Document:

exv10w2

 

Exhibit 10.2

 

 

MEMBERSHIP INTERESTS PURCHASE AGREEMENT

By and Between

GOLDENDALE ENERGY CENTER, LLC,

AS SELLER

And

PUGET SOUND ENERGY, INC.,

AS BUYER

Dated as of November 3, 2006

 

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 
	 	 	 	 	 	Page
	 
	 	 	 	 	 
	ARTICLE 1
	 	PURCHASE AND SALE OF THE PURCHASED INTERESTS	 	 	1
	 
	 	 	 	 	 
	1.1
	 	Transfer of Purchased Interests	 	 	1
	1.2
	 	Excluded Assets	 	 	3
	1.3
	 	Assumption of Liabilities	 	 	5
	1.4
	 	Excluded Liabilities	 	 	5
	1.5
	 	Non-Assignment of Assigned Contracts	 	 	6
	 
	 	 	 	 	 
	ARTICLE 2
	 	CONSIDERATION	 	 	6
	 
	 	 	 	 	 
	2.1
	 	Consideration	 	 	6
	2.2
	 	Deposits	 	 	6
	 
	 	 	 	 	 
	ARTICLE 3
	 	CLOSING AND DELIVERIES	 	 	7
	 
	 	 	 	 	 
	3.1
	 	Closing	 	 	7
	3.2
	 	Seller’s Deliveries	 	 	7
	3.3
	 	Buyer’s Deliveries	 	 	8
	3.4
	 	Proration	 	 	8
	 
	 	 	 	 	 
	ARTICLE 4
	 	REPRESENTATIONS AND WARRANTIES OF SELLER	 	 	9
	 
	 	 	 	 	 
	4.1
	 	Organization	 	 	9
	4.2
	 	Authorization and Validity	 	 	9
	4.3
	 	No Conflict or Violation	 	 	9
	4.4
	 	Consents, Approvals and Notifications	 	 	10
	4.5
	 	Compliance with Law	 	 	10
	4.6
	 	Litigation	 	 	10
	4.7
	 	Material Contracts	 	 	10
	4.8
	 	Permits	 	 	11
	4.9
	 	Environmental Matters	 	 	11
	4.10
	 	Employee Benefits	 	 	12
	4.11
	 	Real Property	 	 	13
	4.12
	 	Personal Property	 	 	13
	4.13
	 	Regulatory Status	 	 	13
	4.14
	 	Taxes	 	 	13
	4.15
	 	Condition of Acquired Assets	 	 	13
	4.16
	 	New LLC	 	 	14
	4.17
	 	Capitalization	 	 	14
	 
	 	 	 	 	 
	ARTICLE 5
	 	REPRESENTATIONS AND WARRANTIES OF BUYER	 	 	14
	 
	 	 	 	 	 
	5.1
	 	Corporate Organization	 	 	14
	5.2
	 	Authorization and Validity	 	 	14
	5.3
	 	No Conflict or Violation	 	 	14
	5.4
	 	Consents, Approvals and Notifications	 	 	15
	5.5
	 	Availability of Funds	 	 	15

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	 	 	 	 	 	Page
	5.6
	 	Adequate Assurances Regarding Assigned Contracts	 	 	15
	5.7
	 	Licenses, Permits, etc	 	 	15
	5.8
	 	Investigation by Buyer	 	 	16
	 
	 	 	 	 	 
	ARTICLE 6
	 	COVENANTS OF SELLER	 	 	16
	 
	 	 	 	 	 
	6.1
	 	Actions Before Closing	 	 	16
	6.2
	 	Conduct of Business Before the Closing Date.	 	 	16
	6.3
	 	Sale Order and Bidding Procedures Order	 	 	17
	6.4
	 	Consents and Approvals	 	 	17
	6.5
	 	Access to Properties and Records; Confidentiality	 	 	17
	6.6
	 	Rejection of Assigned Contracts	 	 	18
	6.7
	 	Further Assurances	 	 	18
	6.8
	 	Cure Costs and Cure of Non-Monetary Defaults	 	 	18
	6.9
	 	Notices	 	 	18
	6.10
	 	Additional Real Property	 	 	18
	6.11
	 	Provision of Data; Transfer of Software	 	 	19
	6.12
	 	Revocation of Gas Transportation Agency Arrangement	 	 	19
	 
	 	 	 	 	 
	ARTICLE 7
	 	COVENANTS OF BUYER	 	 	19
	 
	 	 	 	 	 
	7.1
	 	Actions Before Closing Date	 	 	19
	7.2
	 	Consents, Approvals and Notifications	 	 	19
	7.3
	 	Adequate Assurances Regarding Assigned Contracts	 	 	20
	7.4
	 	Cure Costs Other than Seller’s Cure Costs	 	 	20
	7.5
	 	Support Obligations.	 	 	20
	7.6
	 	Availability of Business Records	 	 	22
	7.7
	 	Calpine Marks	 	 	22
	7.8
	 	Casualty Loss	 	 	22
	 
	 	 	 	 	 
	ARTICLE 8
	 	BANKRUPTCY PROCEDURES	 	 	23
	 
	 	 	 	 	 
	8.1
	 	Bankruptcy Actions.	 	 	23
	8.2
	 	Bidding Procedures	 	 	23
	 
	 	 	 	 	 
	ARTICLE 9
	 	EMPLOYEE MATTERS	 	 	24
	 
	 	 	 	 	 
	9.1
	 	Possible Employment Offers	 	 	24
	9.2
	 	WARN Act Obligations	 	 	24
	9.3
	 	Key Employee Retention Plan	 	 	24
	9.4
	 	Employment Agreements	 	 	24
	 
	 	 	 	 	 
	ARTICLE 10
	 	REGULATORY MATTERS	 	 	24
	 
	 	 	 	 	 
	10.1
	 	Regulatory Filings	 	 	25
	10.2
	 	Cooperation; Confidentiality Agreement	 	 	25
	10.3
	 	Objections or Other Challenges	 	 	25
	 
	 	 	 	 	 
	ARTICLE 11
	 	TAXES	 	 	26
	 
	 	 	 	 	 
	11.1
	 	Taxes Related to Purchase of Assets	 	 	26
	11.2
	 	Proration of Real and Personal Property Taxes	 	 	27
	11.3
	 	Cooperation on Tax Matters	 	 	27

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	 	 	 	 	 	Page
	11.4
	 	Retention of Tax Records	 	 	28
	11.5
	 	Allocation of Purchase Price and Purchase Price Allocation Forms	 	 	28
	11.6
	 	Unbilled Transactional Taxes	 	 	29
	11.7
	 	Washington Tax Ruling	 	 	29
	 
	 	 	 	 	 
	ARTICLE 12
	 	CONDITIONS PRECEDENT TO PERFORMANCE BY PARTIES	 	 	30
	 
	 	 	 	 	 
	12.1
	 	Conditions Precedent to Performance by Seller and Buyer	 	 	30
	12.2
	 	Conditions Precedent to Performance by Seller	 	 	30
	12.3
	 	Conditions Precedent to the Performance by Buyer	 	 	31
	 
	 	 	 	 	 
	ARTICLE 13
	 	TERMINATION AND EFFECT OF TERMINATION	 	 	33
	 
	 	 	 	 	 
	13.1
	 	Right of Termination	 	 	33
	13.2
	 	Termination Without Default	 	 	33
	13.3
	 	Effect of Failure of Seller’s Conditions to Closing	 	 	35
	13.4
	 	Effect of Failure of Buyer’s Conditions to Closing	 	 	35
	13.5
	 	Termination on Alternative Transaction	 	 	36
	 
	 	 	 	 	 
	ARTICLE 14
	 	MISCELLANEOUS	 	 	37
	 
	 	 	 	 	 
	14.1
	 	LIMITATION ON DAMAGES	 	 	37
	14.2
	 	Successors and Assigns	 	 	37
	14.3
	 	Dispute Resolution	 	 	37
	14.4
	 	Governing Law; Jurisdiction	 	 	38
	14.5
	 	Disclosure Schedule Supplements	 	 	38
	14.6
	 	Warranties Exclusive	 	 	38
	14.7
	 	Survival of Representations and Warranties	 	 	38
	14.8
	 	No Recourse Against Third Parties	 	 	38
	14.9
	 	Mutual Drafting	 	 	39
	14.10
	 	Expenses	 	 	39
	14.11
	 	Broker’s and Finder’s Fees	 	 	39
	14.12
	 	Severability	 	 	39
	14.13
	 	Notices	 	 	40
	14.14
	 	Amendments; Waivers	 	 	41
	14.15
	 	Schedules	 	 	41
	14.16
	 	Public Announcements	 	 	41
	14.17
	 	Entire Agreement	 	 	41
	14.18
	 	Parties in Interest	 	 	42
	14.19
	 	Headings	 	 	42
	14.20
	 	Construction	 	 	42
	14.21
	 	Currency	 	 	42
	14.22
	 	Time of Essence	 	 	42
	14.23
	 	Counterparts	 	 	42
	 
	 	 	 	 	 
	ARTICLE 15
	 	DEFINITIONS	 	 	42
	 
	 	 	 	 	 
	15.1
	 	Certain Terms Defined	 	 	42
	15.2
	 	All Terms Cross-Referenced	 	 	48

iii

 

EXHIBITS

	 	 	 	 	 
	Exhibit A
	 	Form of Assignment Agreement
	Exhibit B
	 	Form of Sale Order
	Exhibit C
	 	Form of Bidding Procedures Order
	Exhibit D
	 	Form of Transfer and Contribution Agreement
	Exhibit E
	 	Form of Special Warranty Deed

DISCLOSURE SCHEDULES

	 	 	 
	Schedule 1.1(a)
	 	Owned Real Property
	Schedule 1.1(c)
	 	Equipment
	Schedule 1.1(d)
	 	Customer Contracts
	Schedule 1.1(e)
	 	Supplier Contracts
	Schedule 1.1(f)
	 	Other Contracts
	Schedule 1.1(i)
	 	Permits
	Schedule 1.1(l)
	 	Software Licenses
	Schedule 1.2(m)
	 	Calpine Marks
	Schedule 1.2(q)
	 	Excluded Assets
	Schedule 1.4
	 	Excluded Liabilities
	Schedule 4.4
	 	Seller’s Required Consents
	Schedule 4.5
	 	Compliance with Law
	Schedule 4.6
	 	Litigation
	Schedule 4.7
	 	Material Contracts and Related Exceptions
	Schedule 4.8
	 	Material Permits and Related Exceptions
	Schedule 4.9
	 	Environmental Matters
	Schedule 4.10
	 	Employee Benefit Plans; Business Employees
	Schedule 4.15
	 	Condition of Acquired Assets
	Schedule 5.4
	 	Buyer’s Required Consents
	Schedule 7.5(a)
	 	Credit Support Obligations
	Schedule 11.5
	 	Real Property Allocation Schedule for REET
	Schedule 15.1
	 	Permitted Liens

iv

 

MEMBERSHIP INTERESTS PURCHASE AGREEMENT

     THIS MEMBERSHIP INTERESTS PURCHASE AGREEMENT (this “Agreement”), dated as of November 3, 2006
(“Execution Date”), is made by and between Goldendale Energy Center, LLC (the “Seller”), a Delaware
limited liability company, and Puget Sound Energy, Inc., a Washington corporation (the “Buyer”)
(each a “Party” and together the “Parties”). Capitalized terms used in this Agreement are defined
or cross-referenced in Article 15.

BACKGROUND INFORMATION

     WHEREAS, Seller is an indirect wholly owned subsidiary of Calpine Corporation (“Calpine”), a
Delaware corporation;

     WHEREAS, on December 20, 2005, Calpine and its debtor Affiliates, including Seller, filed
voluntary petitions for relief under the Bankruptcy Code in the Bankruptcy Court;

     WHEREAS, on the terms and subject to the conditions set forth in this Agreement, Buyer desires
to purchase from Seller, and Seller desires to sell to Buyer, the Purchased Interests, in a sale
authorized by the Bankruptcy Court pursuant to, inter alia, sections 105, 363, and 365 of the
Bankruptcy Code;

     WHEREAS, it is intended that the acquisition of the Purchased Interests would be accomplished
through the sale, transfer and assignment of the Purchased Interests by Seller to Buyer;

     WHEREAS, Buyer also desires to assume, and Seller desires to assign and transfer to Buyer, the
Assumed Liabilities;

     NOW, THEREFORE, in consideration of the foregoing and their respective representations,
warranties, covenants and undertakings herein contained, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree as
follows:

ARTICLE 1

PURCHASE AND SALE OF THE PURCHASED INTERESTS

     1.1 Transfer of Purchased Interests. At the Closing, and upon the terms and
conditions herein set forth, Seller shall sell to Buyer, and Buyer shall acquire from Seller, all
of Seller’s right, title and interest in, to and under one hundred percent (100%) of the membership
interests (the “Purchased Interests”) in a single member Delaware limited liability company (“New
LLC”), free and clear of Liens, claims and other interests (except for Permitted Liens and Assumed
Liabilities) pursuant to sections 105, 363 and 365 of the Bankruptcy Code, after Seller has,
immediately prior to the Closing, organized New LLC and contributed, conveyed, assigned and
transferred to New LLC pursuant to the terms of a transfer and contribution agreement (the
“Transfer and Contribution Agreement”) in the form attached hereto as Exhibit D, all of
Seller’s right, title and interest in, to and under the Acquired Assets free and clear of Liens, claims
and other interests (except for Permitted Liens and Assumed Liabilities) pursuant to

 

 

sections 105,
363 and 365 of the Bankruptcy Code. “Acquired Assets” shall mean solely the following property,
but shall exclude the Excluded Assets:

     (a) all real property owned or to be owned (as contemplated by Section 6.10) by
Seller and listed on Schedule 1.1(a) of the disclosure schedules accompanying this
Agreement (the “Disclosure Schedules”), together with all improvements, structures and
fixtures thereon (the “Owned Real Property”);

     (b) all of Seller’s rights (including the Additional Real Property Entitlements to be
transferred to Seller as contemplated by Section 6.10) under the easements, rights of
way, real property licenses, and other real property entitlements related to its Owned Real
Property (the “Entitled Real Property” and, together with the Owned Real Property, the “Real
Property”);

     (c) all of (i) Seller’s owned equipment, spare parts, machinery, furniture, fixtures,
and other personal property that is either (A) used exclusively or substantially on an
exclusive basis in the Business and not listed on Schedule 1.2(q), (B) located on, or
in transit to, the Real Property or (C) listed on Schedule 1.1(c) (the “Equipment”);
and (ii) any rights of Seller to the warranties and licenses received from manufacturers and
sellers of the Equipment or otherwise relating to the Power Plant;

     (d) all of Seller’s rights under sales orders, service agreements, customer contracts or
other similar Contracts entered into by Seller with the customers that are listed on
Schedule 1.1(d) of the Disclosure Schedules or (ii) pursuant to Contracts otherwise
listed on Schedule 1.1(d) of the Disclosure Schedules (“Customer Contracts”);

     (e) all of Seller’s rights under outstanding purchase orders, service agreements,
transmission agreements, leases of personal property or other similar Contracts to the extent
pertaining to the Business (“Supplier Contracts”), including those entered into by Seller
with any supplier that are listed on Schedule 1.1(e) of the Disclosure Schedules;

     (f) all of Seller’s rights under the Contracts that are listed on Schedule
1.1(f) of the Disclosure Schedules, including the Additional Real Property Farming Lease
to be transferred by Calpine to Seller as contemplated by Section 6.10 (the “Other
Contracts” and, together with the Customer Contracts, the Supplier Contracts and any licenses
transferred pursuant to Section 1.1(l) below, the “Assigned Contracts”);

     (g) all inventories of fuel, chemical and gas inventories, supplies and materials
located at or in transit to the Real Property and owned by Seller on the Closing Date (the
“Inventory”).

     (h) any rights of Seller to the warranties received from third parties with respect to
any Acquired Assets, including Equipment, Intangible Property and Inventory;

     (i) to the extent transferable under applicable Law, all rights of Seller under the
permits, authorizations, approvals, registrations, Emission Allowances and licenses (and
pending applications for the foregoing) issued by any Government and related to the

2

 

Business or the Power Plant (collectively, the “Permits”), including those listed on Schedule
1.1(i) of the Disclosure Schedules;

     (j) copies of all Business Records;

     (k) all of Seller’s right, title and interest in and to the Power Plant;

     (l) any computer software or systems, inventions, proprietary processes, patents and
patent rights, copyrights and copyright rights, trade secrets, know-how, source and object
codes and all other intellectual property and intellectual property rights owned or licensed
by Seller and used exclusively or substantially on an exclusive basis in the Business,
including (A) computer data relating to the operation and maintenance of the Power Plant, (B)
rights to, and goodwill represented by, the names “Goldendale Energy Center,” “Goldendale
Power” and “Goldendale Power Project” and (C) subject to Section 6.11, all of the
software listed on Schedule 1.1(l) (collectively, the “Intangible Property”);
provided, that nothing in this Section 1.1(l) will give Buyer any rights to any name
that includes a Calpine Mark; and

     (m) except as set forth in Section 1.2(g) below, all rights to Claims, refunds
or adjustments, and all rights to insurance proceeds or other insurance recoveries, of Seller
or any Affiliate of Seller with respect to the Acquired Assets, to the extent relating to the
Assumed Liabilities.

     1.2 Excluded Assets. Notwithstanding anything to the contrary in this Agreement, the
Purchased Interests (and thereby the Acquired Assets) are the only properties and assets
transferred to Buyer under this Agreement. Without limiting the generality of the foregoing, the
Acquired Assets do not include (i) any right, title or interest of any Person other than Seller in
any property or asset (except for the Additional Real Property and the Additional Real Property
Farming Lease to be transferred by Calpine to Seller as contemplated by Section 6.10) and
(ii) the properties and assets of Seller listed or described in this Section 1.2 as follows
(all properties and assets not being acquired by Buyer are herein referred to as the “Excluded
Assets”):

     (a) all of Seller’s cash and cash equivalents, marketable securities, prepaid expenses,
advance payments, surety accounts, deposits and other similar prepaid items (including for
the purchase of natural gas), checks in transit and undeposited checks;

     (b) all of Seller’s accounts and notes receivable as of 11:59 p.m. on the Closing Date
(the “Accounts Receivable”);

     (c) assets, property and other rights held or owned by Calpine and its Affiliates not
used exclusively or substantially on an exclusive basis by Seller in the operation of the
Business, except to the extent included in the Acquired Assets pursuant to Section
1.1 above;

     (d) forecasts, financial information or financial statements and proprietary manuals
(except rights to use manuals specific to and necessary for the operation of the Business)
prepared by or used by Seller or its Affiliates to the extent not relating exclusively to the
Business;

3

 

     (e) all of Seller’s rights under Contracts that are not Assigned Contracts, including
the Intracompany Service Contracts;

     (f) all assets to be retained by Seller pursuant to Article 9;

     (g) all rights to (I) Claims, refunds or adjustments with respect to the Excluded Assets
relating to any proceeding before any Government and (II) insurance proceeds or other
insurance recoveries (A) that relate to, or are reimbursement for, Seller’s or Seller’s
Affiliate’s expenditures made prior to the Closing Date for which insurance proceeds are
available or due to Seller or Seller’s Affiliates or (B) to the extent relating to Excluded
Assets or Excluded Liabilities;

     (h) any asset of Seller that would constitute an Acquired Asset (if owned by Seller on
the Closing Date) that is conveyed or otherwise disposed of during the period from the date
hereof until the Closing Date as permitted by the terms of this Agreement;

     (i) all losses, loss carry forwards and rights to receive refunds, credits and loss
carry forwards with respect to any and all Taxes of Seller incurred or accrued on or prior to
the Closing Date, including interest receivable with respect thereto;

     (j) any and all rights, demands, claims, credits, allowances, rebates, causes of action,
known or unknown, pending or threatened (including all causes of action arising under
sections 510, 544 through 551 and 553 of the Bankruptcy Code or under similar state Laws
including fraudulent conveyance claims, and all other causes of action of a trustee and
debtor-in-possession under the Bankruptcy Code) or rights of set-off (collectively,
“Claims”), of Seller or any Affiliate of Seller arising out of or relating to events prior to
the Closing Date (except to the extent relating to the Assumed Liabilities) or arising out of
or relating in any way to the Chapter 11 Case or any of the transactions contemplated thereby
or entered into as a consequence thereof, including any claims (as defined in section 101(5)
of the Bankruptcy Code) filed, scheduled or otherwise arising in the Chapter 11 Case;

     (k) except for the Purchased Interests, all shares of capital stock, partnership
interests or other equity interests of Seller and all Affiliates of Seller;

     (l) all rights of Seller arising under this Agreement and under any other agreement
between Seller and Buyer entered into in connection with this Agreement;

     (m) all rights to or goodwill represented by or pertaining to all names, marks, trade
names, trademarks and service marks incorporating the name Calpine or any other name set
forth on Schedule 1.2(m) (the “Calpine Marks”) and any brand names or derivatives
thereof no matter how used, whether as a corporate name, domain name or otherwise and
including the corporate design logo associated with any Calpine Mark or variant of any
Calpine Mark other than the Goldendale Energy Center, Goldendale Power or Goldendale Power
Project;

     (n) all Retained Books and Records;

4

 

     (o) all of Seller’s rights to recovery of collateral given to obtain letters of credit
and rights to recover amounts drawn or paid on letters of credit;

     (p) all accounts receivable and other amounts due to Seller from any Affiliate of Seller
and all rights and Claims of Seller against any Affiliate of Seller, including all Claims of
Seller against Calpine; and

     (q) any assets set forth on Schedule 1.2(q) of the Disclosure Schedules; and

     1.3 Assumption of Liabilities.

     (a) Effective immediately prior to the Closing, New LLC shall assume, and New LLC shall
thereafter pay, perform and discharge when due, the following liabilities and obligations of
Seller, and no others (collectively, the “Assumed Liabilities”):

     (i) all liabilities and obligations of Seller under the Assigned Contracts
arising after Closing;

     (ii) all liabilities and obligations of Seller under the Permits;

     (iii) to the extent provided in Article 11, all liabilities and
obligations for real and personal property Taxes and assessments that are not yet
due and payable and all liabilities and obligations for any Taxes relating to the
Acquired Assets for periods after the Closing Date;

     (iv) all liabilities and obligations of Seller arising under any Environmental
Law, to the extent, and only to the extent, relating to the ownership or operation
of the Acquired Assets prior to the Closing; and

     (v) all liabilities and obligations relating to or arising from the operation
of the Business or the ownership of the Purchased Interests and the Acquired Assets
after the Closing Date.

     (b) At the Closing, as a result of the purchase by Buyer of the Purchased Interests,
Buyer shall assume, and Buyer shall thereafter pay, perform and discharge, or cause to be
paid, performed and discharged, when due, the Assumed Liabilities.

     1.4 Excluded Liabilities. Seller shall retain all liabilities and obligations not
expressly identified herein as Assumed Liabilities (the “Excluded Liabilities”), including the
following liabilities and obligations: (i) except as specifically provided in Section 1.3 above,
all liabilities and obligations relating to the operation of the Business or the ownership of the
Purchased Interests and the Acquired Assets and arising on or prior to the Closing Date, including
all liabilities and obligations with respect to accounts payable arising in connection with the
Business or the Acquired Assets on or prior to the Closing Date (which shall include, for the
avoidance of doubt, invoiced accounts payable and accrued expenses for which an invoice has not yet
been rendered) (the “Accounts Payable”); (ii) liabilities and obligations related to the Excluded
Assets; (iii) any liability or obligation for Taxes relating to the transactions contemplated by
this Agreement, including (A) Transaction Taxes (except to the extent Buyer is

5

 

responsible to reimburse Seller for fifty percent (50%) of the REET imposed as a result of the transactions
contemplated by this Agreement pursuant to Section 11.1 below) and (B) Taxes of a Related
Person imposed on Seller; (iv) all liabilities and obligations with respect to all Employee Benefit
Plans of Seller or any of its ERISA Affiliates; (v) all liabilities and obligations under any
employment agreement that is in effect with respect to any Business Employee; (vi) reimbursement
liabilities and obligations in respect of credit support furnished by or on behalf of Seller or its
Affiliates relating to the Acquired Assets, except to the extent Buyer is obligated to indemnify
Seller for certain liabilities arising post-Closing in connection with the credit support
obligations specified in Schedule 7.5, as contemplated by Section 7.5; and (vii)
those liabilities and obligations listed on Schedule 1.4 of the Disclosure Schedules.

     1.5 Non-Assignment of Assigned Contracts. Anything contained herein to the contrary
notwithstanding, (i) this Agreement shall not constitute an agreement to assign any Assigned
Contract if, after giving effect to the provisions of sections 363 and 365 of the Bankruptcy Code,
an attempted assignment thereof, without obtaining a Consent, would constitute a breach thereof or
in any way negatively affect the rights of Seller or Buyer, as the assignee of such Assigned
Contract and (ii) no breach of this Agreement shall have occurred by virtue of such nonassignment.
If, after giving effect to the provisions of sections 363 and 365 of the Bankruptcy Code, such
Consent is required but not obtained, Seller shall, at Buyer’s sole cost and expense, cooperate
with Buyer in any reasonable arrangement, including Buyer’s provision of credit support, designed
to provide for Buyer the benefits and obligations of or under any such Assigned Contract, including
enforcement for the benefit of Buyer of any and all rights of Seller against a third party thereto
arising out of the breach or cancellation thereof by such third party; provided, that nothing in
this Section 1.5 shall (x) require Seller to make any significant expenditure or incur any
significant obligation on its own or on Buyer’s behalf or (y) prohibit Seller from ceasing
operations or winding up its affairs following the Closing. Any assignment to Buyer of any
Assigned Contract that shall, after giving effect to the provisions of sections 363 and 365 of the
Bankruptcy Code, require the Consent of any third party for such assignment as aforesaid shall be
made subject to such Consent being obtained. Any contract that would be an Assigned Contract but
is not assigned in accordance with the terms of this Section 1.5 shall not
be considered an “Assigned Contract” for purposes hereof unless and until such contract is
assigned to Buyer following the Closing Date upon receipt of the requisite consents to assignment
and Bankruptcy Court approval.

ARTICLE 2

CONSIDERATION

     2.1 Consideration. The aggregate consideration for the sale and transfer of the
Purchased Interests shall be (a) One Hundred Million Dollars ($100,000,000) in cash (the “Purchase
Price”), which price is payable and deliverable at the Closing in accordance with Section
3.3 and (b) the assumption by Buyer of the Assumed Liabilities.

     2.2 Deposits. On the date hereof, Buyer and Calpine have executed and delivered the
Purchase Notice and no later than one (1) Business Day after the date hereof Buyer shall deposit
with the Escrow Agent Three Million Seven Hundred Fifty Thousand Dollars ($3,750,000) (the “Initial
Deposit”). No later than five (5) Business Days following the Bankruptcy Court’s entry of the Sale
Order or, if a qualifying bid (including a deposit) has been received in accordance

6

 

with the Bidding Procedures, no later than the Business Day prior to the Auction, Buyer shall deposit with
the Escrow Agent an additional Three Million Seven Hundred Fifty Thousand Dollars ($3,750,000) (the
"Additional Deposit,” and together with the Initial Deposit, and interest thereon, the “Deposits”).
The Deposits shall be held and disbursed pursuant to the terms of the Master Escrow Agreement, the
Purchase Notice and this Agreement.

ARTICLE 3

CLOSING AND DELIVERIES

     3.1 Closing. The consummation of the transactions contemplated hereby (the “Closing”)
shall take place at the offices of Kirkland & Ellis LLP, 153 East 53rd Street, New York,
New York at 9:00 a.m. on the third Business Day following the satisfaction or waiver by the
appropriate Party of all the conditions contained in Article 12 hereof, or on such other
date or at such other place and time as may be agreed to by the Parties hereto (the “Closing
Date”). The Parties currently anticipate that certain of the deliverables described below,
including documents to be recorded in the local real estate records and all funds to be disbursed
at the Closing (other than the Deposits), would be delivered into escrow with the Title Company and
that the Closing would occur through the use of joint closing instructions mutually acceptable to
the Parties and issued to the Title Company in its capacity as the escrow agent for the Closing.

     3.2 Seller’s Deliveries. On the Closing Date, Seller shall deliver to Buyer the
following items:

     (a) a certificate of an officer of Seller certifying that the closing conditions set
forth in Sections 12.3(a) and 12.3(b) have been satisfied;

     (b) the Assignment Agreement, duly executed by Seller;

     (c) the Business Records (it being understood that any Business Records located at the
Power Plant need not be physically delivered, but shall be deemed delivered upon the
occurrence of the Closing);

     (d) documentation evidencing the contribution to New LLC of all of the Acquired Assets,
including (A) the Transfer and Contribution Agreement in the form of Exhibit D and
(B) the special warranty deed with respect to the Owned Real Property and Entitled Real
Property in the form of Exhibit E, each duly executed by Seller in form and substance
satisfactory to Buyer;

     (e) a certificate of a secretary, assistant secretary or other similar officer of Seller
certifying as to (i) the resolutions of the board of directors and members of Seller
approving and authorizing this Agreement, the Transfer and Contribution Agreement and the
transactions contemplated by this Agreement and the Transfer and Contribution Agreement, (ii)
the certificate of formation of Seller and (iii) the limited liability company agreement of
Seller;

     (f) an affidavit of non-foreign status that complies with section 1445 of the Code;

7

 

     (g) the Title Commitment;

     (h) an executed IRS Form W-9;

     (i) copies of any REET affidavits required to be filed in accordance with RCW 82.45; and

     (j) all such other documents, certificates and instruments customarily delivered upon
consummation of transactions contemplated by this Agreement as may reasonably be requested by
Buyer.

     3.3 Buyer’s Deliveries. On the Closing Date, in payment for the Purchased Interests:

     (a) the Escrow Agent shall pay to Seller the Deposits in accordance with the terms of
the Master Escrow Agreement and the Purchase Notice, by wire transfer of immediately
available funds to the bank account designated by Seller therein (the “Seller’s Account”);

     (b) Buyer shall pay to Seller the Purchase Price, reduced by the amount of the Deposits
paid pursuant to Section 3.3(a), any adjustment contemplated by Section 6.8
and any amounts retained in accordance with Section 11.1, by wire transfer of
immediately available funds to Seller’s Account;

     (c) Buyer shall execute and deliver to Seller an instrument of assumption of liabilities
with respect to the Assumed Liabilities substantially in the form of the Assignment Agreement
attached as Exhibit A hereto;

     (d) Buyer shall deliver a certificate of an officer of Buyer certifying that the closing
conditions set forth in Sections 12.2(a) and 12.2(b) have been satisfied;

     (e) Buyer shall deliver a certificate, in form and substance reasonably satisfactory to
Seller, of a secretary, assistant secretary or other similar officer of Buyer certifying as
to (i) the resolutions of the board of directors of Buyer approving and authorizing this
Agreement and the transactions contemplated by this Agreement, (ii) the certificate of
incorporation of Buyer and (iii) the bylaws of Buyer;

     (f) copies of any REET affidavits required to filed in accordance with RCW 82.45; and

     (g) Buyer shall deliver all such other documents, certificates and instruments
customarily delivered upon consummation of transactions contemplated by this Agreement as may
reasonably be requested by Seller.

     3.4 Proration. The Parties agree that all of the items normally prorated in a
transaction of the type contemplated by this Agreement, including the following items listed below
relating to the Business and the ownership of the Purchased Interests and the Acquired Assets,
shall be prorated as of the Closing, with Seller liable to the extent such items relate to any
period or portion thereof ending on or prior to the Closing, and Buyer liable to the extent such

8

 

items relate to periods after the Closing Date: (i) rent, and other items payable by or to Seller
or Buyer under any Assigned Contract, (ii) any Permit or other fees, (iii) sewer rents and charges
for water, telephone, electricity and other utilities, and (iv) Taxes (other than Transaction
Taxes), which shall be prorated in accordance with Section 11.2. The amount of all such
prorations that must be paid in order to convey the Purchased Interests and the Acquired Assets to
Buyer free and clear of all Liens other than Permitted Liens shall be calculated and paid on the
Closing Date; all other prorations shall be calculated by the Party having the applicable payment
obligation (or as otherwise contemplated by this Agreement) and paid by the Parties as soon as
practicable thereafter.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF SELLER

     Seller hereby represents and warrants to Buyer as follows, except in all cases as disclosed in
the Disclosure Schedules, as the same may be amended or modified in accordance with Section
14.5 hereof:

     4.1 Organization.

     (a) Seller is duly organized and validly existing under the Laws of the jurisdiction of
its organization. Subject to any necessary authority from the Bankruptcy Court, Seller has
all requisite limited liability company power and authority to own its properties and assets
and to conduct its business as now conducted.

     (b) New LLC shall be formed immediately prior to the Closing, and as of the Closing, New
LLC will (i) be duly organized and validly existing under the Laws of the
State of Delaware and (ii) have all requisite limited liability company power and
authority to own its properties and assets and to conduct its business as then conducted.

     4.2 Authorization and Validity. Subject to the Bankruptcy Court’s entry of the Sale
Order and the receipt of the Consents set forth on Schedule 4.4 of the Disclosure
Schedules, Seller has all requisite limited liability company power and authority to enter into
this Agreement and to carry out its obligations hereunder. Subject to the entry of the Sale Order,
the execution and delivery of this Agreement and the performance by Seller of its obligations
hereunder have been duly authorized by all necessary limited liability company action by the board
of directors and members of Seller, and no other proceedings on the part of Seller are necessary to
authorize such execution, delivery and performance. This Agreement has been duly executed by
Seller and, subject to the Bankruptcy Court’s entry of the Sale Order, constitutes its valid and
binding obligation, enforceable against it in accordance with the terms herein.

     4.3 No Conflict or Violation. Subject to (a) the receipt of all Consents set forth on
Schedule 4.4 of the Disclosure Schedules, (b) the Bankruptcy Court’s entry of the Sale
Order and (c) the receipt of the Antitrust Approvals, the execution, delivery and performance by
Seller of this Agreement does not and will not (i) violate or conflict with any provision of the
certificate of formation and limited liability company agreement (or equivalent organizational
documents) (collectively, the “Organizational Documents”) of Seller, (ii) violate any provision of
law, regulation, rule or other legal requirement of any Government (“Law”) or any order, judgment
or

9

 

decree of any court or Government (“Order”) applicable to Seller, or (iii) violate or result in
a breach of or constitute (with due notice or lapse of time or both) a default under any Assigned
Contract, which violation, conflict, breach or default in any such case would reasonably be
expected to have a Material Adverse Effect.

     4.4 Consents, Approvals and Notifications. The execution, delivery and performance of
this Agreement by Seller does not require the Consent of, or filing with or notification of, any
Government or any other Person except: (a) as required under any Antitrust Law; (b) for the
matters set forth on Schedule 4.4, (c) for the entry of the Sale Order by the Bankruptcy
Court; or (d) for such Consents and filings, the failure to obtain or make which would not
reasonably be expected to have a Material Adverse Effect or a material adverse effect on the
ability of Seller to consummate the transactions contemplated hereby.

     4.5 Compliance with Law. With respect to the conduct of the Business and the
ownership and operation of the Purchased Interests and the Acquired Assets, Seller is not in
violation of any Law (other than Environmental Law, as to which the only representations and
warranties made by Seller are those contained in Section 4.9), except for violations that
would not reasonably be expected to have a Material Adverse Effect. No investigation or review by
any Government relating to the conduct of the Business of the ownership or operation of the
Purchased Interests or the Acquired Assets is pending or, to the Knowledge of Seller, threatened.
Except as set forth on Schedule 4.5 of the Disclosure Schedules and as may result from the
filing of the Chapter 11 Case, since January 1, 2005, Seller has not received written notice of any
violation of any Law (other than with respect to Environmental Law, as to which the only
representations and warranties made by Seller are those contained in Section 4.9) nor is
Seller in default with respect to any Order, applicable to the Purchased Interests, the Acquired
Assets or the Business or any of its assets, properties or operation of the Power Plant, other than
violations and defaults the consequences of which would not reasonably be expected to have a
Material Adverse Effect.

     4.6 Litigation. Except as set forth on Schedules 4.6 or 4.9 of the
Disclosure Schedules, there are no Claims, suits or proceedings pending or, to the Knowledge of
Seller, threatened in writing, before any Government brought by or against Seller that, if
adversely determined, could reasonably be expected to have a Material Adverse Effect or materially
impair the ability of Seller to consummate the transactions contemplated by this Agreement.

     4.7 Material Contracts

     (a) Schedule 4.7 of the Disclosure Schedules sets forth a complete and correct
list of each of the Assigned Contracts that:

     (i) creates a right to lease, use or occupy real estate that is material to the
Business; or

     (ii) contemplates or involves the performance of services or sales of products
by Seller having a value in excess of $250,000 in the aggregate during the twelve
(12) month period ended June 30, 2006 or commitments for such services or sales
during the twelve (12) month period following such period,

10

 

unless any such commitment is terminable by Seller without material penalty on not more than ninety
(90) days’ prior notice;

     (iii) relates to the purchase or lease of personal property with any supplier
or the furnishing of services to Seller and involves payments in excess of $250,000
in the aggregate during the twelve (12) month period ended June 30, 2006 or
commitments for such purchase or lease during the twelve (12) month period following
such period;

     (iv) pursuant to which Seller otherwise received (or was or will be entitled to
receive) or paid (or was or will be obligated to pay) more than $250,000 in the
aggregate during any twelve (12) month period; or

     (v) the consequences of a default under or termination of such Assigned
Contract would reasonably be expected to have a Material Adverse Effect ((i)-(v)
collectively, the “Material Contracts”).

     (b) Other than as set forth on Schedule 4.7 of the Disclosure Schedules (i)
Seller and New LLC have performed all material obligations required to be performed by each
of them to date under each Material Contract and neither of them is (with or without the
lapse of time or the giving of notice, or both) in material breach or default thereunder and
(ii) neither Seller nor, to Seller’s Knowledge, any other party to any of the Material
Contracts has commenced any action against any of the parties to such Material Contracts or
given or received any written notice of any material default or violation under any
Material Contract that was not withdrawn or dismissed, except only for those defaults
that will be cured in accordance with the Sale Order (or that need not be cured under the
Bankruptcy Code to permit the assumption and assignment of the Assigned Contracts). To
Seller’s Knowledge, each of the Material Contracts is, or will be at the Closing, valid,
binding and in full force and effect against Seller and/or New LLC, as applicable, except as
otherwise set forth on Schedule 4.7 of the Disclosure Schedules. Correct and
complete copies of the Assigned Contracts have been made available to Buyer prior to the date
hereof. Except as set forth on Schedule 4.7, to Seller’s Knowledge, as of the date
hereof there are no cure amounts owed under any of the Assigned Contracts.

     4.8 Permits. Schedule 4.8 of the Disclosure Schedules sets forth a complete
and correct list of all material Permits and all pending applications therefor obtained by Seller
in connection with the Business. As of the date of this Agreement, except as set forth on
Schedule 4.8 and as would not reasonably be expected to have a Material Adverse Effect,
each such Permit is valid and in full force and effect, and is not subject to any pending or, to
Seller’s Knowledge, threatened administrative or judicial proceeding to revoke, cancel, suspend or
declare such Permit invalid in any respect.

     4.9 Environmental Matters. Except as set forth on Schedule 4.9 of the
Disclosure Schedules:

11

 

     (a) Seller is, and as of the Closing New LLC will be, in compliance with applicable
Environmental Laws, except where such non-compliance would not reasonably be expected to have
a Material Adverse Effect.

     (b) Since January 1, 2005, Seller has not received a written complaint, Order,
directive, Claim, request for information, citation or notice of violation from any
Government or any other Person relating to actual or alleged noncompliance with or liability
under any Environmental Law, with respect to any release, spill, leak, discharge or emission
of any Hazardous Materials to the air, surface water, groundwater or soil of the Real
Property.

     (c) There have not been any releases or threatened releases of Hazardous Materials on or
in connection with the Real Property or the Power Plant that would be reasonably expected to
form the basis of a complaint, Order, directive, Claim, citation or notice of violation from
any Government or any other Person (including any third parties) except where such matter
could not reasonably be expected to have a Material Adverse Effect.

     (d) Seller has delivered or made available to Buyer true and complete copies and results
of all Environmental Reports.

     (e) The representations and warranties contained in this Section 4.9 are the
only representations and warranties made by Seller with respect to matters arising under
Environmental Laws or relating to Hazardous Materials.

     4.10 Employee Benefits.

     (a) There are no Employee Benefit Plans that Seller maintains or to which Seller
contributes.

     (b) Neither Seller, New LLC nor any of their respective ERISA Affiliates has maintained
or contributed to any Employee Benefit Plan that is a Multiemployer Plan or is subject to
Title IV of ERISA (a “Title IV Plan”) within the past five (5) years. Neither Seller, New
LLC nor any of their respective ERISA Affiliates have incurred (i) any liability to the
Pension Benefit Guaranty Corporation or otherwise under Title IV of ERISA with respect to any
Title IV Plan that has not been satisfied in full or (ii) any liability (including withdrawal
liability as defined in Section 4201 of ERISA) under or with respect to any Multiemployer
Plan.

     (c) None of the Business Employees’ employment is subject to a collective bargaining
agreement.

     (d) Schedule 4.10 lists all employees and secondees who are employed or seconded
primarily in or with respect to the Business as of the Execution Date (the “Business
Employees”) and as to each such Business Employee describes his or her position with the
Business in sufficient detail to enable Buyer to comply with the covenant described in
Section 9.1 of this Agreement.

12

 

     4.11 Real Property.

     (a) Schedule 1.1(a) of the Disclosure Schedules sets forth a complete and
correct list of the Owned Real Property and any material Entitled Real Property (and states
the ownership percentage of all partially owned real property). As of the Execution Date,
Seller has good and marketable title to the Real Property (other than the Additional Real
Property and related entitlements, which will be transferred to Seller prior to Closing in
accordance with Section 6.10), free and clear of all Liens or other title
encumbrances, other than (i) Permitted Liens, and (ii) Liens that shall be released at or
prior to the Closing pursuant to the Sale Order. As of the Closing, New LLC will have good
and marketable title to the Real Property, free and clear of all Liens or other title
encumbrances, other than Permitted Liens. Seller has made available to Buyer, to the extent
within Seller’s possession or control, a copy of all certificates of occupancy for the Owned
Real Property and a copy of any variance granted with respect to the Owned Real Property
pursuant to applicable zoning laws or ordinances, all of which documents are true and
complete copies thereof. Seller has made available to Buyer all material existing surveys
(including the Existing Survey) or topographical maps for the Real Property, title policies
(including the Existing Title Policy), engineering reports and Environmental Reports in
Seller’s possession or control.

     (b) Seller has not received written notice of, and to Seller’s Knowledge, there is not
any pending, threatened or contemplated action to change the zoning status of the Real
Property or eminent domain proceedings which would reasonably be expected to
have individually or, in the aggregate a Material Adverse Effect on the use or
possession of the Real Property.

     4.12 Personal Property. Seller has good title to all of the owned personal property
and assets, tangible or intangible, that are included in the Acquired Assets, free and clear of all
Liens, except for (i) Permitted Liens and (ii) Liens that shall be released at or prior to the
Closing pursuant to the Sale Order provided, however, that Seller makes no representation or
warranty in this Section 4.12 with respect to Real Property, which is specifically
addressed in Section 4.11.

     4.13 Regulatory Status. Seller has authorization from the FERC to sell power at
market based rates and such authorization is in full force and effect, subject to proceedings of
general applicability relating to sellers of power in the geographic location where the Power Plant
is located.

     4.14 Taxes. There are no unpaid Taxes of Seller or New LLC that will become a
liability of Buyer, except for any prorated Taxes contemplated by Section 3.4 above (it
being understood that Buyer is responsible to reimburse Seller for fifty percent (50%) of the REET
imposed as a result of the transactions contemplated by this Agreement pursuant to Section
11.1 below).

     4.15 Condition of Acquired Assets. Except as set forth on Schedule 4.15, the
Acquired Assets are in good operating condition, in all material respects, subject to normal wear
and tear.

13

 

     4.16 New LLC. At all times, (i) the sole business of New LLC will be the ownership
and operation of the Acquired Assets and activities related thereto, (ii) New LLC will have no
assets other than the Acquired Assets and (iii) New LLC will have no liabilities other than the
Assumed Liabilities. As of the Closing, New LLC will own and control all of the Acquired Assets
free and clear of all Liens, other than Permitted Liens. New LLC will at all times be a
disregarded entity for U.S. federal tax purposes under Treasury Regulation Section 301.7701-3.

     4.17 Capitalization. From and after its formation and until the Closing, all of the
issued and outstanding membership interests of New LLC shall be held by Seller. There are not now,
and will not as of the Closing be, any other units or membership interests or any other securities
issued or outstanding for New LLC. Seller will on the Closing Date be the record and beneficial
owner and holder of one hundred percent (100%) of the Purchased Interests. Immediately following
the Closing, Buyer will own one hundred percent (100%) of the membership interests in New LLC free
and clear of all Liens except for Permitted Liens. All of the Purchased Interests shall be duly
authorized, validly issued and fully paid and nonassessable. There are not now, and will not as of
the Closing be, any options, warrants, purchase rights, preemptive rights, convertible securities
or other agreements or commitments, other than this Agreement, relating to the issuance, sale or
transfer of the Purchased Interests or any equity securities or other interests in New LLC. None
of the Purchased Interests was or will be issued in violation of applicable Laws, it being
understood that the approval of the Bankruptcy Court shall be required prior to the issuance
thereof.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF BUYER

     Buyer hereby represents and warrants to Seller as follows, except in all cases as disclosed in
the Disclosure Schedules.

     5.1 Corporate Organization. Buyer is a corporation duly incorporated, validly
existing and in good standing under the Laws of the jurisdiction of its incorporation, and has all
requisite corporate power and authority to own its properties and assets and to conduct its
business as now conducted.

     5.2 Authorization and Validity. Buyer has all requisite corporate power and authority
to enter into this Agreement and to carry out its obligations hereunder. The execution and
delivery of this Agreement and the performance of Buyer’s obligations hereunder have been duly
authorized by all necessary corporate action by the board of directors of Buyer, no other corporate
proceedings on the part of Buyer are necessary to authorize such execution, delivery and
performance. This Agreement has been duly executed by Buyer and constitutes its valid and binding
obligation, enforceable against it in accordance with the terms herein, subject to applicable
bankruptcy, reorganization, moratorium and similar laws affecting creditors’ rights and remedies
generally, and subject, as to enforceability, to general principles of equity.

     5.3 No Conflict or Violation. The execution, delivery and performance by Buyer of
this Agreement and the operation of the Business by Buyer as it is constituted as of the Closing
Date do not and will not violate or conflict with any provision of the Organizational Documents of
Buyer and do not and will not violate in any material respect any provision of Law, or any

14

 

Order applicable to Buyer, nor will they result in a breach of or constitute (with due notice or lapse of
time or both) a default under any material Contract to which Buyer is a party or by which it is
bound or to which any of its properties or assets is subject.

     5.4 Consents, Approvals and Notifications. The execution, delivery and performance of
this Agreement and the operation of the Business by Buyer as it is constituted as of the Closing
Date by Buyer do not require the Consent of, or filing with or notification of, any Government or
any other Person except: (a) as required under any Antitrust Law; (b) for the matters set forth on
Schedule 5.4, (c) for the entry of the Sale Order by the Bankruptcy Court; or (d) for such
Consents and filings, the failure to obtain or make which would not reasonably be expected to have
a material adverse effect on the ability of Buyer to consummate the transactions contemplated
hereby.

     5.5 Availability of Funds. Buyer has, and on the Closing Date will have, sufficient
funds available to finance and consummate the transactions contemplated by this Agreement.

     5.6 Adequate Assurances Regarding Assigned Contracts. Buyer is and will be capable of
satisfying the conditions contained in sections 365(b)(1)(C) and 365(f) of the Bankruptcy Code with
respect to the Assigned Contracts.

     5.7 Licenses, Permits, etc. Upon receipt of the Consents and approvals set forth on
Schedules 4.4 and 5.4, Buyer will have as of the Closing Date, all licenses,
permits, franchises and authority, whether from a Government or otherwise, and will have provided any requisite
notice to customers necessary to purchase the Purchased Interests and to assume the Assumed
Liabilities and to operate the Business as it is constituted as of the Closing Date.

     5.8 Investigation by Buyer. Buyer has conducted its own independent review and
analysis of the Acquired Assets and the Assumed Liabilities, of the value of such Acquired Assets
and of the business, operations, technology, assets, liabilities, financial condition and prospects
of the Business and Buyer acknowledges that Seller has provided Buyer with access to the personnel,
properties, premises and records of the Business for this purpose. Buyer has conducted its own
independent review of all Orders of, and all motions, pleadings, and other submissions to, the
Bankruptcy Court in connection with the Chapter 11 Case to the extent that such Orders, motions,
pleadings or submissions can be determined through an electronic search of the record to be related
to the Power Plant without unreasonable effort or expense. Buyer acknowledges that the price being
paid under this Agreement for the Purchased Interests is the fair value for acquiring the Acquired
Assets under the circumstances and that such value, rather than replacement cost, is the
appropriate measure of damages if and to the extent Buyer may have any recourse for any failure to
deliver the Purchased Interests in accordance with the terms of this Agreement. In entering into
this Agreement, Buyer has relied solely upon its own investigation and analysis, and the
representations and warranties made by Seller in this Agreement, and Buyer acknowledges that (a)
neither Seller nor any of its Related Persons or Affiliates makes or has made any representation or
warranty, either express or implied, as to the accuracy or completeness of any of the information
provided or made available to Buyer or any of its Related Persons or Affiliates, except as and only
to the extent expressly set forth in Article 4 (which are subject to the limitations and
restrictions contained in this Agreement), and (b) to the fullest extent permitted by Law, neither
Seller nor any of its Related Persons or Affiliates

15

 

shall have any liability or responsibility whatsoever to Buyer or its Related Persons or Affiliates on any basis (including in contract or
tort, under securities Laws or otherwise) based upon any information provided or made available, or
statements made, to Buyer or Related Persons or Affiliates (or any omissions therefrom), including
in respect of the specific representations and warranties of Seller set forth in this Agreement,
except, with regard to Seller, as and only to the extent expressly set forth in Article 4
(which are subject to the limitations and restrictions contained in this Agreement). Buyer has no
actual knowledge of any condition, event or circumstance that constitutes a breach of any
representation, warranty or covenant of Seller in this Agreement.

ARTICLE 6

COVENANTS OF SELLER

     Seller hereby covenants to Buyer as follows:

     6.1 Actions Before Closing. Seller shall use commercially reasonable efforts to
perform and satisfy all conditions to Buyer’s obligations to consummate the transactions
contemplated by this Agreement that are to be performed or satisfied by Seller under this
Agreement.

     6.2 Conduct of Business Before the Closing Date.

     (a) Without the prior written consent of Buyer or the authorization of the Bankruptcy
Court, after notice and a hearing, between the date hereof and the Closing Date, Seller shall
not, nor shall Seller permit New LLC to, except as required or expressly permitted pursuant
to the terms hereof (i) make any material change in the Acquired Assets, taken as a whole,
(ii) increase the salary or wage level, benefits, severance or termination pay of any
Business Employee, or change any Business Employee’s job description or position except in
the Ordinary Course of Business, (iii) transfer any Business Employee to a location other
than the Power Plant, (iv) enter into any agreement or understanding with respect to the
Business or the Acquired Assets that would be required to be disclosed under Schedule
4.7 of the Disclosure Schedules, (v) enter into power sales, tolling, fuel supply or
other agreement with respect to the Business or the Acquired Assets that would not be
required to be disclosed under Schedule 4.7 of the Disclosure Schedules unless such
agreement is terminable at any time without penalty or (vi) enter into any material
transaction other than an Alternative Transaction, in each case other than in the Ordinary
Course of Business. Without limitation of the foregoing, except as may be required by the
Bankruptcy Court, from the date hereof until the Closing, Seller shall (A) use commercially
reasonable efforts to operate the Power Plant and conduct the Business in substantially the
same manner as conducted by Seller in the Ordinary Course of Business, taking into account
business exigencies arising as a result of Seller’s financial condition and status as a filer
under Chapter 11 of the Bankruptcy Code, and (B) keep all Business Employees current with
respect to wage and salary payments.

     (b) Seller shall maintain at the Power Plant the spare parts located at, or in transit
to, the Power Plant as of the date of execution of this Agreement, subject to use for the
operation of the Power Plant in the Ordinary Course of Business; and Seller shall not

16

 

use at any other facility owned by Calpine or its Affiliates any of the spare parts located at, or
in transit to, the Power Plant.

     (c) Without limiting the generality of Section 6.2(a), prior to the Closing,
Seller shall not, and shall not permit New LLC or their respective Affiliates to, without the
prior written consent of Buyer: (i) sell, lease or transfer any assets relating to or forming
part of the Business or the Acquired Assets (except for the depletion of Inventory (including
spare parts Inventory) in the Ordinary Course of Business), (ii) amend, modify, or change in
any material respect any Assigned Contract, (iii) fail to maintain in full force and effect
insurance policies covering the Acquired Assets, in form and amount consistent with past
practice or (iv) permit any Lien (other than a Permitted Lien or a Lien that will be released
at or prior to Closing pursuant to the Sale Order) to be placed on the Purchased Interests or
the Acquired Assets.

     6.3 Sale Order and Bidding Procedures Order. Seller shall use commercially reasonable
efforts to obtain entry by the Bankruptcy Court of Orders in the forms of Exhibit B (the
"Sale Order”) and Exhibit C (the “Bidding Procedures Order”) attached hereto.

     6.4 Consents and Approvals. Seller shall use commercially reasonable efforts to
obtain all necessary material consents, waivers, authorizations and approvals of all Governments,
and of all other Persons, required to be obtained by Seller in connection with the execution,
delivery and performance by it of this Agreement. Seller shall use commercially reasonable efforts
to assist Buyer in obtaining all necessary consents, waivers, authorizations and approvals of all
Governments, and of all other Persons, required to be obtained by Buyer in connection with the
execution, delivery and performance by Buyer of this Agreement.

     6.5 Access to Properties and Records; Confidentiality. Seller shall afford to Buyer
and its Representatives reasonable access during normal business hours throughout the period prior
to the Closing Date (or the earlier termination of this Agreement pursuant to Article 13)
to all books and records of Seller relating to the Business if: (w) permitted under Law; (x) such
books and records are not subject to confidentiality agreements that would be breached as a result
of such disclosure; provided that Seller shall use its commercially reasonable efforts to obtain a
waiver of any such confidentiality restrictions in order to permit such disclosure; (y) disclosing
such books and records would not adversely affect any attorney client, work product or like
privilege; and (z) such books and records do not relate to any confidential proprietary models or
other information of Seller or any of its Affiliates pertaining to energy project evaluation,
energy or natural gas price curves or projections or other economic or other predictive models.
Upon reasonable prior notice, Seller shall also afford Buyer reasonable access, during normal
business hours, to the Business, all operations of the Business and to all Acquired Assets
throughout the period prior to the Closing Date. The rights of access contained in this
Section 6.5 are granted subject to, and on, the following terms and conditions: (A) any
such investigation shall not include physical testing or samplings, and shall be exercised in such
a manner as not to interfere unreasonably with the operation of the Business; (B) during the period
from the date hereof to the Closing Date, all information provided to Buyer or its agents or
representatives by or on behalf of Seller or their agents or representatives (whether pursuant to
this Section 6.5 or otherwise) shall be governed by and subject to the Confidentiality
Agreement, dated as of June 24, 2005, by and among Buyer, Calpine and Seller (the “Confidentiality

17

 

Agreement”); (C) such rights of access shall not affect or modify the conditions set forth in
Article 12 in any way; and (D) all such rights of access shall be at Buyer’s sole cost,
expense and risk; and Buyer shall indemnify Seller for any damages, suits, claims, proceedings,
fines, judgments, costs or expenses (including attorneys’ fees and third party incidental,
consequential or punitive damages that constitute direct damages of Seller (collectively,
"Losses”)) that Seller or any third party may suffer as a result of Buyer’s exercise of its rights
under this Section 6.5; and (E) Buyer shall comply with and adhere to all of Seller’s
safety policies and procedures.

     6.6 Rejection of Assigned Contracts. Seller shall not reject any Assigned Contracts
pursuant to the Chapter 11 Case without the prior written consent of Buyer.

     6.7 Further Assurances. Upon the request and at the sole expense of Buyer at any time
after the Closing Date, Seller shall execute and deliver such documents as Buyer or its counsel may
reasonably request to effectuate the purposes of this Agreement.

     6.8 Cure Costs and Cure of Non-Monetary Defaults. Notwithstanding anything else to
the contrary contained in this Agreement, Seller shall, on or prior to the Closing, cure any and
all defaults and pay any and all cure costs payable to (i) the U.S. Department of Energy,
Bonneville Power Administration (“BPA”), in respect of Assigned Contracts to which the BPA is a
counterparty and (ii) Public Utility District No. 1, Klickitat County, Washington (“KPUD”) in
respect of that certain Station Service Power Purchase and Sale Agreement between KPUD and Seller,
dated March 28, 2005, as amended (collectively, “Seller’s Cure Costs”), or otherwise reserve
sufficient funds necessary to satisfy any such cure obligations in respect of Seller’s Cure Costs,
in either such case so that the Assigned Contracts which relate to Seller’s Cure Costs may be
assumed by Seller and assigned to New LLC in accordance with the provisions of section 365 of the
Bankruptcy Code. In addition, Seller shall, on or prior to the Closing, cure any and all defaults
under the Assigned Contracts that cannot be cured through the payment of money and that are
required to be cured under the Bankruptcy Code so that such Assigned Contracts may be assumed by
Seller and assigned to New LLC in accordance with the provisions of section 365 of the Bankruptcy
Code, it being understood that Buyer shall be responsible for the payment of all cure costs (other
than Seller’s Cure Costs), as more particularly described in Section 7.4 below. If and to
the extent that the cure costs associated with the Assigned Contracts (other than Seller’s Cure
Costs) exceed the aggregate amount of such cure costs set forth on Schedule 4.7 (excluding
any of Seller’s Cure Costs), Buyer and Seller shall share equally in the payment of such additional
costs, with Seller’s portion of such costs being paid through a reduction of the Purchase Price
equal to fifty percent (50%) of such excess up to a maximum adjustment of One Hundred and Fifty
Thousand Dollars ($150,000).

     6.9 Notices. Seller shall provide Buyer with prompt written notice of Seller’s
Knowledge of (i) any material breach of any representation or warranty by Seller or (ii) any other
material failure by Seller to comply with the obligations of this Agreement.

     6.10 Additional Real Property. Pursuant to the transactions contemplated by the
Transfer and Contribution Agreement, Seller shall cause Calpine to (i) transfer to Seller title to
the real property identified on Schedule 1.1(a) as being owned by Calpine as of the
Execution Date (the “Additional Real Property”), (ii) transfer to Seller all of Calpine’s rights
under the easements, rights of way, real property licenses, and other real property entitlements
related to

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the Additional Real Property (the “Additional Real Property Entitlements”) and (iii)
assume and assign to Seller, in accordance with the provisions of section 365 of the Bankruptcy
Code, all rights and obligations as lessor under that certain farming lease identified on
Schedule 1.1(f) relating to the Additional Real Property (the “Additional Real Property
Farming Lease”), such that the Additional Real Property shall be included in the Owned Real
Property, the Additional Real Property Entitlements shall be included in the Entitled Real Property
and the Additional Real Property Farming Lease shall be included in the Other Contracts,
respectively, and thereby included in the Acquired Assets transferred to New LLC pursuant to the
Transfer and Contribution Agreement. Prior to the Closing, Seller shall cause the Additional Real
Property Survey to be completed and furnished to Buyer, with the cost of such survey being shared
equally between Buyer and Seller.

     6.11 Provision of Data; Transfer of Software. Seller agrees to cooperate with such
reasonable requests during normal business hours as Buyer may make prior to and following the
Closing (which requests shall not interfere in any material respect with the responsibilities
of Seller’s employees) so as to assist Buyer with the integration from and after the Closing of the
existing operational data, software and systems relating to the Power Plant into Buyer’s software
and systems (and in furtherance of the foregoing, at or prior to the Closing Seller agrees to
furnish Buyer with an electronic copy (which may be a scanned pdf file) of Seller’s maintenance
plan and schedule for the one year period following the Closing). The Parties agree that the
software listed on Schedule 1.1(l) shall only be included in the Acquired Assets to the
extent that Buyer shall have obtained any necessary licenses or rights to use such software from
and after the Closing. Seller agrees to cooperate with such reasonable requests during normal
business hours as Buyer may make in order to facilitate Buyer’s acquisition of such licenses or
rights.

     6.12 Revocation of Gas Transportation Agency Arrangement. Effective prior to the
Closing, Seller shall terminate its designation of Calpine Energy Services, L.P. as agent for the
purpose of the Transportation Agreement (Rate Schedule TF-1, Contract No. 127115) identified on
Schedule 1.1(e).

ARTICLE 7

COVENANTS OF BUYER

     Buyer hereby covenants to Seller as follows:

     7.1 Actions Before Closing Date. Buyer shall use commercially reasonable efforts to
perform and satisfy all conditions to Seller’s obligations to consummate the transactions
contemplated by this Agreement that are to be performed or satisfied by Buyer under this Agreement.

     7.2 Consents, Approvals and Notifications. Buyer shall use commercially reasonable
efforts to obtain all consents and approvals of all Governments, and all other Persons, required to
be obtained by Buyer and provide notifications to all Persons required to be notified by Buyer to
effect the transactions contemplated by this Agreement. Buyer shall promptly take all actions as
are reasonably requested by Seller to assist in obtaining the Bankruptcy Court’s entry of the Sale
Order, including furnishing affidavits, financial information or other documents or information for
filing with the Bankruptcy Court and making Buyer’s employees and representatives

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available (upon reasonable advance notice) to testify before the Bankruptcy Court, subject to appropriate
protective orders.

     7.3 Adequate Assurances Regarding Assigned Contracts. With respect to each Assigned
Contract, Buyer shall use commercially reasonable efforts to provide the Bankruptcy Court, Seller
or the applicable counterparty to such Assigned Contract, as the case may be, adequate assurance of
the future performance of such Assigned Contract by Buyer to the extent required under Section 365
of the Bankruptcy Code.

     7.4 Cure Costs Other than Seller’s Cure Costs. Buyer shall, on or prior to the
Closing, pay any and all cure costs related to the Assigned Contracts (other than Seller’s Cure
Costs, which shall be paid by Seller or otherwise reserved for, as set forth in Section
6.8) that are required to be paid under Section 365 of the Bankruptcy Code so that, assuming
the performance by Seller of its obligations under Section 6.8, the Assigned Contracts may
be assumed by Seller and assigned to New LLC in accordance with the provisions of Section 365 of the Bankruptcy
Code.

     7.5 Support Obligations.

     (a) Buyer recognizes that Seller has provided credit support with respect to the
Acquired Assets pursuant to certain credit support obligations set forth on Schedule
7.5(a) (the “Support Obligations”). Prior to the Closing, Buyer shall use commercially
reasonable efforts to effect the full and unconditional release of Seller from all Support
Obligations, in so far as they relate to the Acquired Assets, by:

     (i) furnishing letters of credit containing terms and conditions that are
substantially identical to the terms and conditions of existing letters of credit
and from lending institutions that are either investment grade institutions or have
a credit rating commensurate with or better than that of lending institutions for
existing letters of credit;

     (ii) instituting escrow arrangements with terms equal to or more favorable to
the counterparty than the terms of existing escrow arrangements;

     (iii) posting surety or performance bonds issued by an investment grade
institution having a credit rating at least equal to those of the issuer of existing
surety or performance bonds, and which replacement surety or performance bond
contains terms and conditions that are substantially identical to the terms and
conditions of existing surety or performance bonds; or

     (iv) providing substitute guaranties.

     (b) Buyer and Seller shall use commercially reasonable efforts to cause the beneficiary
or beneficiaries of the Support Obligations to terminate and redeliver to Seller, prior to
the Closing, each original copy of each guaranty, letter of credit or other instrument
constituting or evidencing such Support Obligations as well as to redeliver to Seller any
cash collateral in respect of the Support Obligations and, as to any Support Obligations
terminated after the Closing, promptly to redeliver such originals or cash to

20

 

Seller, and in each case, to take such other actions as may be required to terminate
such Support Obligations.

     (c) If Buyer is not successful in obtaining the complete and unconditional release of
Seller from the Support Obligations prior to the Closing, then Buyer shall indemnify, defend
and hold harmless Seller from and against any and all costs, expenses, reimbursements or
performance incurred by Seller and arising after the Closing Date in connection with the
Support Obligations. Buyer shall, for so long as any Support Obligation remains outstanding,
not effect any amendments or modifications or any other changes to the agreement to which
such Support Obligation relates that would reasonably be expected to materially increase such
Support Obligation, without Seller’s prior written consent, which shall not be unreasonably
withheld, delayed or conditioned. Notwithstanding anything in this Agreement to the
contrary, prior to Closing, Buyer shall have the right to contact and have discussions with
each beneficiary of a Support Obligation in order to satisfy its obligations under this
Section 7.5; provided, that (i) Buyer shall give Seller prior notice before making
any such contact, (ii) Seller shall have the right to have one of its representatives present
on the telephone line or in person, as applicable, during any such contact or discussion,
(iii) Buyer shall only contact and hold discussions with such beneficiaries through
representatives of Buyer previously reasonably approved by Seller and (iv) Buyer shall cause
such representatives to comply with all reasonable procedures and protocols regarding such
contacts and discussions that may be established by Seller.

     (d) Prior to the Release Date, Buyer agrees not to assign, sell, transfer or convey all
or any portion of the Acquired Assets in a single transaction or series of related
transactions, in each case without the assignment to the transferee of the rights of Buyer
under this Agreement and the assumption in writing by the transferee (which assumption shall
be enforceable by Seller) of the obligations of Buyer under this Agreement (including the
obligations of Buyer pursuant to Section 7.5(c)); provided that, for the avoidance of
doubt, neither the dissolution of New LLC (or the merger of New LLC into Buyer) nor the sale,
transfer or conveyance of equity interests of Buyer, its parent company or any of their
respective Affiliates (whether accomplished by merger, exchange or otherwise) shall be deemed
a sale, transfer, conveyance or assignment for purposes of this Section 7.5. Any
assignment, sale, transfer or conveyance in contravention of the preceding sentence shall be
null and void ab initio. Buyer agrees to provide Seller with a copy of such assignment and
assumption agreement prior to execution and prior to the assignment, sale, transfer or
conveyance and a copy of the executed assignment and assumption agreement which shall be in
the same form with such changes as Seller may reasonably request. Upon such an assignment,
sale, transfer or conveyance pursuant to which the transferee assumes all of Buyer’s rights
and obligations under this Agreement, Buyer shall have no further rights or obligations under
this Agreement (except for obligations relating to breaches by Buyer occurring prior to the
date of the assignment, sale, transfer or conveyance). The “Release Date” shall be the date
on which Seller has been fully and unconditionally released in respect of all matters arising
after the Closing Date in respect of the Support Obligations.

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     (e) In furtherance of the foregoing, Seller agrees to use commercially reasonable
efforts to amend the letter of credit issued in favor of Northwest Pipeline Corporation and
identified on Schedule 7.5(a) prior to Closing so as to clarify that such letter of
credit serves as collateral only for that certain Transportation Agreement (Rate Schedule
TF-1, Contract No. 127115), by and between Northwest Pipeline Corporation and Seller.

     7.6 Availability of Business Records. After the Closing Date, each of Seller and
Buyer shall provide to the other party (after reasonable notice and during normal business hours
and without charge) access to all Business Records for periods prior to the Closing and shall
preserve such Business Records until the later of (a) six (6) years after the Closing Date or (b)
the required retention period for all government contact information, records or documents. Such
access shall include access to any computerized information systems that contain data regarding the
Purchased Interests or the Acquired Assets. Buyer acknowledges that Seller has the right to retain
originals or copies of Business Records for periods prior to the Closing. Prior to destroying any
Business Records relating to periods prior to the Closing, each party shall notify the other party
thirty (30) days in advance of any such proposed destruction of its intent to destroy such Business
Records, provided, however, that failure to provide such notification shall not constitute a basis
for any liability or claim for damages. With respect to any litigation and claims that are
Excluded Liabilities, Buyer shall render all reasonable assistance that Seller may request in
defending such litigation or claim and shall make available to Seller’s personnel most
knowledgeable about the matter in question at Seller’s cost. If after the Closing Buyer (or any
Affiliate or creditor of Buyer) shall receive any payment or revenue that belongs to Seller
pursuant to this Agreement or Seller (or any Affiliate or creditor of Seller) shall receive any
payment or revenue that belongs to Buyer pursuant to this Agreement, Buyer or Seller, as applicable
shall promptly remit or caused to be remitted the same to the other Party, without set-off or
deduction of any kind or nature.

     7.7 Calpine Marks. The Calpine Marks may appear on some of the Acquired Assets,
including on signage. Buyer acknowledges and agrees that it does not have and, upon consummation
of the transactions contemplated by this Agreement, will not have, any right, title, interest,
license or other right to use the Calpine Marks. Buyer will promptly after the Closing Date use
its commercially reasonable efforts to remove within ninety (90) days following the Closing Date
the Calpine Marks from, or cover or conceal the Calpine Marks on, the Acquired Assets, or otherwise
refrain from the use and display of the Acquired Assets on which the Calpine Marks are affixed.

     7.8 Casualty Loss. Notwithstanding any provision hereof to the contrary, if, before
the Closing Date, all or any portion of the Acquired Assets is (a) condemned or taken by eminent
domain or is the subject of a pending or threatened condemnation or taking which has not been
consummated, or (b) materially damaged or destroyed by fire or other casualty, Seller shall notify
Buyer promptly in writing of such fact, and (i) in the case of a condemnation or taking, Seller
shall assign or pay, as the case may be, any proceeds thereof to Buyer at the Closing and (ii) in
the case of a fire or other casualty, Seller shall either restore such damage or assign the
insurance proceeds therefrom to Buyer at Closing. Notwithstanding the foregoing, if such
condemnation, taking, damage or destruction has or would reasonably be expected to result in a
Material Adverse Effect, either Seller or Buyer may terminate this Agreement.

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ARTICLE 8

BANKRUPTCY PROCEDURES

     8.1 Bankruptcy Actions.

     (a) As soon as reasonably practicable after execution of this Agreement (but not later
than as is necessary to permit twenty (20) days regular notice of a hearing on December 6,
2006), Seller shall file with the Bankruptcy Court motions seeking entry of the Bidding
Procedures Order and the Sale Order. Seller shall furnish Buyer with drafts of such motions
no later than November 10, 2006 so as to permit Buyer sufficient time to review and comment
upon such motions. Seller shall be permitted, but not required, to include in the motion
seeking entry of the Sale Order a request for exemption from stamp taxes pursuant to Section
1146(a) of the Bankruptcy Code, it being understood that, if requested, the failure of Seller
to obtain such an exemption or Seller’s withdrawal of such request shall not result in the
failure of any Seller closing condition set forth herein (it being understood that Seller
shall be entitled to withdraw the proposed request for relief under Section 1146(a) of the
Bankruptcy Code in its sole and exclusive judgment). Seller shall also include in the Sale
Order a request for authorization to pay to the DOR Seller’s Washington state sales and use
tax liability related to Seller’s 2001 fiscal year, it being understood, however, that the
issuance of the Sale Order with an authorization to pay an amount different than that
originally requested by Seller (but acceptable to the DOR) or with an alternative arrangement
(for example, requiring a portion of the Purchase Price to be escrowed during the pendency of
any dispute between Seller, DOR or any other Person with respect to such tax liability and
the satisfaction thereof) shall not result in the failure of any Seller closing condition set
forth herein. Seller shall use its reasonable best efforts to obtain the entry of the
Bidding Procedures Order and Sale Order as Final Orders on the Bankruptcy Court’s docket.
Seller shall file all pleadings with the Bankruptcy Court as are necessary or appropriate to
secure entry of the Bidding Procedures Order and the Sale Order, shall serve all creditors
and all other parties entitled to notice of such pleadings under applicable provisions of the
Bankruptcy Code and Rules, including all parties to the Assigned Contracts and all
Governmental Authorities having or asserting jurisdiction over Seller, New LLC, the Purchased
Interests or the Acquired Assets and shall diligently pursue the obtaining of such orders.
Buyer covenants and agrees that it shall cooperate with Seller in connection with furnishing
information or documents to Seller to satisfy the requirements of adequate assurance of
future performance under section 365(f)(2)(B) of the Bankruptcy Code.

     (b) In the event an appeal or other proceeding is filed seeking review of the Bidding
Procedures Order or the Sale Order, or if a motion to reconsider, vacate, modify, amend or
stay either of such Orders is filed, Seller shall immediately notify Buyer of such appeal,
other proceeding or motion and shall provide to the Buyer within three (3) Business Days
after the Seller’s receipt thereof a copy of the notice of appeal or motion.

     8.2 Bidding Procedures. The bidding procedures (the “Bidding Procedures”) to be
employed with respect to this Agreement shall be those reflected in the Bidding Procedures Order.
Buyer acknowledges that the Bidding Procedures may be supplemented by other customary procedures
not inconsistent with the matters otherwise set forth herein and the terms

23

 

of this Agreement. Seller will use its reasonable best efforts to schedule a sale hearing before the Bankruptcy Court
to approve the sale of the Purchased Interests and the Acquired Assets and related transactions
contemplated hereby to be held no later than ninety (90) days after the date on which the Bidding
Procedures Order is entered.

ARTICLE 9

EMPLOYEE MATTERS

     9.1 Possible Employment Offers. Prior to Closing, Buyer expects to take such actions
as may be reasonably necessary to offer employment at the Power Plant to existing qualified
employees of Buyer, in a manner consistent with Buyer’s past practices and any labor requirements
(including any union agreements) applicable to Buyer and its operations. Following the
satisfaction of the foregoing, as determined by Buyer, Buyer expects to consider for and make,
prior to the Closing, offers of employment to those Business Employees meeting Buyer’s standard
hiring criteria (subject to the occurrence of the Closing and satisfaction of any other conditions
imposed by Buyer (including with respect to the satisfaction of any requirements of union
agreements applicable to Buyer and its operations)). If and to the extent any Business Employee is
offered employment with Buyer, such employment will include welfare and retirement benefits that
are consistent with Buyer’s existing plans and practices. Buyer intends to conduct, with Seller’s
consent, one or more general employee meetings prior to the Closing to address employment related
matters, including: employment opportunities that may be available; transition; compensation
practices; health and wellness benefits; retirement plan transitions; and other matters that may be
of general concern to prospective employees of Buyer. Notwithstanding anything to the contrary
contained herein, nothing in this Agreement shall be construed as an employment agreement or
contract with any Business Employee, and Buyer shall not be required to offer employment to any of
the Business Employees.

     9.2 WARN Act Obligations. Seller agrees to timely perform and discharge, or cause to
be timely performed and discharged, all requirements under the WARN Act to the extent applicable
and under applicable state and local laws and regulations for the notification of Seller’s or any
of Seller’s Affiliates’ employees arising from the sale of the Purchased Interests and the
Business.

     9.3 Key Employee Retention Plan. Buyer shall not be responsible for any amounts due
and owing or that may arise under the key employee retention plan approved by the Bankruptcy Court.
Buyer shall not be responsible for any other compensation due to the Business Employees for
services to Seller.

     9.4 Employment Agreements. Seller shall not assign and Buyer shall not assume any
employment agreement that is in effect with respect to any Business Employee immediately prior to
the Closing.

ARTICLE 10

REGULATORY MATTERS

     Buyer hereby covenants to Seller, and Seller hereby covenants to Buyer, as follows:

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     10.1 Regulatory Filings. Subject to the terms and conditions of this Agreement, each
Party shall use its reasonable best efforts to: (a) take, or cause to be taken, all actions and to
do, or cause to be done, all things necessary under applicable Laws to consummate the transactions
contemplated by this Agreement, which shall include each Party’s reasonable best efforts to obtain
any consents required pursuant to Section 203 of the FPA, including filing the Section 203 FERC
application within thirty (30) days after the date hereof; (b) file a Notification and Report Form
pursuant to the HSR Act with respect to the transactions contemplated hereby within ten (10)
Business Days after the date hereof; (c) supply as promptly as practicable any additional
information and documentary material that may be requested or required pursuant to any Antitrust
Law, including the HSR Act; and (d) cause the expiration or termination of the applicable waiting
periods under the HSR Act or any other Antitrust Law as soon as practicable.

     10.2 Cooperation; Confidentiality Agreement. In connection with the efforts
referenced in Section 10.1 to obtain all requisite approvals and authorizations for the
transactions contemplated by this Agreement under the FPA, the HSR Act, any other Antitrust Law, or
any state law, each of the Parties shall use reasonable best efforts to: (a) cooperate with each
other in connection with any filing or submission and in connection with any investigation or other
inquiry, including any proceeding initiated by a private party; (b) keep the other Parties informed
in all material respects of any material communication received by such Party from, or given by
such Party to, any Government and of any material communication received or given in connection
with any proceeding by a private party, in each case regarding any of the transactions contemplated
hereby; and (c) permit the other Party to review any material communication given to it by, and
consult with each other in advance of any meeting or conference with, or making any filing or other
submission with or to any Government, including in connection with any proceeding by a private
party. The foregoing obligations in this Section 10.2 shall be subject to the
Confidentiality Agreement and any attorney-client, work product or other privilege, and each of the
Parties hereto shall coordinate and cooperate fully with the other Parties hereto in exchanging
such information and providing such assistance as such other Parties may reasonably request in
connection with the foregoing and in seeking early termination of any applicable waiting periods
under Antitrust Law, it being understood, however, that the foregoing shall not require a Party to
disclose competitive information of a commercially sensitive nature to the other Party. The
Parties will not take any action that will have the effect of delaying, impairing or impeding the
receipt of any required authorizations, consents, Orders or approvals. “Antitrust Law” means the
Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the Federal Trade Commission
Act, as amended, and all other Laws and Orders that are designed or intended to prohibit, restrict
or regulate actions having the purpose or effect of monopolization or restraint of trade or
lessening of competition through merger or acquisition. “Antitrust Approval” means any approval or
consent of any Government required under any applicable Antitrust Law or the expiration or
termination of any applicable waiting period under any applicable Antitrust Law.

     10.3 Objections or Other Challenges. If any objections are asserted with respect to
the transactions contemplated hereby under any Antitrust Law or if any suit is instituted by any
Government or any private party challenging any of the transactions contemplated hereby as
violative of any Antitrust Law or if the filing pursuant to Section 10.1 is reasonably
likely to be rejected or conditioned by the FERC or a state Government, each of the Parties shall
use reasonable best efforts to resolve such objections or challenge as such Government or private

25

 

party may have to such transactions, including to vacate, lift, reverse or overturn any Order,
whether temporary, preliminary or permanent, so as to permit consummation of the transactions
contemplated by this Agreement. Without limiting the generality of the foregoing, Buyer shall use
its reasonable best efforts to promptly take and diligently pursue any or all of the following
actions to the extent necessary to eliminate any concerns on the part of, or to satisfy any
conditions imposed by, any Government with jurisdiction over the enforcement of any applicable Law,
including any Antitrust Law, the FPA and applicable state Law, regarding the legality of Buyer’s
acquisition of the Purchased Interests and the Business or any portion thereof, the Acquired Assets
or the Assumed Liabilities: (a) using its reasonable best efforts to prevent the entry in a
judicial or administrative proceeding brought under any Law, including any Antitrust Law, the FPA
or applicable state Law, by any Government or any other Person of any permanent, temporary or
preliminary injunction or other Order that would make consummation of the acquisition of the
Purchased Interests, the Business or any portion thereof, the Acquired Assets or the Assumed
Liabilities in accordance with the terms of this Agreement unlawful or that would prevent or delay
such consummation; (b) taking promptly and diligently pursuing, in the event that an injunction or
Order of the kind referred to in the foregoing clause (a) of this Section 10.3, any and all
steps, including the appeal thereof, the posting of a bond and/or the steps contemplated by this
Section 10.3, necessary to vacate, modify or suspend such injunction or Order so as to
permit such consummation as promptly as possible; and (c) promptly taking and diligently pursuing
all other actions and doing all other things reasonably necessary and proper to avoid or eliminate
each and every impediment under any Law, including any Antitrust Law and the FPA, that may be
asserted by any Government or any other Person to the consummation of the acquisition of the
Purchased Interests, the Business or any portion thereof, the Acquired Assets or the Assumed
Liabilities by Buyer in accordance with the terms of this Agreement; provided, however, that in no
event shall Buyer be under any obligation to (i) submit to conditions or Orders that would
materially and adversely affect Buyer, including any condition or Order requiring Buyer to incur
any material expense relating to Buyer’s infrastructure (whether related to the Power Plant or
not), or (ii) sell or otherwise dispose of, or hold separate (through the establishment of a trust
or otherwise), particular assets or categories of assets (including, after the Closing, any of the
Purchased Interests or the Acquired Assets) or operations (including, after the Closing, the
Business or any portion thereof) of Buyer or any of its Affiliates.

ARTICLE 11

TAXES

     11.1 Taxes Related to Purchase of Assets. All state and local sales, use, gross
receipts, transfer, business occupation, gains, excise, value-added or other similar Taxes in
connection with the sale, transfer, assignment and delivery of the Purchased Interests and Acquired
Assets and the assumption of the Assumed Liabilities, and all recording and filing fees that may be
imposed by reason of the sale, transfer, assignment and delivery of the Purchased Interests
and the Acquired Assets, and that are not exempt under section 1146 of the Bankruptcy Code
(collectively, “Transaction Taxes”), shall be paid by Seller on or prior to their due date,
provided that Buyer shall reimburse Seller for fifty percent (50%) of the cost of any Washington
State real estate excise taxes imposed pursuant to RCW 82.45 in connection with the sale, transfer,
assignment and delivery of the Purchased Interests and Acquired Assets and the assumption of the
Assumed Liabilities (“REET”). In furtherance of the foregoing, the Parties

26

 

shall cooperate in good faith to file any REET affidavits required in accordance with RCW 82.45 on
or prior to the Closing (and Seller shall pay any applicable REET upon the filing of any such affidavits with Buyer
reimbursing Seller for fifty percent (50%) of such amounts at the Closing); provided, that
if any such affidavits and Taxes have not been filed and paid, as applicable, prior to the Closing,
then, notwithstanding Section 3.3(b), Buyer shall be permitted to retain out of the
Purchase Price payment otherwise due at Closing an amount equal to fifty percent (50%) of Buyer’s
reasonable, good faith estimate of the amount of any REET payable in connection with the sale,
transfer, assignment and delivery of the Purchased Interests and the Acquired Assets and Buyer
shall cause such taxes to be paid directly on Seller’s behalf to the appropriate Taxing authority
upon filing of the appropriate affidavit(s), it being agreed that (i) if the amount retained by
Buyer is not sufficient to pay Seller’s fifty percent (50%) share of such liability, Seller shall
promptly remit the deficiency to Buyer, (ii) any excess amount withheld from the Purchase Price
pursuant to this Section 11.1 in order to satisfy Seller’s share of such Tax liability
shall be promptly returned to Seller upon the payment by Buyer of such Taxes and (iii) fifty
percent (50%) of any refund of such Taxes shall be remitted to Seller promptly after receipt by
Buyer thereof.

     11.2 Proration of Real and Personal Property Taxes. All real and personal property
taxes and assessments on the Purchased Interests and the Acquired Assets for any taxable period
commencing prior to the Closing Date and ending after the Closing Date (a “Straddle Period”) shall
be prorated between Buyer and Seller as of the close of business on the Closing Date based on the
best information then available, with (a) Seller being liable for such Taxes attributable to any
portion of a Straddle Period ending on the Closing Date and (b) Buyer being liable for such Taxes
attributable to any portion of a Straddle Period beginning after the Closing Date. Due to the fact
that real and personal property taxes in Washington may become payable in the tax years subsequent
to the year in which such taxes are accrued, Seller acknowledges that Buyer may treat its payment
of such taxes after the Closing that relate to such pre-Closing period as additional purchase price
payments for the Acquired Assets and may capitalize same for utility ratemaking purposes.
Information available after the Closing Date that alters the amount of Taxes due with respect to
the Straddle Period will be taken into account and any change in the amount of such Taxes shall be
prorated between Buyer and Seller as set forth in the next sentence. All such prorations shall be
allocated so that items relating to the portion of a Straddle Period ending on the Closing Date
shall be allocated to Seller based upon the number of days in the Straddle Period on and prior to
the Closing Date and items related to the portion of a Straddle Period beginning after the Closing
Date shall be allocated to Buyer based upon the number of days in the Straddle Period after the
Closing Date; provided, however, that the Parties shall allocate any real property
Tax in accordance with Section 164(d) of the Code. The amount of all such prorations that must be
paid in order to convey the Purchased Interests and the Acquired Assets to Buyer free and clear of
all Liens other than Permitted Liens shall be calculated and paid on the Closing Date; all other
prorations shall be calculated and paid as contemplated by Section 3.4.

     11.3 Cooperation on Tax Matters. Seller and Buyer shall (and shall cause their
respective Affiliates to) cooperate fully with each other and make available or cause to be made
available to each other for consultation, inspection and copying (at such other Party’s expense) in
a timely fashion such personnel, Tax data, relevant Tax Returns or portions thereof and filings,
files, books, records, documents, financial, technical and operating data, computer records and

27

 

other information as may be reasonably required (a) for the preparation by such other Party of any
Tax Returns or (b) in connection with any Tax audit or proceeding including one Party (or an
Affiliate thereof) to the extent such Tax audit or proceeding relates to or arises from the
transactions contemplated by this Agreement, including the sale, transfer, assignment and delivery
of the Purchased Interests and the Acquired Assets.

     11.4 Retention of Tax Records. After the Closing Date and until the expiration of all
statutes of limitation applicable to Seller’s liabilities for Taxes, Buyer shall retain possession
of all accounting, business, financial and Tax records and information that (a) relate to the
Purchased Interests or the Acquired Assets and are in existence on the Closing Date and (b) come
into existence after the Closing Date but relate to the Purchased Interests or Acquired Assets
before the Closing Date, and Buyer shall give Seller notice and a reasonable opportunity to retain
any such records in the event that Buyer determines to destroy or dispose of them during such
period. In addition, from and after the Closing Date, Buyer shall provide to Seller and their
Related Persons (after reasonable notice and during normal business hours and without charge to
Seller) access to the books, records, documents and other information relating to the Purchased
Interests or the Acquired Assets as may be reasonably necessary to (i) properly prepare for, file,
prove, answer, prosecute and defend any Tax Return, claim, filing, tax audit, tax protest, suit,
proceeding or answer or (ii) administer or complete any cases under chapter 11 of the Bankruptcy
Code of or including Seller. Such access shall include access to computer generated data regarding
the Purchased Interests or the Acquired Assets to the extent it does not contain confidential or
proprietary information of Buyer, including data that is unrelated to the Purchased Interests or
the Acquired Assets.

     11.5 Allocation of Purchase Price and Purchase Price Allocation Forms.

     (a) The Purchase Price (and any other relevant items for tax purposes, including certain
Assumed Liabilities) shall be allocated among the Acquired Assets in accordance with Section
1060 of the Code. Set forth on Schedule 11.5 hereof is an allocation setting forth
the tentative allocation to “real property” (as defined in RCW 82.45) of New LLC (the “Real
Property Allocation Schedule”). The REET payable in accordance with Section 11.1
above shall be calculated on a basis substantially consistent with the Real Property
Allocation Schedule, subject to the refinement and finalization of the calculation prior to
the Closing.

     (b) Within forty-five (45) days after the Execution Date, Seller shall prepare and
deliver to Buyer a proposed allocation schedule setting forth Seller’s good faith estimation
of the allocation of the Purchase Price (and any other relevant items for tax purposes, including
certain Assumed Liabilities) among the Acquired Assets in accordance
with Section 1060 of the Code and Treas. Reg. Section 1.1060-1 (the “Preliminary Allocation
Schedule”), which Preliminary Allocation Schedule shall be subject to the reasonable approval
of Buyer.

     (c) Within sixty (60) days after the Closing, Seller shall prepare and deliver to Buyer
a final allocation schedule setting forth Seller’s allocation of the Purchase Price (and any
other relevant items for tax purposes, including certain Assumed Liabilities) among the
Acquired Assets in accordance with Section 1060 of the Code and Treas. Reg.

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Section 1.1060-1 and substantially consistent with the Preliminary Allocation Schedule (the “Final Allocation
Schedule”), which Final Allocation Schedule shall be subject to the reasonable approval of
Buyer.

     (d) The Parties agree that they will report the federal, state, local and other Tax
consequences of the purchase and sale hereunder (including in filings on IRS Form 8594) in a
manner consistent with the Final Allocation Schedule and that they will not take any position
inconsistent therewith in connection with any Tax Return, refund claim, litigation or
otherwise, unless and to the extent required to do so pursuant to applicable law. Seller and
Buyer shall cooperate in the filing of any forms (including Form 8594) with respect to such
allocation. Notwithstanding any other provision of this Agreement, this Section 11.5
shall survive any termination or expiration of this Agreement.

     (e) If Seller and Buyer are unable to agree upon the Final Allocation Schedule within
thirty (30) days after the delivery thereof to Buyer, Seller and Buyer shall refer the matter
to a national accounting firm that is independent as to both Buyer and Seller and their
respective Affiliates as of the date of selection, as mutually agreed to by Buyer and Seller
(the “Independent Accounting Firm”), which shall determine the Final Allocation Schedule
(including any valuations). The Independent Accounting Firm shall be instructed to deliver
to Seller and Buyer a written determination of the Final Allocation Schedule within thirty
(30) days from the date of referral thereof to the Independent Accounting Firm. For purposes
of this Section and whenever the Independent Accounting Firm is retained to resolve a dispute
between the Parties, the Independent Accounting Firm may determine the issues in dispute
following such procedures, consistent with the provisions of this Agreement, as it deems
appropriate in the circumstances and with reference to the amounts in issue. The Parties do
not intend to impose any particular procedures upon the Independent Accounting Firm, it being
the desire of the Parties that any such disagreement shall be resolved as expeditiously and
inexpensively as reasonably practicable. Except in the case of manifest error, the finding
of such Independent Accounting Firm shall be final and binding on the Parties hereto and
shall not be subject to the Dispute resolution proceedings set forth in Section 14.3.
Seller and Buyer shall share equally the fees and disbursements of the Independent
Accounting Firm.

     11.6 Unbilled Transactional Taxes. If a Tax assessment is levied upon any Party by an
authorized tax jurisdiction for unbilled transactional Taxes that are the obligation of the other
Party under this Agreement, then the non-assessed Party shall reimburse the assessed Party for
those taxes including any interest and penalty.

     11.7 Washington Tax Ruling. Neither Seller nor Buyer shall take any action that is
intended to, or reasonably might, cause the consummation of the transactions contemplated by this
Agreement, including the sale, transfer, assignment and delivery of the Purchased Interests and the
Acquired Assets and the subsequent dissolution of New LLC, to fail to be made in the manner
described in the request for the Washington Tax Ruling.

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ARTICLE 12

CONDITIONS PRECEDENT TO PERFORMANCE BY PARTIES

     12.1 Conditions Precedent to Performance by Seller and Buyer. The respective
obligations of Seller and Buyer to consummate the transactions contemplated by this Agreement are
subject to the satisfaction or waiver (other than the condition relating to entry of the Sale Order
contained in Section 12.1(a), the satisfaction of which cannot be waived), on or prior to
the Closing Date, of the following conditions:

     (a) Bankruptcy Matters. The Bidding Procedures Order and the Sale Order,
substantially in the form attached hereto (which includes a finding of good faith under
section 363 of the Bankruptcy Code and which may include non-substantive changes necessary to
comply with the Guidelines for the Conduct of Asset Sales adopted by the Bankruptcy Court on
September 5, 2006), shall have been entered by the Bankruptcy Court and shall have become
Final Orders. On the Closing Date, the Bidding Procedures Order and the Sale Order shall
each be in effect, and shall not have been reversed, stayed, modified or amended without the
prior written consent of Buyer.

     (b) Antitrust Approvals. The applicable waiting periods for the transactions
contemplated under this Agreement under the HSR Act, and any other Antitrust Law shall have
expired or terminated.

     (c) Consents, Approvals and Notifications. The Consents, approvals and
notifications set forth on Schedules 4.4 and 5.4 of the Disclosure Schedules
shall have been obtained or made, as appropriate, and each such Consent, approval and
notification shall be in form and substance reasonably satisfactory to the Parties, including
without the imposition of any conditions that would reasonably be expected to materially and
adversely impact the applicable Party.

     (d) No Violation of Orders. No preliminary or permanent injunction or other
Order that declares this Agreement, the Purchase Notice or the Master Escrow Agreement
invalid or unenforceable in any respect or that would prevent the consummation of the
transactions contemplated hereby or thereby shall be in effect.

     (e) Washington Tax Ruling. The Washington Tax Ruling shall be in full force and
effect and shall not have been reversed, stayed, modified or amended.

     12.2 Conditions Precedent to Performance by Seller. The obligations of Seller to
consummate the transactions contemplated by this Agreement are subject to the satisfaction, on or
before the Closing Date, of the following conditions, any one or more of which may be waived by
Seller in its sole discretion:

     (a) Representations and Warranties of Buyer. All representations and warranties
made by Buyer in this Agreement shall be true and correct in all material respects on and as
of the Closing Date as if again made by Buyer on and as of such date (or, if made as of a
specific date, at and as of such date), except that those representations and warranties made
by Buyer that contain materiality, Material Adverse Effect or other similar qualifiers shall
be true and correct in all respects, and Seller shall have received a

30

 

certificate dated as of the Closing Date and signed by the President or a Vice President of Buyer to that effect.

     (b) Performance of the Obligations of Buyer. Buyer shall have performed in all
material respects all obligations required under this Agreement to be performed by it on or
before the Closing Date (except with respect to the obligation to pay the Purchase Price in
accordance with the terms of this Agreement, which obligation shall be performed in all
respects as required under this Agreement), and Seller shall have received a certificate
dated the Closing Date and signed by the President or a Vice President of Buyer to that
effect.

     (c) Assurance of Future Performance. Buyer shall, on or prior to the Closing,
have provided all assurances of future performance required to be provided under Section 365
of the Bankruptcy Code so that, assuming the performance by Seller of its obligations under
Section 6.8, the Assigned Contracts may be assumed by Seller and assigned to New LLC
in accordance with the provisions of Section 365 of the Bankruptcy Code.

     (d) Cure Costs Other than Seller’s Cure Costs. Buyer shall, on or prior to the
Closing, have paid any and all cure costs related to the Assigned Contracts (other than
Seller’s Cure Costs, which shall be Seller’s responsibility as set forth in Section
6.8) that are required to be paid under Section 365 of the Bankruptcy Code so that,
assuming the performance by Seller of its obligations under Section 6.8, the Assigned
Contracts may be assumed by Seller and assigned to New LLC in accordance with the provisions
of Section 365 of the Bankruptcy Code.

     (e) Buyer’s Deliveries. Buyer shall have delivered, and Seller shall have
received, all of the items set forth in Section 3.3 of this Agreement.

     12.3 Conditions Precedent to the Performance by Buyer. The obligations of Buyer to
consummate the transactions contemplated by this Agreement are subject to the satisfaction, on or
before the Closing Date, of the following conditions, any one or more of which may be waived by
Buyer in its sole discretion:

     (a) Representations and Warranties of Seller. The representations and
warranties made by Seller in Article 4 of this Agreement shall be true and correct in
all material respects as of the Closing, in each case as though made at and as of such time
(or, if made as of a specific date, at and as of such date), except that those
representations and warranties made by Seller that contain materiality, Material Adverse
Effect or other similar qualifiers shall be true and correct in all respects and Buyer shall
have received a certificate dated the Closing Date and signed by the President or a Vice
President of Seller to that effect.

     (b) Performance of the Obligations of Seller. Seller shall have performed in
all respects all obligations required under this Agreement to be performed by them on or
before the Closing Date, except for such failures to perform do not constitute a Material
Adverse Effect, and Buyer shall have received a certificate dated the Closing Date and signed
by the President or a Vice President of Seller to that effect.

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     (c) Seller’s Cure Costs; Cure of Non-Monetary Defaults. Seller shall, on or
prior to the Closing, have (i) paid any and all Seller’s Cure Costs in respect of the
Assigned Contracts or otherwise have reserved sufficient funds necessary to satisfy any such
cure obligations in respect of Seller’s Cure Costs and (ii) cured any and all defaults under
the Assigned Contracts that cannot be cured through the payment of money, in each case so
that, assuming the performance by Buyer of its obligations under Section 7.4, the
Assigned Contracts may be assumed by Seller and assigned to New LLC in accordance with the
provisions of section 365 of the Bankruptcy Code.

     (d) Excess Cure Costs Other than Seller’s Cure Costs. The aggregate amount
required to be paid by Buyer pursuant to Section 7.4 or otherwise to overcome any
objections to the assignment and assumption of the Assigned Contracts, after taking into
account any reduction to the Purchase Price contemplated by Section 6.8, shall not
exceed the aggregate amount of the cure costs set forth on Schedule 4.7 (not
including Seller’s Cure Costs) by greater than One Hundred and Fifty Thousand Dollars
($150,000).

     (e) Assigned Contracts. The Bankruptcy Court shall have entered an Order on the
docket (which may be the Sale Order) approving the assumption of the Assigned Contracts by
Seller and the assignment of such Assigned Contracts to New LLC, and no Order staying,
reversing, modifying or amending such Order shall be in effect on the Closing Date.

     (f) FERC Approvals. Buyer shall have received all authorizations, in form and
substance reasonably satisfactory to Buyer, as contemplated by Section 12.1(c), from
the FERC under the FPA to acquire, own and operate the Acquired Assets.

     (g) Material Adverse Effect. No Material Adverse Effect shall have occurred and
be continuing.

     (h) Title Commitment. Seller shall have furnished Buyer with a preliminary
commitment from the Title Company to issue the Title Policy, which shall be in form and
substance reasonably satisfactory to Buyer.

     (i) Additional Real Property. Calpine shall have transferred title to the
Additional Real Property to Seller, such that the Additional Real Property shall be
included in the Real Property and transferred to New LLC pursuant to the Transfer and
Contribution Agreement.

     (j) Additional Real Property Survey. Seller shall have furnished Buyer with the
Additional Real Property Survey, which shall be in form and substance reasonably satisfactory
to Buyer.

     (k) Termination of Existing Intracompany Service Contracts. Effective no later
than the Closing, Seller shall have terminated, in so far as they relate to the Power Plant
and without liability to Buyer in any manner, (i) that certain Master Maintenance Services
Agreement Base Contract, dated March 23, 2004, between Seller and certain of its Affiliates
and Calpine Operating Services Company, Inc., (ii) that certain Master Administrative
Services Agreement, dated March 23, 2004, between Seller and certain of

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its Affiliates and Calpine Administrative Services Company, Inc., (iii) that certain Master Operation and
Maintenance Agreement, dated March 23, 2004, between Seller and certain of its Affiliates and
Calpine Operating Services Company, Inc., (iv) that certain Master Construction Management
Agreement, dated March 23, 2004, among Seller and certain of its Affiliates, Calpine
Generating Company and Calpine Construction Management Company, Inc. and (v) that certain
Index Based Gas Sale and Power Purchase Agreement, dated March 23, 2004, among Calpine Energy
Services, L.P., Calpine Generating Company, LLC and certain of its Affiliates, including
Seller (collectively, the “Intracompany Service Contracts”).

ARTICLE 13

TERMINATION AND EFFECT OF TERMINATION

     13.1 Right of Termination. Notwithstanding anything to the contrary contained herein,
this Agreement may be terminated only as provided in this Article 13. In the case of any
such termination, the terminating Party shall give notice to the other Party specifying the
provision pursuant to which the Agreement is being terminated.

     13.2 Termination Without Default.

     (a) This Agreement may be terminated at any time before Closing:

     (i) by mutual written consent of Seller and Buyer;

     (ii) by Buyer if the Bidding Procedures Order has not been entered and become a
Final Order within sixty (60) days of the Execution Date;

     (iii) by Buyer if a Sale Order has not been entered and become a Final Order
within ninety (90) days of the entry of the Bidding Procedures Order;

     (iv) by Buyer, on any date that is more than 270 days after the date hereof
(the “Termination Date”), if any condition contained in Section 12.1 has not
been satisfied or waived as of such time; provided, however, that
Buyer shall not have the right to terminate this Agreement under this Section 13.2(a)(iv) if Buyer’s failure to fulfill
any of its obligations under this Agreement is the reason that the Closing has not
occurred on or before said date; provided, further, however, that if
the Closing shall not have occurred on or before the Termination Date due to the
failure to obtain the FERC approval under the FPA and (x) FERC has not denied or
terminated its review of the Section 203 application, and (y) all other conditions
to the respective obligations of the Parties to close hereunder that are capable of
being fulfilled by the Termination Date shall have been so fulfilled or waived
(other than those conditions that, by their terms, cannot be satisfied until the
Closing), then the Termination Date shall be automatically extended for an
additional ninety (90) days or such earlier date as FERC denies or terminates its
review of the Section 203 application.

     (v) by Seller, on any date that is after the Termination Date, if any condition
contained in Section 12.1 has not been satisfied or waived as of such

33

 

time; provided, however, that Seller shall not have the right to terminate
this Agreement under this Section 13.2(a)(v) if Seller’s failure to fulfill
any of their obligations under this Agreement is the reason that the Closing has not
occurred on or before said date; provided, further, however, that if the Closing
shall not have occurred on or before the Termination Date due to the failure to
obtain the FERC approval under the FPA and (x) FERC has not denied or terminated its
review of the Section 203 application, and (y) all other conditions to the
respective obligations of the parties to close hereunder that are capable of being
fulfilled by the Termination Date shall have been so fulfilled or waived (other than
those conditions that, by their terms, cannot be satisfied until the Closing), then
the Termination Date shall be automatically extended for an additional ninety (90)
days or such earlier date as FERC denies or terminates its review of the Section 203
application.

     (vi) by either Buyer or Seller, immediately upon an Order becoming final and
non-appealable that declares this Agreement, the Purchase Notice or the Master
Escrow Agreement invalid or unenforceable in any material respect or that would
prevent the consummation of the transactions contemplated hereby or thereby (a
“Termination Order”); provided, however, that neither Seller nor
Buyer shall have the right to terminate this Agreement pursuant to this Section
13.2(a)(vi) if such Party or any of its Affiliates has sought entry of, or has
failed to use all commercially reasonable efforts to oppose entry of, such
Termination Order;

     (vii) by Buyer, if there shall be a breach by Seller of any representation,
warranty, covenant or agreement contained in this Agreement, which would result in a
failure of a condition set forth in Sections 12.1 or 12.3 and which
breach is not reasonably capable of being cured such that the applicable condition
is not capable of being satisfied prior to the Termination Date;

     (viii) by Seller, if there shall be a breach by Buyer of any representation,
warranty, covenant or agreement contained in this Agreement, which would result
in a failure of a condition set forth in Sections 12.1 or 12.2
and which breach is not reasonably capable of being cured such that the applicable
condition is not capable of being satisfied prior to the Termination Date;

     (ix) by Buyer at any time after the Bankruptcy Court approves an Alternative
Transaction, unless Buyer is a Back-Up Bidder (as that term is defined in the
Bidding Procedures attached to the Bidding Procedures Order), in which case Buyer
may terminate this Agreement only in accordance with the Bidding Procedures Order.

     (b) If this Agreement is terminated pursuant to Section 13.2(a), (i) the
Deposits, together with any interest accrued thereon less Buyer’s share of any fees and
expenses of the Escrow Agent, as set forth in the Purchase Notice, shall be returned to
Buyer, (ii) this Agreement shall become null and void and have no effect (other than this
Article 13, Article 14 and Article 15, which shall survive
termination) and (iii) none of

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Seller, Buyer or any of their respective Related Persons shall
have any liability or obligation arising under or in connection with this Agreement, except
for fraud, intentional breach or willful misconduct of either Party.

     13.3 Effect of Failure of Seller’s Conditions to Closing.

     (a) Seller may terminate this Agreement at any time after the Termination Date and
before Closing if any condition contained in Section 12.2(a) or Section
12.2(b) has not been satisfied or waived by Seller as of such time; provided,
however, that Seller shall not have the right to terminate this Agreement under this
Section 13.3 if Seller’s failure to fulfill any of its obligations under this
Agreement has been the reason that the Closing has not been consummated on or before such
date.

     (b) If this Agreement is terminated pursuant to this Section 13.3, Buyer
acknowledges that a monetary remedy may be inadequate or impracticable and that Seller may
have been caused irreparable harm and, if Seller so determines, Seller shall have the right,
subject to the waiver by Seller or satisfaction of the conditions contained in Section
12.1, to obtain an Order requiring Buyer to specifically perform all of its obligations
under this Agreement.

     (c) If Seller determines that a monetary remedy is adequate and practicable, Seller may
terminate this Agreement, retain the Deposits (together with any interest accrued thereon),
to the extent of any damages Seller may have incurred, and pursue any other remedies
available to Seller at Law.

     13.4 Effect of Failure of Buyer’s Conditions to Closing.

     (a) Buyer may terminate this Agreement at any time after the Termination Date and before
Closing if any condition contained in Section 12.3 has not been satisfied or waived
as of such time; provided, however, that Buyer shall not have the right to
terminate this Agreement under this Section 13.4 if Buyer’s failure to fulfill any of
its obligations under this Agreement has been the reason that the Closing has not been
consummated on or before said date.

     (b) If this Agreement is terminated pursuant to this Section 13.4: (i) the
Deposits, together with any interest accrued thereon less Buyer’s share of any fees and
expenses of the Escrow Agent, as set forth in the Purchase Notice, shall be returned to
Buyer, (ii) this Agreement shall become null and void and have no effect (other than this
Article 13, Article 14 and Article 15, which shall survive
termination) and (iii) except as provided in this Section 13.4, none of Seller, Buyer
or any of their respective Related Persons shall have any liability or obligation arising
under or in connection with this Agreement except for fraud, intentional breach or willful
misconduct of Seller.

     (c) If this Agreement is terminated pursuant to this Section 13.4, Seller
acknowledges that a monetary remedy may be inadequate or impracticable and that Buyer may
have been caused irreparable harm and, if Buyer so determines, Buyer shall have the right,
subject to the waiver by Buyer or satisfaction of the conditions contained in Section
12.1, to obtain an Order requiring Seller to specifically perform all of its

35

 

obligations under this Agreement; provided, however, that it is understood that Seller
shall not be obligated to proceed with the Closing absent appropriate authorization from the
Bankruptcy Court (whether pursuant to the Sale Order or otherwise) but that, in exercising
its remedies hereunder Buyer shall be permitted, among other things, to compel Seller to seek
such authorization.

     13.5 Termination on Alternative Transaction.

     (a) This Agreement may be terminated at any time before Closing by either Buyer or
Seller, upon Seller’s entering into any Alternative Transaction.

     (b) If this Agreement is terminated pursuant to Section 13.5(a): (i) the
Deposits, together with any interest accrued thereon less Buyer’s share of any fees and
expenses of the Escrow Agent, as set forth in the Purchase Notice, shall be returned to
Buyer, (ii) Seller shall pay Buyer the Break-Up Fee in accordance with Section
13.5(c), (iii) this Agreement shall become null and void and of no effect (except for
this Article 13, Article 14 and Article 15 which shall survive
termination), and (iv) except as provided in this Section 13.5(b) and
13.5(c), none of Buyer, Seller or their respective Related Persons shall have any
liability or obligation arising under or in connection with this Agreement.

     (c) Break-Up Fee

     (i) If this Agreement is terminated pursuant to Section 13.5(a) Seller
shall pay to Buyer in immediately available funds a fee equal to 2.5% of the
Purchase Price (the “Break-Up Fee”), such fee to be paid upon the closing of the
Alternative Transaction and from the sales proceeds of such Alternative Transaction.

     (ii) Seller’s obligation to pay the Break-Up Fee pursuant to this Section
13.5(c) shall survive termination of this Agreement and shall constitute an
allowed administrative expense of Seller under sections 503(b) and 507(a)(2) of
the Bankruptcy Code without further Order of the Bankruptcy Court.

     (iii) The Break-Up Fee, payable under the circumstances provided in Section
13.5(c)(i) shall be the exclusive remedy of Buyer and its Affiliates for any
termination of this Agreement pursuant to Section 13.5. In no event shall
Seller or any of its respective Affiliates or Related Persons have any liability
with respect to Buyer or any other Person hereunder in excess of the applicable
Break-Up Fee in the event that this Agreement terminates for any reason permitted by
Section 13.5, except for fraud, intentional breach or willful misconduct of
Seller, and any claim, right or cause of action by Buyer or any other Person against
Seller or their respective Affiliates or Related Persons in excess of the applicable
Break-Up Fee is hereby fully waived, released and forever discharged.

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ARTICLE 14

MISCELLANEOUS

     14.1 LIMITATION ON DAMAGES. IN NO EVENT SHALL EITHER PARTY OR THEIR RESPECTIVE
AFFILIATES HAVE ANY LIABILITY TO THE OTHER PARTY OR ANY OTHER PERSON FOR ANY SPECIAL,
CONSEQUENTIAL, INDIRECT, EXEMPLARY OR PUNITIVE DAMAGES (INCLUDING ANY DAMAGES ON ACCOUNT OF LOST
PROFITS OR OPPORTUNITIES OR BUSINESS INTERRUPTION AND THE LIKE), WHETHER BY STATUTE, IN TORT OR
UNDER CONTRACT, AND ANY SUCH CLAIM, RIGHT OR CAUSE OF ACTION FOR ANY SUCH DAMAGES IS HEREBY FULLY
WAIVED, RELEASED AND FOREVER DISCHARGED.

     14.2 Successors and Assigns. Except as otherwise provided in this Agreement and
except for an assignment by Buyer to an Affiliate of Buyer (it being understood that any such
assignment by Buyer to an Affiliate shall not relieve Buyer of its obligations hereunder), no Party
hereto shall assign this Agreement or any rights or obligations hereunder without the prior written
consent of the other Party hereto, and any such attempted assignment without such prior written
consent shall be void and of no force and effect. This Agreement shall inure to the benefit of and
shall be binding upon the successors and permitted assigns of the Parties hereto.

     14.3 Dispute Resolution.

     (a) In the event of any action, dispute or controversy arising out of or relating to
this Agreement (each, a “Dispute”), the Parties shall promptly seek to resolve any such
Dispute by negotiations between senior executives of the Parties who have the authority to
settle the Dispute. When a Party believes there is a Dispute, that Party shall give the
other Party written notice of the Dispute. Within fifteen (15) days after receipt of such
notice, the other Party shall submit to the first Party a written response. Both the notice
and response shall include (i) a statement of each Party’s position and a summary of the
evidence and arguments supporting such position; and (ii) the name, title, fax number and
telephone number of the executive or executives who shall represent the Party. In the event
that the Dispute involves a claim arising out of the actions of any Person not a signatory to
this Agreement, the receiving Party shall have such additional time as necessary, not to
exceed an additional fifteen (15) days, to investigate the Dispute before submitting a written response. The executives shall meet at a
mutually agreeable time and place within seven (7) days after the date of the response and
thereafter as often as they reasonably deem necessary to exchange relevant information and to
attempt to resolve the Dispute. If one of the executives intends to be accompanied at a
meeting by an attorney, the other executive shall be given a least five (5) Business Days’
notice of such intention and may also be accompanied by an attorney.

     (b) If the Dispute has not been resolved within thirty (30) days after the date of the
response given pursuant to Section 14.3(a), or such additional time, if any, that the
Parties mutually agree to in writing, or if any Party receiving a Dispute notice denies the
applicability of the provisions of this Section 14.3 or otherwise refuses to
participate under the provisions hereof, either Party may pursue such remedies as are
available to it at Law or in equity.

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     14.4 Governing Law; Jurisdiction. This Agreement shall be construed, performed and
enforced in accordance with, and governed by, the Laws of the State of New York (without giving
effect to the principles of conflicts of Laws thereof), except to the extent that the Laws of such
State are superseded by the Bankruptcy Code; provided that, the validity and enforceability of all
conveyance documents or instruments executed and delivered pursuant to this Agreement insofar as
they affect title to real property shall be governed by and construed in accordance with the Laws
of the jurisdiction in which such property is located. For so long as Seller is subject to the
jurisdiction of the Bankruptcy Court, the Parties hereto irrevocably elect as the sole judicial
forum for the adjudication of any matters arising under or in connection with the Agreement, and
consent to the exclusive jurisdiction of, the Bankruptcy Court. After Seller is no longer subject
to the jurisdiction of the Bankruptcy Court, any legal action or proceeding with respect to this
Agreement or the transactions contemplated hereby may be brought in the courts of the State of New
York sitting in Manhattan or of the United States for the Southern District of New York, and by
execution and delivery of this Agreement, each of the Parties consents to the non-exclusive
jurisdiction of those courts. Each of the Parties irrevocably waives any objection, including any
objection to the laying of venue or based on the grounds of forum non conveniens, which it may now
or hereafter have to the bringing of any action or proceeding in such jurisdiction in respect of
this Agreement or the transactions contemplated hereby.

     14.5 Disclosure Schedule Supplements. From time to time prior to the Closing, Seller
shall supplement or amend the Disclosure Schedules to this Agreement with respect to any matter
that, if existing, occurring or known at the date of this Agreement, would have been required to be
set forth or described in the Disclosure Schedules. The Disclosure Schedules shall be deemed
amended by all such supplements and amendments except for purposes of determining whether the
conditions set forth in Section 12.3(a) of the Agreement have been satisfied.

     14.6 Warranties Exclusive. The representations and warranties contained herein are
the only representations or warranties given by Seller and all other express or implied warranties
are disclaimed. Without limiting the foregoing, except as provided in this Agreement, Buyer
acknowledges that the Purchased Interests and the Acquired Assets are conveyed “AS IS,” “WHERE IS”
and “WITH ALL FAULTS” and that all warranties of merchantability, usage or
suitability or fitness for a particular purpose are disclaimed. Without limiting the
foregoing, except as provided in this Agreement, Buyer further acknowledges that no material or
information provided by or communications made by Seller or its agents will create any
representation or warranty of any kind, whether express or implied, with respect to the Purchased
Interests or the Acquired Assets and the title thereto, the operation of the Acquired Assets, or
the prospects (financial and otherwise), risks and other incidents of the Business, including the
actual or rated generating capability of the Power Plant or the ability of Buyer to generate or
sell electrical energy.

     14.7 Survival of Representations and Warranties. None of the representations or
warranties of Seller set forth in this Agreement or in any certificate delivered pursuant to
Section 12.3(a) or Section 12.3(b) shall survive the Closing.

     14.8 No Recourse Against Third Parties. Buyer agrees for itself and for all of its
officers, directors, shareholders, Affiliates, attorneys, agents and any other parties making any

38

 

claim by, through or under the rights of such persons (collectively, the “Buyer Group”) that no
member of Buyer Group shall have any rights against any officer, director, shareholder, Affiliate
(including Calpine), attorney or agent of Seller (each, individually, a “Non-Recourse Person”) for
any Losses that any member of Buyer Group may suffer in connection with this Agreement, except to
the extent arising out of fraud, intentional breach or willful misconduct. Buyer and all members
of Buyer Group hereby waive any rights, recourse or remedy against Seller under any Environmental
Laws, including any arising under the Comprehensive Environmental Response, Compensation and
Liability Act, any analogous state law, or the common law, with respect to any environmental matter
relating to the Acquired Assets, the Power Plant or the Business. If any member of Buyer Group
makes a claim against any person or entity that is not a Non-Recourse Person (a “Third Person”)
that in any way gives rise to a claim by such Third Person against any Non-Recourse Person
asserting that such Non-Recourse Person is or may be liable to such Third Person with respect to
any Losses arising in connection with this Agreement (whether by way of indemnification,
contribution, or otherwise on any theory whatever) (a “Claim Over”), such member of Buyer Group
shall reduce or credit against any judgment or settlement such member of Buyer Group may obtain
against such Third Person the full amount of any judgment or settlement such Third Person may
obtain against the Non-Recourse Person on such Claim Over, and shall, as part of any settlement
with such Third Person, obtain from such Third Person for the benefit of such Non-Recourse Person a
satisfaction in full of such Third Person’s Claim Over against the Non-Recourse Person.

     14.9 Mutual Drafting. This Agreement is the result of the joint efforts of Buyer and
Seller, and each provision hereof has been subject to the mutual consultation, negotiation and
agreement of the Parties and there is to be no construction against either Party based on any
presumption of that Party’s involvement in the drafting thereof.

     14.10 Expenses. Except as otherwise provided herein, each of the Parties hereto shall
pay its own expenses in connection with this Agreement and the transactions contemplated hereby,
including any legal and accounting fees, whether or not the transactions contemplated hereby are
consummated. Buyer and Seller shall share equally the cost of all surveys and title
reports obtained in connection with this Agreement and the transactions contemplated hereby.
Transaction Taxes shall be the responsibility of Seller in accordance with Section 11.1
(except to the extent Buyer is responsible to reimburse Seller for fifty percent (50%) of the REET
imposed as a result of the transactions contemplated by this Agreement pursuant to Section
11.1). The Parties shall share equally the cost of the Title Policy and all filing fees
required to be paid in connection with any filings made or notices given pursuant to any Antitrust
Law.

     14.11 Broker’s and Finder’s Fees. Each of the Parties represents and warrants that it
has not dealt with any broker or finder in connection with any of the transactions contemplated by
this Agreement in a manner so as to give rise to any claims against the other Party for any
brokerage commission, finder’s fees or other similar payout.

     14.12 Severability. In the event that any part of this Agreement is declared by any
court or other judicial or administrative body to be null, void or unenforceable, said provision
shall survive to the extent it is not so declared, and all of the other provisions of this
Agreement shall remain in full force and effect only if, after excluding the portion deemed to be
unenforceable, the remaining terms shall provide for the consummation of the transactions
contemplated hereby

39

 

in substantially the same manner as originally set forth at the later of the
date this Agreement was executed or last amended.

     14.13 Notices. All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given: (a) on the date of
service if served personally on the Party to whom notice is to be given; (b) on the day of
transmission if sent via facsimile transmission to the facsimile number given below, and telephonic
confirmation of receipt is obtained promptly after completion of transmission; (c) on the day after
delivery to Federal Express or similar overnight courier or the Express Mail service maintained by
the United States Postal Service or (d) on the fifth day after mailing, if mailed to the Party to
whom notice is to be given, by first class mail, registered or certified, postage prepaid and
properly addressed, to the Party as follows:

If to Seller:

c/o Calpine Corporation

50 West San Fernando Street

San Jose, California 95113

Attention: General Counsel

Facsimile: (408) 794-2434

Copy to:

Kirkland & Ellis LLP

153 E. 53rd Street

Citicorp Center

New York, NY 10022-4611

Attention: Adam D. Phillips

Facsimile: (212) 446-4900

Kirkland & Ellis LLP

777 South Figueroa Street

Los Angeles, CA 90017

Attention: Bennett Spiegel

Facsimile: (213) 680-8500

If to Buyer:

c/o Puget Sound Energy, Inc.

10885 NE 4th Street (98004-5591)

P.O. Box 97034

Bellevue, WA 98009-9734

Facsimile No: (425) 462-3300

Attention: Senior Vice President Energy Resources

40

 

with a copy to:

Puget Sound Energy, Inc.

10885 NE 4th Street (98004-5591)

P.O. Box 97034

Bellevue, WA 98009-9734

Facsimile No: (425) 462-3300

Attention: General Counsel

Any Party may change its address for the purpose of this Section 14.13 by giving the other
Party written notice of its new address in the manner set forth above.

     14.14 Amendments; Waivers. This Agreement may be amended or modified, and any of the
terms, covenants, representations, warranties or conditions hereof may be waived, only by a written
instrument executed by the Parties hereto, or in the case of a waiver, by the Party waiving
compliance. Any waiver by any Party of any condition, or of the breach of any provision, term,
covenant, representation or warranty contained in this Agreement, in any one or more instances,
shall not be deemed to be nor construed as a furthering or continuing waiver of any such condition,
or of the breach of any other provision, term, covenant, representation or warranty of this
Agreement.

     14.15 Schedules. Seller may, at its option, include in the Disclosure Schedules items
that are not material, and any such inclusion, or any references to dollar amounts, shall not be
deemed to be an acknowledgment or representation that such items are material or would cause a
Material Adverse Effect, to establish any standard of materiality or to define further the meaning
of such terms for purposes of this Agreement.

     14.16 Public Announcements. At all times prior to or in connection with the Closing,
no Party shall make any press release or public announcement concerning the transactions
contemplated by this Agreement without the prior written approval of the other Party (which
approval shall not be unreasonably withheld, conditioned or delayed), unless a press release or
public announcement is required by Law or Order of the Bankruptcy Court. If any such press
release or announcement or other disclosure is required by Law or Order of the Bankruptcy
Court, the disclosing Party may make such press release, announcement or other disclosure and shall
promptly furnish the other Party with a copy thereof. The Parties acknowledge that Seller shall
file this Agreement with the Bankruptcy Court in connection with obtaining the Sale Order and
Bidding Procedures Order.

     14.17 Entire Agreement. This Agreement, the Master Escrow Agreement (in so far as it
applies to the transactions contemplated by this Agreement, as set forth in the Purchase Notice),
the Purchase Notice and the Confidentiality Agreement contain the entire understanding among the
Parties hereto (including, for this purpose, Calpine with respect to the Purchase Notice and the
Master Escrow Agreement) with respect to the transactions contemplated hereby and supersede and
replace all prior and contemporaneous agreements and understandings, oral or written, with regard
to such transactions. All Schedules hereto and any documents and instruments delivered pursuant to
any provision hereof are expressly made a part of this Agreement as fully as though completely set
forth herein.

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     14.18 Parties in Interest. Nothing in this Agreement is intended to confer any rights
or remedies under or by reason of this Agreement on any Persons other than Seller and Buyer and
their respective successors and permitted assigns. Nothing in this Agreement is intended to
relieve or discharge the obligations or liability of any third Persons to Seller or Buyer. No
provision of this Agreement shall give any third Persons any right of subrogation or action over or
against Seller or Buyer.

     14.19 Headings. The article and section headings in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this Agreement.

     14.20 Construction. Unless the context of this Agreement otherwise requires, (i)
words of any gender include the other gender, (ii) words using the singular or plural number also
include the plural or singular number, respectively, (iii) the terms “hereof,” “herein,” “hereby,”
and derivative or similar words refer to this entire Agreement as a whole and not to any other
particular Article, Section or other subdivision, (iv) the words “include,” “includes” and
“including” shall be deemed to be followed by the phrase “without limitation,” (v) “shall,” “will,”
or “agrees” are mandatory, and “may” is permissive, and (vi) “or” is not exclusive.

     14.21 Currency. Except where otherwise expressly provided, all amounts in this
Agreement are stated and shall be paid in United States currency.

     14.22 Time of Essence. Time is of the essence of this Agreement.

     14.23 Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which shall constitute the same agreement.

ARTICLE 15

DEFINITIONS

     15.1 Certain Terms Defined. As used in this Agreement, the following terms shall have
the following meanings:

     “Additional Real Property Survey” means that certain ALTA/ASCM survey to be
completed by Taylor Engineering, Inc. prior to the Closing, covering all of the Additional Real
Property.

     “Affiliate” means, with respect to any Person, any Person directly or indirectly controlling,
controlled by or under direct or indirect common control with such other Person 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.

     “Alternative Transaction” means a transaction involving a sale of all or substantially all of
the Purchased Interests, the Business or the Acquired Assets by Seller to a purchaser or purchasers
other than Buyer, following an Auction in which Buyer is the stalking horse bidder, or, the filing
by Seller with the Bankruptcy Court of a plan of reorganization or liquidation that does not
contemplate the sale of the Purchased Interests by Seller to Buyer in accordance with the terms of
this Agreement.

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     “Assignment Agreement” means the agreement substantially in the form of Exhibit
A hereto.

     “Auction” means the auction conducted by Seller pursuant to the Bidding Procedures Order.

     “Bankruptcy Code” means Title 11 of the United States Code.

     “Bankruptcy Court” means the United States Bankruptcy Court for the Southern District of New
York or such other court having jurisdiction over the Chapter 11 Case originally administered in
the United States Bankruptcy Court of the Southern District of New York.

     “Business” means the business of generating and selling electric power, capacity and ancillary
services from the Power Plant, as managed and operated by Seller on the date hereof, to Seller’s
customers and any business activities of Seller incidental to the foregoing.

     “Business Day” means any day other than Saturday, Sunday and any day that is a legal holiday
or a day on which banking institutions in New York, New York are authorized by Law or other
Governmental action to close.

     “Business Records” means all books, files and records (whether existing in paper or electronic
format) to the extent they apply primarily to the Purchased Interests, the Acquired Assets or the
Business, including customer lists, historical customer files, reports, plans, data, accounting and
tax records, test results, product specifications, drawings, diagrams, construction plans and
records, training manuals, engineering data, safety and Environmental Reports and documents,
maintenance schedules, operating and production records, inventory records, business plans, and
marketing and all other studies, documents and records but excluding any Retained Books and
Records.

     “Chapter 11 Case” means, collectively, the cases commenced and to be commenced by Seller under
chapter 11 of the Bankruptcy Code in the Bankruptcy Court.

     “Clayton Act” means Title 15 of the United States Code §§ 12-27 and Title 29 of the United
States Code §§ 52-53, as amended.

     “Code” means the Internal Revenue Code of 1986, as amended.

     “Consent” means any consent, approval, authorization, qualification, waiver or notification of
a Government.

     “Contract” means any written or oral contract, agreement, license, sublicense, lease,
sublease, mortgage, instruments, guaranties, commitment, undertaking or other similar arrangement,
whether express or implied.

     “DOR” means the Department of Revenue of the State of Washington.

     “Emission Allowances” means authorizations to emit specified units of sulfur dioxide (SO2)
pursuant to Title IV of the U.S. Clean Air Act and nitrogen oxides (NOx) pursuant to the

43

 

22 State
SIP Call in amounts equal to the respective SO2 and NOx accounts for the Power Plant as of May 1,
2006.

     “Employee Benefit Plan” means any “employee benefit plan” (as such term is defined in ERISA
§3(3)) and any other employee benefit plan, program or arrangement of any kind.

     “Environmental Laws” means all Laws for protection of the environment.

     “Environmental Reports” means any environmental sampling or report performed specifically to
test compliance with any Environmental Laws and any and all Phase I or II environmental
assessments, in each case which Seller has received from an un-Affiliated third party within the
last three (3) years with respect to the Power Plant or the Owned Real Property; provided that
Environmental Reports shall not include any safety, health and environmental audit reports, or
internal investigation reports, prepared under the direction of Seller’s legal department and
privileged under the attorney-client privilege, attorney work-product privilege, or state or
federal environmental self-auditing privilege or policy.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

     “ERISA Affiliate” means any entity treated as a single employer with Seller pursuant to
Section 414 of the Code.

     “Escrow Agent” means Union Bank of California, N.A., the escrow agent under the Master Escrow
Agreement.

     “Existing Survey” means that certain ALTA/ASCM survey by Taylor Engineering, Inc., initially
date October 14, 2003 and revised as of March 2, 2004, provided by Seller to Buyer and covering all
of the Owned Real Property.

     “Existing Title Policy” means that certain policy of title insurance issued by First American
Title Insurance Company and dated April 24, 2001, provided by Seller to Buyer and covering all of
the Owned Real Property other than that portion identified on Schedule 1.1(a) as being
owned by Calpine as of the Execution Date.

     “FERC” means the Federal Energy Regulatory Commission, or any successor agency thereto.

     “Final Order” means any Order of a Government, the Bankruptcy Court or other court of
competent jurisdiction after all opportunities for rehearing, reargument, petition for certiorari
and appeal are exhausted or expired and any requests for
rehearing have been denied, and that has not been revised, stayed, enjoined, set aside,
annulled, reversed, remanded, modified or suspended, with respect to which any required waiting
period has expired, and to which all conditions to effectiveness prescribed therein or otherwise by
law or Order have been satisfied; provided, however, that no Order shall fail to be a Final Order
solely because of the possibility that a motion pursuant to Rule 60 of the Federal Rules of Civil
Procedure or Bankruptcy Rule 9024 may be filed with respect to such Order. In the case of the Sale
Order, a Final Order shall also consist of an Order as to which an appeal, notice of appeal or
motion for rehearing or new

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trial has been filed but as to which Buyer, in its sole and absolute
discretion, elects to proceed with Closing.

     “FPA” means the Federal Power Act (16 U.S.C. § 791a et seq.), as amended, and the rules and
regulations thereunder.

     “Government” means any agency, division, subdivision, audit group, procuring office or
governmental or regulatory authority in any event or any adjudicatory body thereof, of the United
States, any state thereof or any foreign government.

     “Hazardous Materials” means and includes any hazardous or toxic substance or waste or any
contaminant or pollutant regulated under Environmental Laws, including “hazardous substances” as
currently defined by the Federal Comprehensive Environmental Response Compensation and Liability
Act of 1980, as amended, “hazardous wastes” as currently defined by the Resource Conservation and
Recovery Act, as amended, natural gas petroleum products or byproducts and crude oil.

     “HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (15 U.S.C. §§
15c-15h, 18a), as amended.

     “Improvements” means the buildings, improvements and structures now existing on the Real
Property, but only to the extent such buildings, improvements and structures constitute fixtures
under applicable law.

     “Knowledge of Seller,” “Seller’s Knowledge” or any other similar term or knowledge
qualification means the present actual knowledge of Rick Thomas, Gevan Reeves, Bevin Hong, Rich
Downen, Gerald Klug, Wayne Milke and Bob McCaffrey.

     “Lien” means any mortgage, pledge, charge, security interest, encumbrance, lien (statutory or
other) or conditional sale agreement.

     “Master Escrow Agreement” means the Amended and Restated Master Escrow Agreement by and
between Calpine and Union Bank of California, N.A., dated as of October 27, 2006, as amended.

     “Material Adverse Effect” means a state of facts, event, change or effect that results, or
would reasonably be expected to result, in a material adverse effect on the combined operations of
the Business but excluding any state of facts, event, change or effect caused by events, changes or
developments relating to: (i) changes of Laws
generally, including those governing national, regional, state or local electric transmission
or distribution systems, (ii) strikes, work stoppages or other labor disturbances, (iii) increases
in costs of commodities or supplies, including fuel, (iv) effects of weather or meteorological
events other than such events that cause material physical damage to the Power Plant or the
transmission service to the plant, (v) changes or conditions affecting the industries of which the
Business is a part generally (including any change or condition (x) generally affecting the
international, national or regional or local electric generating, transmission or distribution
industry, (y) generally affecting the international, national, regional or local wholesale or
retail markets for electric power or (z) resulting from changes in the international, national,
regional or local fuel markets for the type of fuel used at

45

 

the Power Plant); (vii) changes in
economic, regulatory or political conditions generally; (viii) changes resulting from any motion,
application, pleading or Order filed under or in connection with, the Chapter 11 Case or Seller’s
status as a debtor in possession or any motion, application, pleading or Order filed by any
Government applicable to providers of generation, transmission or distribution of electricity
generally; or (ix) any act(s) of war or of terrorism other than such events or occurrences that
cause material physical damage to the Power Plant or transmission service to the plant.

     “Multiemployer Plan” has the meaning set forth in ERISA §3(37).

     “Ordinary Course of Business” means, with respect to the operation by Seller of the Power
Plant, the operation thereof consistent with prior practices with respect to the operation thereof
and prudent health, safety and environmental practices, and taking into account the status and
quality of the Power Plant.

     “Permitted Liens” means: (i) all Liens set forth on Schedule 15.1 of the Disclosure
Schedules; (ii) Liens for Taxes, assessments and Government or other similar charges that are not
yet due and payable or that, although due and payable, are being contested by appropriate
proceedings in good faith (excluding the Washington State sales and use tax liability related to
Seller’s 2001 fiscal year) and do not exceed $100,000 in the aggregate; (iii) mechanics’,
materialmen’s, warehouseman’s and similar Liens that secure Assumed Liabilities; (iv) such
covenants, conditions, restrictions, easements, encroachments or encumbrances, or any other state
of facts, that do not materially interfere with the present occupancy of the Real Property or the
use of such Real Property as it has been used by Seller in the Business prior to the Closing Date;
(v) zoning, building codes and other land use laws regulating the use of occupancy of Owned Real
Property or the activities conducted thereon which are imposed by any governmental authority having
jurisdiction over Owned Real Property and do not materially interfere with the present occupancy of
the Real Property or the use of such Real Property as it has been used by Seller in the Business
prior to the Closing Date; (vi) restrictions and regulations imposed by any Government authority
or any local, state, regional, national or international reliability council, or any independent
system operator or regional transmission organization with jurisdiction over Seller or the Power
Plant in each case of general applicability to similarly situated facilities and that do not
materially interfere with the present occupancy of the Real Property or the use of such Real
Property as it has been used by Seller in the Business prior to the Closing Date; and (vii)
exceptions and related matters set forth in the Title Policy.

     “Person” means any individual, corporation, partnership, joint venture, association,
joint-stock company, trust, unincorporated organization or Government.

     “Power Plant” means the approximately 245 MW (nominal) gas-fired combined cycle electric
generating facility known as the Goldendale Energy Center and located in Klickitat County,
Washington, including all equipment, electrical transformers, pipeline and electrical
interconnection facilities (including water discharge facilities and water injection facilities)
related thereto.

     “Purchase Notice” means Exhibit A of the Master Escrow Agreement, as executed and delivered by
Buyer and Seller.

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     “Related Person” means, with respect to any Person, all past, present and future directors,
officers, members, managers, stockholders, employees, controlling persons, agents, professionals,
attorneys, accountants, investment bankers, Affiliates or representatives of any such Person.

     “Representatives” of a Person means, collectively, such Person’s Affiliates and its and their
respective directors, officers, partners, members, employees, representatives, agents, advisors
(including accountants, legal counsel, environmental consultants and financial advisors), parent
entities and other controlling Persons.

     “Retained Books and Records” means (i) all corporate seals, minute books, charter documents,
corporate stock record books, original tax and financial records and such other files, books and
records to the extent they relate to any of the Excluded Assets or Excluded Liabilities or the
organization, existence, capitalization or debt financing of Seller or of any Affiliate of Seller,
(ii) all books, files and records that would otherwise constitute a Business Record but for the
fact that disclosure of books, files or records could (w) violate any legal constraints or
obligations regarding the confidentiality thereof, provided that Seller shall use its commercially
reasonable efforts to obtain a waiver of any such confidentiality restrictions in order to permit
such disclosure (x) waive any attorney client, work product or like privilege, (y) disclose
information about Seller or any of its Affiliates that is unrelated to the Power Plant or the
Business or (z) disclose information about Seller or any of its Affiliates pertaining to energy or
project evaluation, energy or natural gas price curves or projections or other economic predictive
models or (iii) all books and records prepared in connection with or relating in any way to the
transactions contemplated by this Agreement, including bids received from other parties and
analyses relating in any way to the Purchased Interests, the Acquired Assets and the Assumed
Liabilities.

     “Rule” or “Rules” means the Federal Rules of Bankruptcy Procedure.

     “Sherman Act” means title 15 of the United States Code §§ 1-7, as amended.

     “Subsidiary” means, with respect to any Person, any corporation, partnership, limited
liability company, association or other business entity of which
(a) if a corporation, a majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (b) if
a partnership, limited liability company, association or other business entity, a majority of the
partnership or other similar ownership interest thereof is at the time owned or controlled,
directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination
thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership
interest in a partnership, limited liability company, association or other business entity if such
Person or Persons shall be allocated a majority of partnership, limited liability company,
association or other business entity gains or losses or shall be or control the managing director
or general partner of such partnership, limited liability company, association or other business
entity.

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     “Tax Return” means any report, return, information return, filing or other information,
including any schedules, exhibits or attachments thereto, and any amendments to any of the
foregoing required to be filed or maintained in connection with the calculation, determination,
assessment or collection of any Taxes (including estimated Taxes).

     “Taxes” means any and all taxes, however denominated, including any interest, penalties or
additions to tax that may become payable in respect thereof, imposed by any Government, which taxes
shall include all income taxes, Transaction Taxes, payroll and employee withholding, unemployment
insurance, social security (or similar), sales and use, excise, franchise, gross receipts,
occupation, real and personal property, stamp, transfer, workmen’s compensation, customs duties,
registration, documentary, value added, alternative or add-on minimum, estimated, environmental
(including taxes under section 59A of the Code) and other obligations of the same or a similar
nature, whether arising before, on or after the Closing Date.

     “Title Commitment” means a commitment for the issuance of an ALTA Owner’s Title Insurance
Policy or other form of policy reasonably acceptable to Buyer and meeting the requirements of the
Title Policy, together with a copy of all documents referenced therein.

     “Title Company” means a title company reasonably acceptable to Buyer.

     “Title Policy” means an extended coverage title insurance policy from the Title Company (which
may be in the form of a mark-up of the Title Commitment or of a pro forma of the Title Policy) in
accordance with the Title Commitment, insuring Buyer’s fee simple title to the Owned Real Property
(including all recorded appurtenant easements, insured as separate legal parcels) as of the Closing
Date in an amount equal to the Purchase Price, with gap coverage from Closing through the date of
recording and with exceptions limited to the Schedule B ALTA “General Exceptions” and Permitted
Liens, which policy shall include such other endorsements as Buyer may reasonably request and shall
otherwise be reasonably acceptable to Buyer.

     “WARN Act” means the Worker Adjustment Retraining and Notification Act of 1988, as amended.

     “Washington Tax Ruling” means that certain tax ruling in respect of the tax treatment of the
transactions contemplated hereby issued by the DOR on dated October 18, 2006.

     15.2 All Terms Cross-Referenced. Each of the following terms is defined in the
Section set forth opposite such term:

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	Term	 	Section
	Accounts Payable
	 	 	1.4
	Accounts Receivable
	 	 	1.2(b)
	Acquired Assets
	 	 	1.1
	Additional Deposit
	 	 	2.2
	Additional Real Property
	 	 	6.10
	Additional Real Property Entitlements
	 	 	6.10
	Additional Real Property Farming Lease
	 	 	6.10
	Additional Real Property Survey
	 	 	15.1
	Adjustment Date
	 	 	11.2
	Affiliate
	 	 	15.1
	Agreement
	 	Preamble
	Alternative Transaction
	 	 	15.1
	Antitrust Approval
	 	 	10.2
	Antitrust Law
	 	 	10.2
	Assigned Contracts
	 	 	1.1(f)
	Assignment Agreement
	 	 	15.1
	Assumed Liabilities
	 	 	1.3
	Auction
	 	 	15.1
	Bankruptcy Code
	 	 	15.1
	Bankruptcy Court
	 	 	15.1
	Bidding Procedures
	 	 	8.2
	Bidding Procedures Order
	 	 	6.3
	BPA
	 	 	6.8
	Break-Up Fee
	 	 	13.5(c)(i)
	Business
	 	 	15.1
	Business Day
	 	 	15.1
	Business Employees
	 	 	4.10(d)
	Business Records
	 	 	15.1
	Buyer
	 	Preamble
	Buyer Group
	 	 	14.8
	Calpine
	 	Recitals

49

 

	 	 	 	 
	Term	 	Section
	Calpine Marks
	 	 	1.2(m)
	Chapter 11 Case
	 	 	15.1
	Claim Over
	 	 	14.8
	Claims
	 	 	1.2(j)
	Clayton Act
	 	 	15.1
	Closing
	 	 	3.1
	Closing Date
	 	 	3.1
	Code
	 	 	15.1
	Confidentiality Agreement
	 	 	6.5
	Consent
	 	 	15.1
	Contract
	 	 	15.1
	Customer Contracts
	 	 	1.1(d)
	Deposits
	 	 	2.2
	Disclosure Schedules
	 	 	1.1(a)
	Dispute
	 	 	14.3(a)
	Emission Allowances
	 	 	15.1
	Employee Benefit Plan
	 	 	15.1
	Entitled Real Property
	 	 	1.1(c)
	Environmental Laws
	 	 	15.1
	Environmental Reports
	 	 	15.1
	Equipment
	 	 	1.1(c)
	ERISA
	 	 	15.1
	ERISA Affiliate
	 	 	15.1
	Escrow Agent
	 	 	15.1
	Excluded Assets
	 	 	1.2
	Excluded Liabilities
	 	 	1.4
	Execution Date
	 	Preamble
	Existing Survey
	 	 	15.1
	Existing Title Policy
	 	 	15.1
	FERC
	 	 	15.1
	Final Allocation Schedule
	 	 	11.5(c)
	Final Order
	 	 	15.1
	FPA
	 	 	15.1

50

 

	 	 	 	 
	Term	 	Section
	Government
	 	 	15.1
	Hazardous Materials
	 	 	15.1
	HSR Act
	 	 	15.1
	Improvements
	 	 	15.1
	Independent Accounting Firm
	 	 	11.5
	Initial Deposit
	 	 	2.2
	Intangible Property
	 	 	1.1(l)
	Intracompany Service Contracts
	 	 	12.3(k)
	Inventory
	 	 	1.1(g)
	Knowledge of Seller
	 	 	15.1
	KPUD
	 	 	6.8
	Law
	 	 	4.3
	Lien
	 	 	15.1
	Losses
	 	 	6.5
	Master Escrow Agreement
	 	 	15.1
	Material Adverse Effect
	 	 	15.1
	Material Contracts
	 	 	4.7(a)(v)
	Multiemployer Plan
	 	 	15.1
	Non-Recourse Person
	 	 	14.8
	Order
	 	 	4.3
	Ordinary Course of Business
	 	 	15.1
	Organizational Documents
	 	 	4.3
	Other Contracts
	 	 	1.1(f)
	Owned Real Property
	 	 	1.1(a)
	Party or Parties
	 	Preamble
	Permits
	 	 	1.1(i)
	Permitted Liens
	 	 	15.1
	Person
	 	 	15.1
	Power Plant
	 	 	15.1
	Preliminary Allocation Schedule
	 	 	11.5(b)
	Purchase Notice
	 	 	15.1
	Purchase Price
	 	 	2.1
	Purchased Interests
	 	 	1.1

51

 

	 	 	 	 
	Term	 	Section
	Real Property
	 	 	1.1(b)
	Real Property Allocation Schedule
	 	 	11.5(a)
	REET
	 	 	11.1
	Related Person
	 	 	15.1
	Release Date
	 	 	7.5(d)
	Representatives
	 	 	15.1
	Retained Books and Records
	 	 	15.1
	Rule
	 	 	15.1
	Rules
	 	 	15.1
	Sale Order
	 	 	6.3
	Seller
	 	Preamble
	Seller’s Account
	 	 	3.3(a)
	Seller’s Cure Costs
	 	 	6.8	 
	Seller’s Knowledge
	 	 	15.1
	Sherman Act
	 	 	15.1
	Straddle Period
	 	 	11.2
	Subsidiary
	 	 	15.1
	Supplier Contracts
	 	 	1.1(e)
	Support Obligations
	 	 	7.5(a)
	Tax Return
	 	 	15.1
	Taxes
	 	 	15.1
	Termination Date
	 	13.2(a)(iv)
	Termination Order
	 	13.2(a)(vi)
	Third Person
	 	 	14.8
	Title Commitment
	 	 	15.1
	Title Company
	 	 	15.1
	Title IV Plan
	 	 	4.10(b)
	Title Policy
	 	 	15.1
	Transaction Taxes
	 	 	11.1
	Transfer and Contribution Agreement
	 	 	1.1
	WARN Act
	 	 	15.1
	Washington Tax Ruling
	 	 	15.1

52

 

(Signatures are on the following page.)

53

 

     IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their
respective officers thereunto duly authorized as of the date first above written.

	 	 	 	 	 
	 	GOLDENDALE ENERGY CENTER, LLC

 	 
	 	By:  	/s/ Richard L. Thomas
 	 
	 	 	Name:  	Richard L. Thomas 	 
	 	 	Its:  Authorized Signatory 	 
	 
	 	PUGET SOUND ENERGY, INC.

 	 
	 	By:  	/s/ Eric M. Markell
 	 
	 	 	Name:  	Eric M. Markell 	 
	 	 	Its:  Senior Vice President, Energy Resources 	 

Membership Interests Purchase Agreement — Signature Pageexv4w1

 

EXHIBIT 4.1

FORM OF CERTIFICATE EVIDENCING COMMON UNITS

REPRESENTING LIMITED PARTNER INTERESTS IN

	 	 	 
	NUMBER

	 	UNITS
	 
	 	 
	 

	 	CUSIP 265026 10 4
	THIS CERTIFICATE IS TRANSFERABLE IN

	 	SEE REVERSE FOR
	[          ]

	 	CERTAIN DEFINITIONS

DUNCAN ENERGY PARTNERS L.P.

A LIMITED PARTNERSHIP FORMED UNDER THE LAWS OF DELAWARE

     In accordance with Section 4.1 of the Amended and Restated Agreement of Limited Partnership of
Duncan Energy Partners L.P., as amended, supplemented or restated from time to time (the
"Partnership Agreement”), Duncan Energy Partners L.P., a Delaware limited partnership (the
"Partnership”), hereby certifies that [          ] (the “Holder”) is the registered
owner of Common Units representing Limited Partner Interests in the Partnership (the “Common
Units”) transferable on the books of the Partnership, in person or by duly authorized attorney,
upon surrender of this Certificate properly endorsed. The rights, preferences and limitations of
the Common Units are set forth in, and this Certificate and the Common Units represented hereby are
issued and shall in all respects be subject to the terms and provisions of, the Partnership
Agreement. Copies of the Partnership Agreement are on file at, and will be furnished without charge
on delivery of written request to the Partnership at, the principal office of the Partnership
located at 1100 Louisiana Street, 10th Floor, Houston, Texas, 77002 or such other address as may be
specified by notice under the Partnership Agreement. Capitalized terms used herein but not defined
shall have the meanings given them in the Partnership Agreement.

     The Holder, by accepting this Certificate, is deemed to have (i) requested admission as, and
agreed to become, a Limited Partner and to have agreed to comply with and be bound by and to have
executed the Partnership Agreement, (ii) represented and warranted that the Holder has all right,
power and authority and, if an individual, the capacity necessary to enter into the Partnership
Agreement, (iii) granted the powers of attorney provided for in the Partnership Agreement, and (iv)
made the waivers and given the consents and approvals contained in the Partnership Agreement.

     This Certificate shall be governed by, and construed in accordance with, the laws of the State
of Delaware, without regard to principles of conflict of laws thereof.

     This Certificate shall not be valid for any purpose unless it has been countersigned and
registered by the Transfer Agent and Registrar.

Dated:____________________

	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Duncan Energy Partners L.P.,
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	DEP Holdings, LLC, its general partner
	 
	 	 	 	 	 	 	 	 
	Countersigned and Registered by:	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	 
	Mellon Investor Services LLC	 	 	 	 	 	Richard H. Bachmann
	     as Transfer Agent and Registrar	 	 	 	 	 	President and Chief Executive Officer
	 
	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	Authorized Signature
	 	 	 	 	 	Stephanie Hildebrandt
	 

	 	 	 	 	 	 	 	Secretary

 

 

Reverse of Certificate

ABBREVIATIONS

     The following abbreviations, when used in the inscription on the face of this Certificate,
shall be construed as follows according to applicable laws or regulations:

	 	 	 	 	 
	TEN COM—

	 	as tenants in common
	 	UNIF GIFT/TRANSFERS MIN ACT
	 
	 	 	 	 
	TEN ENT—

	 	as tenants by the entireties
	 	                     Custodian                     
	 

	 	 	 	   (Cust)                              (Minor)
	 
	 	 	 	 
	JT TEN—

	 	as joint tenants with right
	 	under Uniform Gifts/Transfers
	 

	 	of survivorship and not as
	 	to CD Minors
	 

	 	tenants in common
	 	Act                      (State)

Additional abbreviations, though not in the above list, may also be used.

 

 

ASSIGNMENT OF COMMON UNITS

IN

DUNCAN ENERGY PARTNERS L.P.

FOR VALUE RECEIVED, ________________ hereby assigns, conveys, sells and transfers unto

	 	 	 
	 

	 	 
	(Please print or typewrite name
and address of Assignee)

	 	(Please insert Social Security or other
identifying number of Assignee)

                     Common Units representing Limited Partner Interests evidenced by this Certificate, subject
to the Partnership Agreement, and does hereby irrevocably constitute and appoint                     
                     as its attorney-in-fact with full power of substitution to transfer the same on the
books of Duncan Energy Partners L.P.

	 	 	 
	 
	 	 
	 
	 	 
	Date:
 

	 	NOTE: The signature to any
endorsement hereon must correspond
with the name as written upon the
face of this Certificate in every
particular, without alteration,
enlargement or change.
	 
	 	 
	 
	 	 
	SIGNATURE(S) MUST BE GUARANTEED BY A
MEMBER FIRM OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS,
INC. OR BY A COMMERCIAL BANK OR
TRUST COMPANY SIGNATURE(S)
GUARANTEED

	 	 

(Signature)
	 
	 	 
	 

	 	 
	 

	 	(Signature)

No transfer of the Common Units evidenced hereby will be registered on the books of the
Partnership, unless the Certificate evidencing the Common Units to be transferred is surrendered
for registration of transfer.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00114-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00114-of-00352.parquet"}]]