Document:

exv4w4

 

Exhibit 4.4

 

CALPINE CORPORATION

$650,000,000 PRINCIPAL AMOUNT

7.75% CONTINGENT CONVERTIBLE NOTES DUE 2015

 

THIRD SUPPLEMENTAL INDENTURE

Dated as of June 23, 2005

 

WILMINGTON TRUST COMPANY

Trustee

 

 

 

Table of Contents

	 	 	 	 	 
	 	 	 	 	Page
	ARTICLE I DEFINITIONS

	Section 1.01	 	Definitions
	 	1
	Section 1.02	 	Other Definitions
	 	6
	ARTICLE II THE NOTES

	Section 2.01	 	Form and Dating
	 	7
	Section 2.02	 	Registrar, Paying Agent and Conversion Agent
	 	8
	Section 2.03	 	Transfer and Exchange
	 	8
	ARTICLE III REDEMPTION AND PREPAYMENT

	Section 3.01	 	Mandatory Redemption
	 	9
	Section 3.02	 	Optional Redemption Upon Conversion
	 	9
	Section 3.03	 	Purchase of Notes at Option of the Holder upon
Change of Control
	 	10
	Section 3.04	 	Effect of Change of Control Purchase Notice
	 	13
	Section 3.05	 	Deposit of Change of Control Purchase Price
	 	14
	Section 3.06	 	Notes Purchased in Part
	 	14
	Section 3.07	 	Covenant to Comply With Securities Laws Upon
Purchase of Notes
	 	15
	Section 3.08	 	Repayment to the Company
	 	15
	ARTICLE IV COVENANTS

	Section 4.01	 	Compliance Certificate
	 	15
	Section 4.02	 	Taxes
	 	16
	Section 4.03	 	Stay, Extension and Usury Laws
	 	17
	Section 4.04	 	Corporate Existence
	 	17
	Section 4.05	 	Calculations in Respect of Notes
	 	17
	ARTICLE V MERGER AND CONSOLIDATION OF COMPANY

	Section 5.01	 	Lease of Properties
	 	18
	ARTICLE VI DEFAULTS AND REMEDIES

	Section 6.01	 	Events of Default
	 	18
	ARTICLE VII TRUSTEE

	Section 7.01	 	Rights of Trustee
	 	19
	Section 7.02	 	Reports by Trustee to Holders of the Notes
	 	19
	Section 7.03	 	Eligibility; Disqualification
	 	19

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	 	 	 	 	Page
	ARTICLE VIII DEFEASANCE

	Section 8.01	 	No Defeasance
	 	20
	ARTICLE IX AMENDMENT, SUPPLEMENT AND WAIVER

	Section 9.01	 	Without Consent of Holders of Notes
	 	20
	Section 9.02	 	With Consent of Holders of Notes
	 	20
	ARTICLE X CONVERSION

	Section 10.01	 	Conversion Privilege
	 	21
	Section 10.02	 	Conversion Procedure
	 	24
	Section 10.03	 	Taxes on Conversion
	 	25
	Section 10.04	 	Company to Provide Stock
	 	25
	Section 10.05	 	Adjustment of Conversion Price
	 	26
	Section 10.06	 	Adjustment for Certain Changes of Control
	 	29
	Section 10.07	 	When No Adjustment Required
	 	30
	Section 10.08	 	When Adjustment May Be Deferred
	 	31
	Section 10.09	 	Successive Adjustments
	 	31
	Section 10.10	 	Notice of Adjustment
	 	31
	Section 10.11	 	Notice of Certain Transactions
	 	32
	Section 10.12	 	Effect of
Reclassification, Consolidation, Merger, Share Exchange or Sale on Conversion
Privilege
	 	32
	Section 10.13	 	Trustee’s Disclaimer
	 	33
	Section 10.14	 	Voluntary Reduction
	 	34
	Section 10.15	 	Conversion Value of Notes Tendered
	 	34
	ARTICLE XI SUBORDINATION

	Section 11.01	 	Agreement to Subordinate
	 	36
	Section 11.02	 	Default On Senior Debt
	 	36
	Section 11.03	 	Liquidation; Dissolution; Bankruptcy
	 	37
	Section 11.04	 	Subrogation
	 	38
	Section 11.05	 	Trustee To Effectuate Subordination
	 	39
	Section 11.06	 	Notice By The Company
	 	39
	Section 11.07	 	Rights Of The Trustee; Holders Of Senior Debt
	 	40
	Section 11.08	 	Subordination May Not Be Impaired
	 	41
	ARTICLE XII MISCELLANEOUS

	Section 12.01	 	No Adverse Interpretation of Other Agreements
	 	42
	Section 12.02	 	Severability
	 	42
	Section 12.03	 	Table of Contents, Headings, etc
	 	42
	Section 12.04	 	Ratification Of Original Indenture
	 	42
	Section 12.05	 	Trustee Not Responsible for Recitals
	 	42
	Section 12.06	 	Performance by Trustee
	 	43
	Section 12.07	 	Governing Law
	 	43

ii

 

EXHIBITS

	 	 	 
	Exhibit A

Schedule A

	 	Form of Note

Table of Additional Shares

iii

 

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

WITNESSETH:

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

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

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

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

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

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

ARTICLE I

DEFINITIONS

          Section 1.01 Definitions.

               (a) Unless the context requires otherwise:

 

 

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

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

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

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

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

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

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

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

          “Capital Stock” means:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

          “Permitted Investments” means the following investments:

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

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

4

 

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

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

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

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

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

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

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

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

	 	1.	 	the Company’s 10 1/2% Senior Notes due 2006,
	 
	 	2.	 	the Company’s 8 3/4% Senior Notes due 2007,

5

 

	 	3.	 	the Company’s 7 7/8% Senior Notes due 2008,
	 
	 	4.	 	the Company’s 7 5/8% Senior Notes due 2006, and
	 
	 	5.	 	the Company’s 7 3/4% Senior Notes due 2009; and

          (C) any deferrals, renewals or extensions of any of the foregoing.

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

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

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

          “Underwriter” means Goldman, Sachs & Co.

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

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

          Section 1.02 Other Definitions.

6

 

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

ARTICLE II

THE NOTES

          Section 2.01 Form and Dating.

          

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

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

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

7

 

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

          Section 2.02 Registrar, Paying Agent and Conversion Agent.

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

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

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

          Section 2.03 Transfer and Exchange.

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

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

8

 

ARTICLE III

REDEMPTION AND PREPAYMENT

          Section 3.01 Mandatory Redemption.

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

          Section 3.02 Optional Redemption Upon Conversion.

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

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

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

9

 

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

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

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

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

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

          For purposes of this Section 3.03,

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

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

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

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

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

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

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

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

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

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

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

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

                    (6) the Conversion Rate and any adjustments thereto;

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

11

 

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

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

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

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

                    (12) the CUSIP numbers of the Notes.

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

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

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

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

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

12

 

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

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

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

          Section 3.04 Effect of Change of Control Purchase Notice.

          

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

                    (1) the Notes will cease to be outstanding;

                    (2) interest will cease to accrue; and

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

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

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

13

 

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

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

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

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

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

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

          Section 3.05 Deposit of Change of Control Purchase Price.

          

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

          Section 3.06 Notes Purchased in Part.

          

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

14

 

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

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

          

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

          Section 3.08 Repayment to the Company.

          

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

ARTICLE IV

COVENANTS

          Section 4.01 Compliance Certificate.

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

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

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

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

          Section 4.02 Taxes.

          

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

16

 

          Section 4.03 Stay, Extension and Usury Laws.

          

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

          Section 4.04 Corporate Existence.

          

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

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

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

          Section 4.05 Calculations in Respect of Notes.

          

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

17

 

ARTICLE V

MERGER AND CONSOLIDATION OF COMPANY

     Section 5.01 Lease of Properties.

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

ARTICLE VI

DEFAULTS AND REMEDIES

     Section 6.01 Events of Default.

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

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

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

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

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

18

 

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

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

ARTICLE VII

TRUSTEE

     Section 7.01 Rights of Trustee.

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

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

     Section 7.02 Reports by Trustee to Holders of the Notes.

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

     Section 7.03 Eligibility; Disqualification.

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

19

 

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

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

ARTICLE VIII

DEFEASANCE

     Section 8.01 No Defeasance.

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

ARTICLE IX

AMENDMENT, SUPPLEMENT AND WAIVER

     Section 9.01 Without Consent of Holders of Notes.

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

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

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

     Section 9.02 With Consent of Holders of Notes.

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

20

 

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

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

ARTICLE X

CONVERSION

     Section 10.01 Conversion Privilege.

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

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

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

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

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

21

 

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

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

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

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

22

 

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

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

23

 

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

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

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

     Section 10.02 Conversion Procedure.

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

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

24

 

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

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

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

     Section 10.03 Taxes on Conversion.

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

     Section 10.04 Company to Provide Stock.

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

25

 

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

     Section 10.05 Adjustment of Conversion Price.

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

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

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

26

 

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

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

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

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

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

27

 

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

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

28

 

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

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

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

     Section 10.06 Adjustment for Certain Changes of Control.

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

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

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

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

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

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

     Section 10.07 When No Adjustment Required.

     No adjustment of the Conversion Price shall be made:

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

30

 

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

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

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

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

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

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

     Section 10.08 When Adjustment May Be Deferred.

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

     Section 10.09 Successive Adjustments.

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

     Section 10.10 Notice of Adjustment.

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

     Section 10.11 Notice of Certain Transactions.

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

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

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

          (c) there is a liquidation or dissolution of the Company.

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

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

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

32

 

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

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

     Section 10.13 Trustee’s Disclaimer.

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

33

 

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

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

     Section 10.14 Voluntary Reduction.

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

     Section 10.15 Conversion Value of Notes Tendered.

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

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

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

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

34

 

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

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

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

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

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

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

35

 

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

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

ARTICLE XI

SUBORDINATION

     Section 11.01 Agreement to Subordinate.

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

     Section 11.02 Default On Senior Debt.

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

36

 

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

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

     Section 11.03 Liquidation; Dissolution; Bankruptcy.

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

37

 

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

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

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

     Section 11.04 Subrogation.

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

38

 

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

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

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

     Section 11.05 Trustee To Effectuate Subordination

     . 

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

     Section 11.06 Notice By The Company

39

 

        .

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

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

     Section 11.07 Rights Of The Trustee; Holders Of Senior Debt

     . 

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

40

 

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

     Section 11.08 Subordination May Not Be Impaired

     . 

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

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

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

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

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

41

 

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

ARTICLE XII

MISCELLANEOUS

     Section 12.01 No Adverse Interpretation of Other Agreements

     . 

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

     Section 12.02 Severability

     . 

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

     Section 12.03 Table of Contents, Headings, etc

     . 

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

     Section 12.04 Ratification Of Original Indenture

     . 

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

     Section 12.05 Trustee Not Responsible for Recitals

     . 

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

42

 

     Section 12.06 Performance by Trustee

     . 

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

     Section 12.07 Governing Law

     . 

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

[Signatures on following page]

43

 

SIGNATURES

Dated as of June 23, 2005

	 	 	 	 	 
	 	CALPINE CORPORATION

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

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

[SIGNATURE PAGE TO THE THIRD SUPPLEMENTAL INDENTURE]

 

 

EXHIBIT A

[Face of Note]

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

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

A-1

 

CALPINE CORPORATION

$[ ] PRINCIPAL AMOUNT OF

7.75% CONTINGENT CONVERTIBLE NOTES DUE 2015

 

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

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

Interest Payment Dates: June 1 and December 1.

Record Dates: May 15 and November 15.

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

A-2

 

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

Date: June 23, 2005

	 	 	 	 	 
	 	CALPINE CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

Dated: June 23, 2005

TRUSTEE’S CERTIFICATE OF AUTHENTICATION:

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

	 	 	 	 	 	 	 
	By:	 	 	 	Dated:	 	 
	 	 	 	 	 	 	 
	 

	 	Authorized Officer	 	 	 	 

A-3

 

[Back of Note]

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

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

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

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

A-4

 

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

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

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

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

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

A-5

 

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

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

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

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

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

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

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

A-6

 

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

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

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

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

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

     Calpine
Corporation

     50 West San Fernando Street

     San Jose, California 95113

     Attention: Investor Relations

A-7

 

ASSIGNMENT FORM

          To assign this Note, fill in the form below:

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

 

(Insert assignee’s legal name)

 

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

 

      

 

      

 

      

 

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

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

Date:                                                                            
                                   

Your Signature:                                                                         
                                                          

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

Signature Guarantee*:                                                               
                                                                    

 

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

A-8

 

OPTION OF HOLDER TO ELECT PURCHASE

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

$_______________ principal amount

Date:                                                                            
                                   

Your Signature:                                                                          
                                                         

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

Tax Identification No.:                                                                         
                                                                    

Signature Guarantee*:                                                               
                                                                              

 

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

A-9

 

FORM OF CONVERSION NOTICE

	 	 	 
	TO:

	 	CALPINE CORPORATION

WILMINGTON TRUST COMPANY

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

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

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

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

$__________________

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

     
 

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

      

 

      

 

      

 

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

Date:                                                     Signed:                       
                                                          

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

Signature Guarantee:                                                                         
                                                          

A-10

 

SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE*

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

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

 

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

A-11

 

Schedule A

Table of Additional Shares

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

A-12exv10w1

 

Exhibit 10.01

DATED 28 MAY 2005

CALPINE UK HOLDINGS LIMITED

CALPINE CORPORATION

QUINTANA CANADA HOLDINGS, LLC

NORMANTRAIL (UK CO 3) LIMITED

INTERNATIONAL POWER PLC

and

MITSUI & CO., LTD

	 	 	 	 	 
	 
	 	

	 	 
	 	 	 	 	 
	 
	 	SHARE SALE AND PURCHASE AGREEMENT
	 	 
	 	 	 	 	 
	 
	 	

	 	 

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

40 Bank Street

Canary Wharf

London

E14 5DS

 

 

CONTENTS

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 	1.	 	 	Interpretation

	 	 	3	 
	 	2.	 	 	Sale and Purchase

	 	 	22	 
	 	3.	 	 	Conditions Precedent

	 	 	23	 
	 	4.	 	 	Consideration

	 	 	26	 
	 	5.	 	 	Conduct of business before Completion

	 	 	27	 
	 	6.	 	 	Completion

	 	 	28	 
	 	7.	 	 	Completion Accounts

	 	 	31	 
	 	8.	 	 	Seller’s Warranties

	 	 	33	 
	 	9.	 	 	Purchaser parties’ Warranties

	 	 	38	 
	 	10.	 	 	Undertakings

	 	 	39	 
	 	11.	 	 	Effect of Completion

	 	 	40	 
	 	12.	 	 	Remedies and Waivers

	 	 	40	 
	 	13.	 	 	Conduct of Claims

	 	 	40	 
	 	14.	 	 	Basis of Recovery

	 	 	42	 
	 	15.	 	 	Trade Marks

	 	 	43	 
	 	16.	 	 	Assignment and novation

	 	 	43	 
	 	17.	 	 	Termination

	 	 	44	 
	 	18.	 	 	Further Assurance

	 	 	44	 
	 	19.	 	 	Notices

	 	 	45	 
	 	20.	 	 	Announcements

	 	 	46	 
	 	21.	 	 	Confidentiality

	 	 	47	 
	 	22.	 	 	Costs and Expenses

	 	 	48	 
	 	23.	 	 	Time of Essence

	 	 	48	 
	 	24.	 	 	Interest

	 	 	48	 
	 	25.	 	 	Invalidity

	 	 	49	 
	 	26.	 	 	Several Guarantee from the Purchaser Guarantors

	 	 	49	 
	 	27.	 	 	Guarantee from the Seller Guarantor

	 	 	50	 
	 	28.	 	 	Third Party Rights

	 	 	52	 
	 	29.	 	 	Counterparts

	 	 	52	 
	 	30.	 	 	Entire Agreement

	 	 	52	 
	 	31.	 	 	Withholding, Deductions and Set Off

	 	 	53	 
	 	32.	 	 	Choice of Governing Law

	 	 	53	 
	 	 	 	 	 
	 	 	 	 
	SCHEDULE 1 CORPORATE INFORMATION	 	 	54	 
	SCHEDULE 2 THE WARRANTIES	 	 	56	 
	SCHEDULE 3 LIMITATION OF LIABILITY	 	 	69	 
	SCHEDULE 4 COMPLETION ARRANGEMENTS	 	 	75	 
	SCHEDULE 5 CONDUCT OF BUSINESS BEFORE COMPLETION	 	 	79	 
	SCHEDULE 6 DATA ROOM LIST	 	 	84	 
	SCHEDULE 7 BP AGREEMENTS	 	 	85	 
	SCHEDULE 8 ENVIRONMENTAL COVENANT	 	 	86	 
	 	 	 	 	 
	 	 	 	 
	APPENDIX I BALANCE SHEET DATED APRIL 2005	 	 	 	 

1

 

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

BETWEEN:

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

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

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

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

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

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

WHEREAS

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

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

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

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

2

 

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

WHEREBY IT IS AGREED as follows:

	1.	 	INTERPRETATION
	 
	1.1	 	In this Agreement and the Schedules to it:

	 	 	 
	“Accounts”

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

	 	means 31 December 2004;
	 
	 	 
	“Accounting Principles”

	 	means the accounting policies, principles, bases,
assumptions and judgements adopted or used in the
preparation of the Accounts;
	 
	 	 
	“Accountant’s Report”

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

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

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

3

 

	 	 	 
	“Aggregate Projected NWC”

	 	has the meaning ascribed to such
term in clause 4.1;
	 
	 	 
	“Aggregate Unadjusted
Purchase Price”

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

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

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

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

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

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

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

 

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

4

 

	 	 	 
	 

	 	Agreements that are necessary
to reflect the sale and transfer of the Shares to
the Purchaser;
	 
	 	 
	“BP Chemicals”

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

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

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

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

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

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

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

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

5

 

	 	 	 
	“Business Information
Technology”

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

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

	 	means the combined cycle gas turbine plant situated
on the Property;
	 
	 	 
	“Certificate of Title”

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

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

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

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

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

6

 

	 	 	 
	 

	 	in connection with the Business;
	 
	 	 
	“Competent Authority”

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

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

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

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

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

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

	 	means the conditions precedent set out in clause 3.1;
	 
	 	 
	“Confidential Information”

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

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

7

 

	 	 	 
	 

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

	 
	 	 
	 

	 	but does not include:
	 
	 	 
	 

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

	 
	 	 
	 

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

	 
	 	 
	 

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

	 
	 	 
	“Data Room”

	 	means those documents referred to in the list set
out in Schedule 6;
	 
	 	 
	“Deed of Adherence”

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

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

	 	has the meaning ascribed to such term in clause 7;
	 
	 	 
	“Electricity Trading Agreements”

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

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

8

 

	 	 	 
	“Employee”

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

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

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

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

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

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

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

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

	 
	 	 
	 

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

9

 

	 	 	 
	 

	 	(c) common laws and equity,

	 
	 	 
	 

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

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

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

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

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

	 	has the meaning ascribed to such term in clause 4.1;
	 
	 	 
	“Facility”

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

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

10

 

	 	 	 
	 

	 	notified to SCCL prior to Completion;
	 
	 	 
	“Financial Assistance
Procedure”

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

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

	 	means the gas pipeline servicing the Property;
	 
	 	 
	“Gas Supply Agreement”

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

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

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

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

	 	means the three grid trade master agreements between SCCL and:
	 
	 	 
	 

	 	[*] dated 26 September 2003;
	 
	 	 
	 

	 	[*] dated 13 March 2001; and
	 
	 	 
	 

	 	[*] dated 15 April 2002;
	 
	 	 
	“Hazardous Substance”

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

11

 

	 	 	 
	“H&S Laws”

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

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

	 
	 	 
	 

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

	 
	 	 
	 

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

	 
	 	 
	“ICTA 1988”

	 	means the Income and Corporation Taxes Act 1988;
	 
	 	 
	“Incipient Claim”

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

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

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

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

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

12

 

	 	 	 
	 

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

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

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

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

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

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

	 	means the loan agreement dated 26 October 2004 among
SCCL as borrower, Luxco and others;
	 
	 	 
	“Material Adverse Effect”

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

13

 

	 	 	 
	 

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

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

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

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

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

	 
	 	 
	 

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

14

 

	 	 	 
	 

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

	 
	 	 
	 

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

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

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

	 	has the meaning ascribed to such term in clause 4.1;
	 
	 	 
	“O&M Guarantee”

	 	means a guarantee to be provided by a member of the
Purchaser’s Group pursuant to the [*] in a form
acceptable to [*]
	 
	 	 
	“Participation Agreement”

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

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

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

15

 

	 	 	 
	 

	 	Agreement and any lien arising by
operation of law;
	 
	 	 
	“Preferred”

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

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

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

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

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

	 	means the purchase price payable in respect of the
Shares as determined in accordance with clause 2.3;
	 
	 	 
	“Purchaser’s Auditors”

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

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

	 	means Clifford Chance LLP of 10 Upper Bank Street,
London E14 5JJ;
	 
	 	 
	“Relevant Period”

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

16

 

	 	 	 
	“Relief”

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

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

	 	has the meaning ascribed to such term in clause
8.10.2;
	 
	 	 
	“Reporting Accountants”

	 	means the Seller’s Auditors;
	 
	 	 
	“Response Notice”

	 	has the meaning ascribed to such term in clause
8.10.1;
	 
	 	 
	“Sale Group”

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

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

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

	 	means the Officer’s Certificate delivered by or on

17

 

	 	 	 
	Certificate”

	 	behalf of the Seller Guarantor on the date of this Agreement;
	 
	 	 
	“Seller’s Auditors”

	 	means PricewaterhouseCoopers LLP;
	 
	 	 
	“Seller’s Solicitors”

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

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

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

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

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

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

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

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

	 	means the supplemental letter agreement in the
Agreed Form;
	 
	 	 
	“Tax” or "Taxation”

	 	has the meaning ascribed to it in the Tax Covenant;

18

 

	 	 	 
	“Tax Authority”

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

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

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

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

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

	 	means a Claim under a Tax Warranty;
	 
	 	 
	“TCGA 1992”

	 	means the Taxation of Chargeable Gains Act 1992;
	 
	 	 
	“Trade Marks”

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

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

	 	means [*]
	 
	 	 
	“Unadjusted UK OpCo
Purchase Price”

	 	means [*]
	 
	 	 
	“Unit”

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

19

 

	 	 	 
	“VAT”

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

	 	means the Value Added Tax Act 1994;
	 
	 	 
	“Warranties”

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

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

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

	 	means 9.30 a.m. to 5.00 p.m. on a Business Day.

	1.2	 	In this Agreement, unless otherwise specified:

	 	1.2.1	 	references to clauses, sub-clauses, paragraphs,
sub-paragraphs, Schedules, and the Recitals are to clauses, sub-clauses,
paragraphs, sub-paragraphs and the Recitals of, and the Schedules to this
Agreement;
	 
	 	1.2.2	 	a reference to any statute or statutory provision shall be
construed as a reference to the same as it may have been, or may from time to
time be, amended, modified or re-enacted except to the extent that any
amendment or modification made or coming into effect of any statute or
statutory provision after the date of this Agreement would increase or alter
the liability of the Seller under this Agreement;
	 
	 	1.2.3	 	headings to clauses and Schedules are for convenience only
and do not affect the interpretation of this Agreement;
	 
	 	1.2.4	 	the Schedules and any attachments form part of this
Agreement and shall have the same force and effect as if expressly set out in
the body of this Agreement, and any reference to this Agreement shall include
the Schedules;
	 
	 	1.2.5	 	references to this Agreement, or to any other document, or
to any specified provision of this Agreement, or any other document, are to
this Agreement, that document or provision as in force for the time being, as
amended, modified, supplemented, varied, assigned or novated, from time to
time;

20

 

	 	1.2.6	 	references to a “company” shall be construed so as to
include any company, corporation or other body corporate, wherever and
however incorporated or established;
	 
	 	1.2.7	 	references to a “person” shall be construed so as to
include any individual, firm, company, government, state or agency of a state
or any joint venture, association or partnership (whether or not having
separate legal personality), its successors and assigns;
	 
	 	1.2.8	 	words importing the singular include the plural and vice
versa, words importing a gender include every gender;
	 
	 	1.2.9	 	references to a “party” or “parties” means a party or the
parties to this Agreement;
	 
	 	1.2.10	 	references to “indemnify” and “indemnifying” any person against any
circumstance include indemnifying and keeping that person harmless from all
actions, claims and proceedings from time to time made against that person
and all loss or damage and all payments, costs or expenses made or incurred
by that person as a consequence of or which would not have arisen but for
that circumstance;
	 
	 	1.2.11	 	references to writing shall include any modes of reproducing words in a
legible and non-transitory form;
	 
	 	1.2.12	 	references to “pounds” or to “£” shall be construed as references to the
lawful currency for the time being of England and Wales;
	 
	 	1.2.13	 	references to times of the day are to London time;
	 
	 	1.2.14	 	general words shall not be given a restrictive interpretation by reason of
their being preceded or followed by words indicating a particular class of
acts, matters or things;
	 
	 	1.2.15	 	where any statement is qualified by the statement “so far as the Seller is
aware” or “to the Seller’s knowledge” or any similar expression or otherwise
refers to the knowledge or awareness of the Seller, that statement shall be
deemed to be made only on the basis of the actual knowledge of any of Zamir
Rauf, Tayeb Tahir, Richard Hinks, Neil Cranswick and Vanessa Bustall having
made reasonable enquiry; and
	 
	 	1.2.16	 	where any statement is qualified by the expression “the Purchaser’s actual
knowledge” or “so far as the Purchaser is aware” or any similar expression or
otherwise that refers to the knowledge or awareness of the Purchaser, that
statement shall be deemed to be made only on the basis of the actual
knowledge of any of Sean Neely, Christopher Trower, Paul Evans, Mark
Craddock, Ken Oakley, Takashi Umezu, Owen Bannister and Grant Gillon, each of
whom shall be deemed to be aware of the content of any written report in
relation to the Sale Group provided by any Purchaser Party’s professional
advisers and consultants (including legal, financial, environmental and
accounting advisers and consultants) specifically in connection with the
Purchaser’s due diligence investigation of and into SCCL, UK OpCo, the
Business, and the transactions the subject of the Share Purchase Documents
but for this

21

 

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

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

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

	2.	 	SALE AND PURCHASE
	 
	2.1	 	At Completion the Seller shall sell and the Purchaser shall purchase the Shares and each
right attaching to the Shares at or after the date of this Agreement, including without
limitation the right to receive all dividends, distributions or any return of capital paid or
made on or after the date of this Agreement, with full title guarantee and free from
Encumbrances.
	 
	2.2	 	Title to, beneficial ownership of, and any risk attaching to the Shares shall pass on
Completion. Following Completion, the Purchaser shall be entitled to exercise all rights
attached or accruing to the Shares.
	 
	2.3	 	The Purchase Price shall be the sum of the purchase price attributable to the SCCL shares to
be acquired pursuant to this Agreement as determined in accordance with clause 2.3.1 and the
purchase price attributable to the UK OpCo shares to be acquired pursuant to this Agreement as
determined in accordance with clause 2.3.2.

	 	2.3.1	 	That part of the Purchase Price attributable to the SCCL shares to be acquired pursuant to this Agreement is equal to the Unadjusted
SCCL Purchase Price less an amount equal to the SCCL Intergroup Debt:
	 
	 	(a)	 	plus the amount by which SCCL’s Net Working Capital
exceeds zero; or
	 
	 	(b)	 	less the amount by which SCCL’s Net Working Capital is
less than zero.
	 
	 	2.3.2	 	That part of the Purchase Price attributable to the UK
OpCo shares to be acquired pursuant to this Agreement is equal to the
Unadjusted UK OpCo Purchase Price less any indebtedness owed by UK OpCo to
the Calpine Group or any Calpine Group member, excluding in each case SCCL,
at or immediately prior to Completion, including any interest which has
accrued thereon and:
	 
	 	(a)	 	plus the amount by which UK OpCo’s Net Working Capital
exceeds zero; or

22

 

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

	 	 	The provisions of clause 7 shall apply in respect of the preparation of the Completion
Balance Sheets and the agreement or determination of the Purchase Price.
	 
	2.4	 	The Seller waives all rights of pre-emption and other restrictions on transfer over the
Shares conferred on it.
	 
	3.	 	CONDITIONS PRECEDENT
	 
	3.1	 	Completion is conditional upon the satisfaction (or waiver in accordance with clause 3.8) of
the following conditions precedent on or before the Long Stop Date:

	 	3.1.1	 	the BP Approval having been received in a form
satisfactory to the Seller and the Purchaser;
	 
	 	3.1.2	 	BP International confirming in a form satisfactory to the
Seller and the Purchaser that BP International will not exercise its right of
first refusal under and in accordance with the terms of the Participation
Agreement, or expiry of the term during which BP International may exercise
its right of first refusal without BP International having exercised any such
right in accordance with the terms of the Participation Agreement, whichever
is the earlier to occur or, if BP International exercises its right to make a
lump sum cash offer under clause 4.2.3 of the Participation Agreement, the
Seller having determined that such offer is not of equivalent value to that
comprising the sale of the Shares pursuant to this Agreement and the
transactions contemplated hereby;
	 
	 	3.1.3	 	the European Commission issuing a decision under Article
6(1)(b) of Council Regulation (EC) 139/2004 (the “Regulation”), or being
deemed to have done so under Article 10(6) of the Regulation, declaring the
acquisition of the Shares by the Purchaser pursuant to this Agreement (the
“Transaction”) compatible with the Common Market without attaching to its
decision any conditions or obligations and in the event that a request under
Article 9(2) of the Regulation has been made by a Member State, the European
Commission indicating that it has decided not to refer the Transaction (or
any part thereof) or any matter arising therefrom to a competent authority of
a Member State in accordance with Article 9(1) of the Regulation (the
“Anti-Trust Condition”);
	 
	 	3.1.4	 	the banks and financial institutions which are to be party
to the Facility Agreement and the relevant members of the BP Group having
agreed upon a form of direct agreement which is to become effective upon
Completion on terms reasonably satisfactory to the Purchaser;
	 
	 	3.1.5	 	the Reporting Accountants confirming in writing in a form
satisfactory to the Seller and the Purchaser that they are not aware of any
fact matter or circumstance as at the date of such confirmation that would
prevent them from issuing the Accountants Report at Completion, such
confirmation to be accompanied by a draft of the Accountants Report;
	 
	 	3.1.6	 	the Seller being satisfied in its sole and absolute
discretion that the BP Director is likely to execute the statutory
declaration and to vote in favour

23

 

	 	 	 	of the resolution(s) each referred to in paragraph 1 of Part II of Schedule 4; and
	 	 	 	 
	 
	 	3.1.7	 	the Seller having provided the Purchaser with the Audited Accounts.

	3.2	 	The Seller shall promptly give notice to the Purchaser of the satisfaction of the Condition
Precedent set out in clause 3.1.6.
	 
	3.3	 	The Seller hereby undertakes to use reasonable efforts to ensure satisfaction of the
Condition Precedents in clauses 3.1.1, 3.1.2, 3.1.5 and 3.1.7 on or before the Long Stop Date.
The Seller undertakes to keep the Purchaser informed as to progress towards satisfaction of
the Conditions Precedent in clauses 3.1.1 and 3.1.2 (the “BP Conditions”) and undertakes to:

	 	3.3.1	 	disclose in writing to the Purchaser immediately upon
becoming aware of anything which may prevent one or both of the BP Conditions
from being satisfied;
	 
	 	3.3.2	 	notify the Purchaser and (subject to law and any
confidentiality obligations binding upon the Seller) provide copies of any
communications from or on behalf of any BP Group member in relation to the
satisfaction of the BP Conditions or either of them;
	 
	 	3.3.3	 	provide the Purchaser (or advisers nominated by the
Purchaser) with draft copies of all submissions to and communications with
any BP Group member in relation to the satisfaction of the BP Conditions or
either of them. Provided that it is reasonably practicable for it to do so,
the Seller shall provide such copies at such time as will allow the Purchaser
a reasonable opportunity to provide comments on such submissions or
communications before they are submitted or sent and provide the Purchaser
(or such nominated advisers) with copies of all such submissions or
communications in the form submitted or sent;
	 
	 	3.3.4	 	where requested by the Purchaser and where agreed to by
the relevant BP Group member, allow persons nominated by the Purchaser to
attend all meetings in relation to satisfaction of the BP Conditions or
either of them with any BP Group member and, where applicable, to make oral
submissions at such meetings; and
	 
	 	3.3.5	 	notify the Purchaser within 2 Business Days of a BP
Condition being satisfied.

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

	 	3.3A.1 	 	between SCCL and any BP Group member entered into in the ordinary course of the
Business on arm’s length terms;
	 
	 	3.3A.2 	 	with any BP Group member to which neither Sale Group member is a party and which
imposes no obligation or liability (contingent or otherwise) upon either of them; or
	 
	 	3.3A.3 	 	required under or contemplated by the Participation Agreement,

24

 

	 	 	the Seller shall not enter into (and shall procure that neither Sale Group member enters
into) any arrangement, understanding, commitment, agreement or contract with any BP Group
member and shall not (and shall procure that neither Sale Group member shall) agree to any
amendment to any of the BP Agreements, in each case without the prior written consent of the
Purchaser.
	 
	3.4	 	The Purchaser hereby undertakes to use reasonable efforts to ensure the satisfaction of the
Anti-Trust Condition and the Conditions Precedent set out in clauses 3.1.4 and 3.1.5 (the
“Purchaser Conditions”) on or before the Long Stop Date. The Purchaser Conditions are given
in favour of the Purchaser and, at any time before the Long Stop Date the Purchaser may, by
notice in writing to the Seller, waive a Purchaser Condition on any terms the Purchaser may
decide. The Purchaser undertakes to keep the Seller informed as to progress towards
satisfaction of the Anti-Trust Condition and the Purchaser Conditions and undertakes to:

	 	3.4.1	 	disclose in writing to the Seller immediately upon
becoming aware of anything which may prevent the Anti-Trust Condition or the
Purchaser Condition from being satisfied;
	 
	 	3.4.2	 	notify the Seller and (subject to law and any
confidentiality obligations binding upon the Purchaser) provide copies of any
communications from any governmental or regulatory body in relation to
satisfaction of the Anti-Trust Condition or from BP in relation to the
satisfaction of the Purchaser Conditions where such communications have not
been independently or simultaneously supplied to the Seller;
	 
	 	3.4.3	 	provide the Seller (or advisers nominated by the Seller)
with draft copies of all submissions and communications to governmental or
regulatory bodies in relation to satisfaction of the Anti-Trust Condition or
any submissions or communications to any BP Group member in relation to the
satisfaction of the Purchaser Condition or either of them. The Purchaser
shall provide such copies at such time as will allow the Seller a reasonable
opportunity to provide comments on such submissions and communications before
they are submitted or sent and provide the Seller (or such nominated
advisers) with copies of all such submissions and communications in the form
submitted or sent; provided, however that if the Seller does not provide its
comments within the time frame required for the making of such communications
or submissions, the Purchaser may nonetheless make such communications or
submissions;
	 
	 	3.4.4	 	where requested by the Seller and where permitted by the
governmental or regulatory body, allow persons nominated by the Seller to
attend all meetings in relation to satisfaction of the Anti-Trust Condition
(if any) with such governmental or regulatory bodies and, where appropriate,
to make oral submissions at such meetings;
	 
	 	3.4.5	 	where requested by the Seller and where agreed to by the
relevant BP Group member, allow persons nominated by the Seller to attend all
meetings in relation to the satisfaction of the Purchaser Condition with any
BP Group member and, where applicable, to make oral submissions at such
meetings; and
	 
	 	3.4.6	 	notify the Seller within 2 Business Days of such condition
being satisfied.

25

 

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

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

	3.7	 	The Seller shall promptly notify the Purchaser (providing reasonable details of such fact or
circumstance (but without any obligation to provide quantum)) if it becomes aware of a fact or
circumstance which would or might reasonably entitle the Purchaser to terminate this Agreement
under clause 3.6.
	 
	3.8	 	Each of the Conditions Precedent in clauses 3.1.4 and 3.1.7 may be waived only by the
Purchaser giving notice to the Seller in writing. The Condition Precedent set out in clause
3.1.6 may be waived only by the Seller giving notice to the Purchaser in writing. Each of the
Conditions Precedent set out in clauses 3.1.1 through 3.1.3 (inclusive) and 3.1.5 may be
waived only by the Purchaser and the Seller each giving notice to the other in writing.
	 
	4.	 	CONSIDERATION
	 
	4.1	 	On or before the fifth (5th) Business Day prior to the date scheduled for Completion in
accordance with clause 6.1, the Seller shall prepare and deliver to the Purchaser a statement
(the “NWC Completion Statement”) setting out the projected Net Working Capital for each of
SCCL and UK OpCo as at Completion (the sum of such amounts the “Aggregate Projected NWC”) and
specifying the Seller’s estimate of the value of the SCCL Intergroup Debt at Completion
expressed in pounds (the “Estimated SCCL Intergroup Debt”) and the relevant member(s) of the
Calpine Group to which such amounts are due. For the purposes of determining the Estimated
SCCL Intergroup Debt, if any amount comprising an SCCL Intergroup Debt is denominated in a
currency other than pounds, that amount shall be converted to pounds at the closing mid-point
pound spot rate applicable to that non-sterling currency on the date on which the NWC
Completion Statement is prepared and delivered in accordance with this clause 4.1 as shown in
the Financial Times (London edition), or if the Financial Times (London edition) is not
published on that date, the closing mid-point pound spot rate applicable to that non-sterling
currency quoted by Barclays Bank plc. The NWC Completion Statement shall be determined and
prepared by the Seller in good faith.

26

 

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

	 	4.2.1	 	if the Aggregate Projected NWC is a positive amount in
excess of zero, plus the lesser of (i) such excess and (ii) [*] ; or
	 
	 	4.2.2	 	if the Aggregate Projected NWC is less than zero, less the
amount (expressed as a positive number) equal to the deficit.

	 	 	The amount payable at Completion as calculated under this clause 4 (the “Completion Amount”)
is payable by the Purchaser to the Seller on Completion in accordance with clauses 6.3 and
6.4.
	 
	4.3	 	If any payment is made by the Seller to the Purchaser in respect of any Claim the Purchase
Price shall be deemed to have been reduced by the amount of such payment but in no event shall
the Purchase Price be deemed to be reduced below £10.00 by virtue of the operation of this
clause 4.3.
	 
	4.4	 	Wherever in this Agreement provision is made for the payment by one party to another (or by
or to SCCL), such payment shall be effected by crediting for same day value in immediately
available funds to the account specified in the payment account details of the party entitled
to the payment (or to SCCL, as the case may be) by way of wire transfer to such account or
accounts as shall have been notified by the party entitled to the payment (or, in the case of
a payment required to be made to SCCL after Completion, by the Purchaser) at least three (3)
Business Days before the due date for payment.
	 
	5.	 	CONDUCT OF BUSINESS BEFORE COMPLETION
	 
	5.1	 	Subject to clause 5.2, the Seller shall procure that between the date of this Agreement and
Completion:

	 	5.1.1	 	SCCL and UK OpCo shall, unless it has obtained the prior
consent of the Purchaser to do otherwise (such consent not to be unreasonably
withheld or delayed), comply with Part I of Schedule 5;
	 
	 	5.1.2	 	to the extent applicable thereto, (i) no member of the
Sale Group knowingly or intentionally acts or omits to act where such act or
omission would result in its being in material breach of any BP Agreement and
(ii) each member of the Sale Group uses its reasonable endeavours to comply
with its respective obligations under each of the BP Agreements to which it
is a party.

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

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

27

 

	 	 	 	adverse effect thereof (and of which the Purchaser will be promptly
notified);
	 
	 	5.2.3	 	the completion or performance of any obligations
undertaken pursuant to any contract or arrangement entered into by any member
of the Sale Group prior to the date of this Agreement provided such contract
or arrangement has been disclosed to the Purchaser in the Data Room, or if
the Seller is aware that such contract or arrangement is not so disclosed,
such contract or arrangement is brought to the attention of the Purchaser
and, where practicable, the Seller consults with the Purchaser in respect of
the obligations to be performed pursuant to such contract or arrangement;
	 
	 	5.2.4	 	the payment of any principal, interest and other amounts
due and payable by SCCL in accordance with the terms of the Luxco Loan
Agreement, this Agreement or as required or contemplated by any contractual
loan or financing arrangement to which SCCL or any of SCCL’s Affiliates is a
party, in each case without prejudice to the Warranty set out in paragraph
5.6 of Schedule 2;
	 
	 	5.2.5	 	any matter required to be undertaken to comply with this
Agreement; or
	 
	 	5.2.6	 	any matter undertaken at the written request of the
Purchaser.

	5.3	 	The Seller shall use its reasonable efforts to provide, and shall procure that the Sale Group
members provide, the Purchaser and the Purchaser’s Auditors with such information concerning
each of the Sale Group members as the Purchaser and the Purchaser’s Auditors shall reasonably
require and allow the Purchaser and the Purchaser’s Auditors, and shall procure that each Sale
Group members allows the Purchaser and the Purchaser’s Auditors, reasonable access during
business hours (and upon reasonable notice) to each member of the Sale Group and its books and
records, its employees and advisers, except for work product of, or privileged communications
with, legal counsel, in each case insofar as is reasonably required for the analysis and
verification of the net asset position of each of the Sale Group members; provided that access
pursuant to this clause 5.3 and the exercise by the Purchaser of its rights under this clause
5.3 shall not interfere with the Seller’s or any member of the Sale Group’s Business
operations or breach the terms of any confidentiality undertakings binding upon it.
	 
	5.4	 	As soon as reasonably practicable after the date on which it gives the NWC Completion
Statement, the Seller will deliver a copy of the Supplemental Letter (duly executed by or on
behalf of each of the Seller Parties) to the Purchaser.
	 
	6.	 	COMPLETION
	 
	6.1	 	Completion shall take place at the offices of the Seller’s Solicitors at 40 Bank Street,
Canary Wharf, London E14 5DS:

	 	6.1.1	 	on the nineteenth (19th) day after the day on
which the last of the Conditions Precedent is satisfied, or, if such day is
not a Business Day, the next Business Day; or
	 
	 	6.1.2	 	such earlier date notified by the Seller to the Purchaser
as being the date on which the Luxco Loan and all amounts thereunder fall due
for repayment or prepayment as a result of the redemption of the Preferred,

28

 

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

	6.1A 	 	If:

	 	6.1A.1 	 	the Seller gives (or is deemed to give) a notice to the Purchaser under clause 8.9
on a date less than 4 Business Days prior to the date for Completion as determined in
accordance with clause 6.1; and
	 
	 	6.1A.2 	 	such notice does not contain a statement from the Seller indicating that the Seller
wishes to disapply the provisions of clause 8.10, then the Completion Date determined
under clause 6.1 shall be postponed to the first Business Day after the date on which
Calpine gives (or is deemed to give) a Reply Notice in respect of the facts or
circumstances described in the Seller’s notice referred to in clause 6.1A.1.
	 
	 	6.1B 	 	At Completion, all and not part only of the transactions contemplated by this
Agreement to take place at Completion shall occur and such transactions shall be deemed
to occur simultaneously.

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

	 	6.3.1	 	do those things required of it in Part II of Schedule 4
(save to the extent that anything required of the Purchaser in Part II of
Schedule 4 requires the BP Director to execute or deliver any document or to
approve any resolution, it being acknowledged that the Purchaser cannot
procure that the BP Director take any action) with any adjustments or
amendments as may be agreed by the Seller and the Purchaser prior to
Completion. The Seller may waive the delivery by the Purchaser of any
document referred to in Part II of Schedule 4 for the purposes of proceeding
with Completion, but without prejudice to its rights in respect of the
failure by the Purchaser to deliver the same in accordance with this clause
6.3;
	 
	 	6.3.2	 	pay the Completion Amount to the Seller on account of the
Purchase Price less an amount equal to [*] which amount shall be paid to
the Escrow Account with the Escrow Agent; and
	 
	 	6.3.3	 	procure that SCCL pays to the Seller or to its order and
to such accounts as it may direct, an amount equal to the Estimated SCCL
Intergroup Debt.

	 	 	Any payments required to be made under this clause 6.3 will be made in accordance with
clause 4.4.
	 
	6.4	 	The Seller is not obliged to complete this Agreement unless the Purchaser complies with all
its obligations under clause 6.3. The Purchaser is not obliged to complete this Agreement
unless:

29

 

	 	6.4.1	 	the Seller complies with all its obligations under clause
6.2; and
	 
	 	6.4.2	 	the sale of all the Shares is completed simultaneously.

	6.5	 	If a party (the “Defaulting Party”) fails to comply with its obligations at Completion under
this clause 6 then the Seller (if the Purchaser is the Defaulting Party) or the Purchaser (if
the Seller is the Defaulting Party) may, by notice in writing to all other parties (i)
postpone Completion by not less than 2 Business Days (to a date no later than [*] ); or (ii)
terminate this Agreement forthwith.
	 
	6.6	 	Neither the Seller nor the Purchaser is obliged to complete this Agreement if:

	 	6.6.1	 	the BP Director fails to deliver at Completion a duly
executed statutory declaration referred to in Part II of Schedule 4 and
approve those resolutions set out in paragraph 1 of Part II of Schedule 4;
	 
	 	6.6.2	 	immediately prior to the implementation of the
transactions referred to in paragraph 3 of Part II of Schedule 4, SCCL does
not have net assets; or
	 
	 	6.6.3	 	the Reporting Accountants fail to deliver the Accountants
Report at Completion,

	 	 	PROVIDED that clause 6.6.1 shall not operate if the BP Director resigns from the board of
directors of SCCL and is not replaced prior to Completion unless the Purchaser provides to
the Seller no later than 10 Business Days after being given notice of such resignation a
certificate indicating that it has received notice from the finance parties under the
Facility Agreement confirming that such financing parties are of the view, having sought the
advice of a Queens Counsel, that the Financial Assistance Procedure intended to be carried
out at Completion, as set out in Part II of Schedule 4, will be adversely affected by the
resignation of the BP Director and that consequently the related condition precedent in the
Facility Agreement is not satisfied (and the Purchaser shall provide to the Seller a copy of
any opinion or memorandum from the leading counsel in the possession or control of the
Purchaser that was obtained by such finance parties in respect of the resignation of the BP
Director from the board of directors of SCCL). If Completion fails to take place as a
result of any of the circumstances referred to in this clause 6.6 then (subject to clause
17.2) Completion will automatically be postponed to the day 5 Business Days after the date
on which Completion was (but for this sentence) otherwise due to occur and that Business Day
will be the Completion Date.
	 
	6.7	 	In the event that Completion does not take place and the appointments and resignations
referred to in paragraph 1 of Part I of Schedule 4 are effective, then the Purchaser shall
(to the extent that it is in its power to do so) procure that a meeting of the directors of
each of UK OpCo and SCCL are immediately held at which resolutions are passed (i) approving
the re-appointment of each of the directors who so resigned and (ii) accepting the
resignation of each of the directors so appointed. The Purchaser shall procure that each of
the directors resigning pursuant to this clause 6.7 delivers to the board of directors of UK
OpCo or SCCL (as the case may be) a duly executed resignation letter in the Agreed Form. The
Purchaser hereby indemnifies the Seller Parties for any and all actions undertaken by the
directors appointed pursuant to paragraph 1 of Part I of Schedule 4 prior to their resignation
in accordance with this clause 6.7.
	 
	6.8	 	The Seller and the Purchaser agree that such amounts standing to the credit of the Escrow
Account shall only be applied in accordance with the provisions of the Escrow Agreement.

30

 

	7.	 	COMPLETION ACCOUNTS
	 
	7.1	 	The Purchaser shall procure that as soon as possible, and in any event within 60 calendar
days of the Completion Date a draft Completion Balance Sheet (having the same line items as
the balance sheet contained in the Accounts for the Sale Group member to which such draft
Completion Balance Sheet relates and by way of example only, an illustrative calculation is
set out in Appendix I) in respect of each of SCCL and UK OpCo (such Completion Balance Sheets
together the “Draft Completion Balance Sheets”) are prepared and delivered to the Seller.
	 
	 	 	Each Draft Completion Balance Sheet shall include a draft statement of Net Working Capital
for the company to which such Completion Balance Sheet relates. The Draft Completion
Balance Sheet for SCCL shall specify the Purchaser’s calculation of the SCCL Intergroup
Debt. The Purchaser shall prepare the Draft Completion Balance Sheets in accordance with
the Accounting Principles.
	 
	7.2	 	The Seller and the Seller’s Auditors shall be entitled to review the Draft Completion Balance
Sheets for a period of 60 calendar days following receipt from the Purchaser.
	 
	7.3	 	The Purchaser shall provide the Seller and the Seller’s Auditors with such information as the
Seller and the Seller’s Auditors shall reasonably require or shall procure that such
information is provided to the Seller and the Seller’s Auditors and allow the Seller and the
Seller’s Auditors access to each member of the Sale Group and its books and records, its
employees and advisers (at reasonable times and upon reasonable notice and subject to the
Seller agreeing in favour of the Purchaser to keep all confidential information disclosed to
it in accordance with this clause 7.3 confidential on the terms as set out in clause 21), and
shall use its reasonable efforts to procure access to the Purchaser’s Auditors (if retained)
and their working papers (or, if the Purchaser’s Auditors are not retained for the purposes of
preparing the draft Completion Balance Sheet, the Purchaser’s own working papers or
equivalent) in each case insofar as is reasonably required for the analysis and verification
of the Draft Completion Balance Sheets (including the draft statements of Net Working Capital
contained therein).
	 
	7.4	 	At or before the end of the period of 60 calendar days referred to in clause 7.2, the Seller
shall either:

	 	7.4.1	 	notify the Purchaser that it accepts each Draft Completion
Balance Sheet in its entirety, in which case the Draft Completion Balance
Sheets shall constitute the Completion Balance Sheets (and the amount of the
Net Working Capital shall be the amount set out in the draft Net Working
Capital statements contained therein) and such Draft Completion Balance
Sheets shall be final and binding on the Seller and the Purchaser; or
	 
	 	7.4.2	 	deliver to the Purchaser written notice of those items
and, where practicable, the amount in each Draft Completion Balance Sheet or
draft statement of Net Working Capital, as appropriate, which it disputes, in
which case only those items or amounts identified by the Seller (the
“Disputed Items”) shall be in dispute and shall be agreed or determined in
accordance with clause 7.5.

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

31

 

	 	 	amendments to the Draft Completion Balance Sheets. At the end of that 30 calendar day
period, those Disputed Items which have not been agreed between the Seller and the Purchaser
(if any) (“Unresolved Disputed Items”) shall be referred for final binding determination to
such firm of independent accountants of international standing (the “Expert”) as the Seller
and the Purchaser may agree or, in the absence of agreement within 10 Business Days
following the expiry of such 30 day period, or longer period as agreed between the Seller
and the Purchaser, as may be selected at the request of either the Seller or the Purchaser
by the President of the Institute of Chartered Accountants in England and Wales, with
instructions that the Expert render his decision on the Unresolved Disputed Items (and any
matters specifically relating thereto) and notify it to the Seller and the Purchaser within
30 days of the Expert accepting such referral. In each case, the Expert so selected (either
by agreement between the Seller and the Purchaser or otherwise in accordance with this
clause 7.5) shall act as expert and not as arbitrator and the Unresolved Disputed Items in a
Draft Completion Balance Sheet will be determined by the Expert in accordance with the
Accounting Principles and such adjustments as are required to be made as a result of the
Expert’s determination of such Unresolved Disputed Items shall be made to the Draft
Completion Balance Sheet in which such Unresolved Disputed Items appear or to which such
Unresolved Disputed Items relate which shall then constitute the Completion Balance Sheet
(and the amount of the Net Working Capital shall be the amount set out in the statement of
Net Working Capital as so adjusted) which shall be final and binding on the Seller and the
Purchaser. Each of the Seller and the Purchaser shall respectively provide or procure the
provision to the Expert of all such information as the Expert shall reasonably require
including from their respective Auditors and, in the case of the Purchaser, such business
records and accounts of the Sale Group in the possession, custody or control of the
Purchaser which the Expert shall in its discretion consider necessary. The decision of the
Expert shall, in the absence of fraud or manifest error, be final and binding on the
Purchaser and the Seller. The Seller and/or the Purchaser shall pay the costs of the Expert
as the Expert may direct failing which such costs shall be borne equally by the Seller and
the Purchaser.
	 
	7.6	 	Within 7 Business Days of the agreement or final determination of the Completion Balance
Sheets (and the Net Working Capital statements contained therein) as set out in this clause 7:

	 	7.6.1	 	if the sum of the Net Working Capital of SCCL and the Net
Working Capital of UK OpCo (the “Aggregate Actual NWC”) is greater than the
Aggregate Projected NWC, the Purchaser shall pay to the Seller an amount
equal to the excess, PROVIDED THAT the maximum amount payable under this
clause 7.6.1 shall not, when added to the amount by which the Completion
Amount is increased under clause 4.2.1 (if any), exceed [*] );
	 
	 	7.6.2	 	if the Aggregate Projected NWC is greater than the
Aggregate Actual NWC, the Seller shall pay to the Purchaser an amount equal
to the excess;
	 
	 	7.6.3	 	if the SCCL Intergroup Debt shown in the Completion
Balance Sheets is less than the amount of the Estimated SCCL Intergroup Debt,
then (a) the Seller shall pay (or procure that a Calpine Group member pays)
to SCCL an amount equal to the deficit and (b) subject to and conditional
upon the Seller’s compliance with sub-clause (a) of this clause 7.6.3, the
Purchaser shall pay the Seller an amount equal to the deficit; and
	 
	 	7.6.4	 	if the SCCL Intergroup Debt shown in the SCCL Completion
Balance Sheet is in excess of the amount of the Estimated SCCL Intergroup
Debt, then (a) the Seller shall pay (or procure that a Calpine Group member
pays) the Purchaser an amount equal to the excess and (b) subject to and

32

 

	 	 	 	conditional upon the Seller’s compliance with sub-clause (a) of this
clause 7.6.4, the Purchaser shall procure that SCCL pays an amount equal
to the excess to the Seller which amount shall be in full and final
settlement of the SCCL Intergroup Debt and the Seller shall (if
requested to do so by the Purchaser) acknowledge the same in writing to
the Purchaser.

	 	 	Any payments required to be made under this clause 7.6 will be made in accordance with
clause 4.4.
	 
	7.7	 	The Purchaser shall not be entitled to recover from the Seller in respect of any Warranty
being breached or being inaccurate or misleading or in respect of any breach of any other
provision of this Agreement (or any other agreement pertaining to this transaction) or in
respect of any indemnity contained in any agreement pertaining to this transaction to the
extent that the amount which the Purchaser seeks to recover from the Seller has been taken
into account in the calculation of Net Working Capital for either SCCL or UK OpCo.
	 
	8.	 	SELLER’S WARRANTIES
	 
	8.1	 	The Seller and Calpine (each a “Warrantor”, together the “Warrantors”) warrant to the
Purchaser in the terms set out in Schedule 2 as at the date of this Agreement. The liability
of the Seller and Calpine in relation to the Warranties shall be joint and several.
	 
	8.2	 	Immediately prior to Completion, the Warrantors shall be deemed to warrant to the Purchaser
in the terms set out in Schedule 2 by reference to the facts and circumstances subsisting
immediately prior to Completion. For the purposes of this clause 8.2 only, (a) where there is
an express or implied reference in a Warranty to the “date of this Agreement”, that reference
is to be construed as a reference to Completion and (b) the Relevant Period shall be deemed to
end at Completion.
	 
	8.3	 	The Purchaser’s rights to make a Claim in respect of the Warranties, and the Warrantors’
liability in respect of any such Claim, shall be limited and/or excluded as set out in
Schedule 3, save in relation to fraud.
	 
	8.4	 	The Warrantors acknowledge that the Purchaser has entered into this Agreement in reliance
upon the Warranties. Each Warranty is separate and independent and shall not be limited by
reference to or inference from any other Warranty, or any other term of this Agreement or any
document referred to in it.
	 
	8.5	 	The only Warranties given:

	 	8.5.1	 	in respect of Intellectual Property are those contained in
paragraph 12 of Schedule 2 and, with the exception of the Warranties
contained in paragraphs 7 and 10 of Schedule 2, each of the other Warranties
shall be deemed not to be given in relation to Intellectual Property;
	 
	 	8.5.2	 	in respect of employment matters are those contained in
paragraph 14 of Schedule 2 (other than paragraph 14.9 thereof) and, with the
exception of the Warranties contained in paragraphs 7 and 10 of Schedule 2,
each of the other Warranties shall be deemed not to be given in relation to
employment matters;

33

 

	 	8.5.3	 	in respect of Tax are those contained in paragraph 15 of
Schedule 2 and each of the other Warranties shall be deemed not to be given
in relation to Tax;
	 
	 	8.5.4	 	in respect of matters related to the Environment are those
contained in paragraphs 16 and 20 and to the extent they relate to
environmental matters paragraphs 4.4.1 and 4.5 of Schedule 2 and each of the
other Warranties shall be deemed not to be given in relation to any matter
relating to the Environment;
	 
	 	8.5.5	 	in respect of the Property are those contained in
paragraph 17 of Schedule 2 and each of the other Warranties shall be deemed
not to be given in relation to the Property, with the exception of the
Warranties contained in paragraph 7 of Schedule 2 insofar as such Warranties
relate to Property, excluding fixtures;
	 
	 	8.5.6	 	in respect of the dispersion of salt from the Facility’s
cooling towers into the Environment is that contained in paragraph 21.11 of
Schedule 2 and each of the other Warranties shall be deemed not to be given
in relation thereto; and
	 
	 	8.5.7	 	in respect of occupational health and safety are those
contained in paragraph 19 of Schedule 2 and each of the other warranties
shall be deemed not to be given in relation to occupational health and
safety.

	8.6	 	Each of Calpine and the Seller Guarantor warrants to the Purchaser that:

	 	8.6.1	 	it has the requisite capacity, power and authority to
enter into and perform its obligations under this Agreement;
	 
	 	8.6.2	 	it has taken all necessary corporate action required by
its articles of association (or like constitutional documents) to permit it
to enter into and perform its obligations under this Agreement;
	 
	 	8.6.3	 	this Agreement constitutes a binding obligation on it in
accordance with its terms;
	 
	 	8.6.4	 	the execution and delivery of, and the performance of its
obligations under this Agreement will not:
	 
	 	(a)	 	result in a breach of any provision of its constitutional
or organisational documents; or
	 
	 	(b)	 	result in a breach of any order, judgment or decree of
any court or governmental agency to which it is a party or by which it is
bound or any contractual commitment to which it is bound; or
	 
	 	(c)	 	result in it being or becoming subject to or threatened
by any procedures or steps which are analogous to those contained in
paragraph 18 of Schedule 2 in any jurisdiction, including the United States
of America;
	 
	 	8.6.5	 	it is not, in any jurisdiction (including the United
States of America) subject to or threatened by any procedures or steps which
are analogous

34

 

	 	 	 	to those contained in paragraph 18 of Schedule 2, nor are any such
procedures or steps pending; and
	 
	 	8.6.6	 	the Seller Guarantor Officer’s Certificate is true and
accurate.

	8.7	 	Save as set out in clause 3.6, a breach of Warranty by the Warrantors shall not entitle the
Purchaser to rescind or terminate this Agreement, or any part of it, whether before or after
Completion.
	 
	8.8	 	The Seller shall indemnify the Purchaser, and keep the Purchaser indemnified, on demand
against each Loss which the Purchaser or any Sale Group member incurs arising (directly or
indirectly) out of:

	 	8.8.1	 	[*]
	 
	 	8.8.2	 	[*] .

	8.9	 	The Seller shall promptly notify the Purchaser if it becomes aware of a fact or circumstance
(providing reasonable details of such fact or circumstance (but without any obligation to
provide quantum)) which would, if Completion were to occur, give rise to a Claim by the
Purchaser under clause 8.2. Any notice given under clause 3.7 shall be deemed to have also
been given under this clause 8.9.
	 
	8.10	 	In the event that the Seller provides (or is deemed to provide) a notice to the Purchaser
pursuant to clause 8.9, then (unless the Seller states in such notice that it wishes to
disapply the provisions of this clause 8.10 (such disapplication without prejudice to the
Purchaser’s rights (if any) under this Agreement) in relation to the fact or circumstance
referred to in the Seller’s notice:

	 	8.10.1	 	the Purchaser shall within 2 Business Days of delivery of the notice
referred to in clause 8.9, deliver to the Seller a notice (a “Response
Notice”):
	 
	 	(a)	 	whether or not the Purchaser believes that, if Completion
were to occur, it would have a Claim against either of the Warrantors;
	 
	 	(b)	 	the Purchaser’s good faith estimate of the amount of such
Claim (which estimate shall be without prejudice to the Purchaser’s right to
seek to recover some other amount in respect of such Claim); and
	 
	 	(c)	 	if the Purchaser’s good faith estimate of the amount of
such Claim exceeds £125,000 (one hundred and twenty five thousand pounds)
(such Claim being referred to as an “Incipient Claim”), whether or not the
Purchaser waives and forever discharges and releases the Warrantors from
such Incipient Claim,

provided that if the Purchaser does not deliver to the Seller a Response Notice
within 2 (two) Business Days in accordance with the terms of this clause 8.10.1,
then the Purchaser shall be deemed not to have waived and forever discharged and
released the Seller from such Incipient Claim; and

	 	8.10.2	 	within 2 Business Days of receipt by the Seller of a Response Notice in
respect of an Incipient Claim that is not waived (or deemed not to be waived)
by the Purchaser, Calpine shall deliver to the Purchaser on behalf

35

 

	 	 	 	of the Warrantors a notice (a “Reply Notice”) stating whether or not the
Seller wishes to terminate this Agreement and, if such notice states
that the Seller wishes to terminate this Agreement, then this Agreement
shall terminate in accordance with clause 17.1 (provided that, for the
avoidance of doubt, if the Seller fails to deliver a Reply Notice within
such 2 Business Day period then it shall be deemed to have delivered a
Reply Notice stating that it does not wish to terminate this Agreement).
If the Seller delivers (or is deemed to deliver) a Reply Notice that
indicates that it does not wish to terminate this Agreement pursuant to
this clause 8.10.2, then Completion shall be without prejudice to the
Purchaser’s rights against the Seller or Calpine (if any) in respect of
the fact, matter or circumstance described in the notice given under
clause 8.9.

	 	 	All notices under this clause 8.10 shall be given by facsimile in accordance with the
provisions of clause 19 and, in respect of any notice to be given to the Seller, a copy
shall be sent to Calpine in accordance with clause 19.3.
	 
	8.11	 	Notwithstanding any provision of this Agreement to the contrary, Calpine shall have no
liability under or in respect of this Agreement, the Share Purchase Documents or any of the
transactions contemplated herein or therein (or in connection with the performance or
non-performance of this Agreement or any Share Purchase Document) except contractual damages
in respect of the Warranties expressly given or deemed repeated by it pursuant to this clause
8 and Schedule 2, and then subject to the terms and conditions of this Agreement, including
Schedule 3.
	 
	8.12	 	Subject to clauses 8.13 and 8.14, the Seller shall indemnify the Purchaser as trustee for
SCCL in respect of any losses, liabilities, damages and costs and expenses (including
reasonable legal defence costs) incurred by SCCL to the extent that they arise from any claim
or proceedings for damages or Remedial Action brought against SCCL by any member of the BP
group or any Competent Authority within eighteen months of the date of this Agreement to the
extent that such claim or proceedings relates to any alleged or actual emission of chlorides
from the cooling towers of the Facility and any actual or alleged resulting deposition of any
such chlorides on the Complex Site (as defined in the Lease of the Property dated 26 September
2003) or elsewhere prior to Completion.
	 
	8.13	 	The Seller shall not be liable for any claim under clause 8.12 to the extent that it arises
from or is increased:

	 	8.13.1	 	due to any failure by SCCL to operate the Facility in the manner of a
reasonable and prudent operator after Completion;
	 
	 	8.13.2	 	by the worsening or aggravation by any person (other than the Seller or by
any person authorised on its behalf) after Completion of any circumstances or
states of affairs (including without limitation the condition of any plant or
equipment at or any part of the Facility) comprising the subject matter of
such claim;
	 
	 	8.13.3	 	by any change after Completion in the production capacity of the Facility;
	 
	 	8.13.4	 	by any change after Completion in any operations or maintenance (including
without limitation their manner and intensity) at the Property or the
Facility (in each case including any part thereof);

36

 

	 	8.13.5	 	by any amendment or alteration to or extension or renewal after Completion
of any deed, contract, lease or other agreement including without limitation
the BP Agreements to the extent that such claim would not have arisen under
such deed, contract, lease or other agreement in its form at the date of this
Agreement;
	 
	 	8.13.6	 	by any development of, alteration to or extension of or addition to the
Facility (including any part thereof) after Completion;
	 
	 	8.13.7	 	by any variation of or modification to any permit, consent, licence or
other permission issued by a Competent Authority or an application for or
issue of any such new permit, consent, licence or other permission; and/or
	 
	 	8.13.8	 	by any waiver, release, reduction or extinction of any of the rights of
SCCL described in clause 8.14 below.

	8.14	 	The Seller shall not be liable under clause 8.12 above, until SCCL has enforced and exhausted
all its rights (including without limitation those arising under the EPC contract) against any
relevant person (including without limitation Mitsubishi) insofar as they relate to or concern
the subject matter of any claim which could be brought under clause 8.12 above. The Purchaser
shall procure that SCCL shall promptly and diligently take all such action within SCCL’s power
as is necessary to compel Mitsubishi to carry out or pay for all works and measures necessary
to reduce the carry over of particles of water from the cooling towers of the Facility and any
deposition of chlorides including without limitation and where relevant the commencement of
any proceedings (save where the prospects of such proceedings being successful are low and the
Seller has given its written consent to the Purchaser or SCCL not to pursue such proceedings
(such consent not to be unreasonably withheld or delayed)). The Purchaser shall and shall
procure that SCCL shall give the Seller all information which the Seller reasonably requests
about such works and measures at all times and allow the Seller to monitor the progress of
such works and to the extent that it is able to procure the same to participate in any
relevant meetings with consultants or contractors.
	 
	8.15	 	No Claim can be brought under any of the Warranties to the extent that its subject matter
falls within the scope of the indemnities in clause 8.12 above or would so fall if it were not
for any limitations contained in clauses 8.12 to 8.14 above or the limitation on the total
aggregate liability of the Seller contained in paragraph 2.4(a) of Schedule 3.
	 
	8.16	 	Promptly after SCCL or any other member of the Purchaser’s Group becomes aware of any matter
which might reasonably be expected to give rise to a Claim by the Purchaser under clause 8.12
(whether at that time or in the future) it shall provide written details thereof to the Seller
and thereafter keep the Seller reasonably informed as to the progress of such matter.
	 
	8.17	 	Each Seller Party shall indemnify the Purchaser, and keep the Purchaser indemnified, on
demand against each Loss which the Purchaser incurs whether before or after the start of an
action arising (directly or indirectly) out of:

	 	8.17.1	 	the settlement of a Claim against such Seller Party for a breach of (in the
case of the Seller) clause 8.1 or clause 8.2 or (in the case of the Seller
Guarantor) clause 8.6 or (in either case) the enforcement of such a
settlement; and
	 
	 	8.17.2	 	legal proceedings against such Seller Party in respect of a Claim against
that Seller Party for a breach of (in the case of the Seller) clause 8.1 or

37

 

	 	 	 	clause 8.2 or (in the case of the Seller Guarantor) clause 8.6 or (in
either case) the enforcement of a judgment obtained in such proceedings.

	8.18	 	Each Purchaser Party shall indemnify the Seller, and keep the Seller indemnified, on demand
against each Loss which the Seller incurs whether before or after the start of an action
arising (directly or indirectly) out of:

	 	8.18.1	 	the settlement of a Claim against such Purchaser Party for a breach of
clause 9 or the enforcement of such a settlement; and
	 
	 	8.18.2	 	legal proceedings against such Purchaser Party in respect of a Claim
against that Seller Party for a breach of clause 9 or the enforcement of a
judgment obtained in such proceedings.

	8.19	 	Notwithstanding any provision of this Agreement to the contrary, none of the Warranties given
or deemed repeated by any of Calpine, the Seller or the Seller Guarantor shall be breached or
proved false in whole or in part by virtue of the actual or intended incurrence of
indebtedness or the granting of security by SCCL at Completion as contemplated by Part II of
Schedule 4.

	9.	 	PURCHASER PARTIES’ WARRANTIES

	9.1	 	Each of the Purchaser Parties warrants to the Seller that:

	 	9.1.1	 	it has the requisite capacity, power and authority to
enter into and perform its obligations under this Agreement and the other
Share Purchase Documents to which it is a party;
	 
	 	9.1.2	 	it has taken all necessary corporate action required by
its articles of association (or like constitutional documents) to permit it
to enter into and perform its obligations under this Agreement and the other
Share Purchase Documents to which it is a party;
	 
	 	9.1.3	 	this Agreement constitutes, and the other Share Purchase
Documents to which it is a party will, when duly executed by it and the other
parties thereto, constitute binding obligations on them in accordance with
their respective terms;
	 
	 	9.1.4	 	the execution and delivery of, and the performance of its
obligations under this Agreement and the other Share Purchase Documents to
which it is a party will not:
	 
	 	(a)	 	result in a breach of any provision of its constitutional
or organisational documents; or
	 
	 	(b)	 	result in a breach of any order, judgment or decree of
any court or governmental agency to which it is a party or by which it is
bound or any contractual commitment by which it is bound;
	 
	 	9.1.5	 	Mitsui owns indirectly 30% of the issued share capital of
the Purchaser and IPR owns indirectly 70% of the issued share capital of the
Purchaser; and

38

 

	 	9.1.6	 	it is not, in any jurisdiction (including the United
States of America) subject to or threatened by any procedures or steps which
are analogous to those contained in paragraph 18 of Schedule 2 and nor are
any such procedures or steps pending.

	9.2	 	The Purchaser warrants to the Seller that, so far as the Purchaser is aware:

	 	9.2.1	 	the resources used to fund the purchase of the Shares or
otherwise used by any member of the Purchaser’s Group in connection with, or
in the performance of its obligations under this Agreement or any Completion
Documents are not derived, in any country, either directly or indirectly,
from drug trafficking, bribery, money laundering, terrorism, trafficking of
arms, or any other activity, whether or not considered legal in the relevant
country, if such activity would be illegal had it occurred in the United
Kingdom; and
	 
	 	9.2.2	 	neither the Purchaser nor any other member of the
Purchaser’s Group nor any person acting on its or their behalf has made,
offered, promised or authorised any payment or given, offered promised or
authorised the giving of anything of material value to any official or
employee of any government or any department, agency or instrumentality
thereof, any political party or candidate for political office, any officer
or employee of any public international or multilateral organisation or any
person who has done or may do any of the things mentioned in this clause
9.2.2 in connection with the Project, this Agreement or any Completion
Documents or any transaction referred to herein or therein or supported,
sponsored, facilitated or financed any act of terrorism or terrorist person
or group in any way.

	9.3	 	The Purchaser warrants to the Seller that:

	 	9.3.1	 	it will have the necessary cash resources to meet its
obligations at Completion under this Agreement; and
	 
	 	9.3.2	 	as at the date of this Agreement, it does not intend to
bring any Claim against the Seller.

	10.	 	UNDERTAKINGS

	10.1	 	The Seller agrees and undertakes that (in the absence of fraud) it has no rights against and
shall not make any claim against any employee, director, agent, officer or adviser of the Sale
Group or of any shareholder or Affiliate of the Sale Group, in each case on whom it may have
relied before agreeing to any term of this Agreement or any other agreement or document
referred to herein (including the Disclosure Letter) or entering into this Agreement or any
other agreement or document referred to herein. The Purchaser agrees and undertakes that (in
the absence of fraud) it has no rights against and shall not make any claim against any
employee, director, agent, officer or adviser of the Calpine Group or of any shareholder or
Affiliate of the Calpine Group, in each case on whom it may have relied before agreeing to any
term of this Agreement or any other agreement or document referred to herein (including the
Disclosure Letter) or entering into this Agreement or any other agreement or document referred
to herein.
	 
	10.2	 	The Purchaser undertakes to the Seller that it shall, and shall procure that each member of
the Sale Group shall, preserve for a period of at least seven (7) years (or any longer period
as may

39

 

	 	 	be required by law or relevant regulations from time to time) from Completion all books,
records and documents of the Sale Group existing at Completion. The Purchaser shall permit
and allow, and shall procure that the relevant member of the Sale Group shall permit and
allow, upon reasonable written notice (and in any event within seven (7) days of written
notice being given) and during Working Hours, the employees, agents and professional
advisers of the Seller or any member of the Calpine Group specified in such notice
reasonable access to such books, records and documents and the right to inspect the same and
at the Seller’s expense, make copies thereof. The Seller hereby agrees (for itself and on
behalf of any of its employees, agents and professional advisers) in favour of the Purchaser
to keep confidential all confidential information disclosed to it or which it learns as a
result of being given access to the books, records and documents under this clause 10.2 on
the same terms as set out in clause 21.2.

	10.3	 	The Purchaser undertakes to the Seller (for itself and for the benefit of SCCL) that, subject
to the delivery of the Accountants Report at Completion, the net assets of SCCL will not be
reduced as a result of the transactions contemplated by paragraph 3 of Part II of Schedule 4
and, if such a reduction would occur as a result of such transactions, then the Purchaser
shall procure that, simultaneous with such transactions, SCCL’s net assets are increased by
an amount at least equal to such reduction, provided that nothing in this clause 10.3 shall
require the Purchaser to make good any reduction of net assets (whether by way of subscription
for share capital or otherwise) occurring as a result of such transactions or incur any
liability for an amount in excess of [*]
	 
	10.4	 	The Seller agrees that it shall (and that it will procure that SCCL shall) use all reasonable
endeavours to procure the delivery of the Accountants Report at Completion and the Purchaser
agrees to provide all assistance reasonably requested by the Seller in connection with the
preparation of the Accountants Report.

	11.	 	EFFECT OF COMPLETION

	11.1	 	Any provision of this Agreement and any other documents referred to herein which are capable
of being performed after (but which has not been performed at or before Completion) and all
Warranties and other undertakings contained in or entered into pursuant to this Agreement
shall remain in full force and effect notwithstanding Completion.

	12.	 	REMEDIES AND WAIVERS

	12.1	 	No delay or omission on the part of any party to this Agreement in exercising any right,
power or remedy provided by law or under this Agreement or any other documents referred to
herein shall impair such right, power or remedy, or operate as a waiver thereof.
	 
	12.2	 	The single or partial exercise of any right, power or remedy provided by law or under this
Agreement shall not preclude any other or further exercise thereof or the exercise of any
other right, power or remedy.

	13.	 	CONDUCT OF CLAIMS

	13.1	 	Without prejudice to the provisions of clause 3.7.5 of the Participation Agreement (if
applicable), upon the Purchaser or a member of the Sale Group becoming aware of any claim,
action or demand against it by a third party or matter of which the Purchaser is aware is
reasonably likely to give rise to any Claim by the Purchaser under this Agreement other than a
Tax Claim or an Environmental Indemnity Claim (“Third Party Claim”), the Purchaser shall and
shall procure that the relevant member of the Sale Group shall:

40

 

	 	13.1.1	 	promptly, and in any event within 10 Business Days of becoming aware (i) of
the claim, action or demand or (ii) that the relevant matter is reasonably
likely to give rise to a Claim, notify the Seller by written notice;
	 
	 	13.1.2	 	at the request of the Seller and subject to the Seller indemnifying the
Purchaser and the relevant member of the Sale Group against any reasonable
liability, costs, damages or expenses which may be reasonably and properly
incurred thereby, allow the Seller, subject to the directions and
requirements of any relevant insurer (if the claim is covered by a valid
policy of insurance) to take the sole conduct of such actions as the Seller
may deem appropriate in connection with any such Third Party Claim in the
name of the Purchaser or the relevant member of the Sale Group and in that
connection the Purchaser shall give or cause to be given to the Seller all
such assistance as the Seller may reasonably require in avoiding, disputing,
resisting, settling, compromising, defending or appealing any such Third
Party Claim. The Seller shall:
	 
	 	13.1.2.1	 	in response to reasonable requests from the Purchaser from time to time,
keep the Purchaser informed of the progress of the Third Party Claim;
	 
	 	13.1.2.2	 	provide the Purchaser with copies of such documentation relating to the
Third Party Claim as it may reasonably request subject to legal privilege
(unless disclosure can be made without loss of privilege) and relevant
duties of confidentiality; and
	 
	 	13.1.2.3	 	give the Purchaser such opportunities as it may reasonably request to
make representations regarding the conduct of the Third Party Claim;
	 
	 	13.1.3	 	subject to the Seller indemnifying the Purchaser and the relevant member of
the Sale Group against any reasonable liability, costs, damages or expenses
which may be reasonably and properly incurred thereby, take such action and
give such information and access to relevant personnel, premises, chattels,
documents and records to the Seller and its professional advisers as the
Seller may reasonably request (save, for the avoidance of doubt, to the
extent that any information, documents or records: (i) constitute internal
memoranda of the Purchaser’s Group which relate directly to a potential Claim
which may be made against the Seller and not to the factual circumstances
underlying such potential Claim, or (ii) are subject to legal privilege
unless disclosure can be made without loss of privilege) or (iii) information
which the Purchaser is obliged to keep confidential and the Purchaser and the
relevant member of the Sale Group shall take (or procure the taking of) such
action and give (or procure the giving of) such information and assistance in
order to avoid, dispute, resist, mitigate, settle, compromise, defend or
appeal any claim in respect a Third Party Claim or adjudication with respect
thereto as the Seller may reasonably require;
	 
	 	13.1.4	 	make no admission of liability, agreement, settlement or compromise in
relation to any such Third Party Claim or adjudication without the prior
written consent of the Seller. If the Seller agrees with the third party to
settle or compromise a Third Party Claim, and the Purchaser refuses to agree
to such settlement or compromise then, if the amount for which the Seller
subsequently becomes liable exceeds the figure at which it would

41

 

	 	 	 	have so settled or compromised the relevant Third Party Claim, the
Seller shall not be liable for the excess amount or any costs or
liabilities incurred since the proposed date of settlement or
compromise; and

	 	13.1.5	 	take all necessary action to mitigate its loss to the extent it is within
its power to do so.

	13.2	 	Clause 9 (Conduct of Tax Claims) of the Tax Covenant shall apply to a Tax Warranty Claim.
	 
	14.	 	BASIS OF RECOVERY
	 
	14.1	 	Where any payment is made pursuant to a claim for breach of this Agreement or under an
indemnity given under this Agreement (but not under the Tax Covenant or in relation to the Tax
Warranties) and the Losses incurred in relation to the claim give rise to a Relief in the
hands of any member of the Calpine Group or the Purchaser Group (as the case may be), then to
the extent that such Relief results in an actual saving of Tax, the Seller or the Purchaser
(as the case may be) shall, on the date on which the Tax so saved would otherwise first have
been due and payable, pay (or procure that the relevant member of the Calpine Group or the
Purchaser Group shall pay) to the other party an amount equal to the Tax so saved provided
that:

	 	14.1.1	 	in determining when any such Relief has been utilised, any other Relief
arising in the same or earlier accounting periods shall be deemed to take
priority to such Relief and such Relief shall be deemed to take priority to
any other Relief arising in subsequent accounting periods; and
	 
	 	14.1.2	 	to the extent that such Relief has not been utilised within seven (7) years
of the date of this Agreement, no payment shall be required to be made
pursuant to this clause.

	14.2	 	The Seller or the Purchaser may (at its own cost and expense) at any time issue an
instruction (the party issuing the instruction is referred to in this clause as the
“Requesting Party”) to the other’s auditors (the party so notified is referred to in this
clause as the “Notified Party”) to determine in writing the extent of any Relief referred to
in clause 14.1 which has arisen. If such auditors determine in writing that a Relief has
arisen and been utilised in accordance with clause 14.1 (as so determined in writing) the
Notified Party shall pay to the Requesting Party the amount so determined by the relevant
auditors within five (5) days of its receipt of a copy of the auditors written determination.
	 
	14.3	 	If a written determination has been issued as referred to in clause 14.2, the Seller or the
Purchaser may on or before the third anniversary of such determination issue a request to the
relevant company’s auditors:

	 	14.3.1	 	to review (at the expense of the party requesting the review, or where a
payment becomes due under clause 14.4, at the expense of the party which is
required to make such payment under clause 14.4) such written determination
in the light of all relevant circumstances at the time of the review; and
	 
	 	14.3.2	 	to determine in writing whether in the light of such circumstances the
original written determination should be amended.

	14.4	 	If the new written determination referred to in clause 14.3 states that the original written
determination should be amended, an adjusting payment equal to the difference between the

42

 

	 	 	sum in the original written determination and the sum in the amended written determination
shall be made by the Requesting Party or the Notified Party (as appropriate) as soon as
reasonably practicable.

	15.	 	TRADE MARKS
	 
	 	 	The Purchaser hereby undertakes to the Seller to procure that each member of the Sale Group
ceases to use or display in any manner whatsoever the Trade Marks or any similar mark, name,
design or logo as soon as reasonably practicable (and in any event within 90 days) following
Completion.
	 
	16.	 	ASSIGNMENT AND NOVATION
	 
	16.1	 	All (and not part only) of the benefits of this Agreement shall be assignable:

	 	16.1.1	 	by the Purchaser to a member of the Purchaser’s Group, or
	 
	 	16.1.2	 	by the Seller to a member of the Calpine Group,

PROVIDED THAT, in either case, any assignment made to a person in accordance with clauses
16.1.1 or 16.1.2 (each such person a “Permitted Assignee”) is subject to the conditions that
if such Permitted Assignee shall subsequently cease to be a member of the Purchaser’s Group
or the Calpine Group, the Purchaser or the Seller (as the case may be) shall procure that
prior to the Permitted Assignee ceasing to be an Affiliate thereof, the Permitted Assignee
assigns the benefit of this Agreement back to the assigning party or to another member of
the Purchaser’s Group or the Calpine Group (as the case may be).

	16.2	 	The Purchaser (or any Permitted Assignee, including under clause 16.3) may charge or assign
the benefit of this Agreement to any bank or financial institution or any other person by way
of security for the purposes of or in connection with the financing (whether in whole or in
part) by the Purchaser and/or SCCL of the acquisition of the Shares or any other transactions
contemplated by this Agreement. Any such bank, financial institution or person (or any
administrative receiver or other person appointed to enforce such security) may charge or
assign such rights on, for the purpose of or in connection with, any enforcement of the
security under such financing arrangements.
	 
	16.3	 	At any time prior to Completion the Purchaser Guarantors may give notice to the Seller
Parties indicating that they wish the Seller Parties to agree to the novation of the
obligations of the Purchaser under this Agreement to a Permitted Assignee and provided that:

	 	16.3.1	 	the Permitted Assignee is an Approved Transferee within the meaning of the
Participation Agreement;
	 
	 	16.3.2	 	such novation is conditional upon such Permitted Assignee remaining a
member of the Purchaser’s Group at all times prior to Completion (failing
which the obligations of the Purchaser as novated to the Permitted Assignee
shall be novated to the Purchaser or another Permitted Assignee); and
	 
	 	16.3.3	 	the liability of the Seller Parties under this Agreement is not increased
as a result of such novation,

then the Seller Parties will execute all such documents as may reasonably be required to
novate the obligations of the Purchaser to the nominated Permitted Assignee and following

43

 

such novation each reference in this Agreement to the Purchaser (including in clause 26)
shall be construed as a reference to the Permitted Assignee.

	16.4	 	In the event of an assignment in accordance with clause 16.1 or clause 16.2 or a novation in
accordance with clause 16.3, each of the Purchaser and the Seller (as the case may be) hereby
agrees that the liability of the other party in respect of any Claim or any liability arising
out of or in connection with this Agreement or the Tax Covenant howsoever arising shall be no
greater than it would otherwise have been had any such assignment or novation not occurred.
	 
	16.5	 	Neither this Agreement (nor any part of it) is assignable by the Calpine or the Seller
Guarantor without the prior written consent of the Purchaser. Neither this Agreement nor any
part of it is assignable by either of the Purchaser Guarantors without the prior written
consent of the Seller.
	 
	16.6	 	Except as expressly permitted by this clause 16, any assignment of this Agreement shall be
void.
	 
	17.	 	TERMINATION
	 
	17.1	 	This Agreement may be terminated as follows:

	 	17.1.1	 	by mutual written consent of the Seller and the Purchaser;
	 
	 	17.1.2	 	upon notice by either the Seller or the Purchaser if any of the Conditions
Precedent shall not have been satisfied (or, in the case of the Purchaser
Conditions, waived by the Purchaser) prior to 3:00 p.m. on the Long Stop
Date;
	 
	 	17.1.3	 	by the Purchaser in accordance with clause 3.6;
	 
	 	17.1.4	 	by the Purchaser or the Seller in accordance with clause 6.5; or
	 
	 	17.1.5	 	by the Seller in accordance with clause 8.10.2.

	17.2	 	This Agreement will terminate automatically at 5:00 p.m. on 30 August 2005 unless Completion
has occurred prior to that time.
	 
	17.3	 	If this Agreement is terminated in accordance with clause 17.1 or terminates in accordance
with clause 17.2 and without limiting any party’s right to claim damages in respect of
antecedent breaches, all obligations of the parties under this Agreement shall end (except for
the provisions of clauses 19, 20, 21, 22 and 32) but all rights and liabilities of the parties
which have accrued before termination shall continue to exist.
	 
	18.	 	FURTHER ASSURANCE
	 
	18.1	 	Each of the Parties shall from time to time at its own cost, on being required to do so by
any other party to this Agreement, now or at any time in the future, do or procure the doing
of all such acts and/or execute or procure the execution of all such documents in a form
satisfactory to the party concerned as they may reasonably consider necessary to transfer the
Shares to the Purchaser and otherwise give full effect to this Agreement.
	 
	18.2	 	This Agreement may only be varied in writing signed by each of the parties.

44

 

	19.	 	NOTICES

	19.1	 	Any notice or other communication given or made under or in connection with the matters
contemplated by this Agreement shall be in writing.

	19.2	 	Any such notice or other communication shall be delivered personally or sent by international
recognised courier or by facsimile to the address or the facsimile number provided in clause
19.3 (marked for the attention of the person identified in the clause) and, if so delivered or
sent, shall be deemed to have been duly given or made as follows:

	 	19.2.1	 	if sent by personal delivery, upon delivery at the address of the party to
whom such notice is addressed;

	 	19.2.2	 	if sent by international recognised courier, two (2) Business Days after
the date of posting; and

	 	19.2.3	 	if sent by facsimile, when dispatched,

	 	 	PROVIDED THAT if, in accordance with the above provisions, any such notice or other
communication would otherwise be deemed to be given or made outside Working Hours, such
notice or other communication shall be deemed to be given or made at the start of Working
Hours on the next Business Day.

	19.3	 	The relevant addressee and facsimile number of each party for the purposes of this Agreement,
subject to clause 19.4, are:

	 	 	 	 	 
	Name of party:	 	For the attention of:	 	Facsimile No.:
	Calpine UK Holdings Limited

c/o Skadden Arps Slate

Meagher & Flom (UK) LLP

40 Bank Street

Canary Wharf

London E14 5DS

	 	Douglas Nordlinger
	 	+44 (0) 20 7072 7030
	 
	 	 	 	 
	with a copy to Calpine
	 	 	 	 
	 
	 	 	 	 
	Calpine Corporation

50 West San Fernando Street

San Jose

California 95113

USA

	 	General Counsel
	 	+1 408 794 2434
	 
	 	 	 	 
	Quintana Canada Holdings, LLC

50 West San Fernando Street

San Jose

California 95113

USA

	 	General Counsel
	 	+1 408 794 2434
	 
	 	 	 	 
	with a copy to Calpine
	 	 	 	 
	Normantrail (UK Co 3) Limited

Senator House

85 Queen Victoria Street

London EC4V 4DP

	 	The Company Secretary
	 	+44 (0) 20 7320 8770

45

 

	 	 	 	 	 
	Name of party:	 	For the attention of:	 	Facsimile No.:
	with a copy to each of the

Purchaser Guarantors
	 	 	 	 
	 
	 	 	 	 
	International Power plc

Senator House

85 Queen Victoria Street

London EC4V 4DP

	 	The Company Secretary
	 	+44 (0)20 7320 8770
	 
	 	 	 	 
	with a copy to Mitsui
	 	 	 	 
	 
	 	 	 	 
	Mitsui & Co., Ltd

2-1, Ohtemachi 1-chome

Chiyoda-ku

Tokyo

Japan

with a copy to IPR

	 	The General Manager

Second Project

Development Department
Power & Infrastructure

Project Development

Division

	 	+81 (0) 3 3285 9783

	19.4	 	A party may notify the other parties to this Agreement of a change to its name, relevant
addressee, address or fax number for the purposes of clause 19.3 PROVIDED THAT such
notification shall only be effective on:

	 	19.4.1	 	the date specified in the notification as the date on which the change is
to take place; or

	 	19.4.2	 	if no date is specified or the date specified is less than five (5) clear
Business Days after the date on which notice under this clause 19.4 is given,
the date falling five (5) clear Business Days after notice of any such change
has been given.

	20.	 	ANNOUNCEMENTS

	20.1	 	Subject to clause 20.2, no announcement concerning the sale of the Shares or any ancillary
matter shall be made by any member of the Purchaser’s Group or any member of the Calpine Group
without the prior written approval of the Seller or the Purchaser (respectively), such
approval not to be unreasonably withheld or delayed.

	20.2	 	Any party (or any of its Affiliates) may make an announcement concerning the sale of the
Shares or any ancillary matter if and to the extent required by:

	 	20.2.1	 	the law of any relevant jurisdiction;

	 	20.2.2	 	existing contractual obligations; or

	 	20.2.3	 	any securities exchange or regulatory or governmental body to which any
party (or any of its Affiliates) is subject or submits, wherever situated,
whether or not the requirement has the force of law,

	 	 	in which case the party which is required to make the announcement shall take all such steps
as may be reasonable and practicable in the circumstances to agree the contents of such
announcement with the Purchaser (in the case of an announcement by a Seller Party or any of
its Affiliates) or the Seller (in the case of an announcement by a Purchaser Party or any of
its Affiliates) before making such announcement PROVIDED THAT any such announcement shall be
made only after notice to the Purchaser or the Seller (as the case may be).

46

 

	20.3	 	The restrictions contained in this clause shall continue to apply after Completion without
limit in time.

	21.	 	CONFIDENTIALITY

	21.1	 	Subject to clauses 21.3 and 21.4, the Purchaser undertakes to the Seller that it will (and
that it will procure that each member of the Purchaser Group will) treat as strictly
confidential all information received or obtained as a result of entering into or performing
this Agreement which relates to:

	 	21.1.1	 	the provisions of this Agreement;

	 	21.1.2	 	the negotiations relating to this Agreement (or any other document referred
to herein);

	 	21.1.3	 	the subject matter of this Agreement (or any other document referred to
herein); or

	 	21.1.4	 	Calpine and each member of the Calpine Group.

	21.2	 	Subject to clauses 21.3 and 21.4, the Seller undertakes to the Purchaser that it will (and
that it will procure that each member of the Seller Group will) treat as strictly confidential
all Confidential Information and all information received or obtained as a result of entering
into or performing this Agreement which relates to:

	 	21.2.1	 	the provisions of this Agreement;

	 	21.2.2	 	the negotiations relating to this Agreement (or any other document referred
to herein);

	 	21.2.3	 	the subject matter of this Agreement (or any other document referred to
herein); or

	 	21.2.4	 	the Purchaser’s Group.

	21.3	 	Information which would otherwise be confidential by virtue of clause 21.1 or clause 21.2 may
be disclosed by the Purchaser (or a Purchaser Group member) or by the Seller (or by a Calpine
Group member), as the case may be, if and to the extent:

	 	21.3.1	 	it is required by the law of any relevant jurisdiction;

	 	21.3.2	 	it is required by any securities exchange or regulatory or governmental
body to which a party (or any of its Affiliates) is subject or submits,
wherever situated, whether or not the requirement for information has the
force of law;

	 	21.3.3	 	it is disclosed on a strictly confidential basis to directors, employees,
professional advisers, auditors, bankers or rating agency of that party or to
directors, employees, professional advisers, auditors or bankers of its
Affiliates;

	 	21.3.4	 	the information has come into the public domain through no fault of that
party or any of its Affiliates;

47

 

	 	21.3.5	 	the Purchaser and the Seller have given their prior written approval to the
disclosure, such approval not to be unreasonably withheld or delayed;

	 	21.3.6	 	it is required to enable that party to enforce its rights under this
Agreement or it is disclosed in connection with regulatory or judicial
proceedings; or

	 	21.3.7	 	it is required by the Gas and Electricity Markets Authority,

	 	 	PROVIDED THAT (unless contrary to law or the direction of any governmental authority) any
such information disclosed pursuant to clauses 21.3.1 or 21.3.2 above shall be disclosed
only after notice to the Purchaser or the Seller (as the case may be).

	21.4	 	The Seller may disclose this Agreement, the other Share Purchase Documents, and other
information which would otherwise be confidential by virtue of clause 21.2 to any member of
the BP Group to the extent required under or contemplated by the Participation Agreement.

	21.5	 	The restrictions contained in this clause 21 shall continue to apply after the termination of
this Agreement or Completion for five (5) years from the date hereof.

	21.6	 	Calpine and IPR agree that the confidentiality undertaking entered into between them dated 7
February 2005 shall terminate at Completion without prejudice to any liability for breach of
such agreement prior to Completion. Calpine and Mitsui agree that the confidentiality
undertaking entered into between them dated 5 March 2005 shall terminate at Completion without
prejudice to any liability for breach of such agreement prior to Completion.

	22.	 	COSTS AND EXPENSES

	22.1	 	Each party shall pay its own costs and expenses in relation to the negotiations leading up to
the sale of the Shares and to the preparation, execution and carrying into effect of this
Agreement and all other documents referred to herein.

	22.2	 	Without prejudice to clause 22.1, all stamp, transfer, registration and other similar taxes,
duties and charges payable in connection with the sale or purchase of the Shares under this
Agreement (if any) shall be paid by the Purchaser.

	23.	 	TIME OF ESSENCE

	23.1	 	Any time, date or period referred to in any provision of this Agreement may be extended by
mutual agreement of the parties, but, in relation to any payment obligations and any
obligations relating to Completion, as regards any time, date or period originally fixed or
any time, date or period so extended, time shall be of the essence.

	24.	 	INTEREST

	24.1	 	If a party defaults in the payment when due of any sum payable under this Agreement (whether
determined by agreement or pursuant to an order of a court or otherwise) the liability of such
party shall be increased to include a payment of interest on such sum (subject to deduction or
withholding of tax as required by law) from the date when such payment is due until the date
of actual payment (before and after judgment) at a rate of two (2) per cent above LIBOR. Such
interest shall accrue from day to day on the basis of a 360-day year.

48

 

	25.	 	INVALIDITY

	25.1	 	If at any time any provision of this Agreement is or becomes illegal, invalid or
unenforceable in any respect under the law of any competent jurisdiction, such provision shall
not affect or impair:

	 	25.1.1	 	the legality, validity or enforceability in that jurisdiction of any other
provision of this Agreement; or

	 	25.1.2	 	the legality, validity or enforceability under the law of any other
jurisdiction of such provision or any other provision of this Agreement.

	26.	 	SEVERAL GUARANTEE FROM THE PURCHASER GUARANTORS

	26.1	 	In consideration of the Seller entering into this Agreement and for other good and valuable
consideration receipt of which is hereby acknowledged, subject to clause 26.2 the Purchaser
Guarantors hereby unconditionally and irrevocably (i) guarantee to the Seller the full, due
and punctual payment by the Purchaser of all amounts payable by the Purchaser under this
Agreement or the Tax Covenant and the performance of the Purchaser’s obligations at Completion
and (ii) indemnify the Seller immediately on demand against any cost, loss or liability
suffered by it if any obligation guaranteed by the Purchaser Guarantors is or becomes
unenforceable, invalid or illegal. The Purchaser Guarantors shall be liable for all such
obligations arising under this clause 26.1 as if they were each a primary obligor. The
guarantee in this clause 26.1 is a continuing guarantee and will extend to the ultimate
balance of sums payable by the Purchaser or the Purchaser Guarantors to the Seller in respect
of all amounts payable by the Purchaser under this Agreement or the Tax Covenant, regardless
of any intermediate payment or discharge.

	26.2	 	The obligations of the Purchaser Guarantors under this clause 26 are several (and not joint
and several) and in respect of any liability under it, IPR shall be responsible for [*] of
such liability and Mitsui shall be responsible for [*] of such liability.

	26.3	 	The Purchaser Guarantors’ obligations under this clause 26 will not be affected by any act,
omission, matter or thing which, but for this clause, would reduce, release or prejudice any
of its obligations under this clause 26, including (without limitation and whether or not
known to the Purchaser Guarantors or the Purchaser):

	 	26.3.1	 	any time, waiver or consent granted to, or composition with, the Purchaser
or the Purchaser Guarantors;

	 	26.3.2	 	the release of the Purchaser or the Purchaser Guarantors or any other
person under the terms of any composition or arrangement with any of their
creditors;

	 	26.3.3	 	the taking, variation, compromise, exchange, renewal or release of, or
refusal or neglect to perfect, take up or enforce, any rights against, or
security over assets of, the Purchaser or a Purchaser Guarantor or any other
person or any non-presentation or non-observance of any formality or other
requirement in respect of any instrument or any failure to release the full
value of any security;

	 	26.3.4	 	any incapacity or lack of power, authority or legal personality of or
dissolution or change in the members or status of the Purchaser or a
Purchaser Guarantor or any other person;

49

 

	 	26.3.5	 	any amendment (however, fundamental) or replacement of this Agreement or
any of the Share Purchase Documents or any other document or security;

	 	26.3.6	 	any unenforceability, illegality or invalidity of any obligation of any
person under this Agreement or any of the Share Purchase Documents or any
other document or security; or

	 	26.3.7	 	any insolvency of any person or similar proceedings.

	26.4	 	If and whenever the Purchaser defaults for any reason whatsoever in the performance of its
obligation to pay all amounts payable by the Purchaser under any Share Purchase Document to
which it is a party, the Purchaser Guarantors shall (on the several basis described in clause
26.2) forthwith unconditionally perform (or procure performance of) and satisfy (or procure
the satisfaction of) such obligation in the manner prescribed by such Share Purchase Document
so that the same benefits shall be conferred on the Seller as it would have received if such
obligation had been duly performed and satisfied by the Purchaser.

	26.5	 	The Seller shall not be obliged before exercising any of the rights, powers or remedies
conferred upon it by this clause 26 or by law:

	 	26.5.1	 	to make any demand of the Purchaser;

	 	26.5.2	 	to take any action or obtain judgment in any court against the Purchaser;

	 	26.5.3	 	to make or file any claim or proof in a winding-up or dissolution of the
Purchaser; or

	 	26.5.4	 	to enforce or seek to enforce any other security taken in respect of any of
the obligations of the Purchaser hereunder.

	26.6	 	Each Purchaser Guarantor agrees that, so long as any amounts are owed by the Purchaser under
this Agreement or the Tax Covenant it shall not exercise any rights which it may at any time
have by reason of performance by it of its obligations under this Agreement or the Tax
Covenant:

	 	26.6.1	 	to be indemnified by the Purchaser in respect of the obligations assumed by
the Purchaser Guarantors under this Agreement or the Tax Covenant; and/or

	 	26.6.2	 	to take the benefit (in whole or in part and whether by way of subrogation
or otherwise) of any rights of the Purchaser under this Agreement or the Tax
Covenant or of any other security taken pursuant to, or in connection with,
this Agreement or the Tax Covenant by the Purchaser.

	27.	 	GUARANTEE FROM THE SELLER GUARANTOR

	27.1	 	In consideration of the Purchaser entering into this Agreement and for other good and
valuable consideration receipt of which is hereby acknowledged, the Seller Guarantor hereby
unconditionally and irrevocably (i) guarantees to the Purchaser the full, due and punctual
payment by the Seller of amounts due in respect of liabilities of the Seller for all Claims
under this Agreement (other than Claims for breach of a Warranty) and all Claims under the Tax
Covenant, and (ii) indemnifies the Purchaser immediately on demand against any cost, loss or
liability suffered by it if any obligation guaranteed by the Seller Guarantor is or becomes

50

 

	 	 	unenforceable, invalid or illegal. The amount of the cost, loss or liability shall be equal
to the amount that the Purchaser would otherwise have been entitled to. The Seller
Guarantor shall be liable for all such obligations arising under this clause 27.1 as if it
were a primary obligor. The guarantee in this clause 27.1 is a continuing guarantee and
will extend to the ultimate balance of sums payable by the Seller in respect of all Claims
under this Agreement (other than Claims for breach of a Warranty) and all Claims under the
Tax Covenant and the ultimate balance of sums payable by the Seller Guarantor to the
Purchaser, regardless of any intermediate payment or discharge.

	27.2	 	The Seller Guarantor’s obligations under this clause 27 will not be affected by any act,
omission, matter or thing which, but for this clause, would reduce, release or prejudice any
of its obligations under this clause 27, including (without limitation and whether or not
known to the Seller Guarantor or the Seller):

	 	27.2.1	 	any time, waiver or consent granted to, or composition with, the Seller or
the Seller Guarantor;

	 	27.2.2	 	the release of the Seller or the Seller Guarantor or any other person under
the terms of any composition or arrangement with any of their creditors;

	 	27.2.3	 	the taking, variation, compromise, exchange, renewal or release of, or
refusal or neglect to perfect, take up or enforce, any rights against, or
security over assets of, the Seller or the Seller Guarantor or any other
person or any non-presentation or non-observance of any formality or other
requirement in respect of any instrument or any failure to release the full
value of any security;

	 	27.2.4	 	any incapacity or lack of power, authority or legal personality of or
dissolution or change in the members or status of the Seller or the Seller
Guarantor or any other person;

	 	27.2.5	 	any amendment (however, fundamental) or replacement of the Agreement or any
of the Share Purchase Documents or any other document or security;

	 	27.2.6	 	any unenforceability, illegality or invalidity of any obligation of any
person under the Agreement or any of the Share Purchase Documents or any
other document or security; or

	 	27.2.7	 	any insolvency of any person or similar proceedings.

	27.3	 	If and whenever the Seller defaults for any reason whatsoever in the performance of its
obligation to pay a liability of the Seller in respect of a Claim (other than a Claim for
breach of a Warranty) or a Claim under the Tax Covenant, the Seller Guarantor shall forthwith
unconditionally perform (or procure performance of) and satisfy (or procure the satisfaction
of) such obligation, commitment or undertaking in regard to which such default has been made
in the manner prescribed by the relevant agreement so that the same benefits shall be
conferred on the Purchaser as it would have received if such obligation, commitment or
undertaking had been duly performed and satisfied by the Seller.

	27.4	 	The Purchaser shall not be obliged before exercising any of the rights, powers or remedies
conferred upon it by this clause 27 or by law:

	 	27.4.1	 	subject to paragraph 8 of Schedule 3, to make any demand of the Seller;

51

 

	 	27.4.2	 	to take any action or obtain judgment in any court against the Seller;

	 	27.4.3	 	to make or file any claim or proof in a winding-up or dissolution of the
Seller; or

	 	27.4.4	 	to enforce or seek to enforce any other security taken in respect of any of
the obligations of the Seller hereunder.

	27.5	 	The Seller Guarantor agrees that, so long as any amounts are or may be owed by the Seller in
respect of all Claims under this Agreement (other than Claims for breach of a Warranty) or a
Claim under the Tax Covenant or under any of the Share Purchase Documents to which the Seller
is party or the Seller is under any actual or contingent obligation under any such agreements,
the Seller Guarantor shall not exercise any rights which the Seller Guarantor may at any time
have by reason of performance by it of its obligations under any such agreements:

	 	27.5.1	 	to be indemnified by the Seller in respect of the obligations assumed by
the Seller Guarantor under any such agreements; and/or

	 	27.5.2	 	to claim any contribution from any other Seller Guarantor of the Seller’s
obligations under any such agreements; and/or

	 	27.5.3	 	to take the benefit (in whole or in part and whether by way of subrogation
or otherwise) of any rights of the Seller under any such agreements or of any
other security taken pursuant to, or in connection with, any such agreements
by the Seller.

	28.	 	THIRD PARTY RIGHTS

	28.1	 	The parties to this Agreement do not intend that any term of this Agreement (other than
clause 10.3, which shall be enforceable by SCCL) should be enforceable by any person who is
not a party to this Agreement by virtue of the Contracts (Rights of Third Parties) Act 1999 or
otherwise. Notwithstanding the foregoing, if any benefits are conferred by this Agreement on
any third party by virtue of such statute, the parties to this Agreement may agree to vary or
rescind this Agreement without any such third party’s consent.

	29.	 	COUNTERPARTS

	29.1	 	This Agreement may be executed in counterparts, and by the parties on separate counterparts,
but shall not be effective until each party has executed at least one counterpart. Each
counterpart shall constitute an original of this Agreement, but the counterparts shall
together constitute but one and the same instrument.

	30.	 	ENTIRE AGREEMENT

	30.1	 	This Agreement and the other Share Purchase Documents (and all other documents which are
entered into by the parties or any of them in connection with this Agreement) contains the
whole agreement between the parties relating to the subject matter of this Agreement at the
date hereof to the exclusion of any terms implied by law which may be excluded by contract.
Each party acknowledges that it has not been induced to enter this Agreement by and, in
agreeing to enter into this Agreement, it has not relied on, any representations or warranties
except as expressly stated or referred to in this Agreement and, so far as permitted by law
(and except in the case of fraud) and each of the parties hereby waives any remedy in respect
of (and acknowledges that no other party nor any of their agents, advisers, officers or

52

 

	 	 	employees have given) any warranties, representations, indemnities or other statements
whatsoever (written or oral) not expressly incorporated into this Agreement.

	31.	 	WITHHOLDING, DEDUCTIONS AND SET OFF

	31.1	 	All sums payable under this Agreement (save amounts payable under clause 8.17 and 8.18) shall
be made in full without any set-off or counterclaim and free and clear of all deductions or
withholdings of any kind, save only as may be required by law, in which event such deduction
or withholding shall not exceed the minimum amount required by law.

	31.2	 	If any deduction or withholding is required by law from any payment made under this Agreement
then, except in relation to payments of interest, the party making the payment shall pay the
recipient such additional sum (the “Additional Sum”) as will, after such deduction or
withholding has been made (and after taking into account any Tax payable in respect of the
Additional Sum), leave the recipient with the same amount as it would have been entitled to
receive in the absence of any such requirement to make a deduction or withholding.

	31.3	 	If any Tax Authority brings into charge to Tax any sum paid by a party to any other party
under this Agreement then, except in relation to payments of interest, the Purchase Price and
any amounts paid pursuant to clauses 4.2, 6.3 and 7.6, the same obligation to pay an
Additional Sum as is referred to in clause 31.2 above shall apply in relation to such Tax as
if it were a deduction or withholding required by law; provided that if this clause 31.3
requires payment of an Additional Sum, if and to the extent that payment of such Additional
Sum would cause the total sum paid by the Seller Parties under this Agreement to exceed an
amount equal to the Purchase Price less £10 then such Additional Sum shall be deemed to be
reduced so that the total sum paid by the Seller Parties under this Agreement does not exceed
the Purchase Price less £10.

	31.4	 	If any party pays an additional amount under this Agreement and the recipient receives, by
virtue of the receipt of that additional amount (or in relation to the matter giving rise to
the payment of that additional amount) a credit for, refund of or relief from any Tax or other
monies payable by it or a similar benefit by reason of any deduction or withholding for or on
account of Tax or by reason of any Tax charged in respect of which there is an additional
amount under clause 31.3 or this clause 31.4, then that party shall reimburse to the other
relevant parties the amount of such credit, refund, relief, or similar benefit.

	31.5	 	If a party to this Agreement assigns the benefit of this Agreement, the other relevant
parties shall only be liable to make additional payments pursuant to clauses 31.3 or 31.4
above to the extent that those other parties would have been liable to make those payments if
no assignment had occurred.

	32.	 	CHOICE OF GOVERNING LAW

	32.1	 	This Agreement shall be governed by and construed in accordance with English law.

	32.2	 	Each party irrevocably agrees that the courts of England shall have exclusive jurisdiction to
settle any Proceedings which may arise out of or in connection with this Agreement and that
accordingly any Proceedings shall be brought in such courts.

	32.3	 	Each party waives (and agrees not to raise) any objection, on the ground of forum non
conveniens or on any other ground, to the taking of proceedings in the English courts. Each
party also agrees that a judgment against it in Proceedings brought in England shall be
conclusive and binding upon it and may be enforced in any other jurisdiction.

53

 

IN WITNESS whereof the parties have entered this Agreement the day and year first before written.

SCHEDULE 1

CORPORATE INFORMATION

PART A

Calpine UK Operations Limited

	 	 	 
	Registered number:
	 	04241615

	 	 	 

	Date of incorporation:
	 	26 June 2001

	 	 	 

	Place of incorporation:
	 	England and Wales

	 	 	 

	Type of company:
	 	Private limited by shares

	 	 	 

	Address of registered office:
	 	Saltend

Hedon Road

Hull East Riding of Yorkshire

HU12 8GA

	 	 	 

	Directors:
	 	Lisa Marie Bodensteiner

Peter Cartwright

Ann B Curtis

	 	 	 

	Secretary:
	 	Alycia Lyons Goody

	 	 	 

	Authorised share capital:
	 	£1,000,000 comprised of 1,000,000 ordinary

shares of £1 each

	 	 	 

	Issued share capital:
	 	1 ordinary share

	 	 	 

	Shareholder:
	 	Calpine UK Holdings Limited

	 	 	 

	Accounting reference date:
	 	31 December

	 	 	 

	Auditors:
	 	PricewaterhouseCoopers LLP

54

 

PART B

Saltend Cogeneration Company Limited

	 	 	 
	Registered number:
	 	03274929

	 	 	 

	Date of incorporation:
	 	1 November 1996

	 	 	 

	Place of incorporation:
	 	England and Wales

	 	 	 

	Type of company:
	 	Private limited by shares

	 	 	 

	Address of registered office:
	 	Saltend

Hedon Road

Hull East Riding of Yorkshire

HU12 8GA

	 	 	 

	Directors:
	 	Peter Cartwright

Ann B Curtis

Christopher Bowlas

Lisa Marie Bodensteiner

	 	 	 

	Secretary:
	 	Alycia Lyons Goody

	 	 	 

	Authorised share capital:
	 	£80,201,000 comprised of 80,201,000 ‘A’

ordinary shares of £1 each

	 	 	 

	Issued share capital:
	 	80,201,000 ‘A’ ordinary shares

	 	 	 

	Shareholder

Accounting reference date:
	 	Calpine UK Holdings Limited

31 December

	 	 	 

	Auditors:
	 	PricewaterhouseCoopers LLP

55

 

SCHEDULE 2

THE WARRANTIES

The Seller warrants to the Purchaser as follows:

	1.	 	Ownership of the Shares
	 
	 	 	The Seller is the sole legal and beneficial owner of the Shares.
	 
	2.	 	Capacity of the Seller
	 
	2.1	 	The Seller has the requisite capacity, power and authority to enter into and perform its
obligations under this Agreement and the Tax Covenant and each other Share Purchase Document
to which it is expressed to be a party.
	 
	2.2	 	The Seller has taken all necessary corporate action required by constitutional documents to
permit it to enter into and perform its obligations under this Agreement and the Tax Covenant
and each other Share Purchase Document to which it is expressed to be a party.
	 
	2.3	 	This Agreement constitutes and the Tax Covenant and each other Share Purchase Document to
which it is expressed to be a party will, when executed, constitute binding obligations of the
Seller in accordance with their respective terms.
	 
	2.4	 	The execution and delivery of, the performance by the Seller of its obligations under this
Agreement and the Tax Covenant and each other Share Purchase Document to which it is expressed
to be a party will not (or with the giving of notice or lapse of time would not):

	 	2.4.1	 	result in a breach of any provision of the constitutional or organisational
documents of the Seller including its memorandum and articles of association;
	 
	 	2.4.2	 	result in a breach of any order, judgment or decree of any court or law or
regulation of any government or governmental agency to which the Seller is a party or
by which the Seller is bound or any agreement, arrangement or obligation by which the
Seller or any member of the Sale Group is bound; or
	 
	 	2.4.3	 	save for those necessary in relation to the satisfaction of the BP Conditions
and the Anti-Trust Condition, require it to obtain any consent or approval of, or give
notice to or make any registration with, any Competent Authority which has not been
obtained or made at the date hereof both on an unconditional basis and on a basis which
cannot be revoked.

	3.	 	Company Structure, etc.
	 
	3.1	 	The Shares comprise the entire allotted and issued share capital of the members of the Sale
Group and all Shares have been properly allotted and issued and are fully paid up.
	 
	3.2	 	The Shares are legally and beneficially owned by the Seller free from any Encumbrances,
except for Permitted Encumbrances, and there is no agreement, arrangement or obligation to
give or create an Encumbrance in relation to any of the Shares.
	 
	3.3	 	There is no agreement or commitment outstanding which calls for the allotment, issue or
transfer of, or accords to any person the right to call for the allotment or issue of, any shares
(including the Shares) or debentures in or securities of the any member of the Sale
Group.

56

 

	3.4	 	The information given in Schedule 1 in relation to each member of the Sale Group is true,
accurate and not misleading, subject to any changes to the directors or secretary that have
been notified to the Purchaser.
	 
	3.5	 	No member of the Sale Group has, and during the Relevant Period no member of the Sale Group
has had, any interest in the share capital of any other company.
	 
	3.6	 	Neither SCCL nor UK OpCo carries on any business in partnership or through a joint venture
with any other person and neither of them is a member of any corporate or unincorporated body,
undertaking or association.
	 
	3.7	 	All registers of each member of the Sale Group contain an accurate record of the matters
which are required to be dealt with there and, so far as the Seller is aware, no member of the
Sale Group has received any application or request for rectification of its statutory
registers or any notice or allegation that any of them is incorrect during the Relevant
Period.
	 
	4.	 	Compliance
	 
	4.1	 	Each member of the Sale Group has during the Relevant Period complied with all laws,
statutes, regulations and other legal, procedural and administrative requirements applicable
to it in the United Kingdom save where failure to comply with the foregoing would not have a
material adverse effect on the Sale Group or the Business.
	 
	4.2	 	No member of the Sale Group has received any written notification during the Relevant Period
that any non-routine investigation or inquiry is being conducted by any Competent Authority in
respect of its affairs and where there is a likelihood that such investigation or inquiry will
lead to Proceedings.
	 
	4.3	 	Neither the execution and delivery of this Agreement or the Tax Covenant or any of the other
Share Purchase Documents, nor the consummation of the transactions contemplated thereby will
result in a breach of, or constitute a default (or give rise to any right of termination,
cancellation or acceleration) under, or (other than to the extent contemplated in the BP
Conditions) require any consent (which has not been obtained) under, any indenture, licence,
contract, agreement or other instrument or obligation to which the Seller or a member of the
Sale Group is a party or by which any of them or their respective assets is bound or (other
than to the extent contemplated in the BP Conditions and the Anti-Trust Condition) which
requires the approval or consent of any third party which has not been obtained.
	 
	4.4	 	Each member of the Sale Group:

	 	4.4.1	 	is in compliance in all material respect with each Material Contract to which
it is a party to the extent that it has obligations thereunder (including obligations
relating to the Environment); and
	 
	 	4.4.2	 	has not waived any material rights under any Material Contract to which it is
a party.

	4.5	 	So far as the Seller is aware, there is no material default on the part of any counterparty
to any Material Contract to which a Sale Group member is a party and no counterparty to any
such Material Contract has given notice of its intention to terminate such Material Contract.
	 
	5.	 	Encumbrances/Borrowings
	 
	5.1	 	Details of all loans and all other financial facilities available to any member of the Sale
Group

57

 

	 	 	are set out in the Data Room or the Disclosure Letter. The amounts borrowed by each member
of the Sale Group thereunder (if any) do not exceed any limitation on their respective
borrowing power as contained in their Articles of Association or in any debenture or other
deed or contractual commitment binding upon them.
	 	 	 
	 
	5.2	 	No member of the Sale Group has outstanding any loan capital, nor have they factored any of
their debts, nor engaged in any financing of a type which would not be required to be shown or
reflected in the Accounts or borrowed any money which they have not repaid, save for
borrowings disclosed in the Disclosure Letter.
	 
	5.3	 	During the Relevant Period, no member of the Sale Group has entered into any guarantee,
indemnity, performance bond, suretyship, letter of credit or other security to secure an
obligation of any person that is outstanding. So far as the Seller is aware, prior to the
Relevant Period no member of the Sale Group entered into any guarantee, indemnity, performance
bond, suretyship, letter of credit or other security to secure an obligation of any person
that is outstanding. The Disclosure Letter sets out a complete list of all guarantees, letters
of credit or other security granted by any person to secure the obligations of a Sale Group
member.
	 
	5.4	 	No member of the Sale Group is party to or has any liability under any Material Contract
which can be terminated by virtue of the transactions contemplated in this Agreement including
any change in the ownership or control of SCCL or UK OpCo or both of them.
	 
	5.5	 	The Disclosure Letter sets out any current outstanding indebtedness (save for any
indebtedness incurred in the ordinary course of business) owed by SCCL to the Calpine Group or
any Calpine Group member. No amounts are owed by UK OpCo to the Calpine Group or any Calpine
Group member (save for amounts that may be owing from UK OpCo to SCCL).
	 
	5.6	 	The aggregate of all amounts (including any interest that has accrued thereon) owed by SCCL
to the Calpine Group is:

	 	5.6.1	 	not less than the aggregate of [*] and
	 
	 	5.6.2	 	not in excess of the aggregate of [*]

	6.	 	Accuracy and Adequacy of information
	 
	6.1	 	The copies of the memorandum and articles of association of each member of the Sale Group in
the Data Room and attached to the Disclosure Letter are complete and accurate.
	 
	6.2	 	The Seller has made available to the Purchaser in the Data Room copies of Material Contracts
(other than the transactions entered into under the Electricity Trading Agreements) to which a
Sale Group member is a party and the Disclosure Letter sets out the Data Room document
references for accurate and complete copies of such documents and agreements.
	 
	6.3	 	During the Relevant Period, no member of the Sale Group has received written notice that it
is in breach of any Material Contract.
	 
	6.4	 	None of the individuals identified in clause 1.2.15 are aware (having read and considered the
Warranties but without any of them being required to make any further enquiry) of any document
contained in the Data Room that is inconsistent in any material respect with any of the New
Warranties (and for these purposes the Seller shall not be fixed with the knowledge of any
other person or be treated as having any imputed or constructive knowledge).

58

 

	7.	 	Accounts
	 
	7.1	 	The Accounts have been prepared on a consistent basis in accordance with the law and
applicable standards, principles and practices generally accepted in the United Kingdom.
	 
	7.2	 	The Accounts show a true and fair view of the assets and liabilities of each of SCCL and UK
OpCo as at the Accounts Date and of the profits and losses of each of SCCL and UK OpCo for the
financial year ended on the Accounts Date.
	 
	8.	 	Events Since the Accounts Date
	 
	8.1	 	Since the Accounts Date:

	 	8.1.1	 	the business of each Sale Group member has been operated in the ordinary
course consistent with the relevant Sale Group member’s usual practices;
	 
	 	8.1.2	 	no Sale Group member has, other than in the ordinary course of its business
consistent with its usual practices:

	 	(a)	 	acquired or disposed of, or agreed to acquire or dispose
of, an asset; or
	 
	 	(b)	 	assumed or incurred, or agreed to assume or incur, a
liability, obligation or expense (actual or contingent); or
	 
	 	(c)	 	factored, sold or agreed to sell a debt;

	 	8.1.3	 	no Sale Group member has, other than under the Supplemental Agreement and/or
the 2005 budget and plant improvement plan disclosed in the Data Room:

	 	(a)	 	made, or agreed to make, capital expenditure exceeding in
total [*] ; or
	 
	 	(b)	 	incurred, or agreed to incur, a commitment or commitments
involving capital expenditure exceeding in total [*] and

	 	8.1.4	 	no Sale Group member has declared, paid or made a dividend or distribution
(including, without limitation, a distribution within the meaning of the ICTA 1988)
except as provided in the Accounts.

	9.	 	Licences
	 
	9.1	 	The Sale Group has all licences (including statutory licences), authorisations, certificates
and consents necessary to carry on the Business as presently conducted and, all such licences,
authorisations, certificates and consents are valid and subsisting and are being complied with
in all material respects. No member of the Sale Group has received written notice during the
Relevant Period to the effect that, and nor is the Seller aware of any fact or circumstances
which would reasonably:

	 	9.1.1	 	constitute a breach of any of the terms or conditions of any such licence,
authorisation, certificate or consent; or
	 
	 	9.1.2	 	result in any such licence, authorisation or consent being revoked, suspended
or terminated.

	10.	 	Litigation

59

 

	10.1	 	Other than as plaintiff in the collection of debts arising in the ordinary course of
business, no member of the Sale Group is engaged in any litigation or arbitration,
administrative, regulatory or criminal proceedings, whether as plaintiff, defendant or
otherwise.
	 
	10.2	 	Save as disclosed in the Disclosure Letter, so far as the Seller is aware (i) no litigation
or arbitration, administrative, regulatory or criminal proceedings as are referred to in
paragraph 10.1 have been threatened or is pending and, (ii) no fact or circumstance has
occurred which entitle any person to bring or commence such proceeding.
	 
	11.	 	Ownership and Condition of Assets
	 
	11.1	 	Each asset included in the Accounts, or acquired by a Sale Group member since the Accounts
Date (other than current assets sold, realised or applied in the ordinary course of trading
and other than the Property) is owned both legally and beneficially by the relevant member of
the Sale Group as the case may be.
	 
	11.2	 	There is no Encumbrance (other than a Permitted Encumbrance) on, over or affecting the whole
or any part of the assets or undertaking of any member of the Sale Group (other than any asset
acquired in the ordinary course of business on terms that the property does not pass until
payment is made) and no member of the Sale Group is a party to an agreement, obligation or
commitment to give or create any such Encumbrance.
	 
	12.	 	Intellectual Property
	 
	12.1	 	All rights and interest in the Company Business Intellectual Property and Company Business
Know-how that are used in the Business are legally and beneficially owned by a member of the
Sale Group or the Sale Group has the benefit of them.
	 
	12.2	 	Particulars of all material Business Information Technology used in the Business are
contained in the Data Room and attached to the Disclosure Letter.
	 
	12.3	 	The Company Business Intellectual Property is valid and enforceable and (if registered) has
not been declared, and the Seller has no reason to believe that it will be declared, invalid
or, if it is the subject of an application for registration or grant, the application has been
duly made and is subsisting and all renewal fees payable in respect of any of the Company
Business Intellectual Property have been paid to date during the Relevant Period.
	 
	12.4	 	Details of all material licences relating to the Company Business Intellectual Property and
Company Business Know-how and all material particulars as to registration of (and application
to register) the Company Business Intellectual Property, are set out in the Disclosure Letter.
	 
	12.5	 	So far as the Seller is aware, none of the Company Business Intellectual Property is
currently being infringed or used without authorisation by any third party.
	 
	12.6	 	The Business Information Technology comprises all of the information technology (including,
without limitation, hardware, software, firmware, networks and connecting media) and documents
relating thereto which are used in the Business.
	 
	12.7	 	The Business Information Technology is owned and operated by and is under the control of a
Sale Group member and is not wholly or partly dependant on any facilities which are not under
the ownership, operation or control of a Sale Group member and is adequate for the needs of
the Business as conducted as at the Completion Date.

60

 

	13.	 	Insurances
	 
	13.1	 	The Calpine Group has obtained and is maintaining the insurance cover for the Facility.
Details of the insurance policies in respect of which each member of the Sale Group has an
interest that are material to the Business are included in the Data Room and set out in the
Disclosure Letter and so far as the Seller is aware, all such policies are in full force and
effect and are not void or voidable and, save as disclosed, no claims are outstanding and, so
far as the Seller is aware, no event has occurred giving rise to any claim which would have a
material adverse affect on the ability of the Sale Group to carry on the Business.
	 
	14.	 	Employment
	 
	14.1	 	A list of the names, positions, dates of birth, dates of commencement of continuous
employment, salary of, and profits, and other benefits (other than those referred to in
paragraph 14.8 below) available to, Employees as at the date of this Agreement are set out in
the Disclosure Letter. Save as disclosed in the Disclosure Letter, no member of the Sale
Group has made any representations, offers or promises to any of the Employees to vary any of
the foregoing.
	 
	14.2	 	All contracts of employment with Employees provide [*]
	 
	14.3	 	SCCL does not have any employees. All persons employed in the Sale Group are employed by UK
OpCo. So far as the Seller is aware, UK OpCo has complied in all material respects with all
statutes and regulations (including for the avoidance of doubt Regulation 10 of the Transfer
Regulations) relating to the terms and condition of employment of the Employees during the
Relevant Period.
	 
	14.4	 	Copies of collective and recognition agreements (currently in force and applicable) in
relation to the Employees are attached to the Disclosure Letter. There is no material dispute
with any trade union, works counsel or representative body, or, so far as the Seller is aware,
pending or threatened in relation to any member of the Sale Group.
	 
	14.5	 	No member of the Sale Group is involved in any litigation, arbitration, mediation,
administration or criminal proceeding in connection with or arising with any Employee arising
from their employment by UK OpCo and the performance of their duties in relation the Sale
Group.
	 
	14.6	 	UK OpCo has no employees other than those engaged wholly in the Business and all of the
employees engaged in the Business are employed by UK OpCo.
	 
	14.7	 	There are no consultants employed or engaged on a continuous basis in the Business.
	 
	14.8	 	No Employee will be entitled to any bonus, incentive payment, compensation or other benefit
or payment as a consequence of the transactions contemplated by this Agreement.
	 
	14.9	 	Save for the group personal pension with Scottish Equitable (the “GPPP”), no member of the
Sale Group has any liabilities or contingent liabilities in respect of any scheme or
arrangement for the provision of pensions or other retirement or death benefits, or has
announced any proposal to establish such a scheme or arrangement. So far as the Seller is
aware, the Sale Group has complied with all its obligations in respect of the GPPP, and no
employee or former employee of the Sale Group has been promised any particular level of
benefits in respect of the GPPP.
	 
	14.10	 	None of the Sale Group, the Seller or any member of the Calpine Group has agreed or

61

 

	 	 	proposed to provide any Employee with any benefit, compensation, damages, redundancy payment
or other payment (save for payment in respect of the applicable notice period and/or a
statutory redundancy payment) which might arise or be payable on or as a consequence of the
termination of an Employee’s employment.
	 
	14.11	 	No member of the Sale Group has provided, or agreed to provide, a gratuitous payment or
benefit to a director, officer or employee or to any of their dependants.
	 
	14.12	 	So far as the Seller and the Sale Group is aware there is no form of industrial action,
strike or other dispute threatened or pending between any member of the Sale Group and any
Employee or trade union or other representative of any of the Employees.
	 
	14.13	 	No Sale Group member operates any share incentive scheme, share option scheme, profit
sharing, bonus or other incentive scheme.
	 
	15.	 	Tax
	 
	15.1	 	Each member of the Sale Group has complied in all material respects with all its obligations
under any applicable laws, rules and regulations relating to Tax (including withholding of
taxes under any law) and has, within the time and the manner prescribed by law, withheld and
paid over to the proper Tax Authority all amounts required to be so withheld and paid over
under applicable laws.
	 
	15.2	 	All notices, returns, computations and registrations of each member of the Sale Group for any
Tax purpose have been made within the requisite periods, on a proper basis and are true,
correct and complete. Each member of the Sale Group has paid in full all Taxes that have
become due for payment for all periods ending on or prior to the date of this Agreement.
	 
	15.3	 	None of the notices, returns, computations and registrations of any member of the Sale Group
for the purposes of Taxation and nothing contained in any such notice, return, computation or
registration is, nor, so far as the Seller is aware, is likely to be, the subject of any
dispute with any Tax Authority and no member of the Sale Group is and no member of the Sale
Group expects to be involved in any dispute in relation to Taxation. Each member of the Sale
Group has duly submitted all claims and disclaimers which have been assumed to be made for the
purposes of the Accounts.
	 
	15.4	 	No member of the Sale Group has been subject to any non-routine visit, audit, investigation,
discovery or access order by any Tax Authority during any accounting period ending on or
within three (3) years before the date hereof and, so far as the Seller is aware, there are no
circumstances existing which make it likely that a non-routine visit, audit, investigation,
discovery or access order will be made.
	 
	15.5	 	Each Sale Group member has properly operated the Pay As You Earn system (including in
relation to national insurance contributions) and has complied with each reporting obligation
in connection with benefits provided (whether by the Sale Group Member or by any other person)
for a Sale Group member’s directors, other officers and employees and former directors, other
officers and employees.
	 
	15.6	 	No member of the Sale Group has without the prior consent of the Treasury carried out or
agreed to carry out any transaction under section 765 of ICTA 1988 which would be unlawful in
the absence of such consent and each member of the Sale Group has, where relevant, complied
with the requirements of section 765A(2) of ICTA 1988 (supply of information on movement of
capital within the EU) and any regulations made or notice given thereunder.

62

 

	15.7	 	Each member of the Sale Group has been only resident in the United Kingdom for Taxation
purposes and has not been liable to corporation tax (or the equivalent thereto in any
jurisdiction outside the United Kingdom) in any jurisdiction other than the United Kingdom,
during the Relevant Period.
	 
	15.8	 	Each member of the Sale Group has sufficient records relating to past events to permit
accurate calculation of the Taxation liability which would arise upon a disposal or
realisation on Completion of each asset owned by it at the Accounts Date or acquired by it
since that date but before Completion.
	 
	15.9	 	The Disclosure Letter gives details of every written agreement that a member of the Sale
Group has entered into with any Calpine Group member for the claim or surrender of group
relief under the provisions of Chapter IV of Part X of ICTA 1988. No member of the Sale Group
will make or agree to make or accept any such surrender to or from a member of the Calpine
Group after the date of this Agreement, save to the extent such surrender is made after
Completion in accordance with the Tax Covenant.
	 
	15.10	 	No liability for Taxation will or may arise by reason of any member of the Sale Group
ceasing to be a member of a group of companies (as defined in section 170 of TCGA 1992) in
connection with the sale of the Shares contemplated by this Agreement.
	 
	15.11	 	Each member of the Sale Group is a taxable person duly registered for the purposes of VAT.
Each member of the Sale Group has complied with all statutory provisions, rules, regulations,
orders and directions in respect of VAT, has promptly submitted accurate returns and maintains
full and accurate VAT records. No member of the Sale Group has ever been subject to any
interest, forfeiture, surcharge or penalty nor been given any notice under section 59 or 64 of
VATA nor been given a warning under section 76(2) of VATA nor has any member of the Sale Group
been required to give security under paragraph 4 of Schedule 11 to VATA. No member of the
Sale Group is or has been treated as a member of a group for the purposes of VAT, nor has any
member of the Sale Group applied for such treatment.
	 
	15.12	 	No member of the Sale Group, nor a company of which a member of the Sale Group is a relevant
associate within the meaning of paragraph 3(7) of Schedule 10 to the VATA (election to waive
exemption), has elected to waive exemption under paragraph 2 of that Schedule 10 in relation
to any land except as disclosed in the Disclosure Letter.
	 
	15.13	 	All documents to which any member of the Sale Group is a party made prior to the date hereof
and which form part of the relevant member of the Sale Group’s title to any asset or in the
enforcement of which the relevant member of the Sale Group is or may be interested and which
are subject to stamp or similar duty, have been duly stamped and adjudicated (as the case may
be).
	 
	15.14	 	No Sale Group member holds an asset that was transferred to it by an instrument which was
executed in the three years ending on the date of this Agreement and to which section 111 or
113 of the Finance Act 2002 could apply. No Sale Group member holds or has held a chargeable
interest that was acquired by it under a relevant transaction in the three years ending on the
date of this Agreement and no Sale Group member holds or has held a chargeable interest that
is or was derived from a chargeable interest so acquired. For the purposes of this warranty:
	 
	 	 	“chargeable interest” has the same meaning as in Part 4 of the Finance Act 2003;
	 
	 	 	“reconstruction relief” has the same meaning as in Part 2 of Schedule 7 to the Finance Act
2003; and

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	 	 	“relevant transaction” means a transaction: (a) that is exempt from stamp duty land tax by
virtue of paragraph 1 of Schedule 7 to the Finance Act 2003 (group relief) or by virtue of
reconstruction relief, or (b) that is subject to a reduced rate of stamp duty land tax by
virtue of acquisition relief.
	 
	15.15	 	SCCL is a taxable person and is duly registered for the purposes of the Climate Change Levy
(pursuant to Schedules 6 and 7 to the Finance Act 2000). SCCL has complied with all statutory
provisions, rules, regulations, orders and directions made in respect of the Climate Change
Levy, has promptly submitted accurate returns and maintains full and accurate records
concerning the Climate Change levy. SCCL has never been, and, so far as the Seller is aware,
is not likely to be, subject to any surcharge, interest, forfeiture or penalty under Schedules
6 or 7 to the Finance Act 2000.
	 
	15.16	 	The total capital expenditure for the Facility as at 31 December 2004 was [*] . This
figure is the sum of capital expenditure of [*] as shown in the Accounts. The written down
allowances to which the Sale Group was entitled as at 1 January 2005 are as follows:

	 	15.16.1
	 	in respect of plant and machinery, not less than [*] ;
	 
	 	15.16.2
	 	in respect of long life assets, not less than [*] ;
	 
	 	15.16.3
	 	in respect of industrial building allowances, not less than [*] .

	15.17	 	Except as disclosed in the Disclosure Letter, to the best of the Seller’s knowledge,
information and belief, no Sale Group member is or has been a party to or otherwise involved
in any transaction, agreement or arrangement (other than a transaction, agreement or
arrangement between Sale Group members) which was entered into otherwise than by way of a
bargain at arm’s length, or any transaction, agreement or arrangement (other than a
transaction, agreement or arrangement between Sale Group Members), whether or not entered into
by way of a bargain at arm’s length, under which it has been or is or may be required to make
any payment for any goods, services or facilities provided to it which is in excess of the
market value of such goods, services or facilities or under which it has been, or is or may be
required to provide goods, services or facilities for a consideration which is less than the
market value of such goods, services or facilities, in each case in circumstances where
Schedule 28AA Taxes Act applies or applied to the relevant transaction, agreement or
arrangement by virtue of paragraph 1(1) of that Schedule.
	 
	15.18	 	[*]
	 
	16.	 	Environmental
	 
	16.1	 	So far as the Seller is aware, the Sale Group currently complies with all Environmental Laws
in all material respects insofar as they relate to the Business and, so far as the Seller is
aware, has so complied during the Relevant Period.
	 
	16.2	 	Copies of material Environmental Approvals (excluding for the avoidance of doubt any
approvals, consents or the permissions required under the Electricity Act 1989) held by the
members of the Sale Group necessary for the carrying on of the Business as now carried on
(“Environmental Approvals”) and commissioned during the Relevant Period are attached to the
Disclosure Letter. So far as the Seller is aware, all such Current Environmental Approvals
are in full force and effect and are being complied with in all material respects.
	 
	16.3	 	So far as the Seller is aware, all Environmental Approvals (excluding for the avoidance of
doubt any approvals, consents or permissions required under the Electricity Act 1989)

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	 	 	necessary for the Business as now carried on have been obtained. No member of the Sale
Group has received any written notice during the Relevant Period which is still outstanding
from any third party (including any Competent Authority) nor is the Seller aware of any
facts or circumstance:

	 	16.3.1	 	indicating that there are investigations, enquiries or proceedings outstanding or
pending against any member of the Sale Group that are likely to result in the
suspension, cancellation, refusal, variation, amendment or revocation of any Current
Environmental Approval;
	 
	 	16.3.2	 	alleging or claiming that any member of the Sale Group will be liable under
Environmental Law to undertake or pay for any material remediation including any
material remediation required to be undertaken at or in the vicinity of the Property;
and/or
	 
	 	16.3.3	 	indicating that any litigation or arbitration, administrative, regulatory or criminal
proceedings as are described in paragraph 16.4 are pending or threatened against the
Sale Group or that such proceedings are likely to be brought against the Sale Group.

	16.4	 	No member of the Sale Group is engaged in any litigation or arbitration, administrative,
regulatory, or criminal proceedings involving any liability arising under or pursuant to any
Environmental Law, whether as plaintiff, defendant or otherwise.
	 
	16.5	 	There are no material environmental audit reports or any material environmental assessments
relating to the assets and business of the Sale Group prepared in the last twelve (12) months
other than those which have been supplied in the Data Room or are attached to the Disclosure
Letter.
	 
	16.6	 	So far as the Seller is aware, no physical works or physical upgrades to the Facility (other
than as provided for in the Accounts or Completion Balance Sheet) are reasonably anticipated
in the next 15 months in order to comply with Environmental Laws or to maintain or obtain any
Environmental Approval.
	 
	17.	 	Property
	 
	17.1	 	The factual information provided by the Seller for the purpose of the preparation of the
Certificate of Title was true and complete in all material respects at the date upon which it
was delivered to Addleshaw Goddard and remains so at the date of delivery of the Certificate
of Title to the Purchaser on Completion.
	 
	17.2	 	The Property comprises all the land and buildings currently owned, used or occupied by the
Sale Group
	 
	17.3	 	Other than in respect of the Property, the Sale Group has no actual or contingent liability
to any third party in its capacity as present or formal freeholder, leaseholder or surety of
any freehold or leasehold land.
	 
	18.	 	Insolvency
	 
	18.1	 	No petition has been presented, no order has been made, or resolution passed for the winding
up of the Seller or a Sale Group member or for the appointment of a liquidator or provisional
liquidator to the Seller or a Sale Group member.

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	18.2	 	No administrator has been appointed in relation to the Seller or a Sale Group member. No
notice has been given or filed with the court of an intention to appoint an administrator to
the Seller or a Sale Group member. No petition or application has been presented or order
made for the appointment of an administrator in respect of the Seller or a Sale Group member.
No receiver or administrative receiver has been appointed, nor any notice given of the
appointment of any such person, over the whole or part of the Seller’s or a Sale Group
member’s business or assets.
	 
	18.3	 	No moratorium has been sought or has been granted under section 1A of the Insolvency Act 1986
in respect of the Seller or a Sale Group member. No voluntary arrangement has been proposed
under section 1 of the Insolvency Act 1986 in respect of the Seller or a Sale Group member.
	 
	18.4	 	Neither the Seller nor any Sale Group member is unable to pay its debts within the meaning of
section 123 of the Insolvency Act 1986. There are no unsatisfied written demands that have
been served on the Seller or a Sale Group member pursuant to section 123 (1)(a) of the
Insolvency Act 1986. There is no unsatisfied judgment or court order outstanding against the
Seller or a Sale Group member.
	 
	18.5	 	No compromise or arrangement has been proposed, agreed to or sanctioned under section 425 of
the Act in respect of the Seller or a Sale Group member, nor has any application been made to,
or filed with, the court for permission to convene a meeting to vote on a proposal for any
such compromise or arrangement. Neither the Seller nor any Sale Group member has proposed or
agreed to a composition, compromise, assignment or arrangement with any of its creditors which
would prevent the sale and purchase of the Shares pursuant to this Agreement.
	 
	18.6	 	No distress, execution, attachment, sequestration or other process has been levied on an
asset of the Seller or a Sale Group member that remains undischarged.
	 
	18.7	 	So far as the Seller is aware, no action is being taken by the Registrar of Companies to
strike the Seller or a Sale Group member off the register under section 652 of the Act.
	 
	18.8	 	So far as the Seller is aware, no Sale Group member has at any time during the two years
immediately prior to the date of this Agreement:

	 	18.8.1	 	entered into a transaction with any person at an undervalue (as referred to in
section 238(4) of the Insolvency Act 1986); or
	 
	 	18.8.2	 	been given a preference by, or given a preference to, any person (as referred to in
section 239(4) of the Insolvency Act 1986).

	18.9	 	This Agreement, each Share Purchase Document to be entered into by the Seller or a Sale Group
member and the transactions contemplated hereunder and thereunder are being entered into by
the Seller and such Sale Group member in good faith and, so far as the Seller is aware, do not
constitute:

	 	18.9.1	 	a transaction with any person at an undervalue (as referred to in section 238(4) of
the Insolvency Act 1986 or the equivalent or analogous provisions of law in any other
jurisdiction); or
	 
	 	18.9.2	 	a preference by, or given to a person (as referred to in section 239(4) of the
Insolvency Act 1986 or the equivalent or analogous provisions of law in any other
jurisdiction).

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	18.10	 	Neither the Seller nor any Sale Group member is, in any jurisdiction, subject to any other
procedures or steps which are analogous to those set out above in this paragraph 18. The
execution and delivery of this Agreement and each Share Purchase Document by the Seller, and
the performance of its obligations under this Agreement and each Share Purchase Document will
not result in the Seller or any Sale Group member being or becoming subject to any other
procedures or steps which are analogous to those set out in sub-paragraphs 18.1, 18.2, 18.4
and 18.6 above in any jurisdiction.
	 
	19.	 	Health and Safety
	 
	19.1	 	So far as the Seller is aware, the Sale Group currently complies in all material respects
with all H&S Laws insofar as they relate to the Business and, so far as the Seller is aware,
has so complied during the Relevant Period.
	 
	19.2	 	So far as the Seller is aware there are no facts or circumstances indicating that any
litigation or arbitration, administrative, regulatory or criminal proceedings as are described
in paragraph 19.3 are pending or threatened against the Sale Group.
	 
	19.3	 	No member of the Sale Group is engaged in any litigation or arbitration, administrative,
regulatory or criminal proceedings involving any liability arising under or pursuant to any
H&S Law whether as plaintiff, defendant or otherwise.
	 
	19.4	 	There are no material health and safety audit reports or material health and safety
assessments relating to the assets and business of the Sale Group prepared in the last twelve
months other than those which have been supplied in the Data Room or are attached to the
Disclosure Letter.
	 
	20.	 	Climate Change
	 
	20.1	 	SCCL has obtained a CHPQA Certificate (as defined in The Climate Change Levy (Combined Heat
and Power Stations) Prescribed Conditions and Efficiency Percentages Regulations 2001 SI 2001
No 1140) in relation to the Facility and has complied with all obligations necessary to
maintain such certification.
	 
	20.2	 	SCCL has in full force and effect in relation to the Facility a valid Secretary of State
(Combined Heat and Power) Exemption Certificate issued pursuant to paragraph 148 of Schedule 6
to the Finance Act 2000 and has done nothing, nor omitted to do anything, that may result in
that certificate becoming invalid, varied or otherwise ineffective.
	 
	20.3	 	SCCL has claimed all CHP LECs made available to it in relation to the Facility and has done
nothing nor omitted to do anything that may lead to the validity of any CHP LECs being
restricted or CHP LECs not being issued in the period following the Completion Date.
	 
	21.	 	Facility/Project specific warranties
	 
	21.1	 	A complete and accurate copy of the Supplemental Agreement dated 21 October 2004 between SCCL
and [*] has been made available in the Data Room.
	 
	21.2	 	A complete and accurate copy of the letter of credit provided by or on behalf of [*] to
SCCL as security in respect of its completion of the [*] at the Facility ( [*] ) has been
made available in the Data Room.
	 
	21.3	 	A complete and accurate copy of the Settlement Agreement dated 21 October 2004 between SCCL
and [*] has been made available in the Data Room.

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	21.4	 	So far as the Seller is aware, no Remedy Event (as that term is defined in the Site Interface
Agreement) has occurred at any time during the Relevant Period and the Seller is not aware of
any fact or circumstance which would result in a Remedy Event.
	 
	21.5	 	As at the date of this Agreement, [*]
	 
	21.6	 	As at the date of this Agreement, [*]
	 
	21.7	 	The list of spare parts disclosed in the Data Room shows a complete and accurate record of
the spare parts available at the Facility as at 18 May 2005.
	 
	21.8	 	The Disclosure Letter sets out a true, complete and accurate list of SCCL’s outstanding
transactions under the GTMAs as at 23 May 2005.
	 
	21.9	 	The Facility has Trading Unit Status (as that term is defined in the Balancing and Settlement
Code dated 14 August 2000).
	 
	21.10	 	The maintenance programme due to be carried out on the Facility during 2005 has been
commenced by SCCL and, so far as the Seller is aware, neither any member of the Sale Group nor
any Seller Party intends to [*]
	 
	21.11	 	So far as the Seller is aware, SCCL has not, since receipt of the letter addressed to SCCL
[*]
	 
	21.12	 	So far as the Seller is aware (without having made any enquiry) the Warranted Replies were,
when given, true and accurate in all material respects.

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SCHEDULE 3

LIMITATION OF LIABILITY

	1.	 	Application of this Schedule
	 
	1.1	 	Subject to paragraph 1.2 of this Schedule 3, the parties intend that the provisions of this
Schedule 3 apply to this Agreement and, where so stated to the other Share Purchase Documents.
	 
	1.2	 	Paragraphs 2.1, 2.3 and 2.4 of this Schedule 3 shall not apply to Fundamental Claims.
Paragraphs 2.7, 3, 4, 5.4, 5.6 and 6 shall not apply to Tax Claims save that paragraphs 2.7, 4
and 6 shall apply to Tax Warranty Claims.
	 
	2.	 	Limitation of Liability
	 
	2.1	 	The Purchaser shall not be entitled to bring any Claim against any of the Seller Parties and
the Seller Parties shall not be liable in respect of any Claim unless the relevant Seller
Party receives notice of such Claim from the Purchaser (such notice to contain so far as is
reasonably practicable having regard to, amongst other things, the information available to
the Purchaser information concerning the matter giving rise to the Claim, the nature of the
Claim and the amount of the Claim or an estimate of the amount of such Claim), such notice to
be received on or before:

	 	(a)	 	in respect of Claims (other than Tax Claims or Claims
under clause 8.12), the date falling 18 months immediately following
Completion;
	 
	 	(b)	 	in respect of Claims under clause 8.12, the later of (i)
the date falling 18 months immediately following Completion, and (ii) the
date falling 9 months after the date the Purchaser is first entitled
pursuant to the provisions of clause 8.14 to claim under clause 8.12; and
	 
	 	(c)	 	in respect of Tax Claims, the date falling seven years
after the Completion Date.

	2.2	 	The liability of a Seller Party for a Claim in respect of which a notice is given by the
Purchaser to such Seller Party in accordance with paragraph 2.1 of this Schedule 3 shall (if
such Claim has not been previously satisfied, settled or withdrawn) absolutely determine and
any Claim made therein be deemed to have been withdrawn (and no new Claim may be made in
respect of the facts, event, matter or circumstance giving rise to such withdrawn Claim)
unless legal proceedings in respect of such Claim shall have been commenced within 12 months
of the date of service of such notice (or such other period as may be agreed by the Purchaser
and the Seller in writing) or, if the Purchaser is using its reasonable efforts to enforce a
claim against its insurers in accordance with paragraph 5.5 of this Schedule 3, 18 months of
the date of service of such notice. For the purpose of this paragraph 2.2, proceedings shall
not be deemed to have commenced unless they shall have been properly issued and validly served
upon the Seller.
	 
	2.3	 	The Purchaser shall not be entitled to damages in respect of any Claim under this Agreement
or under any other Share Purchase Documents, and the Seller shall have no liability in respect
of any Claim by the Purchaser unless:

	 	(a)	 	[*] ;
	 
	 	(b)	 	[*] ;

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	2.4	 	Subject to paragraph 1.2 of this Schedule 3,

	 	(a)	 	without prejudice to paragraph 2.4(b) of this Schedule 3,
the total aggregate liability of the Seller in respect of all Claims under
or in respect of clause 8.12 and all Environmental Indemnity Claims [*]
	 
	 	(b)	 	the total aggregate liability of the Seller, the Seller
Guarantor and Calpine under or in connection with this Agreement and the
other Share Purchase Documents shall not [*]

	2.5	 	The total aggregate liability of Seller Parties under or in connection with a Fundamental
Claim shall not exceed the Unadjusted Aggregate Purchase Price.
	 
	2.6	 	For the purposes of sub-paragraphs 2.3 and 2.4:

	 	(a)	 	Claims arising directly from the same fact or event (and,
in the case of a Claim under the Tax Covenant or Tax Warranty Claims
relating to, or derived from the application of the same section, chapter or
part of the Taxes Acts to the same subject matter) shall be treated as one
individual Claim rather than a series of individual Claims; and
	 
	 	(b)	 	the Seller shall be “finally liable” for a Claim only if
the amount of such Claim is agreed between the Purchaser and the Seller, or
is the subject of a judgment of a court of competent jurisdiction that is
not appealable.

	2.7	 	Nothing in this Agreement shall obviate any duty of the Purchaser to mitigate all and any
Losses howsoever arising in respect of any Claim (other than a Tax Claim under the Tax
Covenant).
	 
	3.	 	Seller Party Exclusions
	 
	3.1	 	No Seller Party shall be liable for any Claim (other than a Tax Claim, to which clause 3.1 of
the Tax Covenant shall apply) as follows:

	 	(a)	 	if and to the extent that the matter is specifically
allowed, provided or reserved for in the Accounts;
	 
	 	(b)	 	if and to the extent that the same occurs, is
attributable to, or is increased as a result of, any legislation not in
force at Completion or any change of law, regulation, rule, directive,
requirement of administrative practice or any change in rates of Tax or the
published practice of any Tax Authority or any change of any Competent
Authority’s interpretation or application of any legislation, which in each
case is not in force or effect at Completion or which takes effect
retrospectively. This paragraph shall not apply to changes in Environmental
Law (as defined in Schedule 8) for the purpose of any Environmental
Indemnity Claim under Schedule 8;
	 
	 	(c)	 	if and to the extent that the amount of any Claim (other
than a Tax Claim) is increased by any delay in the Purchaser making any
Claim (other than a Tax Claim);
	 
	 	(d)	 	in respect of any matter resulting from a change in the
accounting policies or practices of the Purchaser or any member of the
Purchaser’s Group introduced or having effect after Completion;

70

 

	 	(e)	 	to the extent that the Claim (other than a Tax Claim)
would not have arisen but for (or to the extent the same is increased by
reason of) a breach by the Purchaser of any of its obligations under this
Agreement or the Share Purchase Documents; or
	 
	 	(f)	 	in respect of any liability which is contingent unless
and until such contingent liability becomes an actual liability and is due
and payable.

	3.2	 	The Seller shall not be liable in respect of any Claim other than a Tax Claim, to which
clause 3.1 of the Tax Covenant shall apply) to the extent that such Claim (other than a Tax
Claim) is caused or increased by:

	 	(a)	 	any voluntary act, omission, transaction, or arrangement
carried out by or at the written request of the Purchaser before Completion
or is required under the terms of this Agreement or the Share Purchase
Documents;
	 
	 	(b)	 	any voluntary act, omission, transaction, or arrangement
carried out by the Purchaser or by a member of the Purchaser’s Group after
Completion otherwise than (a) in the ordinary course of business of the Sale
Group as the same was conducted prior to Completion; (b) pursuant to a
legally binding commitment entered into before Completion; (c) in order to
mitigate, avoid or discharge a liability relating to or arising in respect
of a period prior to Completion provided that in the case of an
Environmental Indemnity Claim, such mitigation complies with paragraph 5 of
Schedule 8; (d) in order to comply with any applicable law or regulation; or
(e) at the written request or with the written consent of the Seller;
	 
	 	(c)	 	any admission of liability made in breach of the
provisions of this Schedule or Schedule 8 after the date hereof by the
Purchaser or on its behalf or by a member of the Purchaser’s Group or on its
behalf on or after Completion; or
	 
	 	(d)	 	any reorganisation or change in ownership of the
Purchaser or any member of the Purchaser’s Group other than in accordance
with the transactions the subject of this Agreement.

	3.3	 	The Purchaser shall not be entitled to claim or be paid under any Claim relating to any
Environmental Approval, Environmental Laws or Environmental matters or in respect of any
Environmental Indemnity Claim to the extent that the relevant Claim would not have resulted
but for the Purchaser or any member of the Purchaser’s Group or any person on their behalf
making a notification or disclosing any information or matter to any Competent Authority or
any other person after Completion, except where such notification or disclosure is expressly
required under Environmental Law or is a condition of an Environmental Approval or is required
to avoid or abate an Emergency or having regard to prudent environmental practice, is made
with the prior consent of the Seller (such consent not to be unreasonably withheld or
delayed).
	 
	4.	 	Disclosure
	 
	4.1	 	The Purchaser shall not be entitled to claim that any fact, matter or circumstance which
would otherwise give rise to a Claim in respect of the Warranties (other than a Claim under
the Tax Covenant) where, in relation to any fact, matter or circumstance forming the basis of
the Claim:

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	 	(a)	 	the Purchaser had actual knowledge of it on or before the
date of this Agreement;
	 
	 	(b)	 	such fact matter or circumstance was fairly disclosed in
the Disclosure Letter (which in respect of the New Warranties only, shall
be deemed to include all the documents comprising the Data Room save that,
in respect only of the New Warranties in paragraphs 16.3 and 16.4 of
Schedule 2, the Disclosure Letter shall not be deemed to include all the
documents comprising the Data Room to the extent that such fact, matter or
circumstance is material in the context of the Business taken as a whole),
and for this purpose “fairly disclosed” means disclosed in such manner and
in such detail as to enable a reasonable purchaser in the same position as
the Purchaser to make an informed assessment of the fact, matter or
circumstance concerned;
	 
	 	(c)	 	was a matter specifically provided for in this Agreement;
or
	 
	 	(d)	 	was a matter or thing hereafter required to be done or
required to be omitted to be done pursuant to this Agreement (or any other
Share Purchase Document or any other subsequent agreement in writing between
the Purchaser and the Seller) or otherwise done at the express request in
writing or with the express approval in writing of, or on behalf of, the
Purchaser.

	4.2	 	Other than as provided in paragraph 4.1, no other knowledge relating to SCCL or UK OpCo
(actual, constructive or imputed) shall prevent or limit a Claim made by the Purchaser in
respect of the Warranties.
	 
	5.	 	Double Recovery
	 
	5.1	 	Neither the Purchaser nor those deriving title from the Purchaser on or after Completion
shall be entitled to recover damages or obtain payment, reimbursement or restitution more than
once in respect of any Claim or under the provisions of any Share Purchase Documents.
	 
	5.2	 	The Seller shall not be liable under any of the Warranties to the extent that the Purchaser
or the relevant member of the Purchaser’s Group has recovered any amount in respect of the
fact, matter or event that gives rise to a breach of thereof any would otherwise be the
subject matter of a Claim or under any of the Share Purchase Documents and vice versa.
	 
	5.3	 	The Purchaser shall, subject to paragraph 2 of this Schedule 3, be entitled to bring Claims
under one or more applicable Warranties in respect of the same matter fact or circumstance but
any liability in respect of such matter fact or circumstance shall be calculated without
duplication of recovery by reason of such matter fact or circumstance constituting a breach of
more than one Warranty.
	 
	5.4	 	Where the Purchaser or any member of the Purchaser’s Group is at any time entitled to recover
from some other person any sum in respect of any matter giving rise to a Claim (other than a
Tax Claim, to which clause 6 of the Tax Covenant shall apply) the Purchaser shall, and shall
procure that the relevant member of the Purchaser’s Group shall, use all reasonable endeavours
to enforce such recovery and, in the event that the Purchaser or any member of the Purchaser’s
Group recovers any amount from such other person, the amount of any Claim against the Seller
shall be reduced by the amount recovered, less all reasonable costs (including all legal
costs), charges and expenses reasonably incurred by the Purchaser or such member of the
Purchaser’s Group in recovering that sum from such other person or if that

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	 	 	sum is greater than the amount of the relevant Claim, the Claim shall be extinguished
PROVIDED THAT the Purchaser shall not be required to commence any legal proceedings where
the Purchaser has validly assigned all of its rights in relation to the relevant Claim to
the Seller in a manner which entitles the Seller to the same benefits in respect of such
rights as the Purchaser had.
	 
	5.5	 	If, in respect of any matter which would give rise to a breach of the Warranties, the
Purchaser or the relevant member of the Purchaser’s Group is entitled to claim under any
policy of insurance, then the Purchaser shall make such a claim against its insurers and use
all reasonable endeavours to enforce such claim. The amount actually recovered from any such
insurance claim shall then be applied to reduce or extinguish any Claims for breach of the
Warranties in the manner described in clause 14.
	 
	5.6	 	If at any time a Seller Party pays to the Purchaser or any member of the Purchaser’s Group an
amount pursuant to a Claim (other than a Tax Claim, to which clause 6 of the Tax Covenant
shall apply) and the Purchaser or a member of the Purchaser’s Group subsequently recovers from
some other person any sum in respect of any matter giving rise to such Claim (other than a Tax
Claim) the Purchaser shall pay, or shall procure that the relevant member of the Purchaser’s
Group pays, to the Seller an amount equal to the lesser of (i) the amount paid by the Seller
to the Purchaser or member of the Purchaser’s Group in respect of such Claim and (ii) the sum
(including interest (if any)) recovered from such other person, in each case after deduction
of any reasonable costs (including all legal costs), charges and expenses reasonably incurred
in obtaining such recovery.
	 
	5.7	 	Nothing in this paragraph 5 shall oblige the Purchaser to seek to recover any amounts from a
third party in respect of any matter giving rise to a Claim before or as a condition to
bringing a Claim against any Seller Party.
	 
	6.	 	Remedy
	 
	6.1	 	Without limitation to the Purchaser’s rights under clause 3.6 and except in relation to a
Claim in an action for damages brought under the Tax Covenant, the Purchaser shall have no
rights or remedy whatsoever in respect of any fact, matter or circumstance constituting a
breach of Warranty except pursuant to a Claim for such breach under this Agreement (or any
Claim under any other provision of this Agreement or any claim under any provision of the
Share Purchase Documents in each case) in an action for damages, and the Purchaser hereby
irrevocably waives, releases, discharges and acquits the Seller from any other causes of
action under or in connection with Share Purchase Documents and the transactions contemplated
thereby whether based on statute, regulation or common law, under or in connection with Share
Purchase Documents and the transactions contemplated thereby in respect of the fact, matter or
circumstance giving rise to the breach except for breach of contract under or otherwise as
provided in the Share Purchase Documents and other than in the case of fraud or fraudulent
misrepresentation.
	 
	6.2	 	Without limitation to the Purchaser’s rights under clause 3.6, no party to this Agreement
shall be entitled to rescind or repudiate this Agreement and the Seller shall not be liable
(in equity or tort, under the Misrepresentation Act 1967 or in any other way) in respect of
any misrepresentation provided nothing herein shall affect either party’s rights in respect of
fraud or a fraudulent misrepresentation.
	 
	6.3	 	The Seller shall have no liability in respect of a breach of Warranty notified to the Seller
pursuant to paragraph 2 if such breach is remedied within 30 days of the date such notice is
served and no loss is suffered by the Purchaser in respect thereof.

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	7.	 	Tax Claims
	 
	 	 	Clauses 3.1 and 6 of the Tax Covenant shall apply to Tax Warranty Claims.
	 
	8.	 	Priority of Payments in respect of Claims
	 
	8.1	 	All amounts due under this Agreement in respect of Claims for breach of Warranty shall be
paid to the Purchaser in the following manner:

	 	(a)	 	[*]
	 
	 	(b)	 	[*]
	 
	 	(c)	 	[*]

	8.2	 	All amounts due under this Agreement or the Tax Covenant in respect of Claims for anything
other than breach of Warranty shall be paid to the Purchaser in the following manner:

	 	(a)	 	[*]
	 
	 	(b)	 	[*]
	 
	 	(c)	 	[*]
	 
	 	(d)	 	[*]

	8.3	 	The Purchaser undertakes to seek all payments in respect of Claims in accordance with the
priority set out in paragraphs 8.1 and 8.2. Nothing in this paragraph 8 shall restrict the
ability of the Purchaser to serve a Withholding Notice (as defined in the Escrow Agreement) in
accordance with the terms of the Escrow Agreement.

74

 

SCHEDULE 4

COMPLETION ARRANGEMENTS

PART I

	1.	 	The Seller shall procure that the following board meetings of the Sale Group are held to
pass, inter alia, resolutions in relation to the following matters:
	 
	1.1	 	each of the persons nominated by the Purchaser in writing to the Seller prior to Completion
be appointed as directors, as the Purchaser shall direct, such appointments to take effect
immediately;
	 
	1.2	 	the resignations of each the directors proposed by the Purchaser in writing to the Seller
prior to Completion be tendered and accepted so as to take effect immediately;
	 
	1.3	 	the transfer(s) relating to the Shares be approved, subject to Completion, for registration
and (subject only to the transfer being duly stamped) the Purchaser registered as the holder
of the Shares concerned in the register of members; and
	 
	1.4	 	the resignation of the existing auditors and appointment of new auditors nominated by the
Purchaser to be effective immediately after Completion.
	 
	2.	 	Following the performance by the Purchaser of its obligations under paragraphs 1 and 2 of
Part II of this Schedule 4 and simultaneously with the Purchaser performing its obligations
under paragraphs 3, 4 and 5 of Part II of this Schedule 4, the Seller shall deliver (or
procure the delivery of) to the Purchaser or the Purchaser’s Solicitors:
	 
	2.1	 	a copy (certified by the secretary of the Seller to be a true copy of a resolution in force
at Completion) of the resolution of the directors of the Seller which authorised the execution
and delivery of, and the performance by the Seller of its obligations under, this Agreement
and each of the other documents to be executed by the Seller pursuant to this Agreement
(unless previously delivered);
	 
	2.2	 	duly executed transfers in respect of the Shares in favour of the Purchaser (or such person
as the Purchaser may nominate), share certificates for the Shares in the name of the relevant
transferors and any power of attorney under which any transfer is executed on behalf of the
Seller;
	 
	2.3	 	a counterpart of the Tax Covenant duly executed by the Seller and the Seller Guarantor;
	 
	2.4	 	a counterpart of the Escrow Agreement duly executed by the Seller;
	 
	2.5	 	a counterpart of the [*] duly executed by the relevant members of the Calpine Group;
	 
	2.6	 	the Certificate of Title and the title deeds, if any, for the Property;
	 
	2.7	 	irrevocable powers of attorney executed by the Seller in favour of the Purchaser, enabling
the Purchaser to exercise all voting and other rights attaching to the Shares pending
registration of the transfers of the Shares;
	 
	2.8	 	the letters of resignation in the Agreed Form executed as a deed by each of the persons
(other than the BP Director) designated by the Purchaser in writing to the

75

 

	 	 	Seller prior to Completion to retire as a director or secretary of a member of the Sale
Group and presented to the board meetings referred to in paragraph 1 of this Part I;
	 
	2.9	 	a letter of resignation in the Agreed Form executed by the existing auditors of each member
of the Sale Group with a statement, so far as applicable, that there are no circumstances
connected with such resignation which they consider should be brought to the attention of the
members or creditors of such member of the Sale Group and presented to the board meetings
referred to in paragraph 1 of this Part I;
	 
	2.10	 	a legal opinion from Skadden, Arps, Slate, Meagher & Flom (UK) LLP relating to the due
execution by the Seller Guarantor of the Share Purchase Documents to which it is a party;
	 
	2.11	 	certified copies of the minutes of the duly held board meetings of the members of the Sale
Group (as referred to in paragraph 1 of this Part I of Schedule 4);
	 
	2.12	 	all the statutory (duly written up to date) and other books and records of each member of the
Sale Group in its possession or under its control;
	 
	2.13	 	evidence in a form satisfactory to the Purchaser acting reasonably that all amounts under the
Luxco Loan Agreement will be prepaid on the Completion Date;
	 
	2.14	 	a release duly executed by the Seller releasing SCCL from its obligations under the
promissory note dated 24 August 2004 (as amended) issued by SCCL in favour of the Seller (the
“Promissory Note”) in a form satisfactory to the Purchaser acting reasonably;
	 
	2.15	 	a release duly executed by Luxco releasing SCCL from its obligations under the Luxco Loan
Agreement in a form satisfactory to the Purchaser acting reasonably;
	 
	2.16	 	evidence of releases (in a form satisfactory to the Purchaser acting reasonably) of any and
all security over the Shares or the assets of UK OpCo or SCCL including any such security
arrangement referred to in the Disclosure Letter (and the Purchaser will provide all such
assistance as the Seller may reasonably request to procure such releases); and
	 
	2.17	 	a duly executed equitable assignment (in a form satisfactory to the Purchaser acting
reasonably) of the benefit of all the confidentiality undertakings given by any other
potential acquirer of the Shares or the shares in the Seller or the Business (to the extent
such undertakings relate to information concerning the Sale Group and/or the Business) and
confirmation in writing that it has required each counterparty to any such confidentiality
undertaking to return or destroy (i) all Confidential Information (as defined in the relevant
confidentiality undertaking) disclosed to such counterparty; and (ii) all other material in
such counterparty’s possession containing or reflecting all such Confidential Information (to
the extent such Confidential Information is information concerning the Sale Group and/or the
Business), in accordance with the terms of the relevant confidentiality undertaking.

PART II

	1.	 	Following the appointment and resignation of directors referred to in paragraph 1 of Part I
of this Schedule 4, the Purchaser will procure the holding of a meeting of the directors of
SCCL at which the following resolutions will be considered and

76

 

	 	 	approved:
	 
	1.1	 	a resolution to approve SCCL’s entry into the Facility Agreement (and the granting of
security by SCCL in respect of amounts due thereunder as required under the terms of the
Facility Agreement), a loan facility agreement between SCCL and the Purchaser (the “Upstream
Loan Agreement”) and the deed of release referred to in paragraph 3.1 of this Part II of
Schedule 4;
	 
	1.2	 	a resolution to approve drawing [*] under the Facility Agreement;
	 
	1.3	 	a resolution to approve the payment by SCCL so as to enable the Purchaser to satisfy its
obligations under clause 6.3.3 of amounts to Luxco and the Seller to discharge the
indebtedness and other amounts owing by SCCL to such entities (as a result of which, inter
alia, the releases referred to in paragraphs 2.14 and 2.15 of Part I of this Schedule 4 will
be given);
	 
	1.4	 	a resolution to approve, subject to the Purchaser giving a notice of drawdown under the
Upstream Loan Agreement, SCCL making an advance to the Purchaser under the Upstream Loan
Agreement of an amount equal to the amount by which the amount drawn under the Facility
Agreement exceeds the amount paid to Luxco and the Seller pursuant to clause 6.3.3;
	 
	1.5	 	if any of the actions performed pursuant to the resolutions referred to in this paragraph 1
constitute the giving of financial assistance for the purposes of Section 151 of the Act, a
resolution to approve the giving of such financial assistance subject to compliance with the
Financial Assistance Procedure, such resolution to be passed unanimously; and
	 
	1.6	 	a resolution to approve the form of the statutory declaration pursuant to section 155(6) of
the Act relating to the performance of those actions pursuant to the resolutions referred to
in this paragraph 1 (to the extent those actions constitute the giving of financial assistance
for the purposes of Section 151 of the Act) to be sworn by each director of SCCL.
	 
	2.	 	The Purchaser shall subject to (i) SCCL having net assets immediately prior to implementation
of the transactions described in paragraph 3 of this Part II and (ii) delivery of the
Accountants Report, procure the execution and delivery to the Registrar of Companies of a
statutory declaration pursuant to section 155(6) of the Act relating to the performance of
those actions pursuant to the resolutions referred to in paragraph 1 of this Part II (to the
extent those actions constitute the giving of financial assistance for the purposes of Section
151 of the Act) sworn by each director of SCCL.
	 
	3.	 	After complying with its obligations under paragraph 2 of this Part II and simultaneously
with the performance by the Seller of its obligations under paragraph 2 of Part I of this
Schedule 4, the Purchaser shall:
	 
	3.1	 	procure that SCCL executes and delivers a deed of release to the Seller in a form
satisfactory to the Seller (acting reasonably) in respect of the “keep well” letter given by
the Seller in favour of SCCL dated 19 October 2004; and
	 
	3.2	 	comply with the provisions of clauses 6.3.2 and 6.3.3 in their entirety.

77

 

	4.	 	Simultaneously with the performance by the Seller of its obligations under paragraph 2 of
Part I of this Schedule 4, the Purchaser shall deliver to the Seller or the Seller’s
Solicitors:
	 
	4.1	 	if not already provided, a copy (certified by the secretary of relevant company to be a true
copy of a resolution in force at Completion) of the resolution of the board of the directors
of the Purchaser and a committee of the board of directors of IPR authorising the execution
and delivery of, and the performance by the Purchaser and IPR of their respective obligations
under, this Agreement and each of the other documents to be executed by the Purchaser and/or
IPR pursuant to this Agreement or directly or indirectly in connection with the transactions
contemplated hereunder (unless previously delivered);
	 
	4.2	 	a counterpart of the [*] duly executed as a deed by the Purchaser and by the Purchaser
Guarantors in such a form as may be acceptable to [*] ;
	 
	4.3	 	a counterpart of the Tax Covenant in the Agreed Form duly executed by each of the Purchaser
Parties;
	 
	4.4	 	a counterpart of the Escrow Agreement duly executed by the Purchaser; and
	 
	4.5	 	the O&M Guarantee duly executed by the Purchaser or by an Affiliate of the Purchaser as the
same may be acceptable to [*] .
	 
	5.	 	Simultaneously with the delivery of those documents referred to in paragraph 4 of this Part
II, the Purchaser shall deliver:
	 
	5.1	 	to NGC, a letter of credit or other security in replacement of the £758,131 (seven hundred
and fifty eight thousand one hundred and thirty one pounds) letter of credit dated 24 August
2001 (extended on 26 January 2004 and on 10 February 2005) provided in support of SCCL’s
obligations to pay the Balancing Services Use of System Charges under the CUSC and the CUSC
Bilateral Connection Agreement;
	 
	5.2	 	to Elexon Clear Limited, a letter of credit or other security in replacement of the
£1,000,000 (one million pounds) letter of credit dated 24 August 2001 (extended on 26 July
2004) issued in favour of Elexon in support of SCCL’s payment obligations under the Balancing
and Settlement Code;
	 
	5.3	 	to BP Gas, a letter of credit (if required) to secure the obligations of the members of the
Sale Group under the Gas Supply Agreement and the Gas Support Agreement; and
	 
	5.4	 	any replacement credit support or comfort letters provided by a member of the Calpine Group
in relation to SCCL or UK OpCo as may be notified by the Seller to the Purchaser not less than
two (2) Business Days prior to Completion.

78

 

SCHEDULE 5

CONDUCT OF BUSINESS BEFORE COMPLETION

Part I

Each Sale Group member (save in respect of paragraphs 24 to 28 (inclusive)) of this Part I, which
shall not apply to UK OpCo) shall, from the date of this Agreement up to and including the date of
Completion:

Operation of business; maintenance of assets and undertaking

	1.	 	operate its business in ordinary course consistent with past practice;

Material contracts

	2.	 	not enter into an onerous or unusual agreement, arrangement or obligation or enter into any
Material Contract or any other contract that is not in the ordinary course of its business
consistent with past practice;
	 
	3.	 	not amend or terminate a Material Contract to which it is a party;

Acquisition or disposal of assets, etc

	4.	 	not acquire or dispose of, or agree to acquire or dispose of, any revenues, assets, business
or undertakings except in the ordinary course of its business consistent with past practice or
assume or incur, or agree to assume or incur, a liability, obligation or expense (actual or
contingent) except in the ordinary course of its business consistent with past practice.

Share and/or loan capital; interests in bodies corporate

	5.	 	not create, allot, issue, acquire, repay or redeem any share or loan capital or agree,
arrange or undertake to do any of those things or acquire or agree to acquire, an interest in
a corporate body or merge or consolidate with a corporate body or any other person, enter into
any demerger transaction or participate in any other type of corporate reconstruction;

Borrowings and indebtedness; guarantees and other security

	6.	 	not amend, or agree to amend, the terms of its borrowing or indebtedness in the nature of
borrowing or create, incur, or agree to create or incur, borrowing or indebtedness in the
nature of borrowing (except pursuant to (i) overdraft facilities of an amount equal to
£125,000, or similar borrowings created or incurred in the ordinary course of its business
consistent with past practice or (ii) facilities disclosed in the Disclosure Letter where the
borrowing or indebtedness in the nature of borrowing does not exceed the amount available to
be drawn by the relevant Sale Group member under those facilities);

	7.	 	not give, or agree to give, a guarantee, indemnity or other agreement to secure, or incur
financial or other obligations with respect to, another person’s obligation outside the
ordinary course of business consistent with past practice or in any event in

79

 

	 	 	excess of £125,000;

	8.	 	not make, or agree to make, capital expenditure exceeding in total [*] (or its equivalent
at the time) or incur, or agree to incur, a commitment or commitments involving capital
expenditure exceeding in total [*] (or its equivalent at the time);

Insurance

	9.	 	continue, without amendment, each of the insurance policies which have been disclosed in the
Data Room (the “Disclosed Insurance Policies”) and not knowingly do, or omit to do, anything
which would:

	 	(a)	 	make any of the Disclosed Insurance Policies void or
voidable; or
	 
	 	(b)	 	entitle any of the insurers under any of the
Disclosed Insurance Policies to refuse indemnity in relation to particular
claims in whole or in part,

	 	 	PROVIDED THAT nothing in this paragraph shall prevent the notification to insurers of
claims in circumstances which might give rise to claims under any of the Disclosed
Insurance Policies in accordance with the terms of the relevant Disclosed Insurance
Policies;

Dividends

	10.	 	not declare, pay or make a dividend or distribution;

Share capital

	11.	 	not reduce its share capital or purchase its own shares;

Tax claims

	12.	 	not make a claim under section 152 or 153 of TCGA 1992 which affects an asset owned by a Sale
Group member;

Accounting policies

	13.	 	not make any change to the accounting policies, procedures and principles by reference to
which its statutory accounts are drawn up;

Property

	14.	 	in relation to the Property:

	 	(a)	 	not change its existing use;
	 
	 	(b)	 	not terminate, or give a notice to terminate, a
lease, tenancy or licence;
	 
	 	(c)	 	not agree a new rent or fee payable under a lease,
tenancy or

80

 

	 	 	 	licence;

Employment; benefits

	15.	 	not amend the terms and conditions of employment or engagement (including any increase in
emoluments) of a director, other officer or employee (except in the usual course of its
business) or provide, or agree to provide, a gratuitous payment or benefit to a director,
officer or employee (or any of their dependants) or, except in the ordinary course of its
business consistent with past practice, employ, engage or (except for cause) terminate the
employment or engagement of, a person;

	16.	 	not establish a Personal Pension Scheme or an Occupational Pension Scheme (in each case as
such term is defined in section 1 of the Pensions Act 1993) or other arrangement providing
benefit on retirement, cessation of employment, ill-health, injury or death (each a “Pension
Scheme”) or amend or discontinue (wholly or partly) a Pension Scheme or communicate to an
Employee a plan, proposal or an intention to establish a Pension Scheme or amend, discontinue
(wholly or partly), or exercise a discretion, in relation to a Pension Scheme;

Litigation; compliance with law

	17.	 	not start litigation or arbitration proceedings where the amount sought is in excess of [*]
	 
	18.	 	with respect to any litigation or arbitration proceedings or any action, demand or dispute in
existence on the date of this Agreement, consult and provide the Purchaser reasonable
opportunity to make representations or comments in respect thereof;
	 
	19.	 	with respect to any litigation or arbitration proceedings or any action, demand or dispute,
not waive any right;
	 
	20.	 	not release, discharge or compound any liability or claim other than any such liability or
claim in existence as at the date of this Agreement;
	 
	21.	 	conduct its business in all material respects in accordance with all applicable legal and
administrative requirements in any jurisdiction;

Transactions with the Calpine Group

	22.	 	other than as required under this Agreement, not enter into an agreement, arrangement or
obligation (whether legally enforceable or not) in which a Calpine Group member, a director or
former director of a Sale Group member, or a person connected with any of them is interested;

Intellectual property

	23.	 	protect, defend, enforce, maintain and renew each of the Company Business Intellectual
Property and continue any pending application for the Company Business Intellectual Property;

Cooperation with the Purchaser

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	24.	 	co-operate (at the Purchaser’s expense) with the Purchaser to:

	 	(a)	 	facilitate the efficient continuation of management
and operations of the Sale Group after Completion;
	 
	 	(b)	 	prepare for the introduction of the Purchaser’s
normal working procedures in readiness for Completion; and
	 
	 	(c)	 	prepare for the implementation (after Completion) of
trading and hedging strategies and policies consistent with the
Purchaser’s trading and hedging strategies and policies,

	 	 	and shall provide such information as the Purchaser may reasonably request in connection
with the provision of finance under the Facility Agreement to enable the lenders thereunder
to satisfy their internal compliance requirements;

Emissions Trading

	25.	 	[*]

Hedging Arrangements

	25A.	 	[*]
	 
	25B.	 	[*]

	 	(i)	 	[*] ;
	 
	 	(ii)	 	[*] ;
	 
	 	(iii)	 	[*] .

	 	 	 	 	 
	[*]	 	 	 	[*]
	Period	 	[*] MWh	 	(MW)
	[*]

	 	[*]
	 	[*]
	[*]

	 	[*]
	 	[*]
	[*]

	 	[*]
	 	[*]
	[*]

	 	[*]
	 	[*]
	[*]

	 	[*]
	 	[*]

Prepayment of Debt

	26.	 	Without prejudice to the Warranty contained in paragraph 5.6 of Schedule 2, not to
voluntarily prepay, repay or capitalise in whole or in part any amount outstanding under the
SCCL Intergroup Debt except:

	 	(a)	 	for payments of interest, fees and other amounts as
the same fall due for payment under the terms of the LuxCo Loan Agreement;
	 
	 	(b)	 	for refinancings or replacements of all or any
portion of SCCL Intergroup Debt where the amount outstanding immediately
after giving effect to such refinancing or replacement is substantially

82

 

	 	 	 	equivalent (having regard to costs, expenses and fees, as well as to
changes in interest rates, in respect of such refinancing or
replacement on an arms’ length basis) to the amount outstanding
immediately prior to such refinancing or replacement or as otherwise
contemplated pursuant to the terms of this Agreement;

	 	(c)	 	for the purposes permitted, required or contemplated
by the terms of the LuxCo Loan Agreement (including clause 18.5 thereof)
or of any other loan or financing agreement to which SCCL or any of its
Affiliates is a party (including payments by SCCL to enable Calpine
European Funding (Jersey) Holdings Limited (“Calpine Jersey”) to meet its
obligations under the Intercompany Loan Agreement dated 31 January 2005
among Calpine Jersey and Calpine European Funding (Jersey) Limited),

	 	 	provided that (without prejudice to the Warranty contained in paragraph 5.6 of Schedule 2)
nothing in this Schedule 5 shall prohibit the Seller, or any member of the Sale Group or
any of their respective Affiliates from complying with any of their respective obligations
under the LuxCo Loan Agreement or any other loan or financing agreement or arrangement to
which any of them is a party.

Operational spare parts

	27.	 	not sell, transfer or otherwise dispose of or contract to sell, transfer or otherwise dispose
of any operational spare parts in respect of 2 years of operation of the Facility that are
owned by any member of the Sale Group and are used during a 2 year operational cycle;

Part II

The Seller shall not without the Purchaser’s prior written consent (such consent not to be
unreasonably withheld, delayed or rendered subject to conditions):

	1.	 	alter the provisions of any Sale Group member’s Memorandum or Articles of Association (or
like constitutional document) or adopt or pass further regulations or resolutions inconsistent
therewith; or

	2.	 	pass any resolutions in general meeting or by way of written resolution, including, without
limitation, any resolution for winding-up, or to capitalise any profits or any sum standing to
the credit of share premium account or capital redemption reserve fund or any other reserve of
any Sale Group member.

83

 

SCHEDULE 6

DATA ROOM LIST

84

 

SCHEDULE 7

[*]

	 	 	 
	1.

	 	[*]
	2.

	 	[*]
	3.

	 	[*]
	4.

	 	[*]
	5.

	 	[*]
	6.

	 	[*]
	7.

	 	[*]
	8.

	 	[*]
	9.

	 	[*]
	10.

	 	[*]
	11.

	 	[*]
	12.

	 	[*]
	13.

	 	[*]
	14.

	 	[*]
	15.

	 	[*]
	16.

	 	[*]
	17.

	 	[*]

85

 

SCHEDULE 8

ENVIRONMENTAL COVENANT

	1.	 	Definitions
	 
	1.1	 	In this Schedule:

	 	 	 
	“ Credible Environmental
Risk”

	 	means a risk of such seriousness in relation
to a matter that if a Competent Authority in
relation to that matter or other relevant
third party as appropriate was aware of all
relevant information as to the matter, the
likelihood of it occurring and seriousness of
the likely consequences, such person would be
more likely than not to commence Purchaser
Environmental Proceedings for the purpose of
removing or lessening that risk;
	 
	 	 
	“Environment”

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

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

	 	means a claim made under paragraph 2.1(a) or
(b) of this Schedule;
	 
	 	 
	“Environmental Condition”

	 	means:
	 
	 	 
	 

	 	(a) the presence prior to Completion of any
Hazardous Substance in, on or under the land
at the Property where the presence of any such
Hazardous Substance first arose or occurred
after 31 March 1998; and

	 
	 	 
	 

	 	(b) any release or migration of any Hazardous
Substance described in (a) above into the
Environment; or

	 
	 	 
	 

	 	(c) any release or migration of any Hazardous
Substance from the Gas Line into the

86

 

	 	 	 
	 
	 	       Environment after 31 March 1998 but before
Completion;
	 
	 	 
	“Environmental Deed”

	 	means the Environmental Deed of Indemnity
dated 18 July 1997 between BP Chemicals and
SCCL (as subsequently amended);
	 
	 	 
	“Environmental Laws”

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

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

	 
	 	 
	 

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

	 
	 	 
	 

	 	(c) common law and equity,

	 
	 	 
	 

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

	 	[*]
	 
	 	 
	“Gas Line”

	 	means the gas pipeline servicing the Property;
	 
	 	 
	“Hazardous Substance”

	 	means any substance capable (whether alone or
in combination with any other) of causing
pollution or contamination of the Environment;
	 
	 	 
	“Landlord’s Action”

	 	means any proceedings, claim, action, notice
or demand brought by the Landlord against the
Tenant under clause 3.2 or clauses 4.1 or 4.2
of the Environmental Deed;

87

 

	 	 	 
	“Landlord’s Action Losses”

	 	means any Losses incurred by any member of the
Purchaser’s Group to the extent that they
arise from or relate to any Landlord’s Action
to the extent that it arises from an event
which occurred or circumstances which first
arose during the Relevant Period;
	 
	 	 
	“Losses”

	 	means all losses, liabilities, damages,
reasonable costs or expenses (including
reasonable legal and other professional costs
or expenses and the costs of Remedial Works)
or charges but excluding any indirect or
consequential losses, and any lost income or
profits or business interruption costs save
where they are awarded to a third party in
Successful Environmental Proceedings;
	 
	 	 
	“Purchaser Environmental
Proceedings”

	 	means any civil, criminal, regulatory or
administrative proceedings, claim, action,
notice or demand which is brought, taken or
threatened against any member of the
Purchaser’s Group under Environmental Laws;
	 
	 	 
	“Remedial Works”

	 	means any or all of the following:
	 
	 	 
	 

	 	(a) the carrying out of such works as are
reasonably necessary to prevent, minimise,
remedy or mitigate the effects of any harm to
the Environment caused by Hazardous
Substances;

	 
	 	 
	 

	 	(b) the making of subsequent inspections from
time to time for the purpose of keeping under
review to the extent reasonably required the
sufficiency of the works under (a) above; and

	 
	 	 
	 

	 	(c) the carrying out of any investigative work
as is reasonably required in relation to (a)
and (b);

	 
	 	 
	“Successful Environmental
Proceedings”

	 	means any Purchaser Environmental Proceedings
or Landlord’s Action to the extent that a
final, unappealable and legally enforceable
finding of liability is obtained by any third
party against a relevant member of the
Purchaser’s Group or the liability which is
the subject of the Purchaser Environmental
Proceedings or Landlord’s Action is admitted
or otherwise settled or agreed in accordance
with paragraph 4.1 of this Schedule.

	2.	 	Seller’s Environmental Covenant
	 
	2.1	 	Subject to the provisions of this Schedule the Seller covenants as follows:

88

 

	 	(a)	 	the Seller covenants with the Purchaser for the Purchaser itself and as trustee
for any relevant member of the Purchaser’s Group to pay to the Purchaser an amount
equal to the amount of all Environmental Losses; and
	 
	 	(b)	 	the Seller covenants with the Purchaser for the Purchaser itself and as trustee
for any relevant member of the Purchaser’s Group to pay to the Purchaser an amount
equal to the amount of all Landlord’s Action Losses.

	3.	 	Other Limitations on Seller’s Liability
	 
	3.1	 	In addition to the Seller’s protections contained in Schedule 3, the Seller shall not be
liable under paragraph 2 of this Schedule to the extent that any Environmental Claim:

	 	(a)	 	arises from or is increased by the worsening or aggravation by any person
(other than the Seller or by any person authorised on its behalf) after Completion of
any Environmental Condition or of any other circumstances, states of affairs or
condition comprising the subject matter of any Environmental Claim or any part thereof;
	 
	 	(b)	 	arises from or is increased by any change after Completion of the use of the
Property of the Facility (including without limitation any closure or mothballing of
the Facility or the Property) (or in each case any part thereof);
	 
	 	(c)	 	is increased by any redevelopment of the Property or Facility (or in each case
any part thereof) or the carrying out of any building, engineering or mining works or
operations at the Facility or the Property (or in each case any part thereof) or the
demolition of or a substantial alteration to a building or of a structure at the
Property after Completion but for the avoidance of doubt except for such Losses which
would have arisen if the relevant Environmental Condition had been discovered in the
absence of such redevelopment, building, engineering, demolition etc.;
	 
	 	(d)	 	arises from or is increased by any breach of any applicable provision of this
Schedule by any member of the Purchaser’s Group;
	 
	 	(e)	 	arises from or is increased by the carrying out of any intrusive investigations
after Completion other than intrusive investigations carried out to comply with any
Environmental Law or any Environmental Approval or are such intrusive investigations
that would be carried out by a reasonable and prudent operator;
	 
	 	(f)	 	arises from or is increased by any change in any Environmental Law after
Completion in circumstances where such Losses or increase in Losses would not have
arisen under Environmental Laws in force at the date hereof. For the avoidance of
doubt the application of the Pollution Prevention and Control Regulations 2000 in the
form they are in at the date hereof (but not otherwise) shall not constitute a change
in law for the purpose of this paragraph;
	 
	 	(g)	 	arises from or is increased by any variation or modification to any
Environmental Approval (save where such variation or modification directly concerns the
remediation of any relevant Environmental Condition and could have been imposed
pursuant to Environmental Laws in force at the date hereof) or the application for or
the issue of any new Environmental Approval after Completion (except for the
application for and first issue of a permit under the Pollution Prevention and Control
Regulations 2000); and/or

89

 

	 	(h)	 	arises from or is increased by any amendment or alteration to the Environmental
Deed where such Losses or increase in Losses would not have arisen under the
Environmental Deed in its form at the date hereof.

	3.2	 	In addition to the Seller’s protections contained in Schedule 3 and subject to paragraph 4.6
of this Schedule, the Seller shall not be liable under paragraph 2 of this Schedule in respect
of any Environmental Claim for Remedial Works which exceed (in nature, scope, specification or
extent) what is reasonably required by applicable Environmental Laws (and for the avoidance of
doubt and without limitation, subject to the limitation on the Seller’s liability in paragraph
3.1(f) of this Schedule).
	 
	4.	 	Environmental Proceedings and Remedial Works

	4.1	 	The Purchaser shall ensure that in relation to any matter, written claim or demand or
Purchaser Environmental Proceedings or Landlord’s Action which gives rise or may reasonably
give rise to an Environmental Claim by it that neither it, nor any other member of the
Purchaser’s Group, nor any person on their behalf shall make any settlement, compromise or
admission of liability without the prior written consent of the Seller such consent not to be
unreasonably withheld or delayed.

	4.2	 	The Seller shall have conduct of any Purchaser Environmental Proceedings and Landlord’s
Action (Proceedings).

	4.3	 	The Purchaser shall have conduct of any Remedial Works whether relating to Proceedings or a
Credible Environmental Risk.

	4.4	 	The Seller in its conduct of Proceedings and the Purchaser in its conduct of Remedial Works
as the case may be shall ensure that (subject to implementing appropriate arrangements to
maintain commercial confidentiality and privilege):

	 	(a)	 	reasonably frequent and detailed reports shall be provided to the other
regarding the progress of the matter;
	 
	 	(b)	 	copies of all correspondence and documents passing between the parties to any
Proceedings shall be provided to the other;
	 
	 	(c)	 	they consult with the other in relation to the matter and take into account the
other’s reasonable concerns provided that the other shall respond promptly to such
consultation;
	 
	 	(d)	 	allow the other person to attend any relevant court, regulatory or other
hearing, site visit or meeting; and
	 
	 	(e)	 	allow the other to participate in discussions with any relevant counsel,
consultants or contractors concerning the scope, nature, specification and extent of
any Remedial Works as the case may be to be carried out and to attend any meeting with
such counsel, consultants or contractors.

	4.5	 	In conducting any Remedial Works pursuant to this Schedule the Purchaser shall:

	 	(a)	 	obtain the Seller’s prior written consent to the scope, nature, specification
and extent of the Remedial Works to be carried out (such consent not to be unreasonably
withheld or delayed);

90

 

	 	(b)	 	give the Seller reasonable access to the Property and the Facility so that the
Seller can monitor the progress of such Remedial Works;
	 
	 	(c)	 	not prejudice the conduct of any Environmental Proceedings and comply with the
requirements of any relevant judgment, decision or award of any court, arbitrator or
other tribunal or settlement agreement; and
	 
	 	(d)	 	use cost-effective methods for such Remedial Works.

	4.6	 	For the avoidance of doubt, in conducting any Remedial Works the Purchaser shall be entitled
to implement or undertake any Remedial Works which exceed (in nature, scope, specification or
extent) what is reasonably required by applicable Environmental Laws provided that it shall be
responsible for paying for any increased costs and expenses arising from or relating to so
doing.
	 
	5.	 	Mitigation

	5.1	 	The Purchaser shall and shall procure that each member of the Purchaser Group shall mitigate
its Losses as if a claim under paragraph 2 of this Schedule was a claim for breach of contract
rather than indemnification.

	5.2	 	If the Purchaser (whether on behalf of itself or another member of the Purchaser’s Group) is
seeking to mitigate its Losses it shall consult with and obtain the Seller’s written consent
(such consent not to be unreasonably withheld or delayed) to the nature, scope and extent of
such mitigation. Where it is not clear that the mitigation relates to a valid claim, the
Seller is entitled to consent in principle to such mitigation pending resolution of the
validity of the claim.
	 
	6.	 	Matters Disclosed or Known/Relationship with Warranties

	6.1	 	The covenants under this Schedule shall apply whether or not any Environmental Claim under it
relates to any matter disclosed in the Disclosure Letter or the Data Room or was otherwise
disclosed or known to the Purchaser or other member of the Purchaser’s Group.

	6.2	 	The Purchaser acknowledges and confirms that no Claim can be brought under the Warranties to
the extent that its subject matter falls within the scope of any indemnities contained in this
Schedule or the limitation on the total aggregate liability of the Seller contained in
paragraph 2.4(a) of Schedule 3.

	7.	 	General Limitations of Liability
	 
	 	 	For the avoidance of doubt, the provisions of Schedule 3 shall apply to Environmental Claims
under this Schedule as provided for in Schedule 3.
	 
	8.	 	Exclusion of Salt Carry Over Issue
	 
	 	 	The Seller shall not be liable under this Schedule in respect of any Environmental Claim
which relates to or concerns dispersion into the Environment of salt from the Facility’s
cooling towers.

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APPENDIX I

92

 

	 	 	 	 	 	 	 
	Signed by

	 	 	)	 	 	 
	for and on behalf of

	 	 	)	 	 	 
	CALPINE UK HOLDINGS LIMITED

	 	 	)	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	Director
	 
	 	 	 	 	 	 
	Executed and delivered as a Deed by

	 	 	)	 	 	 
	 

	 	 	)	 	 	 
	for and on behalf of

	 	 	)	 	 	 
	CALPINE CORPORATION

	 	 	)	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	Attorney-in-fact
	 
	 	 	 	 	 	 
	In the presence of:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	 	 	 
	Name
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	 	 	 
	Address
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	 	 	 
	Occupation
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Executed and delivered as a Deed by

	 	 	)	 	 	 
	 

	 	 	)	 	 	 
	for and on behalf of

	 	 	)	 	 	 
	QUINTANA CANADA HOLDINGS, LLC

	 	 	)	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	Attorney-in-fact
	 
	 	 	 	 	 	 
	In the presence of:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	 	 	 
	Name
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	 	 	 
	Address
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	 	 	 
	Occupation
	 	 	 	 	 	 

93

 

	 	 	 	 	 	 	 
	Signed by

	 	 	)	 	 	 
	as attorney for

	 	 	)	 	 	 
	NORMANTRAIL (UK CO 3) LIMITED

	 	 	)	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	Attorney
	 
	 	 	 	 	 	 
	In the presence of:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	 	 	 
	Name
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	 	 	 
	Address
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	 	 	 
	Occupation
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Executed and delivered as a Deed by

	 	 	)	 	 	 
	 

	 	 	)	 	 	 
	as attorney for

	 	 	)	 	 	 
	INTERNATIONAL POWER PLC

	 	 	)	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	Attorney
	 
	 	 	 	 	 	 
	In the presence of:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	 	 	 
	Name
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	 	 	 
	Address
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	 	 	 
	Occupation
	 	 	 	 	 	 

94

 

	 	 	 	 	 	 	 
	Executed and delivered as a Deed by

	 	 	)	 	 	 
	 

	 	 	)	 	 	 
	as attorney for

	 	 	)	 	 	 
	MITSUI & CO., LTD

	 	 	)	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	Attorney
	 
	 	 	 	 	 	 
	In the presence of:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	 	 	 
	Name
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	 	 	 
	Address
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	 	 	 
	Occupation
	 	 	 	 	 	 

95

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