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Exhibit 10.3
 
SETTLEMENT AGREEMENT
AND AMENDMENT

This Settlement Agreement and Amendment (this “Agreement”) entered into this
22nd day of October, 2008, is made by and among those parties to a certain
purchase and sale agreement dated as of July 7, 2005 (as modified, supplemented
and amended from time to time, the “Purchase and Sale Agreement”), a certain
transfer and assumption agreement dated as of July 7, 2005 (as modified,
supplemented and amended from time to time, the “Transfer and Assumption
Agreement”), a certain Marketing Agreement and Related Services Agreement, dated
as of July 1, 2007 (the “Marketing Agreement”), a certain Base Contract for Sale
and Purchase of Natural Gas, dated July 7, 2005, and Confirmation Nos. 1 and 2
of the same date (the “GPA”), and all other interrelated agreements thereto,
including the Transition Services Agreement (collectively, the “PSA”), namely,
Calpine Gas Holdings LLC, CPN Pipeline Company, Calpine Corporation, Calpine
Producer Services, L.P., Calpine Fuels Corporation, Calpine Energy Services,
L.P., and their subsidiaries and affiliates, as applicable (collectively,
“Calpine”), on the one hand, and Rosetta Resources Inc., Rosetta Resources
Operating LP (individually and as successor by merger with Rosetta Resources
California, LLC; Rosetta Resources Rockies, LLC; Rosetta Resources Texas GP,
LLC; Rosetta Resources Texas LP, LLC; and Rosetta Resources Texas LP) and
Rosetta Resources Offshore, LLC and their subsidiaries and affiliates, as
applicable (collectively, “Rosetta”), on the other hand.  Calpine and Rosetta
are sometimes referred to collectively as the “Parties” and individually as a
“Party.”

RECITALS

A.           The PSA provided for the sale to Rosetta of ultimate ownership and
control of all or substantially all of the assets comprising Calpine’s oil and
gas business (the “Sale Transaction”).  Except as otherwise provided in this
Agreement, capitalized terms shall have the respective meanings given to them in
the PSA.

B.           On or about December 20, 2005 (the “Commencement Date”), Calpine
filed petitions for relief under chapter 11 of title 11 of the United States
Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the
Southern District of New York (the “Bankruptcy Court”).  Calpine’s chapter 11
cases are being jointly administered under Case No.  05-60200-brl (the
“Chapter  11 Cases”).

C.           As a result of Calpine’s filing for protection under Chapter 11 of
the Bankruptcy Code, certain issues remained open and unresolved with respect to
the PSA and potential conveyances thereunder, and a number of disputes have
arisen between the Parties.  Among other things, there are open issues with
respect to the status of legal title to the Properties as of the Commencement
Date.  Specifically, the Non-Consent Properties, the Petersen Properties (as
defined below), and a number of other oil and gas properties identified in the
PSA were not conveyed, and/or were not able to be conveyed, to Rosetta prior to
the Commencement Date and, in a motion filed under Section 365 in June 2006 and
the corresponding Order(s) thereto entered by the Bankruptcy Court (the “365
Motion and Orders”), Calpine identified a list of other oil and gas properties
(which included the Non-Consent Properties, among others) contending Calpine
still held some legal, equitable or other interest in these oil and gas
properties.

 
 

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D.           On or about August 1, 2006, Rosetta filed a series of
Proofs-of-Claim in the Chapter 11 Cases (the “POCs”).  Since the filing of the
POCs, Calpine has filed an objection to the POCs  (the “Calpine Objection”) and
Calpine’s Objection has been carried or continued by the Bankruptcy Court,
postponing adjudication of those issues until after the Lawsuit (defined below)
has been resolved.

E.           On or about June 29, 2007, Calpine Corporation filed an adversary
proceeding styled Calpine Corp. v. Rosetta Resources, Inc., Adv. No.
07-01760-brl, in the Bankruptcy Court, against Rosetta Resources Inc. alleging
that the Sale Transaction was a fraudulent conveyance under relevant state and
federal law, and shortly thereafter, Rosetta Resources Inc. filed counterclaims
against Calpine Corporation in such proceeding (such proceeding, including such
counterclaims, the “Lawsuit”).

F.           Pursuant to that certain Partial Transfer and Release Agreement
dated as of August 3, 2007 (as modified, supplemented and amended from time to
time, the “PTRA”) and approved by the Bankruptcy Court on September 11, 2007,
the Parties reached an interim business solution with respect to a certain list
of properties resolving the outstanding disputes concerning legal title on those
properties, subject to the outcome of the Lawsuit.  Pursuant to the PTRA,
various conveyances and other documents were executed and delivered by the
Parties.

G.           On or about December 19, 2007, the Bankruptcy Court approved
Calpine’s Sixth Amended Joint Plan of Reorganization (the “Plan”), which in the
Plan or order approving the Plan (the “Order”) provided, among other things,
that Calpine and Rosetta agreed to extend the deadline under Section 365 for
Calpine to assume or reject the PSA and required any settlement of litigation to
which the Unsecured Creditors’ Committee is a party to have Bankruptcy Court
approval.  On or about January 31, 2008, Calpine emerged from bankruptcy,
announcing the effective date of the Plan.

H.           Following negotiations, the Parties have now reached a final
business solution in connection with the PSA (under which Calpine is to convey
to Rosetta all “Oil and Gas Properties” (defined below)), the POCs, Calpine’s
Objection, the Sale Transaction and the Lawsuit, and desire to settle all
outstanding disputes and issues on the basis set forth in this Agreement, which
includes the following attached exhibits:

(a)           Exhibit A – Petersen Properties;

(b)           Exhibit B – Conveyance Documents;

(c)           Exhibit C – Amended and Restated GPA, including Special Provisions
and Confirmation Nos. 1 and 2 for the dedicated California production; and

 
 

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(d)           Exhibit D - Rio Vista Office Sublease.

AGREEMENT

NOW THEREFORE, for valuable consideration as exchanged between Calpine and
Rosetta in this Agreement, the Parties agree:

1.           Amendment; Assumption of PSA.

(a)           Calpine and Rosetta hereby amend the PSA to remove the “Petersen
Properties” (as defined in Section 3(a) below) from the “Properties,”
“Non-Consent Properties,” and “Preferential Rights Properties” (as defined in
the PSA, and all applicable schedules and exhibits thereto) that were, or shall
be conveyed to Rosetta pursuant to the PSA.

(b)           Calpine hereby agrees to assume the PSA, as so amended, and each
Party hereby agrees that, except as otherwise expressly provided in this
Agreement, all of its respective obligations under the PSA shall and hereby do
apply to the Sale Transaction, including without limitation its respective
indemnity obligations (including without limitation as provided in Article 16 of
the Purchase and Sale Agreement and Section 4 of the Transfer and Assumption
Agreement).

2.           Settlement Payment.

(a)           At the “Settlement Closing” (as defined in Section 8 below),
Rosetta agrees to pay to Calpine the aggregate sum of Ninety-Seven Million
Dollars ($97,000,000.00) (the “Settlement Payment”).

(b)           The Settlement Payment shall fully discharge and satisfy all
obligations for final adjustments, payments and reconciliations provided for in
the PSA, including without limitation Articles 4 and 15 of the Purchase and Sale
Agreement, and as described in the proposed Final Settlement Statement dated as
of May 12, 2006, a copy of which was previously delivered to Calpine by Rosetta
(the “PSA FSS”), and all amounts otherwise currently due from Calpine to
Rosetta, or from Rosetta to Calpine, pursuant to this Agreement, including
without limitation all claims for accumulated or earned interest, net revenues
and additional monies related to the PSA.

(c)           The Settlement Payment constitutes the full and final adjustment
of the Purchase Price and no additional payments shall be required, including,
without limitation, in connection with any net revenues from any Properties,
Non-Consent Properties, and Petersen Properties attributable to Calpine’s
interests and that were received by Rosetta after the Effective Date, and
amounts withheld at Closing for the Petersen Properties and Non-Consent
Properties.

(d)           The Settlement Payment shall constitute sufficient and adequate
consideration for the full and final releases that Calpine grants in this
Agreement to fully compromise and release all claims asserted in the Lawsuit,
including without limitation, all claims that could have been or should have
been asserted by Calpine in relation thereto and whether known or unknown.

 
 

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3.           Petersen Properties.

(a)           Pursuant to Section 1(a), the Parties amend the PSA, as of the
Effective Date, to exclude the properties set forth in Exhibit A attached
hereto, being those leases and wells that are more fully described as the
“Transferred Assets” and any of Calpine’s other rights within the “Area of
Mutual Interest,” as such terms are defined in the July 1998 Joint Development
and Acquisition Agreement entered into by and between Petersen Production Co.,
LLC and Sheridan Energy, Inc. (the “Petersen Preferential Rights Properties” or
the “Petersen Properties”).  For all purposes under this Agreement and the PSA,
the Petersen Properties are not included in the “Oil and Gas Properties” to be
conveyed to Rosetta.

(b)           The Parties agree that Rosetta (i) withheld that portion of the
Purchase Price allocated to the Petersen Properties at the Closing, and (ii)
subsequent to the Closing, has or may have received additional amounts
attributable to production from Calpine’s interest in the Petersen
Properties.  Calpine hereby waives any and all rights and claims that it may
have to recover from Rosetta any amounts owed or allegedly owed to Calpine for
the Petersen Properties, including any such deferred portion of the Purchase
Price, amounts attributable to post-Closing or post-Effective Date production
revenue and joint interest billings in respect of the Petersen Properties, and
all other amounts allocable or attributable to the Petersen Properties.  All
such obligations have and will be discharged upon payment of the Settlement
Payment.

(c)           From and after the Settlement Closing, Calpine shall take such
actions as it deems, in its sole discretion, appropriate to deal with the
Petersen Properties and all claims that have been or may be made by Petersen
Production Co., LLC, its affiliates, successors and assigns and Petersen Family
Trust, its heirs, successors and assigns, (collectively, “Petersen”) relating to
Petersen’s “Preferential Right to Purchase” enumerated in Section 15.3 of the
July 1998 Joint Development and Acquisition Agreement entered into by and
between Petersen and Sheridan Energy, Inc.  For the avoidance of any doubt,
Rosetta waives any rights it may have to seek, and agrees to release Calpine
from and against, any amounts Rosetta may have paid on Calpine’s behalf
attributable to the Petersen Properties, and all amounts received by Calpine
attributable to production from Calpine’s interest in the Petersen Properties
after the Effective Date.

(d)           At the request of Calpine, Rosetta shall execute, acknowledge and
deliver to Calpine a quitclaim assigning to Calpine any and all rights, title or
interest it has or may have in the Petersen Properties to the extent arising by,
through or under the PSA.  Such quitclaim shall be without representation,
warranty or recourse of any kind except that Rosetta shall warrant that such
interests are free and clear of any claims or interests arising by, through or
under Rosetta, but not otherwise.

 
 

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(e)           At the Settlement Closing, to the extent Rosetta has any rights or
obligations as interim operator of the Petersen Properties, Rosetta shall resign
as interim operator of the Petersen Properties, transfer any such rights to
Calpine or its designee and Calpine shall affirmatively assume all of Rosetta’s
obligations and rights as operator of the Petersen Properties.

(f)           Rosetta represents and warrants to Calpine that, with respect to
those Petersen Properties for which Rosetta served as the operator and for the
period of time that Rosetta acted as operator, to its knowledge:  (i) Rosetta
has operated such properties as a reasonably prudent operator according to
accepted industry standards; (ii) Rosetta has paid all royalties due and owing
for such properties; (iii) Rosetta has paid all working interest owners all net
production revenue due and owing for such properties; and (iv) there are no
material, unsatisfied liabilities arising from its operation of such properties.

(g)           Calpine agrees to indemnify, save and hold harmless Rosetta,
together with Rosetta’s affiliates, successors and assigns, and their respective
officers, directors, members, agents, representatives and employees
(collectively, the “Rosetta Parties”) from and against any and all demands,
claims, actions, causes of action, assessments, damages, liabilities, losses,
expenses, fees, judgments or deficiencies of any nature whatsoever (including
reasonable attorneys’ fees and other costs and expenses incident to any suit,
action or proceeding or any appeal therefrom) (each, a “Loss” and collectively,
the “Losses”) received, incurred or sustained by, or threatened against, a
Rosetta Party by Petersen or any (i) operator, (ii) purchaser of production,
(iii) lessor or (iv) governmental entity, relating to or arising from the
Petersen Properties, except for any Losses addressed within Section 3(f) above
-- for which Rosetta retains sole and exclusive responsibility, regardless of
cause or amount, including without limitation, all Losses related to net
revenues (taking into account production revenue and joint interest billings
attributable to Calpine’s interest in the Petersen Properties) paid or to be
paid to Rosetta since the Closing Date.

(h)           The provisions of this Section 3 pertaining to the Petersen
Properties shall be effective and binding upon the Parties regardless of the
disposition of any claims that Petersen has made or may make against Calpine or
Rosetta, whether in the Chapter 11 Cases or otherwise.

4.           Resolution of Outstanding Property Issues.

(a)           At the Settlement Closing, each Party agrees to execute,
acknowledge and deliver counterparts of all conveyance documents attached as or
listed in Exhibit B (the “Conveyance Documents”).

 
 

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(b)           In addition to the properties transferred by the Conveyance
Documents, Calpine shall convey to Rosetta, at the Settlement Closing and from
time to time thereafter at Rosetta’s request, all right, title and interest in
and to all of Calpine’s oil and gas properties and oil and gas reserves that it
owned on the Effective Date, including without limitation, all leases, fee
property, mineral fee property, surface leases and easements, easements,
rights-of-way, farm-out agreements, pooling and unitization agreements, area of
mutual interest agreements, participation agreements and other interests of any
kind in oil and gas properties, whether listed or not in the schedules or
exhibits to the PSA, Calpine’s Section 365 Motion and Orders, excluding the
Petersen Properties (such properties, including those described in the
Conveyance Documents, collectively, the “Oil and Gas Properties”).  The Oil and
Gas Properties (including those identified from time to time after the
Settlement Closing and then conveyed to Rosetta, free and clear of all liens,
claims and encumbrances) shall be deemed and considered to be part of the
Properties for all purposes.

(c)           Rosetta represents and warrants to Calpine that as of the date of
this Agreement it is not aware of any Oil and Gas Properties of any material
value other than those listed in the schedules or exhibits to the PSA and/or
Calpine’s Section 365 Motion and Orders, and those that are listed in, described
in or are the subject of any of the Material Contracts, but excluding the
Petersen Properties.

(d)           The Oil and Gas Properties are to be conveyed by Calpine to
Rosetta effective as of the Effective Date, free and clear of any and all liens,
claims and encumbrances, whether arising before or after July 7, 2005, arising
by, through or under Calpine.

(e)           The Parties agree to take all reasonable steps necessary to obtain
acknowledgments from various governmental agencies and authorities, including
without limitation, California State Lands Commission (“CSLC”), U.S. Department
of Interior, Minerals Management Service (“MMS”) or Bureau of Land Management
(“BLM”) (collectively, “Agencies”) or Third Parties, as may be required, that
such Agencies or Third Parties will recognize the applicable Rosetta entity as
the record title owner and operator of each of the Oil and Gas Properties,
including those conveyed by Calpine on July 7, 2005 and under the PTRA, as of
the Effective Date.

(f)            In connection with the process of transferring title to the Oil
and Gas Properties and, as applicable, the right to operate the same, Rosetta
shall furnish to Agencies such bonds and other security that may be required in
connection therewith.  Following receipt of all required governmental approvals
of the transfer to Rosetta of legal title to the Oil and Gas Properties, Rosetta
agrees to aid and assist Calpine to secure the release of any collateral
security Calpine has posted with respect to the Oil and Gas Properties.

(g)           At the Settlement Closing, each Party agrees to execute,
acknowledge and deliver counterparts of a Rio Vista office sublease,
substantially in the form attached hereto as Exhibit D (the “Rio Vista
Sublease”).

 
 

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5.           Termination of Marketing Agreement.  Calpine acknowledges that
Rosetta has timely provided notice of its intent not to renew the Marketing
Agreement.  The Marketing Agreement shall therefore expire, by its terms,
effective as of June 30, 2009, subject, however, to Rosetta’s right to request a
transition period as is more fully set forth and subject to the terms in the
Marketing Agreement.  As fully set forth in Section 9 (“Releases”) of this
Agreement, as of the date of the Settlement Closing (the “Settlement Closing
Date”), the Parties hereby release, discharge, acquit, and covenant not to sue
one another for any and all claims, causes of action, suits or demands existing
prior to the Settlement Closing Date, whether known or unknown, that they have
or could have asserted against one another arising from or related to the
Marketing Agreement, save and except current payment obligations for services or
hydrocarbon production, including balancing payments or prior period adjustments
attributable to the period before the Settlement Closing Date but which have not
yet been invoiced or paid.

6.           Amendment of Gas Purchase Agreement.  At the Settlement Closing,
each Party shall execute, and deliver counterparts of, the Amended and Restated
Base Contract for Sale and Purchase of Natural Gas, with Special Provisions
pertaining thereto, and Amended and Restated Confirmations Nos. 1 and 2,
originally dated July 7, 2005 issued thereunder, by and between Calpine and
Rosetta, substantially in the form attached hereto as Exhibit C (the GPA, as so
amended and restated, the “GPA Amendment”).  As fully set forth in Section 9
(“Releases”) of this Agreement, as of the Settlement Closing Date, the Parties
hereby release, discharge, acquit, and covenant not to sue one another for any
and all claims, causes of action, suits or demands existing prior to the
Settlement Closing Date, whether known or unknown, that they have or could have
asserted against one another arising from or related to the GPA, save and except
current payment obligations for services or hydrocarbon production (but not
including compression costs), including balancing payments or prior period
adjustments attributable to the period before the Settlement Closing Date but
which have not yet been invoiced or paid.

7.           Court Approval; Assumption and Assignment of Contracts and Leases
and Related Liabilities.

(a)           The Parties’ respective rights and obligations under this
Agreement, including the execution and delivery of the various documents to be
executed and delivered by the Parties pursuant to this Agreement at the
Settlement Closing or thereafter (collectively, the “Settlement Documents”), are
expressly subject to and contingent upon the entry by the Bankruptcy Court of an
order, in form and substance acceptable to Calpine and Rosetta (the “Approval
Order”):

(i)            approving the terms of this Agreement pursuant to Bankruptcy Rule
9019 and authorizing and directing Calpine and Rosetta to perform their
obligations hereunder,

(ii)           authorizing the sale and transfer by Calpine to the appropriate
Rosetta entity of the Oil and Gas Properties identified in the exhibits to the
Conveyance Documents (and any other Oil and Gas Properties, as applicable),
pursuant to the terms of this Agreement and the PSA (as the same is modified and
amended pursuant to this Agreement), the Plan, and the Bankruptcy Code, free and
clear of any and all liens, claims and encumbrances and finding, in connection
therewith, that Rosetta is a good faith purchaser, and

 
 

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(iii)           authorizing Calpine to assume the PSA, as the same is modified
and amended herein, pursuant to Section 365 of the Bankruptcy Code.

(b)           Notwithstanding the foregoing, neither the terms of this Agreement
nor the entry of the Approval Order shall have an effect upon or otherwise waive
or release any claims, causes of action or rights under the PSA or otherwise
that are not expressly waived or released herein and approval of this Agreement
shall not be conditioned upon any demands, claims, actions or causes of action
of any nature whatsoever that Petersen or any other Third Party may have or
exercise against Calpine and/or Rosetta with respect to the Petersen Properties,
the PSA or otherwise.  Calpine shall have the right in its sole discretion, to
seek an order from the Bankruptcy Court with respect to the Petersen Properties
or any demands, claims, actions or causes of action made by Petersen with
respect thereto; provided that, the Approval Order and the obligations of the
Parties under this Agreement shall remain effective regardless of whether
Calpine exercises such option or the outcome of any such action.

(c)            Calpine shall, promptly upon the execution of this Agreement by
the Parties, file such motions and take such other action as reasonably may be
required to obtain the entry of the Approval Order.  Rosetta agrees to assist
Calpine in this regard.  Calpine shall provide notice of such motion to all
persons entitled thereto.  If the Approval Order is not entered by the
Bankruptcy Court on or before December 31, 2008, or if the Approval Order is
overturned or modified on appeal, then this Agreement shall be of no further
force and effect and, in such event, (i) neither this Agreement nor any
negotiations and writings in connection with this Agreement shall in any way be
construed as or deemed to be evidence of or an admission on behalf of any Party
regarding any claim or right that such Party may have against the other Party,
and (ii) the Parties shall otherwise be restored to the position in effect prior
to the date of this Agreement.

(d)           With respect to any obligations due Third Parties, except as may
be expressly allocated to or assumed by Calpine under the PSA, Rosetta agrees to
assume, effective as of the Assumption Date (defined below), all other cure
obligations (as provided in Section 365(b)(1)(A) of the Bankruptcy Code) in
connection with any such assumption related to the Oil and Gas Properties,
except to those already addressed and/or paid under the 365 Motion and Orders,
and to pay such obligations which shall be set forth or, by agreement of the
Parties, otherwise provided for in the Bankruptcy Court order approving such
assumption.  To the extent Rosetta reasonably disputes any cure claims asserted
by any counterparties, Calpine agrees to reasonably cooperate in Rosetta’s
defending against and opposing such asserted cure claims, and the Parties agree
to request that the Bankruptcy Court retain jurisdiction to resolve any such
disputes.

(e)           The term “Assumption Date” shall mean: (i) for liabilities Rosetta
assumed pursuant to the PSA, the effective date of such assumption as provided
in the PSA; and (ii) for additional liabilities that Rosetta did not assume
pursuant to the PSA but has expressly agreed to assume pursuant to this
Agreement or the PTRA, the date of such agreement, or, if otherwise set forth,
the effective date of such assumption set forth in the applicable agreement or
in the applicable Settlement Document.  The Parties agree to use all reasonable
efforts to include in such Approval Order any wording as may be reasonably
requested by the Agencies, Third Parties, or either Party, as applicable, in
order to effectuate the terms of this Agreement.

 
 

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(f)            At or promptly after the Settlement Closing, the Parties shall
file such other motions, pleadings and papers necessary to dismiss with
prejudice the Lawsuit and the Calpine Objection and to withdraw Rosetta’s POCs.

(g)           The Bankruptcy Court shall retain jurisdiction to interpret and
enforce this Agreement.

8.           Settlement Closing.

(a)           The Parties have exchanged executed copies of this Agreement.  The
consummation of the transactions contemplated by this Agreement (the “Settlement
Closing”) shall occur upon the expiration of ten days following the entry of the
Approval Order, as to which no appeal or objection has been filed and not then
dismissed.

(b)           At the Settlement Closing, the Parties shall do the following:

(i)            Calpine shall deliver original, executed counterparts of:

 
(1)
The Conveyance Documents;

 
(2)
The GPA Amendment;

 
(3)
The Rio Vista Sublease;

 
(4)
A receipt for the Settlement Payment;

 
(5)
Unless previously delivered, resolutions of the boards of directors or similar
bodies of each of the relevant Calpine entities signatories hereto, authorizing
the execution, delivery and performance of into this Agreement and the other
Settlement Documents;

 
(6)
Agreed Motion(s) to Dismiss with Prejudice the Lawsuit, Calpine’s Claims
Objection;

 
(7)
An instrument implementing the resignation, transfer and assumption provided for
in Section 3(e) of this Agreement;

 
(8)
All Records pertaining to the Properties and the Oil and Gas Properties not
previously delivered to Rosetta; and

 
 

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(9)
any other Settlement Documents reasonably requested by Rosetta.

(ii)           Rosetta shall deliver original, executed counterparts of:

 
(1)
The Conveyance Documents;

 
(2)
The GPA Amendment;

 
(3)
The Rio Vista Sublease;

 
(4)
Unless previously delivered, resolutions of the boards of directors or similar
bodies of each of the relevant Rosetta entities signatories hereto, authorizing
the execution, delivery and performance of into this Agreement and the other
Settlement Documents;

 
(5)
Motion(s) to Withdraw with Prejudice Rosetta’s POCs;

 
(6)
An instrument implementing the resignation, transfer and assumption provided for
in Section 3(e) of this Agreement; and

 
(7)
any other Settlement Documents reasonably requested by Calpine.

(iii)          Rosetta shall deliver the Settlement Payment, by cashier’s check
or wire transfer of immediately available funds to a bank account designated by
Calpine to Rosetta in writing not less than three (3) business days prior to the
Settlement Closing.
 
(c)           The Parties agree to work cooperatively with the Agencies toward
the objective that, on or before the Settlement Closing, all Agencies will have
confirmed to the Parties that their respective ministerial approvals will be
granted upon receipt of the Bankruptcy Court order approving this Agreement and
their receipt, respectively, of required documents.

9.           Releases.  The following releases shall be effective at and as of
the Settlement Closing:

 
 

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(a)           Except with respect to any Buyer Liabilities and any indemnities
or other obligations expressly assumed or undertaken by Rosetta pursuant to the
PSA, this Agreement or the Settlement Documents, unless otherwise released by
Calpine, Calpine, for itself and the other Calpine Parties (defined below)
hereby releases, discharges, acquits, covenants not to sue, and agrees to
forever hold harmless the Rosetta Parties, from and against any and all claims,
causes of action, suits or demands that Calpine or its estate may have or may
have had against the Rosetta Parties up through and including the date of the
Approval Order, including without limitation all such claims, causes of action,
suits or demands that Calpine asserted, or should have or could have asserted
(i) in the Lawsuit, (ii) in response to the POCs, (iii) in regard to Calpine’s
Objection, or (iv) in any other action, of any kind or nature whatsoever,
including without limitation (A) all claims Calpine could have asserted under
state law, Bankruptcy Law or in equity, whether arising under fraudulent
conveyance law or otherwise, against Rosetta in connection with the Sale
Transaction; (B) Rosetta’s operation, management, or control of the Oil and Gas
Properties (and all Properties previously conveyed to Rosetta); (C) Rosetta’s
obligations under the PSA to convey, transfer or receive Oil and Gas Properties
or to pay monies to Calpine under the PSA FSS or otherwise; (D) for periods
prior to the Settlement Closing Date, Rosetta’s obligations under the Marketing
Agreement or the GPA (except for current payment obligations for services or
hydrocarbon production, including balancing payments or prior period adjustments
under these agreements attributable to the period before the Settlement Closing
Date but which have not yet been invoiced or paid); and (E) in connection with
the Petersen Properties.

(b)           Except with respect to any Sellers’ Retained Liabilities of
Sellers and Calpine under the PSA, indemnities or other obligations expressly
assumed or undertaken by Calpine pursuant to the PSA, this Agreement or the
Settlement Documents, unless otherwise released by Rosetta under the PTRA,
Rosetta, for itself and the other Rosetta Parties, hereby releases, discharges,
acquits, covenants not to sue, and agrees to forever hold harmless Calpine
together with their affiliates, successors and assigns, and their respective
officers, directors, members, agents, representatives and employees
(collectively, the “Calpine Parties”), from and against any and all claims,
causes of action, suits or demands that Rosetta or its estate may have or may
have had against the Calpine Parties up through and including the date of the
Approval Order, including without limitation all such claims, causes of action,
suits or demands that Rosetta asserted, or should have or could have asserted
(i) in the Lawsuit, (ii) in the POCs, (iii) in Calpine’s Objection, or (iv) in
any other action, of any kind or nature whatsoever, including without limitation
(A) all claims Rosetta could have asserted under state law, Bankruptcy Law or in
equity, whether arising under breach of contract, fraud or otherwise, against
Calpine in connection with the Sale Transaction; (B) Rosetta’s operation,
management, or control of the Oil and Gas Properties (and all Properties
previously conveyed to Rosetta); (C) Calpine’s obligations under the PSA to
convey, transfer or receive Oil and Gas Properties or pay monies to Rosetta
under the PSA FSS or otherwise; (D) for periods prior to the Settlement Closing
Date, Calpine’s obligations under the Marketing Agreement or the GPA (except for
current payment obligations for services or hydrocarbon production, including
balancing payments or prior period adjustments under these agreements
attributable to the period before the Settlement Closing Date but which have not
yet been invoiced or paid); and (E) in connection with the Petersen Properties.

(c)           The Parties each acknowledge that they have been advised by their
respective legal counsel and are familiar with the provisions of California
Civil Code Section 1542, which provides as follows:

“A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor.”

 
 

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Each of the Parties, being aware of Section 1542, hereby expressly waives any
and all rights it may have thereunder, as well as under any other statutes or
common law principles of similar effect, with respect to the releases set forth
in this Agreement.

10.           Entire Agreement.

(a)           Except for the PSA (and the documents and agreements pertaining
thereto), this Agreement and the Settlement Documents are the entire agreement
between the Parties in respect of the subject matter hereof and shall not be
modified, altered, amended or vacated without the prior written consent of all
Parties hereto.  No statement made or action taken in the negotiation of this
Agreement may be used by any Party for any purpose whatsoever.

(b)           Except as expressly set forth herein, nothing in this Agreement
shall be deemed to waive or release the Parties’ indemnification rights under
the PSA, or any rights, interests or claims that any of the Parties might have
against any Third Party pursuant to the PSA.

(c)           Except in regard to Calpine’s assumption of the PSA under Section
365 and the releases and dismissal with prejudice of the Lawsuit as expressly
provided in this Agreement, nothing in this Agreement or the Settlement
Documents shall diminish or impair the Parties’ rights and interests under the
PTRA.  The Parties agree that the releases made and given in this Agreement
apply to the properties that were the subject of the PTRA.

11.           No Admissions; No Presumption Against Drafter.  This Agreement and
its contents are the result of negotiations by the Parties in an effort to
compromise on certain unresolved disputes.  Nothing herein shall be held to be
an admission against the interests of either Party or form the basis for waiver
or estoppel in connection with either Party’s legal rights, claims or defenses
associated with the properties not addressed by this Agreement.  Each Party has
cooperated in the drafting and preparation of this Agreement.  Hence, in any
construction to be made of this Agreement, the same shall not be construed
against any Party.

12.           Further Assurances.

(a)           Each Party shall provide to the other Party certified copies of
resolutions duly adopted by its board of directors or other governing body
authorizing the execution, delivery and performance of this Agreement and the
documents and transactions contemplate by this Agreement, including the
Conveyance Documents, the GPA Amendment, and the Limited Power of Attorney.

(b)           Following the execution of this Agreement, each Party is and shall
be obligated to execute and deliver such other certificates, agreements and
other documents and take such other actions as may be reasonably be requested,
from time to time, by any of the other Parties in order to consummate or
implement to the fullest degree possible the transactions and agreements
contemplated by this Agreement.

 
 

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(c)           To the extent that same relate to the Sale Transaction and are not
included in the Bankruptcy Court’s order, pursuant to Section 365(d) of the
Bankruptcy Code, dated July 12, 2006 (the “365 Order”), Rosetta agrees to assist
Calpine, following the Settlement Closing, in Calpine’s efforts to secure
release of the collateral security held to secure the performance by Calpine of
various obligations related to the Oil and Gas Properties by providing records
or copies of records and the use of the reasonable time of its employees in
support of this objective.

13.           Notices.  Notices to the Parties under this Agreement shall be
delivered to the following:

 
If to Calpine,
 
Calpine Corporation
Attn.: Thad Miller
717 Texas, Suite 1000
Houston, Texas 77002
If to Rosetta,
 
Rosetta Resources Inc.
Attn.: Michael H. Hickey
717 Texas, Suite 2800
Houston, Texas  77002

14.           Successors and Assigns.  This Agreement and all of the provisions
hereof are binding upon and shall inure to the benefit of the Parties and their
respective successors, assigns, agents, employees, representatives, officers,
directors, partners, parent companies, subsidiaries, affiliates, assigns,
predecessors-in-interest, successors-in interest, and shareholders.  Nothing in
this Agreement, express or implied, is intended to confer upon any person other
than the Parties, and their successors and assigns, any rights, remedies or
obligations under or by reason of this Agreement.

15.           Governing Law.  The terms of this Agreement will be governed by,
and interpreted in accordance with the internal laws of, the State of Texas,
without regard to the rules regarding choice of laws or conflicts of laws.

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

17.           No Waivers.  The failure of any Party to insist on performance of
any of the terms and conditions of this Agreement shall not be construed as a
waiver or relinquishment of any rights granted hereunder or of the future
performance of any such term, covenant or condition, but the obligations of the
Parties with respect thereto shall continue in full force and effect.

18.           Severability.  Subsequent to the Settlement Closing, if any part
of this Agreement is found to be prohibited, unlawful, void or for any reason
unenforceable, then it shall be deemed severable and separable from the
remaining parts and it shall not invalidate or render unenforceable the
remaining parts of this Agreement.

 
 

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19.           Representations.  Each Party represents and warrants to, and
agrees with, the other Party as follows:

(a)           Each Party has received or has been given full opportunity to
receive independent legal advice from its attorneys with respect to the
advisability of making the settlement provided for herein, and with respect to
the advisability of executing this Agreement.

(b)           Neither Party (nor, without limitation, any officer, agent,
employee, representative, or attorney of or for either Party) has made any
statement or representation to the other Party regarding any fact relied upon in
entering into this Agreement, and each Party warrants that it does not rely upon
any statement, representation or promise of the other Party (or, without
limitation, of any officer, agent, employee, representative, or attorney for the
other Party) in executing this Agreement, or in making the settlement or
granting the releases provided for herein, except as expressly stated in this
Agreement.

(c)           Each Party has made such investigation of the facts pertaining to
the settlement outlined above and to this Agreement, and of all the matters
pertaining thereto, as it deems necessary.

(d)           No Party has heretofore assigned, transferred, or granted, or
purported to assign, transfer, or grant, any of the claims, demands, causes of
action or rights of appeal disposed of by this Agreement.

(e)           Each term of this Agreement is contractual and not merely a
recital.

20.           Fees and Expenses.  Each Party shall pay its own costs, fees and
expenses (including attorneys’ fees) incurred in connection with the
preparation, negotiation, and execution of this Agreement, and the documents and
agreements contemplated by this Agreement, and shall not seek reimbursement
thereof from the other Party.

21.           Headings.  The headings in this Agreement are for convenience only
and shall not be considered a part of or affect the construction or
interpretation of any provision of this Agreement.

22.           Exhibits.  The exhibits attached to this Agreement are fully
incorporated into and are made a part of this Agreement for all purposes.

[signatures begin on following page]

 
 

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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date and
year first above written.

ROSETTA RESOURCES INC.

By:
/s/ Michael J. Rosinski
       
Name: 
Michael J. Rosinski
       
Date:
10/22/08
 

ROSETTA RESOURCES OPERATING LP,

formerly known as Calpine Natural Gas L.P., and

successor by merger to Rosetta Resources California, LLC,

Rosetta Resources Rockies, LLC, Rosetta Resources Texas, GP, LLC,

Rosetta Resources Texas LP, LLC, and Rosetta Resources Texas LP

By:
/s/ Michael J. Rosinski
       
Name: 
Michael J. Rosinski
   
Executive Vice President and Chief Financial Officer
       
Date:
10/22/08
             
ROSETTA RESOURCES OFFSHORE, LLC
             
By:
/s/ Michael J. Rosinski
       
Name: 
Michael J. Rosinski
   
Executive Vice President and Chief Financial Officer
       
Date:
10/22/08
 

 
 

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CALPINE CORPORATION
       
By:
/s/ Jack A. Fusco
       
Name:
Jack A. Fusco, President and
   
Chief Executive Officer
       
Date:
10/22/08
             
CALPINE PRODUCER SERVICES, L.P.
 
By:  CPN Energy Services GP, Inc.
       
By:
/s/ Jack A. Fusco
       
Name:
Jack A. Fusco, President
       
Date:
10/22/08
             
CALPINE FUELS CORPORATION
       
By:
/s/ Jack A. Fusco
       
Name:
Jack A. Fusco, President
       
Date:
10/22/08
             
CALPINE GAS HOLDINGS, LLC
       
By:
/s/ Jack A. Fusco
       
Name:
Jack A. Fusco, President
       
Date:
10/22/08
             
CPN PIPELINE COMPANY
       
By:
/s/ Jack A. Fusco
       
Name: 
Jack A. Fusco, President
       
Date:
10/22/08
       

 

 
 

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CALPINE ENERGY SERVICES, L.P.
       
By:
/s/ Larry B. Leverett
       
Name: 
Larry B. Leverett, Vice President
       
Date:
10/22/08
 

 
 

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EXHIBIT A

PETERSEN PROPERTIES

[See attached pages.]

 
A-

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EXHIBIT B

CONVEYANCE DOCUMENTS

[NOTE:  There will be a general conveyance, similar to the 2005 and 2007
conveyances, substantially in the form of the attached document, in sufficient
counterparts for recording in approximately 20 counties or parishes in 8 states,
plus additional assignments of government-issued leases on appropriate
government forms.]

 
B-

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EXHIBIT C

AMENDED AND RESTATED GAS SALES AGREEMENT
FOR DEDICATED CALIFORNIA PRODUCTION

[See attached pages.]

 
C-

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EXHIBIT D

RIO VISTA OFFICE SUBLEASE

[See attached pages.]
   
   
D-

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