environmental Claim which relates to or concerns dispersion into the Environment of salt from the Facility’s cooling towers.

APPENDIX I


Signed by	)
for and on behalf of	)
CALPINE UK HOLDINGS LIMITED	)


		Director

Executed and delivered as a Deed by	)
	)
for and on behalf of	)
CALPINE CORPORATION	)


		Attorney-in-fact

In the presence of:


Name


Address


Occupation

Executed and delivered as a Deed by	)
	)
for and on behalf of	)
QUINTANA CANADA HOLDINGS, LLC	)


		Attorney-in-fact

In the presence of:


Name


Address


Occupation


Signed by	)
as attorney for	)
NORMANTRAIL (UK CO 3) LIMITED	)


		Attorney

In the presence of:


Name


Address


Occupation

Executed and delivered as a Deed by	)
	)
as attorney for	)
INTERNATIONAL POWER PLC	)


		Attorney

In the presence of:


Name


Address


Occupation


Executed and delivered as a Deed by	)
	)
as attorney for	)
MITSUI & CO., LTD	)


		Attorney

In the presence of:


Name


Address


Occupation

EX-99.1 6 f10195exv99w1.htm EXHIBIT 99.1 exv99w1

Exhibit 99.1

Press Release

Calpine Announces Pricing on $650 Million of Contingent Convertible Notes Due 2015

Proceeds to be Used to Redeem HIGH TIDES III

SAN JOSE, Calif., June 20, 2005 /PRNewswire-FirstCall via COMTEX/ — Calpine Corporation (NYSE: CPN) today announced that it has priced its registered public offering of $650 million of contingent convertible notes due 2015. The notes will pay interest at a rate of 7 3/4% and will be convertible into cash and into shares of Calpine common stock at a price of $4.00 per share, which represents a 29% premium over the New York Stock Exchange closing price of $3.10 per Calpine common share on June 17, 2005. Upon conversion of the notes, Calpine will deliver the applicable current principal value in cash and any additional value in Calpine common shares. The offering is expected to close on Thursday, June 23, 2005.

Calpine expects to use the net proceeds from the convertible notes offering to redeem in full its HIGH TIDES III preferred securities. The company will use the remaining net proceeds to repurchase a portion of the outstanding principal amount of its 8 1/2% senior unsecured notes due 2011.

Goldman, Sachs & Co. is the sole manager of the offering. A copy of the final prospectus supplement relating to the offering may be obtained from Goldman, Sachs & Co., Attention: Prospectus Department at 85 Broad Street, New York, NY 10004.

A registration statement relating to these securities has been filed with the Securities and Exchange Commission and has been declared effective. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state.

A major power company, Calpine Corporation supplies customers and communities with electricity from clean, efficient, natural gas-fired and geothermal power plants. Calpine owns, leases and operates integrated systems of plants in 21 U.S. states, three Canadian provinces and in the United Kingdom. Calpine was founded in 1984. It is included in the S&P 500 Index and is publicly traded on the New York Stock Exchange under the symbol CPN. For more information, visit www.calpine.com.

This news release discusses certain matters that may be considered “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding the intent, belief or current expectations of Calpine Corporation (“the Company”) and its management. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties that could materially affect actual results such as, but not limited to, (i) the timing and extent of deregulation of energy markets and the rules and regulations adopted on a transitional basis with respect thereto; (ii) the timing and extent of changes in commodity prices for energy, particularly natural gas and electricity; (iii) unscheduled outages of operating plants; (iv) a competitor’s development of lower cost generating gas-fired power plants; (v) risks associated with marketing and selling power from power plants in the newly-competitive energy market; (vi) other risks identified from time-to-time in the Company’s reports and registration statements filed with the SEC, including the risk factors identified in its Annual Report on Form 10-K for the year ended December 31, 2004 and in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, which can also be found on the Company’s website at www.calpine.com. All information set forth in this news release is as of today’s date, and the Company undertakes no duty to update this information.

SOURCE Calpine Corporation

media relations, Katherine Potter, ext. 1168, or investor relations, Rick Barraza, ext. 1125, both of Calpine, +1-408-995-5115

EX-99.2 7 f10195exv99w2.htm EXHIBIT 99.2 exv99w2

Exhibit 99.2

Press Release

Calpine Closes $155 Million Preferred Shares Offering and $100 Million Senior Term Loan Refinancing for Its Metcalf Energy Center

SAN JOSE, Calif., June 21, 2005 /PRNewswire-FirstCall via COMTEX/ — Calpine Corporation’s (NYSE: CPN) indirect subsidiary Metcalf Energy Center, LLC (Metcalf LLC) has received funding for its $155 million offering of 5.5-Year Redeemable Preferred Shares and five-year, $100 million Senior Term Loan.

Metcalf LLC owns the 600-megawatt Metcalf Energy Center in San Jose, Calif. Metcalf LLC is a stand-alone, indirect subsidiary of Calpine. Calpine and other Calpine affiliates will not be responsible for the debts or other obligations of Metcalf LLC or other Metcalf entities.

The net proceeds of the offering of the Redeemable Preferred Shares will ultimately be used as permitted by Calpine’s existing bond indentures. Net proceeds from the offering of the Senior Term Loan will be used to refinance all outstanding indebtedness under the existing Metcalf LLC construction credit facility, to pay fees and expenses related to the transaction, and as permitted by Calpine’s existing indentures.

The Redeemable Preferred Shares are not registered under the Securities Act of 1933, and may not be offered in the United States absent registration or an applicable exemption from registration requirements. The Redeemable Preferred Shares were offered in a private placement in the United States under Regulation D under the Securities Act of 1933 and outside of the United States pursuant to Regulation S under the Securities Act of 1933. This press release shall not constitute an offer to sell or the solicitation of an offer to buy. Securities laws applicable to private placements limit the extent of information that can be provided at this time.

SOURCE Calpine Corporation

Katherine Potter of Media Relations, +1-408-995-5115, ext. 1168, or Karen Bunton of Investor Relations, +1-408-995-5115, ext. 1121, both of Calpine Corporation

EX-99.3 8 f10195exv99w3.htm EXHIBIT 99.3 exv99w3

Exhibit 99.3

Press Release

Calpine Provides Update on HIGH TIDES III Securities

SAN JOSE, Calif., June 17 /PRNewswire-FirstCall/ Calpine Corporation (NYSE: CPN) today announced that on Friday, June 17, it submitted the required notification leading up to the potential remarketing of the company’s 5% Convertible Preferred Securities (HIGH TIDES III).

Calpine also notified holders of its right to redeem HIGH TIDES III, in whole or in part, at any time on or before July 21, 2005. To date, Calpine has expressed its intent to redeem HIGH TIDES III prior to the reset of the terms of HIGH TIDES III following a remarketing. If not earlier redeemed, the remarketing of HIGH TIDES III would begin on July 23, 2005.

This news release discusses certain matters that may be considered “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding the intent, belief or current expectations of Calpine Corporation (“the Company”) and its management. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties that could materially affect actual results such as, but not limited to, (i) the Company’s ability to access the capital markets or obtain bank financing on attractive terms; (ii) the direct or indirect effects on the Company’s business of a lowering of its credit rating (or actions it may take in response to changing credit rating criteria), including, increased collateral requirements, refusal by the Company’s current or potential counterparties to enter into transactions with it and its inability to obtain credit or capital in desired amounts or on favorable terms; and (iii) other risks identified from time-to-time in the Company’s reports and registration statements filed with the SEC, including the risk factors identified in its Annual Report on Form 10-K for the year ended December 31, 2004 and in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, which can be found on the Company’s website at www.calpine.com. All information set forth in this news release is as of today’s date, and the Company undertakes no duty to update this information.

SOURCE Calpine Corporation
06/17/2005
CONTACT: media, Katherine Potter, Ext. 1168, or investors, Rick Barraza, Ext. 1125, both of Calpine Corporation, +1-408-995-5115
Web site: http://www.calpine.com

-----END PRIVACY-ENHANCED MESSAGE-----

(a)		Financial Statements of Businesses Acquired.

		Not Applicable

(b)		Pro Forma Financial Information.

		Not Applicable

	(a)		Incorporated by reference to the Company’s Registration Statement on Form S-3 (Registration No. 333-76880) filed with the SEC on January 17, 2002.

	(b)		Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000, filed with the SEC on March 15, 2001.

	(c)		Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on September 30, 2004.


	CALPINE CORPORATION
	By:	/s/ Charles B. Clark, Jr.
		Charles B. Clark, Jr.
		Senior Vice President and Controller Chief Accounting Officer


Very truly yours, CALPINE CORPORATION
By:	/s/ Robert D. Kelly
	Name:	Robert D. Kelly
	Title:	Executive Vice President

•		Androscoggin Energy, Inc.

•		Calpine Administrative Services Company, Inc.

•		Calpine International Holdings, Inc.

•		Calpine Finance Company

•		Calpine Fuels Corporation

•		Calpine Energy Services Holdings, Inc.

•		Calpine Northbrook Corporation of Maine, Inc.

•		Calpine Operating Management Company, Inc.

•		Calpine Power Company

•		Quintana Canada Holdings LLC

	1.		the Company’s 10 1/2% Senior Notes due 2006,

	2.		the Company’s 8 3/4% Senior Notes due 2007,

	3.		the Company’s 7 7/8% Senior Notes due 2008,

	4.		the Company’s 7 5/8% Senior Notes due 2006, and

	5.		the Company’s 7 3/4% Senior Notes due 2009; and

1.		INTERPRETATION

1.1		In this Agreement and the Schedules to it:

	1.2.1		references to clauses, sub-clauses, paragraphs, sub-paragraphs, Schedules, and the Recitals are to clauses, sub-clauses, paragraphs, sub-paragraphs and the Recitals of, and the Schedules to this Agreement;

	1.2.2		a reference to any statute or statutory provision shall be construed as a reference to the same as it may have been, or may from time to time be, amended, modified or re-enacted except to the extent that any amendment or modification made or coming into effect of any statute or statutory provision after the date of this Agreement would increase or alter the liability of the Seller under this Agreement;

	1.2.3		headings to clauses and Schedules are for convenience only and do not affect the interpretation of this Agreement;

	1.2.4		the Schedules and any attachments form part of this Agreement and shall have the same force and effect as if expressly set out in the body of this Agreement, and any reference to this Agreement shall include the Schedules;

	1.2.5		references to this Agreement, or to any other document, or to any specified provision of this Agreement, or any other document, are to this Agreement, that document or provision as in force for the time being, as amended, modified, supplemented, varied, assigned or novated, from time to time;

	1.2.6		references to a “company” shall be construed so as to include any company, corporation or other body corporate, wherever and however incorporated or established;

	1.2.7		references to a “person” shall be construed so as to include any individual, firm, company, government, state or agency of a state or any joint venture, association or partnership (whether or not having separate legal personality), its successors and assigns;

	1.2.8		words importing the singular include the plural and vice versa, words importing a gender include every gender;

	1.2.9		references to a “party” or “parties” means a party or the parties to this Agreement;

	1.2.10		references to “indemnify” and “indemnifying” any person against any circumstance include indemnifying and keeping that person harmless from all actions, claims and proceedings from time to time made against that person and all loss or damage and all payments, costs or expenses made or incurred by that person as a consequence of or which would not have arisen but for that circumstance;

	1.2.11		references to writing shall include any modes of reproducing words in a legible and non-transitory form;

	1.2.12		references to “pounds” or to “£” shall be construed as references to the lawful currency for the time being of England and Wales;

	1.2.13		references to times of the day are to London time;

	1.2.14		general words shall not be given a restrictive interpretation by reason of their being preceded or followed by words indicating a particular class of acts, matters or things;

	1.2.15		where any statement is qualified by the statement “so far as the Seller is aware” or “to the Seller’s knowledge” or any similar expression or otherwise refers to the knowledge or awareness of the Seller, that statement shall be deemed to be made only on the basis of the actual knowledge of any of Zamir Rauf, Tayeb Tahir, Richard Hinks, Neil Cranswick and Vanessa Bustall having made reasonable enquiry; and

	1.2.16		where any statement is qualified by the expression “the Purchaser’s actual knowledge” or “so far as the Purchaser is aware” or any similar expression or otherwise that refers to the knowledge or awareness of the Purchaser, that statement shall be deemed to be made only on the basis of the actual knowledge of any of Sean Neely, Christopher Trower, Paul Evans, Mark Craddock, Ken Oakley, Takashi Umezu, Owen Bannister and Grant Gillon, each of whom shall be deemed to be aware of the content of any written report in relation to the Sale Group provided by any Purchaser Party’s professional advisers and consultants (including legal, financial, environmental and accounting advisers and consultants) specifically in connection with the Purchaser’s due diligence investigation of and into SCCL, UK OpCo, the Business, and the transactions the subject of the Share Purchase Documents but for this

	1.3.1		the amount by which any liability to Taxation of the party to be indemnified (or any member of the Group of which that party is a member) is actually reduced or extinguished as a result of the matter giving rise to the indemnity claim; and

	1.3.2		the amount by which any liability to Taxation of the party to be indemnified (or any member of the Group of which that party is a member) is actually increased as a result of the payment by the indemnifying party in respect of the matter giving rise to the indemnity claim.

2.		SALE AND PURCHASE

2.1		At Completion the Seller shall sell and the Purchaser shall purchase the Shares and each right attaching to the Shares at or after the date of this Agreement, including without limitation the right to receive all dividends, distributions or any return of capital paid or made on or after the date of this Agreement, with full title guarantee and free from Encumbrances.

2.2		Title to, beneficial ownership of, and any risk attaching to the Shares shall pass on Completion. Following Completion, the Purchaser shall be entitled to exercise all rights attached or accruing to the Shares.

2.3		The Purchase Price shall be the sum of the purchase price attributable to the SCCL shares to be acquired pursuant to this Agreement as determined in accordance with clause 2.3.1 and the purchase price attributable to the UK OpCo shares to be acquired pursuant to this Agreement as determined in accordance with clause 2.3.2.

	2.3.1		That part of the Purchase Price attributable to the SCCL shares to be acquired pursuant to this Agreement is equal to the Unadjusted SCCL Purchase Price less an amount equal to the SCCL Intergroup Debt:

	(a)		plus the amount by which SCCL’s Net Working Capital exceeds zero; or

	(b)		less the amount by which SCCL’s Net Working Capital is less than zero.

	2.3.2		That part of the Purchase Price attributable to the UK OpCo shares to be acquired pursuant to this Agreement is equal to the Unadjusted UK OpCo Purchase Price less any indebtedness owed by UK OpCo to the Calpine Group or any Calpine Group member, excluding in each case SCCL, at or immediately prior to Completion, including any interest which has accrued thereon and:

	(a)		plus the amount by which UK OpCo’s Net Working Capital exceeds zero; or

		The provisions of clause 7 shall apply in respect of the preparation of the Completion Balance Sheets and the agreement or determination of the Purchase Price.

2.4		The Seller waives all rights of pre-emption and other restrictions on transfer over the Shares conferred on it.

3.		CONDITIONS PRECEDENT

3.1		Completion is conditional upon the satisfaction (or waiver in accordance with clause 3.8) of the following conditions precedent on or before the Long Stop Date:

	3.1.1		the BP Approval having been received in a form satisfactory to the Seller and the Purchaser;

	3.1.2		BP International confirming in a form satisfactory to the Seller and the Purchaser that BP International will not exercise its right of first refusal under and in accordance with the terms of the Participation Agreement, or expiry of the term during which BP International may exercise its right of first refusal without BP International having exercised any such right in accordance with the terms of the Participation Agreement, whichever is the earlier to occur or, if BP International exercises its right to make a lump sum cash offer under clause 4.2.3 of the Participation Agreement, the Seller having determined that such offer is not of equivalent value to that comprising the sale of the Shares pursuant to this Agreement and the transactions contemplated hereby;

	3.1.3		the European Commission issuing a decision under Article 6(1)(b) of Council Regulation (EC) 139/2004 (the “Regulation”), or being deemed to have done so under Article 10(6) of the Regulation, declaring the acquisition of the Shares by the Purchaser pursuant to this Agreement (the “Transaction”) compatible with the Common Market without attaching to its decision any conditions or obligations and in the event that a request under Article 9(2) of the Regulation has been made by a Member State, the European Commission indicating that it has decided not to refer the Transaction (or any part thereof) or any matter arising therefrom to a competent authority of a Member State in accordance with Article 9(1) of the Regulation (the “Anti-Trust Condition”);

	3.1.4		the banks and financial institutions which are to be party to the Facility Agreement and the relevant members of the BP Group having agreed upon a form of direct agreement which is to become effective upon Completion on terms reasonably satisfactory to the Purchaser;

	3.1.5		the Reporting Accountants confirming in writing in a form satisfactory to the Seller and the Purchaser that they are not aware of any fact matter or circumstance as at the date of such confirmation that would prevent them from issuing the Accountants Report at Completion, such confirmation to be accompanied by a draft of the Accountants Report;

	3.1.6		the Seller being satisfied in its sole and absolute discretion that the BP Director is likely to execute the statutory declaration and to vote in favour

			of the resolution(s) each referred to in paragraph 1 of Part II of Schedule 4; and


	3.1.7		the Seller having provided the Purchaser with the Audited Accounts.

3.2		The Seller shall promptly give notice to the Purchaser of the satisfaction of the Condition Precedent set out in clause 3.1.6.

3.3		The Seller hereby undertakes to use reasonable efforts to ensure satisfaction of the Condition Precedents in clauses 3.1.1, 3.1.2, 3.1.5 and 3.1.7 on or before the Long Stop Date. The Seller undertakes to keep the Purchaser informed as to progress towards satisfaction of the Conditions Precedent in clauses 3.1.1 and 3.1.2 (the “BP Conditions”) and undertakes to:

	3.3.1		disclose in writing to the Purchaser immediately upon becoming aware of anything which may prevent one or both of the BP Conditions from being satisfied;

	3.3.2		notify the Purchaser and (subject to law and any confidentiality obligations binding upon the Seller) provide copies of any communications from or on behalf of any BP Group member in relation to the satisfaction of the BP Conditions or either of them;

	3.3.3		provide the Purchaser (or advisers nominated by the Purchaser) with draft copies of all submissions to and communications with any BP Group member in relation to the satisfaction of the BP Conditions or either of them. Provided that it is reasonably practicable for it to do so, the Seller shall provide such copies at such time as will allow the Purchaser a reasonable opportunity to provide comments on such submissions or communications before they are submitted or sent and provide the Purchaser (or such nominated advisers) with copies of all such submissions or communications in the form submitted or sent;

	3.3.4		where requested by the Purchaser and where agreed to by the relevant BP Group member, allow persons nominated by the Purchaser to attend all meetings in relation to satisfaction of the BP Conditions or either of them with any BP Group member and, where applicable, to make oral submissions at such meetings; and

	3.3.5		notify the Purchaser within 2 Business Days of a BP Condition being satisfied.

	3.3A.1		between SCCL and any BP Group member entered into in the ordinary course of the Business on arm’s length terms;

	3.3A.2		with any BP Group member to which neither Sale Group member is a party and which imposes no obligation or liability (contingent or otherwise) upon either of them; or

	3.3A.3		required under or contemplated by the Participation Agreement,

		the Seller shall not enter into (and shall procure that neither Sale Group member enters into) any arrangement, understanding, commitment, agreement or contract with any BP Group member and shall not (and shall procure that neither Sale Group member shall) agree to any amendment to any of the BP Agreements, in each case without the prior written consent of the Purchaser.

3.4		The Purchaser hereby undertakes to use reasonable efforts to ensure the satisfaction of the Anti-Trust Condition and the Conditions Precedent set out in clauses 3.1.4 and 3.1.5 (the “Purchaser Conditions”) on or before the Long Stop Date. The Purchaser Conditions are given in favour of the Purchaser and, at any time before the Long Stop Date the Purchaser may, by notice in writing to the Seller, waive a Purchaser Condition on any terms the Purchaser may decide. The Purchaser undertakes to keep the Seller informed as to progress towards satisfaction of the Anti-Trust Condition and the Purchaser Conditions and undertakes to:

	3.4.1		disclose in writing to the Seller immediately upon becoming aware of anything which may prevent the Anti-Trust Condition or the Purchaser Condition from being satisfied;

	3.4.2		notify the Seller and (subject to law and any confidentiality obligations binding upon the Purchaser) provide copies of any communications from any governmental or regulatory body in relation to satisfaction of the Anti-Trust Condition or from BP in relation to the satisfaction of the Purchaser Conditions where such communications have not been independently or simultaneously supplied to the Seller;

	3.4.3		provide the Seller (or advisers nominated by the Seller) with draft copies of all submissions and communications to governmental or regulatory bodies in relation to satisfaction of the Anti-Trust Condition or any submissions or communications to any BP Group member in relation to the satisfaction of the Purchaser Condition or either of them. The Purchaser shall provide such copies at such time as will allow the Seller a reasonable opportunity to provide comments on such submissions and communications before they are submitted or sent and provide the Seller (or such nominated advisers) with copies of all such submissions and communications in the form submitted or sent; provided, however that if the Seller does not provide its comments within the time frame required for the making of such communications or submissions, the Purchaser may nonetheless make such communications or submissions;

	3.4.4		where requested by the Seller and where permitted by the governmental or regulatory body, allow persons nominated by the Seller to attend all meetings in relation to satisfaction of the Anti-Trust Condition (if any) with such governmental or regulatory bodies and, where appropriate, to make oral submissions at such meetings;

	3.4.5		where requested by the Seller and where agreed to by the relevant BP Group member, allow persons nominated by the Seller to attend all meetings in relation to the satisfaction of the Purchaser Condition with any BP Group member and, where applicable, to make oral submissions at such meetings; and

	3.4.6		notify the Seller within 2 Business Days of such condition being satisfied.

3.5		Each of the Seller and the Purchaser agrees that it shall, upon a request from the other, promptly co-operate with and provide all necessary information reasonably required by the other party or by BP International or by any Competent Authority in respect of all requests and enquiries in connection with this Agreement and the arrangements relating thereto (including, without limitation, in relation to the satisfaction of any or all of the Conditions Precedent) from BP International and/or any such Competent Authority.

3.6		The Purchaser may terminate this Agreement by notice in writing to the Seller if, at any time after the date of this Agreement and prior to Completion:

	3.6.1		any event occurs which has a Material Adverse Effect; or

	3.6.2		the Purchaser becomes aware of any fact or circumstance which would entitle it to make a Claim against a Warrantor for a breach of a Warranty given pursuant to clause 8.1 or which would, were Completion to occur, entitle it to make a Claim against a Warrantor pursuant to clause 8.2, where such breach gives or would give rise to a Material Adverse Effect, determined for this purpose only on the basis of the difference between (1) the business, assets, financial or trading condition or results of operations of the Sale Group taken as a whole as they would have been had the relevant Warranty been true and correct and (2) the actual position of the Sale Group in these same respects (for the avoidance of doubt having regard to the fact or circumstance which entitles or which would entitle the Purchaser to make a Claim against a Warrantor for a breach of clause 8.1 or clause 8.2 (as the case may be)).

3.7		The Seller shall promptly notify the Purchaser (providing reasonable details of such fact or circumstance (but without any obligation to provide quantum)) if it becomes aware of a fact or circumstance which would or might reasonably entitle the Purchaser to terminate this Agreement under clause 3.6.

3.8		Each of the Conditions Precedent in clauses 3.1.4 and 3.1.7 may be waived only by the Purchaser giving notice to the Seller in writing. The Condition Precedent set out in clause 3.1.6 may be waived only by the Seller giving notice to the Purchaser in writing. Each of the Conditions Precedent set out in clauses 3.1.1 through 3.1.3 (inclusive) and 3.1.5 may be waived only by the Purchaser and the Seller each giving notice to the other in writing.

4.		CONSIDERATION

4.1		On or before the fifth (5th) Business Day prior to the date scheduled for Completion in accordance with clause 6.1, the Seller shall prepare and deliver to the Purchaser a statement (the “NWC Completion Statement”) setting out the projected Net Working Capital for each of SCCL and UK OpCo as at Completion (the sum of such amounts the “Aggregate Projected NWC”) and specifying the Seller’s estimate of the value of the SCCL Intergroup Debt at Completion expressed in pounds (the “Estimated SCCL Intergroup Debt”) and the relevant member(s) of the Calpine Group to which such amounts are due. For the purposes of determining the Estimated SCCL Intergroup Debt, if any amount comprising an SCCL Intergroup Debt is denominated in a currency other than pounds, that amount shall be converted to pounds at the closing mid-point pound spot rate applicable to that non-sterling currency on the date on which the NWC Completion Statement is prepared and delivered in accordance with this clause 4.1 as shown in the Financial Times (London edition), or if the Financial Times (London edition) is not published on that date, the closing mid-point pound spot rate applicable to that non-sterling currency quoted by Barclays Bank plc. The NWC Completion Statement shall be determined and prepared by the Seller in good faith.

	4.2.1		if the Aggregate Projected NWC is a positive amount in excess of zero, plus the lesser of (i) such excess and (ii) [*] ; or

	4.2.2		if the Aggregate Projected NWC is less than zero, less the amount (expressed as a positive number) equal to the deficit.

		The amount payable at Completion as calculated under this clause 4 (the “Completion Amount”) is payable by the Purchaser to the Seller on Completion in accordance with clauses 6.3 and 6.4.

4.3		If any payment is made by the Seller to the Purchaser in respect of any Claim the Purchase Price shall be deemed to have been reduced by the amount of such payment but in no event shall the Purchase Price be deemed to be reduced below £10.00 by virtue of the operation of this clause 4.3.

4.4		Wherever in this Agreement provision is made for the payment by one party to another (or by or to SCCL), such payment shall be effected by crediting for same day value in immediately available funds to the account specified in the payment account details of the party entitled to the payment (or to SCCL, as the case may be) by way of wire transfer to such account or accounts as shall have been notified by the party entitled to the payment (or, in the case of a payment required to be made to SCCL after Completion, by the Purchaser) at least three (3) Business Days before the due date for payment.

5.		CONDUCT OF BUSINESS BEFORE COMPLETION

5.1		Subject to clause 5.2, the Seller shall procure that between the date of this Agreement and Completion:

	5.1.1		SCCL and UK OpCo shall, unless it has obtained the prior consent of the Purchaser to do otherwise (such consent not to be unreasonably withheld or delayed), comply with Part I of Schedule 5;

	5.1.2		to the extent applicable thereto, (i) no member of the Sale Group knowingly or intentionally acts or omits to act where such act or omission would result in its being in material breach of any BP Agreement and (ii) each member of the Sale Group uses its reasonable endeavours to comply with its respective obligations under each of the BP Agreements to which it is a party.

	5.2.1		the entering into of any contract or commitment in the ordinary course of business and consistent with the relevant Sale Group member’s usual practices, which contract or commitment is terminable in accordance with its terms by written notice of six months or less and which is not material in relation to the Sale Group;

	5.2.2		any matter reasonably undertaken by any member of the Sale Group in an emergency or disaster situation with the intention of minimising any

			adverse effect thereof (and of which the Purchaser will be promptly notified);

	5.2.3		the completion or performance of any obligations undertaken pursuant to any contract or arrangement entered into by any member of the Sale Group prior to the date of this Agreement provided such contract or arrangement has been disclosed to the Purchaser in the Data Room, or if the Seller is aware that such contract or arrangement is not so disclosed, such contract or arrangement is brought to the attention of the Purchaser and, where practicable, the Seller consults with the Purchaser in respect of the obligations to be performed pursuant to such contract or arrangement;

	5.2.4		the payment of any principal, interest and other amounts due and payable by SCCL in accordance with the terms of the Luxco Loan Agreement, this Agreement or as required or contemplated by any contractual loan or financing arrangement to which SCCL or any of SCCL’s Affiliates is a party, in each case without prejudice to the Warranty set out in paragraph 5.6 of Schedule 2;

	5.2.5		any matter required to be undertaken to comply with this Agreement; or

	5.2.6		any matter undertaken at the written request of the Purchaser.

5.3		The Seller shall use its reasonable efforts to provide, and shall procure that the Sale Group members provide, the Purchaser and the Purchaser’s Auditors with such information concerning each of the Sale Group members as the Purchaser and the Purchaser’s Auditors shall reasonably require and allow the Purchaser and the Purchaser’s Auditors, and shall procure that each Sale Group members allows the Purchaser and the Purchaser’s Auditors, reasonable access during business hours (and upon reasonable notice) to each member of the Sale Group and its books and records, its employees and advisers, except for work product of, or privileged communications with, legal counsel, in each case insofar as is reasonably required for the analysis and verification of the net asset position of each of the Sale Group members; provided that access pursuant to this clause 5.3 and the exercise by the Purchaser of its rights under this clause 5.3 shall not interfere with the Seller’s or any member of the Sale Group’s Business operations or breach the terms of any confidentiality undertakings binding upon it.

5.4		As soon as reasonably practicable after the date on which it gives the NWC Completion Statement, the Seller will deliver a copy of the Supplemental Letter (duly executed by or on behalf of each of the Seller Parties) to the Purchaser.

6.		COMPLETION

6.1		Completion shall take place at the offices of the Seller’s Solicitors at 40 Bank Street, Canary Wharf, London E14 5DS: