Document:

exv4w2

 

Exhibit
4.2

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
	 	 	30	 
	8.

	 	Seller’s Warranties
	 	 	32	 
	9.

	 	Purchaser parties’ Warranties
	 	 	37	 
	10.

	 	Undertakings
	 	 	39	 
	11.

	 	Effect of Completion
	 	 	39	 
	12.

	 	Remedies and Waivers
	 	 	40	 
	13.

	 	Conduct of Claims
	 	 	40	 
	14.

	 	Basis of Recovery
	 	 	41	 
	15.

	 	Trade Marks
	 	 	42	 
	16.

	 	Assignment and novation
	 	 	42	 
	17.

	 	Termination
	 	 	43	 
	18.

	 	Further Assurance
	 	 	44	 
	19.

	 	Notices
	 	 	44	 
	20.

	 	Announcements
	 	 	45	 
	21.

	 	Confidentiality
	 	 	46	 
	22.

	 	Costs and Expenses
	 	 	47	 
	23.

	 	Time of Essence
	 	 	47	 
	24.

	 	Interest
	 	 	47	 
	25.

	 	Invalidity
	 	 	48	 
	26.

	 	Several Guarantee from the Purchaser Guarantors
	 	 	48	 
	27.

	 	Guarantee from the Seller Guarantor
	 	 	49	 
	28.

	 	Third Party Rights
	 	 	51	 
	29.

	 	Counterparts
	 	 	51	 
	30.

	 	Entire Agreement
	 	 	51	 
	31.

	 	Withholding, Deductions and Set Off
	 	 	52	 
	32.

	 	Choice of Governing Law
	 	 	52	 
	 
	 	 	 	 	 	 
	SCHEDULE 1 CORPORATE INFORMATION	 	 	53	 
	SCHEDULE 2 THE WARRANTIES	 	 	55	 
	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	 	 	 	 

 i 

 

 

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

BETWEEN:

	(1)	 	CALPINE UK HOLDINGS LIMITED, a company incorporated in England and Wales (Registered No.
4233113), whose registered office is at Saltend, Hedon Road, Hull, Yorkshire HU12 8GA (the
“Seller”);
	 
	(2)	 	CALPINE CORPORATION, a corporation organized and existing under the laws of Delaware, whose
principal place of business is located at 50 West San Fernando Street, San Jose, California
95113, USA (“Calpine”);
	 
	(3)	 	QUINTANA CANADA HOLDINGS, LLC, a limited liability company organized and existing under the
laws of Delaware, whose principal place of business is located at 50 West San Fernando Street,
San Jose, California 95113, USA (the “Seller Guarantor”, the Seller, Calpine and the Seller
Guarantor collectively are referred to in this Agreement as the “Seller Parties”);
	 
	(4)	 	NORMANTRAIL (UK CO 3) LIMITED, a company incorporated in England and Wales (Registered No.
5234591), with its registered office at Senator House, 85 Queen Victoria Street, London, EC4V
4DP (the “Purchaser”);
	 
	(5)	 	INTERNATIONAL POWER PLC, a company incorporated in England and Wales (Registered No.
2366963), with its registered office at Senator House, 85 Queen Victoria Street, London, EC4V
4DP (“IPR”); and
	 
	(6)	 	MITSUI & CO., LTD., a company incorporated in Japan, with its registered office at 2-1,
Ohtemachi 1-chome, Chiyoda ku, Tokyo, Japan (“Mitsui” and, together with IPR, the “Purchaser
Guarantors”; the Purchaser and the Purchaser Guarantors collectively are referred to in this
Agreement as the “Purchaser Parties”).

WHEREAS

	(A)	 	The Seller has agreed to sell, and the Purchaser has agreed to purchase, the entire issued
share capital of each of SCCL and UK OpCo for the Purchase Price.
	 
	(B)	 	IPR is the indirect legal and beneficial owner of 70% of the Purchaser’s issued share capital
and Mitsui is the indirect legal and beneficial owner of 30% of the Purchaser’s issued share
capital.
	 
	(C)	 	Each of the Purchaser Guarantors will benefit from the execution, delivery and performance of
this Agreement and therefore each of the Purchaser Guarantors has agreed to guarantee (on a
several basis) the Purchaser’s payment obligations under this Agreement on the terms set out
in clause 26. Each of the Purchaser Guarantors intends that this Agreement shall have effect
as a deed.
	 
	(D)	 	As the indirect parent of the Seller, the Calpine will indirectly benefit from the execution,
delivery and performance of this Agreement and therefore Calpine has agreed to provide certain
warranties under this Agreement. Calpine intends that this Agreement shall have effect as a
deed.
	 
	(E)	 	As an Affiliate of the Seller, the Seller Guarantor will indirectly benefit from the
execution, delivery and performance of this Agreement and therefore the Seller Guarantor has
agreed to guarantee on the terms set out in clause 27 the payment by the Seller of amounts in
respect of

2

 

liabilities of the Seller in respect of all Claims under this Agreement other than Claims
for breach of Warranty. The Seller Guarantor intends that this Agreement shall have effect
as a deed.

WHEREBY IT IS AGREED as follows:

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

	 	 	 	 	 
	 

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

	 	“Accounts Date”
	 	means 31 December 2004;
	 
	 	 	 	 
	 

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

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

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

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

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

3

 

	 	 	 	 	 
	 

	 	“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
Participation Agreement and in respect of any
consequential amendments to the BP 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;

4

 

	 	 	 	 	 
	 

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

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

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

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

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

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

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

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

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

5

 

	 	 	 	 	 
	 

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

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

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

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

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

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

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

6

 

	 	 	 	 	 
	 

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

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

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

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

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

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

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

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

	 	 	 	(b)
	 	future projections, business development or
planning, commercial relationships and negotiations,
	 
	 	 	 	 	 	 
	 	 	 	 	but does not include:
	 
	 	 	 	 	 	 
	 

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

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

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

7

 

	 	 	 	 	 
	 

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

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

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

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

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

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

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

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

8

 

	 	 	 	 	 
	 

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

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

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

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

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

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

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

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

9

 

	 	 	 	 	 
	 

	 	“EPC Contract”
	 	means the Amended and Restated Turnkey Construction
Agreement dated 26 May 2000 between SCCL, Mitsubishi
Corporation and Raytheon Engineers & Constructors UK
Ltd.;
	 
	 	 	 	 
	 

	 	“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 £275,000,000 secured term facility
agreement between SCCL and certain banks and other
financial institutions for the provision of funds
for, inter alia, the purpose of making the payments
referred to in paragraph 3.2 of Part II of Schedule 4
in the form notified to SCCL prior to Completion;
	 
	 	 	 	 
	 

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

10

 

	 	 	 	 	 
	 

	 	“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 and BP
Gas dated 14 December 1997, as amended;
	 
	 	 	 	 
	 

	 	“Gas Support Agreement”
	 	means the amended and restated gas support agreement
between SCCL and BP Gas 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:
	 
	 	 	 	 	 	 
	 

	 	 	 	(a)
	 	BP Gas Marketing dated 26 September 2003;
	 
	 	 	 	 	 	 
	 

	 	 	 	(b)
	 	AXIA Energy Europe Limited (now known
as Merrill Lynch Commodities (Europe) Trading Limited
dated 13 March 2001; and
	 
	 	 	 	 	 	 
	 

	 	 	 	(c)
	 	RWE Innogy plc (now known as RWE
Npower) dated 15 April 2002;
	 
	 	 	 	 	 	 
	 	 	“Hazardous Substance”	 	means any substance capable (whether alone or in
combination with any other) of causing pollution or
contamination of the Environment and shall include
any waste;
	 
	 	 	 	 	 	 
	 	 	“H&S Laws”	 	means any and all of the following to the extent that
they have the force of law and are enforceable in
England:

11

 

	 	 	 	 	 	 	 
	 

	 	 	 	(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 BP Chemicals and SCCL;
	 
	 	 	 	 
	 

	 	“Liabilities”
	 	means any and all liabilities, duties and obligations
of every description, including without limitation
interest whether deriving from contract, common law,
statute or otherwise, whether present or future,
actual or contingent, ascertained or unascertained or
disputed and whether owed or incurred severally or
jointly and as principal or surety in each case which
arise from or in relation to or are otherwise
attributable to the Business and/or any member of the
Sale Group;

12

 

	 	 	 	 	 
	 

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

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

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

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

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

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

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

13

 

	 	 	 	 	 
	 

	 	 	 	laws, rules and regulations, whether national or
supranational, applicable to the allocation of carbon
credits, which all cases, if such effect is capable
of remedy, has not been remedied within 30 days of
the occurrence of the event giving rise to such
effect or, if later, the Long Stop Date;
	 
	 	 	 	 
	 

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

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

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

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

	 	 	 	(b)
	 	less the sum of creditors falling due within one
year (excluding any amount which comprises SCCL
Intergroup Debt in relation to such Sale Group member
and deferred income), creditors falling due after
more than one year and provisions for liabilities and
charges,
	 
	 	 	 	 	 	 
	 	 	 	 	PROVIDED THAT: if the sum of Net Working Capital of
SCCL and the Net Working Capital of UK OpCo

14

 

	 	 	 	 	 	 	 
	 	 	 	 	exceeds £30,000,000 (thirty million pounds) 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 £30,000,000
(thirty million pounds));

	 	 	 	 	 
	 

	 	“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 Participation
Agreement in a form acceptable to BP International;
	 
	 	 	 	 
	 

	 	“Participation Agreement”
	 	means an agreement dated 18 July 1997 between BP
International, Entergy Power Development Corporation,
certain other parties specified therein, and SCCL, as
amended;
	 
	 	 	 	 
	 

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

	 	“Permitted Encumbrances”
	 	means the right of first refusal or any similar right
granted in favour of BP International under the
Participation Agreement or any other right granted in
favour of any member of the BP Group under a BP
Agreement and any lien arising by operation of law;

15

 

	 	 	 	 	 
	 

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

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

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

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

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

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

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

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

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

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

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

16

 

	 	 	 	 	 
	 

	 	“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 Certificate”
	 	means the Officer’s Certificate delivered by or on
behalf of the Seller Guarantor on the date of this
Agreement;

17

 

	 	 	 	 	 
	 

	 	“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 Entergy Power
Development Corporation 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 BP Chemicals dated 18 July 1997, as amended;
	 
	 	 	 	 
	 

	 	“SPA”
	 	means the steam purchase agreement between SCCL and
BP Chemicals dated 18 July 1997, as amended;
	 
	 	 	 	 
	 

	 	“Supplemental Agreement”
	 	means the supplemental agreement between BP Chemicals
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 £462,569,886 (four hundred sixty two million five hundred sixty nine thousand eight hundred eighty
six pounds);
	 
	 	 	 	 
	 

	 	“Unadjusted UK OpCo
Purchase Price”
	 	means £27,400,000 (twenty seven million four hundred
thousand pounds);
	 
	 	 	 	 
	 

	 	“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 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

21

 

	 	 	 	repeated verbatim in such report, but without imputing to any such person
the knowledge of any other person).

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

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

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

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

	 	(a)	 	plus the amount by which SCCL’s Net Working Capital
exceeds zero; or
	 
	 	(b)	 	less the amount by which SCCL’s Net Working Capital is
less than zero.

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

	 	(a)	 	plus the amount by which UK OpCo’s Net Working Capital
exceeds zero; or
	 
	 	(b)	 	less the amount by which UK OpCo’s Net Working Capital is
less than zero.

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

22

 

	2.4	 	The Seller waives all rights of pre-emption and other restrictions on transfer over the
Shares conferred on it.
	 
	3.	 	CONDITIONS PRECEDENT
	 
	3.1	 	Completion is conditional upon the satisfaction (or waiver in accordance with clause 3.8) of
the following conditions precedent on or before the Long Stop Date:

	 	3.1.1	 	the BP Approval having been received in a form satisfactory to the Seller and
the Purchaser;
	 
	 	3.1.2	 	BP International confirming in a form satisfactory to the Seller and the
Purchaser that BP International will not exercise its right of first refusal under and
in accordance with the terms of the Participation Agreement, or expiry of the term
during which BP International may exercise its right of first refusal without BP
International having exercised any such right in accordance with the terms of the
Participation Agreement, whichever is the earlier to occur or, if BP International
exercises its right to make a lump sum cash offer under clause 4.2.3 of the
Participation Agreement, the Seller having determined that such offer is not of
equivalent value to that comprising the sale of the Shares pursuant to this Agreement
and the transactions contemplated hereby;
	 
	 	3.1.3	 	the European Commission issuing a decision under Article 6(1)(b) of Council
Regulation (EC) 139/2004 (the “Regulation”), or being deemed to have done so under
Article 10(6) of the Regulation, declaring the acquisition of the Shares by the
Purchaser pursuant to this Agreement (the “Transaction”) compatible with the Common
Market without attaching to its decision any conditions or obligations and in the event
that a request under Article 9(2) of the Regulation has been made by a Member State,
the European Commission indicating that it has decided not to refer the Transaction (or
any part thereof) or any matter arising therefrom to a competent authority of a Member
State in accordance with Article 9(1) of the Regulation (the “Anti-Trust Condition”);
	 
	 	3.1.4	 	the banks and financial institutions which are to be party to the Facility
Agreement and the relevant members of the BP Group having agreed upon a form of direct
agreement which is to become effective upon Completion on terms reasonably satisfactory
to the Purchaser;
	 
	 	3.1.5	 	the Reporting Accountants confirming in writing in a form satisfactory to the
Seller and the Purchaser that they are not aware of any fact matter or circumstance as
at the date of such confirmation that would prevent them from issuing the Accountants
Report at Completion, such confirmation to be accompanied by a draft of the Accountants
Report;
	 
	 	3.1.6	 	the Seller being satisfied in its sole and absolute discretion that the BP
Director is likely to execute the statutory declaration and to vote in favour of the
resolution(s) each referred to in paragraph 1 of Part II of Schedule 4; and
	 
	 	3.1.7	 	the Seller having provided the Purchaser with the Audited Accounts.

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

23

 

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

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

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

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

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

24

 

towards satisfaction of the Anti-Trust Condition and the Purchaser Conditions and undertakes to:

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

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

	 	3.6.1	 	any event occurs which has a Material Adverse Effect; or
	 
	 	3.6.2	 	the Purchaser becomes aware of any fact or circumstance which would entitle it
to make a Claim against a Warrantor for a breach of a Warranty given pursuant to

25

 

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

	3.7	 	The Seller shall promptly notify the Purchaser (providing reasonable details of such fact or
circumstance (but without any obligation to provide quantum)) if it becomes aware of a fact or
circumstance which would or might reasonably entitle the Purchaser to terminate this Agreement
under clause 3.6.
	 
	3.8	 	Each of the Conditions Precedent in clauses 3.1.4 and 3.1.7 may be waived only by the
Purchaser giving notice to the Seller in writing. The Condition Precedent set out in clause
3.1.6 may be waived only by the Seller giving notice to the Purchaser in writing. Each of the
Conditions Precedent set out in clauses 3.1.1 through 3.1.3 (inclusive) and 3.1.5 may be
waived only by the Purchaser and the Seller each giving notice to the other in writing.
	 
	4.	 	CONSIDERATION
	 
	4.1	 	On or before the fifth (5th) Business Day prior to the date scheduled for Completion in
accordance with clause 6.1, the Seller shall prepare and deliver to the Purchaser a statement
(the “NWC Completion Statement”) setting out the projected Net Working Capital for each of
SCCL and UK OpCo as at Completion (the sum of such amounts the “Aggregate Projected NWC”) and
specifying the Seller’s estimate of the value of the SCCL Intergroup Debt at Completion
expressed in pounds (the “Estimated SCCL Intergroup Debt”) and the relevant member(s) of the
Calpine Group to which such amounts are due. For the purposes of determining the Estimated
SCCL Intergroup Debt, if any amount comprising an SCCL Intergroup Debt is denominated in a
currency other than pounds, that amount shall be converted to pounds at the closing mid-point
pound spot rate applicable to that non-sterling currency on the date on which the NWC
Completion Statement is prepared and delivered in accordance with this clause 4.1 as shown in
the Financial Times (London edition), or if the Financial Times (London edition) is not
published on that date, the closing mid-point pound spot rate applicable to that non-sterling
currency quoted by Barclays Bank plc. The NWC Completion Statement shall be determined and
prepared by the Seller in good faith.
	 
	4.2	 	At Completion and subject to clause 6, the Purchaser shall pay the Seller (on account of the
Purchase Price) the Aggregate Unadjusted Purchase Price less the Estimated SCCL Intergroup
Debt and:

	 	4.2.1	 	if the Aggregate Projected NWC is a positive amount in excess of zero, plus
the lesser of (i) such excess and (ii) £30,000,000 (thirty million pounds); 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.

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

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

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

	 	5.2.1	 	the entering into of any contract or commitment in the ordinary course of
business and consistent with the relevant Sale Group member’s usual practices, which
contract or commitment is terminable in accordance with its terms by written notice of
six months or less and which is not material in relation to the Sale Group;
	 
	 	5.2.2	 	any matter reasonably undertaken by any member of the Sale Group in an
emergency or disaster situation with the intention of minimising any adverse effect
thereof (and of which the Purchaser will be promptly notified);
	 
	 	5.2.3	 	the completion or performance of any obligations undertaken pursuant to any
contract or arrangement entered into by any member of the Sale Group prior to the date
of this Agreement provided such contract or arrangement has been disclosed to the
Purchaser in the Data Room, or if the Seller is aware that such contract or arrangement
is not so disclosed, such contract or arrangement is brought to the attention of the
Purchaser and, where practicable, the Seller consults with the Purchaser in respect of
the obligations to be performed pursuant to such contract or arrangement;
	 
	 	5.2.4	 	the payment of any principal, interest and other amounts due and payable by
SCCL in accordance with the terms of the Luxco Loan Agreement, this Agreement or as
required or contemplated by any contractual loan or financing arrangement to which SCCL
or any of SCCL’s Affiliates is a party, in each case without prejudice to the Warranty
set out in paragraph 5.6 of Schedule 2;

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	 	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, 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.

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	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 £20,000,000 (twenty million pounds) which amount shall be paid to
the Escrow Account with the Escrow Agent; and
	 
	 	6.3.3	 	procure that SCCL pays to the Seller or to its order and to such accounts as
it may direct, an amount equal to the Estimated SCCL Intergroup Debt.

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

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

	6.5	 	If a party (the “Defaulting Party”) fails to comply with its obligations at Completion under
this clause 6 then the Seller (if the Purchaser is the Defaulting Party) or the Purchaser (if
the Seller is the Defaulting Party) may, by notice in writing to all other parties (i)
postpone Completion by not less than 2 Business Days (to a date no later than 30 August 2005);
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

29

 

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

	 	 	PROVIDED that clause 6.6.1 shall not operate if the BP Director resigns from the board of
directors of SCCL and is not replaced prior to Completion unless the Purchaser provides to
the Seller no later than 10 Business Days after being given notice of such resignation a
certificate indicating that it has received notice from the finance parties under the
Facility Agreement confirming that such financing parties are of the view, having sought the
advice of a Queens Counsel, that the Financial Assistance Procedure intended to be carried
out at Completion, as set out in Part II of Schedule 4, will be adversely affected by the
resignation of the BP Director and that consequently the related condition precedent in the Facility
Agreement is not satisfied (and the Purchaser shall provide to the Seller a copy of any
opinion or memorandum from the leading counsel in the possession or control of the Purchaser
that was obtained by such finance parties in respect of the resignation of the BP Director
from the board of directors of SCCL). If Completion fails to take place as a result of any
of the circumstances referred to in this clause 6.6 then (subject to clause 17.2) Completion
will automatically be postponed to the day 5 Business Days after the date on which
Completion was (but for this sentence) otherwise due to occur and that Business Day will be
the Completion Date.
	 
	6.7	 	In the event that Completion does not take place and the appointments and resignations
referred to in paragraph 1 of Part I of Schedule 4 are effective, then the Purchaser shall
(to the extent that it is in its power to do so) procure that a meeting of the directors of
each of UK OpCo and SCCL are immediately held at which resolutions are passed (i) approving
the re-appointment of each of the directors who so resigned and (ii) accepting the
resignation of each of the directors so appointed. The Purchaser shall procure that each of
the directors resigning pursuant to this clause 6.7 delivers to the board of directors of UK
OpCo or SCCL (as the case may be) a duly executed resignation letter in the Agreed Form. The
Purchaser hereby indemnifies the Seller Parties for any and all actions undertaken by the
directors appointed pursuant to paragraph 1 of Part I of Schedule 4 prior to their resignation
in accordance with this clause 6.7.
	 
	6.8	 	The Seller and the Purchaser agree that such amounts standing to the credit of the Escrow
Account shall only be applied in accordance with the provisions of the Escrow Agreement.
	 
	7.	 	COMPLETION ACCOUNTS
	 
	7.1	 	The Purchaser shall procure that as soon as possible, and in any event within 60 calendar
days of the Completion Date a draft Completion Balance Sheet (having the same line items as
the balance sheet contained in the Accounts for the Sale Group member to which such draft
Completion Balance Sheet relates and by way of example only, an illustrative calculation is
set out in Appendix I) in respect of each of SCCL and UK OpCo (such Completion Balance Sheets
together the “Draft Completion Balance Sheets”) are prepared and delivered to the Seller.
	 
	 	 	Each Draft Completion Balance Sheet shall include a draft statement of Net Working Capital
for the company to which such Completion Balance Sheet relates. The Draft Completion
Balance Sheet for SCCL shall specify the Purchaser’s calculation of the SCCL Intergroup
Debt. The Purchaser shall prepare the Draft Completion Balance Sheets in accordance with
the Accounting Principles.
	 
	7.2	 	The Seller and the Seller’s Auditors shall be entitled to review the Draft Completion Balance
Sheets for a period of 60 calendar days following receipt from the Purchaser.

30

 

	7.3	 	The Purchaser shall provide the Seller and the Seller’s Auditors with such information as the
Seller and the Seller’s Auditors shall reasonably require or shall procure that such
information is provided to the Seller and the Seller’s Auditors and allow the Seller and the
Seller’s Auditors access to each member of the Sale Group and its books and records, its
employees and advisers (at reasonable times and upon reasonable notice and subject to the
Seller agreeing in favour of the Purchaser to keep all confidential information disclosed to
it in accordance with this clause 7.3 confidential on the terms as set out in clause 21), and
shall use its reasonable efforts to procure access to the Purchaser’s Auditors (if retained)
and their working papers (or, if the Purchaser’s Auditors are not retained for the purposes of
preparing the draft Completion Balance Sheet, the Purchaser’s own working papers or
equivalent) in each case insofar as is reasonably required for the analysis and verification
of the Draft Completion Balance Sheets (including the draft statements of Net Working Capital contained
therein).
	 
	7.4	 	At or before the end of the period of 60 calendar days referred to in clause 7.2, the Seller
shall either:

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

	7.5	 	If the Seller delivers a notice under clause 7.4.2 then the Seller and the Purchaser shall
use their respective reasonable endeavours to agree the Disputed Items within 30 calendar
days, or such longer period as may be agreed between them. Any Disputed Items agreed between
the Seller and the Purchaser within that 30 calendar day period shall be reflected in
amendments to the Draft Completion Balance Sheets. At the end of that 30 calendar day period,
those Disputed Items which have not been agreed between the Seller and the Purchaser (if any)
(“Unresolved Disputed Items”) shall be referred for final binding determination to such firm
of independent accountants of international standing (the “Expert”) as the Seller and the
Purchaser may agree or, in the absence of agreement within 10 Business Days following the
expiry of such 30 day period, or longer period as agreed between the Seller and the Purchaser,
as may be selected at the request of either the Seller or the Purchaser by the President of
the Institute of Chartered Accountants in England and Wales, with instructions that the Expert
render his decision on the Unresolved Disputed Items (and any matters specifically relating
thereto) and notify it to the Seller and the Purchaser within 30 days of the Expert accepting
such referral. In each case, the Expert so selected (either by agreement between the Seller
and the Purchaser or otherwise in accordance with this clause 7.5) shall act as expert and not
as arbitrator and the Unresolved Disputed Items in a Draft Completion Balance Sheet will be
determined by the Expert in accordance with the Accounting Principles and such adjustments as
are required to be made as a result of the Expert’s determination of such Unresolved Disputed
Items shall be made to the Draft Completion Balance Sheet in which such Unresolved Disputed
Items appear or to which such Unresolved Disputed Items relate which shall then constitute the
Completion Balance Sheet (and the amount of the Net Working Capital shall be the amount set
out in the statement of Net Working Capital as so adjusted) which shall be final and binding
on the Seller and the

31

 

	 	 	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
£30,000,000 (thirty million pounds);
	 
	 	7.6.2	 	if the Aggregate Projected NWC is greater than the Aggregate Actual NWC, the
Seller shall pay to the Purchaser an amount equal to the excess;
	 
	 	7.6.3	 	if the SCCL Intergroup Debt shown in the Completion Balance Sheets is less
than the amount of the Estimated SCCL Intergroup Debt, then (a) the Seller shall pay
(or procure that a Calpine Group member pays) to SCCL an amount equal to the deficit
and (b) subject to and conditional upon the Seller’s compliance with sub-clause (a) of
this clause 7.6.3, the Purchaser shall pay the Seller an amount equal to the deficit;
and
	 
	 	7.6.4	 	if the SCCL Intergroup Debt shown in the SCCL Completion Balance Sheet is in
excess of the amount of the Estimated SCCL Intergroup Debt, then (a) the Seller shall
pay (or procure that a Calpine Group member pays) the Purchaser an amount equal to the
excess and (b) subject to and conditional upon the Seller’s compliance with sub-clause
(a) of this clause 7.6.4, the Purchaser shall procure that SCCL pays an amount equal to
the excess to the Seller which amount shall be in full and final settlement of the SCCL
Intergroup Debt and the Seller shall (if requested to do so by the Purchaser)
acknowledge the same in writing to the Purchaser.

	 	 	Any payments required to be made under this clause 7.6 will be made in accordance with
clause 4.4.
	 
	7.7	 	The Purchaser shall not be entitled to recover from the Seller in respect of any Warranty
being breached or being inaccurate or misleading or in respect of any breach of any other
provision of this Agreement (or any other agreement pertaining to this transaction) or in
respect of any indemnity contained in any agreement pertaining to this transaction to the
extent that the amount which the Purchaser seeks to recover from the Seller has been taken
into account in the calculation of Net Working Capital for either SCCL or UK OpCo.
	 
	8.	 	SELLER’S WARRANTIES
	 
	8.1	 	The Seller and Calpine (each a “Warrantor”, together the “Warrantors”) warrant to the
Purchaser in the terms set out in Schedule 2 as at the date of this Agreement. The liability
of the Seller and Calpine in relation to the Warranties shall be joint and several.

32

 

	8.2	 	Immediately prior to Completion, the Warrantors shall be deemed to warrant to the Purchaser
in the terms set out in Schedule 2 by reference to the facts and circumstances subsisting
immediately prior to Completion. For the purposes of this clause 8.2 only, (a) where there is
an express or implied reference in a Warranty to the “date of this Agreement”, that reference
is to be construed as a reference to Completion and (b) the Relevant Period shall be deemed to
end at Completion.
	 
	8.3	 	The Purchaser’s rights to make a Claim in respect of the Warranties, and the Warrantors’
liability in respect of any such Claim, shall be limited and/or excluded as set out in
Schedule 3, save in relation to fraud.
	 
	8.4	 	The Warrantors acknowledge that the Purchaser has entered into this Agreement in reliance
upon the Warranties. Each Warranty is separate and independent and shall not be limited by
reference to or inference from any other Warranty, or any other term of this Agreement or any document
referred to in it.

	8.5	 	The only Warranties given:

	 	8.5.1	 	in respect of Intellectual Property are those contained in paragraph 12 of
Schedule 2 and, with the exception of the Warranties contained in paragraphs 7 and 10
of Schedule 2, each of the other Warranties shall be deemed not to be given in relation
to Intellectual Property;
	 
	 	8.5.2	 	in respect of employment matters are those contained in paragraph 14 of
Schedule 2 (other than paragraph 14.9 thereof) and, with the exception of the
Warranties contained in paragraphs 7 and 10 of Schedule 2, each of the other Warranties
shall be deemed not to be given in relation to employment matters;
	 
	 	8.5.3	 	in respect of Tax are those contained in paragraph 15 of Schedule 2 and each
of the other Warranties shall be deemed not to be given in relation to Tax;
	 
	 	8.5.4	 	in respect of matters related to the Environment are those contained in
paragraphs 16 and 20 and to the extent they relate to environmental matters paragraphs
4.4.1 and 4.5 of Schedule 2 and each of the other Warranties shall be deemed not to be
given in relation to any matter relating to the Environment;
	 
	 	8.5.5	 	in respect of the Property are those contained in paragraph 17 of Schedule 2
and each of the other Warranties shall be deemed not to be given in relation to the
Property, with the exception of the Warranties contained in paragraph 7 of Schedule 2
insofar as such Warranties relate to Property, excluding fixtures;
	 
	 	8.5.6	 	in respect of the dispersion of salt from the Facility’s cooling towers into
the Environment is that contained in paragraph 21.11 of Schedule 2 and each of the
other Warranties shall be deemed not to be given in relation thereto; and
	 
	 	8.5.7	 	in respect of occupational health and safety are those contained in paragraph
19 of Schedule 2 and each of the other warranties shall be deemed not to be given in
relation to occupational health and safety.

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

	 	8.6.1	 	it has the requisite capacity, power and authority to enter into and perform
its obligations under this Agreement;

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	 	8.6.2	 	it has taken all necessary corporate action required by its articles of
association (or like constitutional documents) to permit it to enter into and perform
its obligations under this Agreement;
	 
	 	8.6.3	 	this Agreement constitutes a binding obligation on it in accordance with its
terms;
	 
	 	8.6.4	 	the execution and delivery of, and the performance of its obligations under
this Agreement will not:

	 	(a)	 	result in a breach of any provision of its constitutional
or organisational documents; or
	 
	 	(b)	 	result in a breach of any order, judgment or decree of
any court or governmental agency to which it is a party or by which it is
bound or any contractual commitment to which it is bound; or
	 
	 	(c)	 	result in it being or becoming subject to or threatened
by any procedures or steps which are analogous to those contained in
paragraph 18 of Schedule 2 in any jurisdiction, including the United States
of America;

	 	8.6.5	 	it is not, in any jurisdiction (including the United States of America)
subject to or threatened by any procedures or steps which are analogous to those
contained in paragraph 18 of Schedule 2, nor are any such procedures or steps pending;
and
	 
	 	8.6.6	 	the Seller Guarantor Officer’s Certificate is true and accurate.

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

	 	8.8.1	 	the disputed portion of any invoice issued by BP Gas Marketing to SCCL in
respect of a period prior to the date of Completion in connection with disputed
transportation charges rendered by Transco Plc to BP Gas Marketing relating to metering
disputes following the ingress of liquid hydrocarbons from Transco Plc’s gas
distribution network into the Facility (including the Gas Line and Transco Plc’s gas
meter at the Facility); and
	 
	 	8.8.2	 	any claim by BP Chemicals (or any other member of the BP Group) against SCCL
in respect of BP Chemicals’ assertion that SCCL is contractually obliged pursuant to
the terms of the PPA to allocate CHP LECs to BP Chemicals (or any other member of the
BP Group) in respect of any electrical power supplied by SCCL to BP Chemicals (or any
other member of the BP Group) under the PPA.

	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.

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	8.10	 	In the event that the Seller provides (or is deemed to provide) a notice to the Purchaser
pursuant to clause 8.9, then (unless the Seller states in such notice that it wishes to
disapply the provisions of this clause 8.10 (such disapplication without prejudice to the
Purchaser’s rights (if any) under this Agreement) in relation to the fact or circumstance
referred to in the Seller’s notice:

	 	8.10.1	 	the Purchaser shall within 2 Business Days of delivery of the notice referred to in
clause 8.9, deliver to the Seller a notice (a “Response Notice”):

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

	 	 	 	provided that if the Purchaser does not deliver to the Seller a Response Notice
within 2 (two) Business Days in accordance with the terms of this clause 8.10.1,
then the Purchaser shall be deemed not to have waived and forever discharged and
released the Seller from such Incipient Claim; and
	 
	 	8.10.2	 	within 2 Business Days of receipt by the Seller of a Response Notice in respect of an
Incipient Claim that is not waived (or deemed not to be waived) by the Purchaser,
Calpine shall deliver to the Purchaser on behalf of the Warrantors a notice (a “Reply
Notice”) stating whether or not the Seller wishes to terminate this Agreement and, if
such notice states that the Seller wishes to terminate this Agreement, then this
Agreement shall terminate in accordance with clause 17.1 (provided that, for the
avoidance of doubt, if the Seller fails to deliver a Reply Notice within such 2
Business Day period then it shall be deemed to have delivered a Reply Notice stating
that it does not wish to terminate this Agreement). If the Seller delivers (or is
deemed to deliver) a Reply Notice that indicates that it does not wish to terminate
this Agreement pursuant to this clause 8.10.2, then Completion shall be without
prejudice to the Purchaser’s rights against the Seller or Calpine (if any) in respect
of the fact, matter or circumstance described in the notice given under clause 8.9.

	 	 	All notices under this clause 8.10 shall be given by fascimile 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.

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	8.12	 	Subject to clauses 8.13 and 8.14, the Seller shall indemnify the Purchaser as trustee for
SCCL in respect of any losses, liabilities, damages and costs and expenses (including
reasonable legal defence costs) incurred by SCCL to the extent that they arise from any claim
or proceedings for damages or Remedial Action brought against SCCL by any member of the BP
group or any Competent Authority within eighteen months of the date of this Agreement to the
extent that such claim or proceedings relates to any alleged or actual emission of chlorides
from the cooling towers of the Facility and any actual or alleged resulting deposition of any
such chlorides on the Complex Site (as defined in the Lease of the Property dated 26 September
2003) or elsewhere prior to Completion.
	 
	8.13	 	The Seller shall not be liable for any claim under clause 8.12 to the extent that it arises
from or is increased:

	 	8.13.1	 	due to any failure by SCCL to operate the Facility in the manner of a reasonable and
prudent operator after Completion;
	 
	 	8.13.2	 	by the worsening or aggravation by any person (other than the Seller or by any person
authorised on its behalf) after Completion of any circumstances or states of affairs
(including without limitation the condition of any plant or equipment at or any part of
the Facility) comprising the subject matter of such claim;
	 
	 	8.13.3	 	by any change after Completion in the production capacity of the Facility;
	 
	 	8.13.4	 	by any change after Completion in any operations or maintenance (including without
limitation their manner and intensity) at the Property or the Facility (in each case
including any part thereof);
	 
	 	8.13.5	 	by any amendment or alteration to or extension or renewal after Completion of any
deed, contract, lease or other agreement including without limitation the BP Agreements
to the extent that such claim would not have arisen under such deed, contract, lease or
other agreement in its form at the date of this Agreement;
	 
	 	8.13.6	 	by any development of, alteration to or extension of or addition to the Facility
(including any part thereof) after Completion;
	 
	 	8.13.7	 	by any variation of or modification to any permit, consent, licence or other
permission issued by a Competent Authority or an application for or issue of any such
new permit, consent, licence or other permission; and/or
	 
	 	8.13.8	 	by any waiver, release, reduction or extinction of any of the rights of SCCL
described in clause 8.14 below.

	8.14	 	The Seller shall not be liable under clause 8.12 above, until SCCL has enforced and exhausted
all its rights (including without limitation those arising under the EPC contract) against any
relevant person (including without limitation Mitsubishi) insofar as they relate to or concern
the subject matter of any claim which could be brought under clause 8.12 above. The Purchaser
shall procure that SCCL shall promptly and diligently take all such action within SCCL’s power
as is necessary to compel Mitsubishi to carry out or pay for all works and measures necessary
to reduce the carry over of particles of water from the cooling towers of the Facility and any
deposition of chlorides including without limitation and where relevant the commencement of
any proceedings (save where the prospects of such proceedings being successful are low and the
Seller has given its written consent to the Purchaser or SCCL not to pursue such proceedings
(such consent not to be unreasonably withheld or delayed)). The Purchaser shall and shall
procure that SCCL shall give the Seller all information which the

36

 

	 	 	Seller reasonably requests about such works and measures at all times and allow the Seller to monitor the progress of
such works and to the extent that it is able to procure the same to participate in any
relevant meetings with consultants or contractors.
	 
	8.15	 	No Claim can be brought under any of the Warranties to the extent that its subject matter
falls within the scope of the indemnities in clause 8.12 above or would so fall if it were not
for any limitations contained in clauses 8.12 to 8.14 above or the limitation on the total
aggregate liability of the Seller contained in paragraph 2.4(a) of Schedule 3.
	 
	8.16	 	Promptly after SCCL or any other member of the Purchaser’s Group becomes aware of any matter
which might reasonably be expected to give rise to a Claim by the Purchaser under clause 8.12
(whether at that time or in the future) it shall provide written details thereof to the Seller
and thereafter keep the Seller reasonably informed as to the progress of such matter.
	 
	8.17	 	Each Seller Party shall indemnify the Purchaser, and keep the Purchaser indemnified, on
demand against each Loss which the Purchaser incurs whether before or after the start of an
action arising (directly or indirectly) out of:

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

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

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

	8.19	 	Notwithstanding any provision of this Agreement to the contrary, none of the Warranties given
or deemed repeated by any of Calpine, the Seller or the Seller Guarantor shall be breached or
proved false in whole or in part by virtue of the actual or intended incurrence of
indebtedness or the granting of security by SCCL at Completion as contemplated by Part II of
Schedule 4.
	 
	9.	 	PURCHASER PARTIES’ WARRANTIES
	 
	9.1	 	Each of the Purchaser Parties warrants to the Seller that:

	 	9.1.1	 	it has the requisite capacity, power and authority to enter into and perform
its obligations under this Agreement and the other Share Purchase Documents to which it
is a party;
	 
	 	9.1.2	 	it has taken all necessary corporate action required by its articles of
association (or like constitutional documents) to permit it to enter into and perform
its obligations

37

 

	 	 	 	under this Agreement and the other Share Purchase Documents to which it
is a party;
	 
	 	9.1.3	 	this Agreement constitutes, and the other Share Purchase Documents to which it
is a party will, when duly executed by it and the other parties thereto, constitute
binding obligations on them in accordance with their respective terms;
	 
	 	9.1.4	 	the execution and delivery of, and the performance of its obligations under
this Agreement and the other Share Purchase Documents to which it is a party will not:

	 	(a)	 	result in a breach of any provision of its constitutional
or organisational documents; or
	 
	 	(b)	 	result in a breach of any order, judgment or decree of
any court or governmental agency to which it is a party or by which it is
bound or any contractual commitment by which it is bound;

	 	9.1.5	 	Mitsui owns indirectly 30% of the issued share capital of the Purchaser and
IPR owns indirectly 70% of the issued share capital of the Purchaser; and
	 
	 	9.1.6	 	it is not, in any jurisdiction (including the United States of America)
subject to or threatened by any procedures or steps which are analogous to those
contained in paragraph 18 of Schedule 2 and nor are any such procedures or steps
pending.

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

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

	9.3	 	The Purchaser warrants to the Seller that:

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

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	10.	 	UNDERTAKINGS
	 
	10.1	 	The Seller agrees and undertakes that (in the absence of fraud) it has no rights against and
shall not make any claim against any employee, director, agent, officer or adviser of the Sale
Group or of any shareholder or Affiliate of the Sale Group, in each case on whom it may have
relied before agreeing to any term of this Agreement or any other agreement or document
referred to herein (including the Disclosure Letter) or entering into this Agreement or any
other agreement or document referred to herein. The Purchaser agrees and undertakes that (in
the absence of fraud) it has no rights against and shall not make any claim against any
employee, director, agent, officer or adviser of the Calpine Group or of any shareholder or
Affiliate of the Calpine Group, in each case on whom it may have relied before agreeing to any
term of this Agreement or any other agreement or document referred to herein (including the
Disclosure Letter) or entering into this Agreement or any other agreement or document referred
to herein.
	 
	10.2	 	The Purchaser undertakes to the Seller that it shall, and shall procure that each member of
the Sale Group shall, preserve for a period of at least seven (7) years (or any longer period
as may be required by law or relevant regulations from time to time) from Completion all
books, records and documents of the Sale Group existing at Completion. The Purchaser shall
permit and allow, and shall procure that the relevant member of the Sale Group shall permit
and allow, upon reasonable written notice (and in any event within seven (7) days of written
notice being given) and during Working Hours, the employees, agents and professional advisers
of the Seller or any member of the Calpine Group specified in such notice reasonable access to
such books, records and documents and the right to inspect the same and at the Seller’s
expense, make copies thereof. The Seller hereby agrees (for itself and on behalf of any of
its employees, agents and professional advisers) in favour of the Purchaser to keep
confidential all confidential information disclosed to it or which it learns as a result of
being given access to the books, records and documents under this clause 10.2 on the same
terms as set out in clause 21.2.
	 
	10.3	 	The Purchaser undertakes to the Seller (for itself and for the benefit of SCCL) that, subject
to the delivery of the Accountants Report at Completion, the net assets of SCCL will not be
reduced as a result of the transactions contemplated by paragraph 3 of Part II of Schedule 4
and, if such a reduction would occur as a result of such transactions, then the Purchaser
shall procure that, simultaneous with such transactions, SCCL’s net assets are increased by
an amount at least equal to such reduction, provided that nothing in this clause 10.3 shall
require the Purchaser to make good any reduction of net assets (whether by way of subscription
for share capital or otherwise) occurring as a result of such transactions or incur any
liability for an amount in excess of £35,000,000 (thirty five million pounds).
	 
	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.

39

 

	12.	 	REMEDIES AND WAIVERS
	 
	12.1	 	No delay or omission on the part of any party to this Agreement in exercising any right,
power or remedy provided by law or under this Agreement or any other documents referred to
herein shall impair such right, power or remedy, or operate as a waiver thereof.
	 
	12.2	 	The single or partial exercise of any right, power or remedy provided by law or under this
Agreement shall not preclude any other or further exercise thereof or the exercise of any
other right, power or remedy.
	 
	13.	 	CONDUCT OF CLAIMS
	 
	13.1	 	Without prejudice to the provisions of clause 3.7.5 of the Participation Agreement (if
applicable), upon the Purchaser or a member of the Sale Group becoming aware of any claim,
action or demand against it by a third party or matter of which the Purchaser is aware is
reasonably likely to give rise to any Claim by the Purchaser under this Agreement other than a
Tax Claim or an Environmental Indemnity Claim (“Third Party Claim”), the Purchaser shall and
shall procure that the relevant member of the Sale Group shall:

	 	13.1.1	 	promptly, and in any event within 10 Business Days of becoming aware (i) of the
claim, action or demand or (ii) that the relevant matter is reasonably likely to give
rise to a Claim, notify the Seller by written notice;
	 
	 	13.1.2	 	at the request of the Seller and subject to the Seller indemnifying the Purchaser and
the relevant member of the Sale Group against any reasonable liability, costs, damages
or expenses which may be reasonably and properly incurred thereby, allow the Seller,
subject to the directions and requirements of any relevant insurer (if the claim is
covered by a valid policy of insurance) to take the sole conduct of such actions as the
Seller may deem appropriate in connection with any such Third Party Claim in the name
of the Purchaser or the relevant member of the Sale Group and in that connection the
Purchaser shall give or cause to be given to the Seller all such assistance as the
Seller may reasonably require in avoiding, disputing, resisting, settling,
compromising, defending or appealing any such Third Party Claim. The Seller shall:

	 	13.1.2.1	 	in response to reasonable requests from the Purchaser from time to time,
keep the Purchaser informed of the progress of the Third Party Claim;
	 
	 	13.1.2.2	 	provide the Purchaser with copies of such documentation relating to the
Third Party Claim as it may reasonably request subject to legal privilege
(unless disclosure can be made without loss of privilege) and relevant
duties of confidentiality; and
	 
	 	13.1.2.3	 	give the Purchaser such opportunities as it may reasonably request to
make representations regarding the conduct of the Third Party Claim;

	 	13.1.3	 	subject to the Seller indemnifying the Purchaser and the relevant member of the Sale
Group against any reasonable liability, costs, damages or expenses which may be
reasonably and properly incurred thereby, take such action and give such information
and access to relevant personnel, premises, chattels, documents and records to the
Seller and its professional advisers as the Seller may reasonably request (save, for
the avoidance of doubt, to the extent that any information, documents or records: (i)
constitute internal memoranda of the Purchaser’s Group which relate directly to a
potential Claim which may be made against the Seller and

40

 

	 	 	 	not to the factual circumstances underlying such potential Claim, or (ii) are subject to legal privilege
unless disclosure can be made without loss of privilege) or (iii) information which the
Purchaser is obliged to keep confidential and the Purchaser and the relevant member of
the Sale Group shall take (or procure the taking of) such action and give (or procure
the giving of) such information and assistance in order to avoid, dispute, resist,
mitigate, settle, compromise, defend or appeal any claim in respect a Third Party Claim
or adjudication with respect thereto as the Seller may reasonably require;
	 
	 	13.1.4	 	make no admission of liability, agreement, settlement or compromise in relation to
any such Third Party Claim or adjudication without the prior written consent of the
Seller. If the Seller agrees with the third party to settle or compromise a Third
Party Claim, and the Purchaser refuses to agree to such settlement or compromise then,
if the amount for which the Seller subsequently becomes liable exceeds the figure at
which it would have so settled or compromised the relevant Third Party Claim, the
Seller shall not be liable for the excess amount or any costs or liabilities incurred
since the proposed date of settlement or compromise; and
	 
	 	13.1.5	 	take all necessary action to mitigate its loss to the extent it is within its power
to do so.

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

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

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

41

 

	14.3	 	If a written determination has been issued as referred to in clause 14.2, the Seller or the
Purchaser may on or before the third anniversary of such determination issue a request to the
relevant company’s auditors:

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

	 	14.3.2	 	to determine in writing whether in the light of such circumstances the original
written determination should be amended.

	14.4	 	If the new written determination referred to in clause 14.3 states that the original written
determination should be amended, an adjusting payment equal to the difference between the sum
in the original written determination and the sum in the amended written determination shall
be made by the Requesting Party or the Notified Party (as appropriate) as soon as reasonably
practicable.
	 
	15.	 	TRADE MARKS
	 
	 	 	The Purchaser hereby undertakes to the Seller to procure that each member of the Sale Group
ceases to use or display in any manner whatsoever the Trade Marks or any similar mark, name,
design or logo as soon as reasonably practicable (and in any event within 90 days) following
Completion.
	 
	16.	 	ASSIGNMENT AND NOVATION
	 
	16.1	 	All (and not part only) of the benefits of this Agreement shall be assignable:

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

	 	 	PROVIDED THAT, in either case, any assignment made to a person in accordance with clauses
16.1.1 or 16.1.2 (each such person a “Permitted Assignee”) is subject to the conditions that
if such Permitted Assignee shall subsequently cease to be a member of the Purchaser’s Group
or the Calpine Group, the Purchaser or the Seller (as the case may be) shall procure that
prior to the Permitted Assignee ceasing to be an Affiliate thereof, the Permitted Assignee
assigns the benefit of this Agreement back to the assigning party or to another member of
the Purchaser’s Group or the Calpine Group (as the case may be).
	 
	16.2	 	The Purchaser (or any Permitted Assignee, including under clause 16.3) may charge or assign
the benefit of this Agreement to any bank or financial institution or any other person by way
of security for the purposes of or in connection with the financing (whether in whole or in
part) by the Purchaser and/or SCCL of the acquisition of the Shares or any other transactions
contemplated by this Agreement. Any such bank, financial institution or person (or any
administrative receiver or other person appointed to enforce such security) may charge or
assign such rights on, for the purpose of or in connection with, any enforcement of the
security under such financing arrangements.
	 
	16.3	 	At any time prior to Completion the Purchaser Guarantors may give notice to the Seller
Parties indicating that they wish the Seller Parties to agree to the novation of the
obligations of the Purchaser under this Agreement to a Permitted Assignee and provided that:

42

 

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

	 	 	then the Seller Parties will execute all such documents as may reasonably be required to
novate the obligations of the Purchaser to the nominated Permitted Assignee and following
such novation each reference in this Agreement to the Purchaser (including in clause 26)
shall be construed as a reference to the Permitted Assignee.
	 
	16.4	 	In the event of an assignment in accordance with clause 16.1 or clause 16.2 or a novation in
accordance with clause 16.3, each of the Purchaser and the Seller (as the case may be) hereby
agrees that the liability of the other party in respect of any Claim or any liability arising
out of or in connection with this Agreement or the Tax Covenant howsoever arising shall be no
greater than it would otherwise have been had any such assignment or novation not occurred.
	 
	16.5	 	Neither this Agreement (nor any part of it) is assignable by the Calpine or the Seller
Guarantor without the prior written consent of the Purchaser. Neither this Agreement nor any
part of it is assignable by either of the Purchaser Guarantors without the prior written
consent of the Seller.
	 
	16.6	 	Except as expressly permitted by this clause 16, any assignment of this Agreement shall be
void.
	 
	17.	 	TERMINATION
	 
	17.1	 	This Agreement may be terminated as follows:

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

	17.2	 	This Agreement will terminate automatically at 5:00 p.m. on 30 August 2005 unless Completion
has occurred prior to that time.
	 
	17.3	 	If this Agreement is terminated in accordance with clause 17.1 or terminates in accordance
with clause 17.2 and without limiting any party’s right to claim damages in respect of
antecedent breaches, all obligations of the parties under this Agreement shall end (except for
the provisions of clauses 19, 20, 21, 22 and 32) but all rights and liabilities of the parties
which have accrued before termination shall continue to exist.

43

 

	18.	 	FURTHER ASSURANCE
	 
	18.1	 	Each of the Parties shall from time to time at its own cost, on being required to do so by
any other party to this Agreement, now or at any time in the future, do or procure the doing
of all such acts and/or execute or procure the execution of all such documents in a form
satisfactory to the party concerned as they may reasonably consider necessary to transfer the
Shares to the Purchaser and otherwise give full effect to this Agreement.
	 
	18.2	 	This Agreement may only be varied in writing signed by each of the parties.
	 
	19.	 	NOTICES
	 
	19.1	 	Any notice or other communication given or made under or in connection with the matters
contemplated by this Agreement shall be in writing.
	 
	19.2	 	Any such notice or other communication shall be delivered personally or sent by international
recognised courier or by facsimile to the address or the facsimile number provided in clause
19.3 (marked for the attention of the person identified in the clause) and, if so delivered or
sent, shall be deemed to have been duly given or made as follows:

	 	19.2.1	 	if sent by personal delivery, upon delivery at the address of the party to whom such
notice is addressed;
	 
	 	19.2.2	 	if sent by international recognised courier, two (2) Business Days after the date of
posting; and
	 
	 	19.2.3	 	if sent by facsimile, when dispatched,

	 	 	PROVIDED THAT if, in accordance with the above provisions, any such notice or other
communication would otherwise be deemed to be given or made outside Working Hours, such
notice or other communication shall be deemed to be given or made at the start of Working
Hours on the next Business Day.
	 
	19.3	 	The relevant addressee and facsimile number of each party for the purposes of this Agreement,
subject to clause 19.4, are:

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

c/o Skadden Arps Slate

Meagher & Flom (UK) LLP

40 Bank Street

Canary Wharf

London E14 5DS
	 	Douglas Nordlinger	 	+44 (0) 20 7072 7030
	 
	 	 	 	 
	with a copy to Calpine
	 	 	 	 
	 
	 	 	 	 
	Calpine Corporation

50 West San Fernando Street

San Jose

California 95113

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

50 West San Fernando Street
	 	General Counsel	 	+1 408 794 2434

44

 

	 	 	 	 	 
	San Jose

California 95113

USA
	 	 	 	 
	 
	 	 	 	 
	with a copy to Calpine
	 	 	 	 
	 
	 	 	 	 
	Normantrail (UK Co 3) Limited

Senator House

85 Queen Victoria Street

London EC4V 4DP

with a copy to each of the

Purchaser Guarantors
	 	The Company Secretary	 	+44 (0) 20 7320 8770
	 
	 	 	 	 
	International Power plc

Senator House

85 Queen Victoria Street

London EC4V 4DP

with a copy to Mitsui
	 	The Company Secretary	 	+44 (0)20 7320 8770
	 
	 	 	 	 
	Mitsui & Co., Ltd
	 	The General Manager	 	+81 (0) 3 3285 9783
	2-1, Ohtemachi 1-chome
	 	Second Project	 	 
	Chiyoda-ku
	 	Development Department	 	 
	Tokyo
	 	Power & Infrastructure	 	 
	Japan
	 	Project Development	 	 
	with a copy to IPR
	 	Division	 	 

	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

45

 

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

	 	 	in which case the party which is required to make the announcement shall take all such steps
as may be reasonable and practicable in the circumstances to agree the contents of such
announcement with the Purchaser (in the case of an announcement by a Seller Party or any of
its Affiliates) or the Seller (in the case of an announcement by a Purchaser Party or any of
its Affiliates) before making such announcement PROVIDED THAT any such announcement shall be
made only after notice to the Purchaser or the Seller (as the case may be).
	 
	20.3	 	The restrictions contained in this clause shall continue to apply after Completion without
limit in time.
	 
	21.	 	CONFIDENTIALITY
	 
	21.1	 	Subject to clauses 21.3 and 21.4, the Purchaser undertakes to the Seller that it will (and
that it will procure that each member of the Purchaser Group will) treat as strictly
confidential all information received or obtained as a result of entering into or performing
this Agreement which relates to:

	 	21.1.1	 	the provisions of this Agreement;
	 
	 	21.1.2	 	the negotiations relating to this Agreement (or any other document referred to
herein);
	 
	 	21.1.3	 	the subject matter of this Agreement (or any other document referred to herein); or
	 
	 	21.1.4	 	Calpine and each member of the Calpine Group.

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

	 	21.2.1	 	the provisions of this Agreement;
	 
	 	21.2.2	 	the negotiations relating to this Agreement (or any other document referred to
herein);
	 
	 	21.2.3	 	the subject matter of this Agreement (or any other document referred to herein); or
	 
	 	21.2.4	 	the Purchaser’s Group.

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

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

46

 

	 	21.3.3	 	it is disclosed on a strictly confidential basis to directors, employees,
professional advisers, auditors, bankers or rating agency of that party or to
directors, employees, professional advisers, auditors or bankers of its Affiliates;
	 
	 	21.3.4	 	the information has come into the public domain through no fault of that party or any
of its Affiliates;
	 
	 	21.3.5	 	the Purchaser and the Seller have given their prior written approval to the
disclosure, such approval not to be unreasonably withheld or delayed;
	 
	 	21.3.6	 	it is required to enable that party to enforce its rights under this Agreement or it
is disclosed in connection with regulatory or judicial proceedings; or
	 
	 	21.3.7	 	it is required by the Gas and Electricity Markets Authority,

	 	 	PROVIDED THAT (unless contrary to law or the direction of any governmental authority) any
such information disclosed pursuant to clauses 21.3.1 or 21.3.2 above shall be disclosed
only after notice to the Purchaser or the Seller (as the case may be).
	 
	21.4	 	The Seller may disclose this Agreement, the other Share Purchase Documents, and other
information which would otherwise be confidential by virtue of clause 21.2 to any member of
the BP Group to the extent required under or contemplated by the Participation Agreement.
	 
	21.5	 	The restrictions contained in this clause 21 shall continue to apply after the termination of
this Agreement or Completion for five (5) years from the date hereof.
	 
	21.6	 	Calpine and IPR agree that the confidentiality undertaking entered into between them dated 7
February 2005 shall terminate at Completion without prejudice to any liability for breach of
such agreement prior to Completion. Calpine and Mitsui agree that the confidentiality
undertaking entered into between them dated 5 March 2005 shall terminate at Completion without
prejudice to any liability for breach of such agreement prior to Completion.
	 
	22.	 	COSTS AND EXPENSES
	 
	22.1	 	Each party shall pay its own costs and expenses in relation to the negotiations leading up to
the sale of the Shares and to the preparation, execution and carrying into effect of this
Agreement and all other documents referred to herein.
	 
	22.2	 	Without prejudice to clause 22.1, all stamp, transfer, registration and other similar taxes,
duties and charges payable in connection with the sale or purchase of the Shares under this
Agreement (if any) shall be paid by the Purchaser.
	 
	23.	 	TIME OF ESSENCE
	 
	23.1	 	Any time, date or period referred to in any provision of this Agreement may be extended by
mutual agreement of the parties, but, in relation to any payment obligations and any
obligations relating to Completion, as regards any time, date or period originally fixed or
any time, date or period so extended, time shall be of the essence.
	 
	24.	 	INTEREST
	 
	24.1	 	If a party defaults in the payment when due of any sum payable under this Agreement (whether
determined by agreement or pursuant to an order of a court or otherwise) the liability of such
party shall be increased to include a payment of interest on such sum (subject

47

 

	 	 	to deduction or withholding of tax as required by law) from the date when such payment is
due until the date of actual payment (before and after judgment) at a rate of two (2) per
cent above LIBOR. Such interest shall accrue from day to day on the basis of a 360-day
year.
	 
	25.	 	INVALIDITY
	 
	25.1	 	If at any time any provision of this Agreement is or becomes illegal, invalid or
unenforceable in any respect under the law of any competent jurisdiction, such provision shall
not affect or impair:

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

	26.	 	SEVERAL GUARANTEE FROM THE PURCHASER GUARANTORS
	 
	26.1	 	In consideration of the Seller entering into this Agreement and for other good and valuable
consideration receipt of which is hereby acknowledged, subject to clause 26.2 the Purchaser
Guarantors hereby unconditionally and irrevocably (i) guarantee to the Seller the full, due
and punctual payment by the Purchaser of all amounts payable by the Purchaser under this
Agreement or the Tax Covenant and the performance of the Purchaser’s obligations at Completion
and (ii) indemnify the Seller immediately on demand against any cost, loss or liability
suffered by it if any obligation guaranteed by the Purchaser Guarantors is or becomes
unenforceable, invalid or illegal. The Purchaser Guarantors shall be liable for all such
obligations arising under this clause 26.1 as if they were each a primary obligor. The
guarantee in this clause 26.1 is a continuing guarantee and will extend to the ultimate
balance of sums payable by the Purchaser or the Purchaser Guarantors to the Seller in respect
of all amounts payable by the Purchaser under this Agreement or the Tax Covenant, regardless
of any intermediate payment or discharge.
	 
	26.2	 	The obligations of the Purchaser Guarantors under this clause 26 are several (and not joint
and several) and in respect of any liability under it, IPR shall be responsible for seventy
per cent. (70%) of such liability and Mitsui shall be responsible for thirty per cent. (30%)
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;

48

 

	 	26.3.4	 	any incapacity or lack of power, authority or legal personality of or dissolution or
change in the members or status of the Purchaser or a Purchaser Guarantor or any other
person;
	 
	 	26.3.5	 	any amendment (however, fundamental) or replacement of this Agreement or any of the
Share Purchase Documents or any other document or security;
	 
	 	26.3.6	 	any unenforceability, illegality or invalidity of any obligation of any person under
this Agreement or any of the Share Purchase Documents or any other document or
security; or
	 
	 	26.3.7	 	any insolvency of any person or similar proceedings.

	26.4	 	If and whenever the Purchaser defaults for any reason whatsoever in the performance of its
obligation to pay all amounts payable by the Purchaser under any Share Purchase Document to
which it is a party, the Purchaser Guarantors shall (on the several basis described in clause
26.2) forthwith unconditionally perform (or procure performance of) and satisfy (or procure
the satisfaction of) such obligation in the manner prescribed by such Share Purchase Document
so that the same benefits shall be conferred on the Seller as it would have received if such
obligation had been duly performed and satisfied by the Purchaser.
	 
	26.5	 	The Seller shall not be obliged before exercising any of the rights, powers or remedies
conferred upon it by this clause 26 or by law:

	 	26.5.1	 	to make any demand of the Purchaser;
	 
	 	26.5.2	 	to take any action or obtain judgment in any court against the Purchaser;
	 
	 	26.5.3	 	to make or file any claim or proof in a winding-up or dissolution of the Purchaser;
or
	 
	 	26.5.4	 	to enforce or seek to enforce any other security taken in respect of any of the
obligations of the Purchaser hereunder.

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

	 	26.6.1	 	to be indemnified by the Purchaser in respect of the obligations assumed by the
Purchaser Guarantors under this Agreement or the Tax Covenant; and/or
	 
	 	26.6.2	 	to take the benefit (in whole or in part and whether by way of subrogation or
otherwise) of any rights of the Purchaser under this Agreement or the Tax Covenant or
of any other security taken pursuant to, or in connection with, this Agreement or the
Tax Covenant by the Purchaser.

	27.	 	GUARANTEE FROM THE SELLER GUARANTOR

	27.1	 	In consideration of the Purchaser entering into this Agreement and for other good and
valuable consideration receipt of which is hereby acknowledged, the Seller Guarantor hereby
unconditionally and irrevocably (i) guarantees to the Purchaser the full, due and punctual
payment by the Seller of amounts due in respect of liabilities of the Seller for all Claims
under this Agreement (other than Claims for breach of a Warranty) and all Claims under the Tax

49

 

	 	 	Covenant, and (ii) indemnifies the Purchaser immediately on demand against any cost, loss or
liability suffered by it if any obligation guaranteed by the Seller Guarantor is or becomes
unenforceable, invalid or illegal. The amount of the cost, loss or liability shall be equal
to the amount that the Purchaser would otherwise have been entitled to. The Seller
Guarantor shall be liable for all such obligations arising under this clause 27.1 as if it
were a primary obligor. The guarantee in this clause 27.1 is a continuing guarantee and
will extend to the ultimate balance of sums payable by the Seller in respect of all Claims
under this Agreement (other than Claims for breach of a Warranty) and all Claims under the
Tax Covenant and the ultimate balance of sums payable by the Seller Guarantor to the
Purchaser, regardless of any intermediate payment or discharge.
	 
	27.2	 	The Seller Guarantor’s obligations under this clause 27 will not be affected by any act,
omission, matter or thing which, but for this clause, would reduce, release or prejudice any
of its obligations under this clause 27, including (without limitation and whether or not
known to the Seller Guarantor or the Seller):

	 	27.2.1	 	any time, waiver or consent granted to, or composition with, the Seller or the Seller
Guarantor;
	 
	 	27.2.2	 	the release of the Seller or the Seller Guarantor or any other person under the terms
of any composition or arrangement with any of their creditors;
	 
	 	27.2.3	 	the taking, variation, compromise, exchange, renewal or release of, or refusal or
neglect to perfect, take up or enforce, any rights against, or security over assets of,
the Seller or the Seller Guarantor or any other person or any non-presentation or
non-observance of any formality or other requirement in respect of any instrument or
any failure to release the full value of any security;
	 
	 	27.2.4	 	any incapacity or lack of power, authority or legal personality of or dissolution or
change in the members or status of the Seller or the Seller Guarantor or any other
person;
	 
	 	27.2.5	 	any amendment (however, fundamental) or replacement of the Agreement or any of the
Share Purchase Documents or any other document or security;
	 
	 	27.2.6	 	any unenforceability, illegality or invalidity of any obligation of any person under
the Agreement or any of the Share Purchase Documents or any other document or security;
or
	 
	 	27.2.7	 	any insolvency of any person or similar proceedings.

	27.3	 	If and whenever the Seller defaults for any reason whatsoever in the performance of its
obligation to pay a liability of the Seller in respect of a Claim (other than a Claim for
breach of a Warranty) or a Claim under the Tax Covenant, the Seller Guarantor shall forthwith
unconditionally perform (or procure performance of) and satisfy (or procure the satisfaction
of) such obligation, commitment or undertaking in regard to which such default has been made
in the manner prescribed by the relevant agreement so that the same benefits shall be
conferred on the Purchaser as it would have received if such obligation, commitment or
undertaking had been duly performed and satisfied by the Seller.
	 
	27.4	 	The Purchaser shall not be obliged before exercising any of the rights, powers or remedies
conferred upon it by this clause 27 or by law:

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

50

 

	 	27.4.2	 	to take any action or obtain judgment in any court against the Seller;
	 
	 	27.4.3	 	to make or file any claim or proof in a winding-up or dissolution of the Seller; or
	 
	 	27.4.4	 	to enforce or seek to enforce any other security taken in respect of any of the
obligations of the Seller hereunder.

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

	 	27.5.1	 	to be indemnified by the Seller in respect of the obligations assumed by the Seller
Guarantor under any such agreements; and/or
	 
	 	27.5.2	 	to claim any contribution from any other Seller Guarantor of the Seller’s obligations
under any such agreements; and/or
	 
	 	27.5.3	 	to take the benefit (in whole or in part and whether by way of subrogation or
otherwise) of any rights of the Seller under any such agreements or of any other
security taken pursuant to, or in connection with, any such agreements by the Seller.

	28.	 	THIRD PARTY RIGHTS
	 
	28.1	 	The parties to this Agreement do not intend that any term of this Agreement (other than
clause 10.3, which shall be enforceable by SCCL) should be enforceable by any person who is
not a party to this Agreement by virtue of the Contracts (Rights of Third Parties) Act 1999 or
otherwise. Notwithstanding the foregoing, if any benefits are conferred by this Agreement on
any third party by virtue of such statute, the parties to this Agreement may agree to vary or
rescind this Agreement without any such third party’s consent.
	 
	29.	 	COUNTERPARTS
	 
	29.1	 	This Agreement may be executed in counterparts, and by the parties on separate counterparts,
but shall not be effective until each party has executed at least one counterpart. Each
counterpart shall constitute an original of this Agreement, but the counterparts shall
together constitute but one and the same instrument.
	 
	30.	 	ENTIRE AGREEMENT
	 
	30.1	 	This Agreement and the other Share Purchase Documents (and all other documents which are
entered into by the parties or any of them in connection with this Agreement) contains the
whole agreement between the parties relating to the subject matter of this Agreement at the
date hereof to the exclusion of any terms implied by law which may be excluded by contract.
Each party acknowledges that it has not been induced to enter this Agreement by and, in
agreeing to enter into this Agreement, it has not relied on, any representations or warranties
except as expressly stated or referred to in this Agreement and, so far as permitted by law
(and except in the case of fraud) and each of the parties hereby waives any remedy in respect
of (and acknowledges that no other party nor any of their agents, advisers, officers or
employees have given) any warranties, representations, indemnities or other statements
whatsoever (written or oral) not expressly incorporated into this Agreement.

51

 

	31.	 	WITHHOLDING, DEDUCTIONS AND SET OFF
	 
	31.1	 	All sums payable under this Agreement (save amounts payable under clause 8.17 and 8.18) shall
be made in full without any set-off or counterclaim and free and clear of all deductions or
withholdings of any kind, save only as may be required by law, in which event such deduction
or withholding shall not exceed the minimum amount required by law.
	 
	31.2	 	If any deduction or withholding is required by law from any payment made under this Agreement
then, except in relation to payments of interest, the party making the payment shall pay the
recipient such additional sum (the “Additional Sum”) as will, after such deduction or
withholding has been made (and after taking into account any Tax payable in respect of the
Additional Sum), leave the recipient with the same amount as it would have been entitled to
receive in the absence of any such requirement to make a deduction or withholding.
	 
	31.3	 	If any Tax Authority brings into charge to Tax any sum paid by a party to any other party
under this Agreement then, except in relation to payments of interest, the Purchase Price and
any amounts paid pursuant to clauses 4.2, 6.3 and 7.6, the same obligation to pay an
Additional Sum as is referred to in clause 31.2 above shall apply in relation to such Tax as
if it were a deduction or withholding required by law; provided that if this clause 31.3
requires payment of an Additional Sum, if and to the extent that payment of such Additional
Sum would cause the total sum paid by the Seller Parties under this Agreement to exceed an
amount equal to the Purchase Price less £10 then such Additional Sum shall be deemed to be
reduced so that the total sum paid by the Seller Parties under this Agreement does not exceed
the Purchase Price less £10.
	 
	31.4	 	If any party pays an additional amount under this Agreement and the recipient receives, by
virtue of the receipt of that additional amount (or in relation to the matter giving rise to
the payment of that additional amount) a credit for, refund of or relief from any Tax or other
monies payable by it or a similar benefit by reason of any deduction or withholding for or on
account of Tax or by reason of any Tax charged in respect of which there is an additional
amount under clause 31.3 or this clause 31.4, then that party shall reimburse to the other
relevant parties the amount of such credit, refund, relief, or similar benefit.
	 
	31.5	 	If a party to this Agreement assigns the benefit of this Agreement, the other relevant
parties shall only be liable to make additional payments pursuant to clauses 31.3 or 31.4
above to the extent that those other parties would have been liable to make those payments if
no assignment had occurred.
	 
	32.	 	CHOICE OF GOVERNING LAW
	 
	32.1	 	This Agreement shall be governed by and construed in accordance with English law.
	 
	32.2	 	Each party irrevocably agrees that the courts of England shall have exclusive jurisdiction to
settle any Proceedings which may arise out of or in connection with this Agreement and that
accordingly any Proceedings shall be brought in such courts.
	 
	32.3	 	Each party waives (and agrees not to raise) any objection, on the ground of forum non
conveniens or on any other ground, to the taking of proceedings in the English courts. Each
party also agrees that a judgment against it in Proceedings brought in England shall be
conclusive and binding upon it and may be enforced in any other jurisdiction.

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

52

 

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

53

 

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
	 	Calpine UK Holdings Limited
	 
	 	 
	Accounting reference date:
	 	31 December
	 
	 	 
	Auditors:
	 	PricewaterhouseCoopers LLP

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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.

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	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

56

 

	 	 	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 US$360,000,000 (three hundred sixty million
United States dollars) and £20,000,000 (twenty million pounds); and
	 
	 	5.6.2	 	not in excess of the aggregate of US$360,000,000 (three hundred sixty million
United States dollars) and £110,000,000 (one hundred ten million pounds).

	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

57

 

of any other person or be treated as having any imputed or constructive knowledge).

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

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

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

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

	 	(a)	 	made, or agreed to make, capital expenditure exceeding in
total £500,000 (five hundred thousand pounds); or
	 
	 	(b)	 	incurred, or agreed to incur, a commitment or commitments
involving capital expenditure exceeding in total £500,000 (five hundred
thousand pounds); 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

58

 

	 	9.1.2	 	result in any such licence, authorisation or consent being revoked, suspended
or terminated.

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

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	12.7	 	The Business Information Technology is owned and operated by and is under the control of a
Sale Group member and is not wholly or partly dependant on any facilities which are not under
the ownership, operation or control of a Sale Group member and is adequate for the needs of
the Business as conducted as at the Completion Date.
	 
	13.	 	Insurances
	 
	13.1	 	The Calpine Group has obtained and is maintaining the insurance cover for the Facility.
Details of the insurance policies in respect of which each member of the Sale Group has an
interest that are material to the Business are included in the Data Room and set out in the
Disclosure Letter and so far as the Seller is aware, all such policies are in full force and
effect and are not void or voidable and, save as disclosed, no claims are outstanding and, so
far as the Seller is aware, no event has occurred giving rise to any claim which would have a
material adverse affect on the ability of the Sale Group to carry on the Business.
	 
	14.	 	Employment
	 
	14.1	 	A list of the names, positions, dates of birth, dates of commencement of continuous
employment, salary of, and profits, and other benefits (other than those referred to in
paragraph 14.8 below) available to, Employees as at the date of this Agreement are set out in
the Disclosure Letter. Save as disclosed in the Disclosure Letter, no member of the Sale
Group has made any representations, offers or promises to any of the Employees to vary any of
the foregoing.
	 
	14.2	 	All contracts of employment with Employees provide that they may be terminated on three
month’s notice or less.
	 
	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

60

 

	 	 	announced any proposal to establish such a scheme or arrangement. So far as the Seller is
aware, the Sale Group has complied with all its obligations in respect of the GPPP, and no
employee or former employee of the Sale Group has been promised any particular level of
benefits in respect of the GPPP.
	 
	14.10	 	None of the Sale Group, the Seller or any member of the Calpine Group has agreed or proposed
to provide any Employee with any benefit, compensation, damages, redundancy payment or other
payment (save for payment in respect of the applicable notice period and/or a statutory
redundancy payment) which might arise or be payable on or as a consequence of the termination
of an Employee’s employment.
	 
	14.11	 	No member of the Sale Group has provided, or agreed to provide, a gratuitous payment or
benefit to a director, officer or employee or to any of their dependants.
	 
	14.12	 	So far as the Seller and the Sale Group is aware there is no form of industrial action,
strike or other dispute threatened or pending between any member of the Sale Group and any
Employee or trade union or other representative of any of the Employees.
	 
	14.13	 	No Sale Group member operates any share incentive scheme, share option scheme, profit
sharing, bonus or other incentive scheme.
	 
	15.	 	Tax
	 
	15.1	 	Each member of the Sale Group has complied in all material respects with all its obligations
under any applicable laws, rules and regulations relating to Tax (including withholding of
taxes under any law) and has, within the time and the manner prescribed by law, withheld and
paid over to the proper Tax Authority all amounts required to be so withheld and paid over
under applicable laws.
	 
	15.2	 	All notices, returns, computations and registrations of each member of the Sale Group for any
Tax purpose have been made within the requisite periods, on a proper basis and are true,
correct and complete. Each member of the Sale Group has paid in full all Taxes that have
become due for payment for all periods ending on or prior to the date of this Agreement.
	 
	15.3	 	None of the notices, returns, computations and registrations of any member of the Sale Group
for the purposes of Taxation and nothing contained in any such notice, return, computation or
registration is, nor, so far as the Seller is aware, is likely to be, the subject of any
dispute with any Tax Authority and no member of the Sale Group is and no member of the Sale
Group expects to be involved in any dispute in relation to Taxation. Each member of the Sale
Group has duly submitted all claims and disclaimers which have been assumed to be made for the
purposes of the Accounts.
	 
	15.4	 	No member of the Sale Group has been subject to any non-routine visit, audit, investigation,
discovery or access order by any Tax Authority during any accounting period ending on or
within three (3) years before the date hereof and, so far as the Seller is aware, there are no
circumstances existing which make it likely that a non-routine visit, audit, investigation,
discovery or access order will be made.
	 
	15.5	 	Each Sale Group member has properly operated the Pay As You Earn system (including in
relation to national insurance contributions) and has complied with each reporting obligation
in connection with benefits provided (whether by the Sale Group Member or by any other person)
for a Sale Group member’s directors, other officers and employees and former directors, other
officers and employees.

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	15.6	 	No member of the Sale Group has without the prior consent of the Treasury carried out or
agreed to carry out any transaction under section 765 of ICTA 1988 which would be unlawful in
the absence of such consent and each member of the Sale Group has, where relevant, complied
with the requirements of section 765A(2) of ICTA 1988 (supply of information on movement of
capital within the EU) and any regulations made or notice given thereunder.
	 
	15.7	 	Each member of the Sale Group has been only resident in the United Kingdom for Taxation
purposes and has not been liable to corporation tax (or the equivalent thereto in any
jurisdiction outside the United Kingdom) in any jurisdiction other than the United Kingdom,
during the Relevant Period.
	 
	15.8	 	Each member of the Sale Group has sufficient records relating to past events to permit
accurate calculation of the Taxation liability which would arise upon a disposal or
realisation on Completion of each asset owned by it at the Accounts Date or acquired by it
since that date but before Completion.
	 
	15.9	 	The Disclosure Letter gives details of every written agreement that a member of the Sale
Group has entered into with any Calpine Group member for the claim or surrender of group
relief under the provisions of Chapter IV of Part X of ICTA 1988. No member of the Sale Group
will make or agree to make or accept any such surrender to or from a member of the Calpine
Group after the date of this Agreement, save to the extent such surrender is made after
Completion in accordance with the Tax Covenant.
	 
	15.10	 	No liability for Taxation will or may arise by reason of any member of the Sale Group
ceasing to be a member of a group of companies (as defined in section 170 of TCGA 1992) in
connection with the sale of the Shares contemplated by this Agreement.
	 
	15.11	 	Each member of the Sale Group is a taxable person duly registered for the purposes of VAT.
Each member of the Sale Group has complied with all statutory provisions, rules, regulations,
orders and directions in respect of VAT, has promptly submitted accurate returns and maintains
full and accurate VAT records. No member of the Sale Group has ever been subject to any
interest, forfeiture, surcharge or penalty nor been given any notice under section 59 or 64 of
VATA nor been given a warning under section 76(2) of VATA nor has any member of the Sale Group
been required to give security under paragraph 4 of Schedule 11 to VATA. No member of the
Sale Group is or has been treated as a member of a group for the purposes of VAT, nor has any
member of the Sale Group applied for such treatment.
	 
	15.12	 	No member of the Sale Group, nor a company of which a member of the Sale Group is a relevant
associate within the meaning of paragraph 3(7) of Schedule 10 to the VATA (election to waive
exemption), has elected to waive exemption under paragraph 2 of that Schedule 10 in relation
to any land except as disclosed in the Disclosure Letter.
	 
	15.13	 	All documents to which any member of the Sale Group is a party made prior to the date hereof
and which form part of the relevant member of the Sale Group’s title to any asset or in the
enforcement of which the relevant member of the Sale Group is or may be interested and which
are subject to stamp or similar duty, have been duly stamped and adjudicated (as the case may
be).
	 
	15.14	 	No Sale Group member holds an asset that was transferred to it by an instrument which was
executed in the three years ending on the date of this Agreement and to which section 111 or
113 of the Finance Act 2002 could apply. No Sale Group member holds or has held a chargeable
interest that was acquired by it under a relevant transaction in the three years ending on the
date of this Agreement and no Sale Group member holds or has held a

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	 	 	chargeable interest that is or was derived from a chargeable interest so acquired. For the
purposes of this warranty:
	 
	 	 	“chargeable interest” has the same meaning as in Part 4 of the Finance Act 2003;
	 
	 	 	“reconstruction relief” has the same meaning as in Part 2 of Schedule 7 to the Finance Act
2003; and
	 
	 	 	“relevant transaction” means a transaction: (a) that is exempt from stamp duty land tax by
virtue of paragraph 1 of Schedule 7 to the Finance Act 2003 (group relief) or by virtue of
reconstruction relief, or (b) that is subject to a reduced rate of stamp duty land tax by
virtue of acquisition relief.
	 
	15.15	 	SCCL is a taxable person and is duly registered for the purposes of the Climate Change Levy
(pursuant to Schedules 6 and 7 to the Finance Act 2000). SCCL has complied with all statutory
provisions, rules, regulations, orders and directions made in respect of the Climate Change
Levy, has promptly submitted accurate returns and maintains full and accurate records
concerning the Climate Change levy. SCCL has never been, and, so far as the Seller is aware,
is not likely to be, subject to any surcharge, interest, forfeiture or penalty under Schedules
6 or 7 to the Finance Act 2000.
	 
	15.16	 	The total capital expenditure for the Facility as at 31 December 2004 was £345,217,000.
This figure is the sum of capital expenditure of £342,575,000 plus stock of £2,642,000 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 £13,000,000;
	 
	 	15.16.2	 	in respect of long life assets, not less than £266,000,000;
	 
	 	15.16.3	 	in respect of industrial building allowances, not less than £13,000,000.

	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	 	The carried forward trading losses of the Sale Group were £62,000,000 as at 31 December
2004. The Seller and the Purchaser agree that in the event of a breach of this warranty the
Seller shall pay to the Purchaser, by way of liquidated damages, an amount equal to thirty per
cent. (30%) of the difference between the actual amount of the carried forward trading losses
of the Sale Group as at 31 December 2004 and £62,000,000 (such difference being the “Loss
Shortfall”) and the parties agree that this shall represent the quantum of loss to the
Purchaser and the Purchaser shall not be required to establish loss (beyond establishing the
amount of the Loss Shortfall and subject to any exclusions and limits applicable to the
Warranties) and

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	 	 	the Seller shall not be required to pay the Purchaser more than, or entitled to pay the
Purchaser less than, thirty per cent. (30%) of the Loss Shortfall in respect of its breach
of this Warranty.
	 
	16.	 	Environmental
	 
	16.1	 	So far as the Seller is aware, the Sale Group currently complies with all Environmental Laws
in all material respects insofar as they relate to the Business and, so far as the Seller is
aware, has so complied during the Relevant Period.
	 
	16.2	 	Copies of material Environmental Approvals (excluding for the avoidance of doubt any
approvals, consents or the permissions required under the Electricity Act 1989) held by the
members of the Sale Group necessary for the carrying on of the Business as now carried on
(“Environmental Approvals”) and commissioned during the Relevant Period are attached to the
Disclosure Letter. So far as the Seller is aware, all such Current Environmental Approvals
are in full force and effect and are being complied with in all material respects.
	 
	16.3	 	So far as the Seller is aware, all Environmental Approvals (excluding for the avoidance of
doubt any approvals, consents or permissions required under the Electricity Act 1989)
necessary for the Business as now carried on have been obtained. No member of the Sale Group
has received any written notice during the Relevant Period which is still outstanding from any
third party (including any Competent Authority) nor is the Seller aware of any facts or
circumstance:

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

	16.4	 	No member of the Sale Group is engaged in any litigation or arbitration, administrative,
regulatory, or criminal proceedings involving any liability arising under or pursuant to any
Environmental Law, whether as plaintiff, defendant or otherwise.
	 
	16.5	 	There are no material environmental audit reports or any material environmental assessments
relating to the assets and business of the Sale Group prepared in the last twelve (12) months
other than those which have been supplied in the Data Room or are attached to the Disclosure
Letter.
	 
	16.6	 	So far as the Seller is aware, no physical works or physical upgrades to the Facility (other
than as provided for in the Accounts or Completion Balance Sheet) are reasonably anticipated
in the next 15 months in order to comply with Environmental Laws or to maintain or obtain any
Environmental Approval.
	 
	17.	 	Property

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	17.1	 	The factual information provided by the Seller for the purpose of the preparation of the
Certificate of Title was true and complete in all material respects at the date upon which it
was delivered to Addleshaw Goddard and remains so at the date of delivery of the Certificate
of Title to the Purchaser on Completion.
	 
	17.2	 	The Property comprises all the land and buildings currently owned, used or occupied by the
Sale Group
	 
	17.3	 	Other than in respect of the Property, the Sale Group has no actual or contingent liability
to any third party in its capacity as present or formal freeholder, leaseholder or surety of
any freehold or leasehold land.
	 
	18.	 	Insolvency
	 
	18.1	 	No petition has been presented, no order has been made, or resolution passed for the winding
up of the Seller or a Sale Group member or for the appointment of a liquidator or provisional
liquidator to the Seller or a Sale Group member.
	 
	18.2	 	No administrator has been appointed in relation to the Seller or a Sale Group member. No
notice has been given or filed with the court of an intention to appoint an administrator to
the Seller or a Sale Group member. No petition or application has been presented or order
made for the appointment of an administrator in respect of the Seller or a Sale Group member.
No receiver or administrative receiver has been appointed, nor any notice given of the
appointment of any such person, over the whole or part of the Seller’s or a Sale Group
member’s business or assets.
	 
	18.3	 	No moratorium has been sought or has been granted under section 1A of the Insolvency Act 1986
in respect of the Seller or a Sale Group member. No voluntary arrangement has been proposed
under section 1 of the Insolvency Act 1986 in respect of the Seller or a Sale Group member.
	 
	18.4	 	Neither the Seller nor any Sale Group member is unable to pay its debts within the meaning of
section 123 of the Insolvency Act 1986. There are no unsatisfied written demands that have
been served on the Seller or a Sale Group member pursuant to section 123 (1)(a) of the
Insolvency Act 1986. There is no unsatisfied judgment or court order outstanding against the
Seller or a Sale Group member.
	 
	18.5	 	No compromise or arrangement has been proposed, agreed to or sanctioned under section 425 of
the Act in respect of the Seller or a Sale Group member, nor has any application been made to,
or filed with, the court for permission to convene a meeting to vote on a proposal for any
such compromise or arrangement. Neither the Seller nor any Sale Group member has proposed or
agreed to a composition, compromise, assignment or arrangement with any of its creditors which
would prevent the sale and purchase of the Shares pursuant to this Agreement.
	 
	18.6	 	No distress, execution, attachment, sequestration or other process has been levied on an
asset of the Seller or a Sale Group member that remains undischarged.
	 
	18.7	 	So far as the Seller is aware, no action is being taken by the Registrar of Companies to
strike the Seller or a Sale Group member off the register under section 652 of the Act.
	 
	18.8	 	So far as the Seller is aware, no Sale Group member has at any time during the two years
immediately prior to the date of this Agreement:

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

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

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

	18.10	 	Neither the Seller nor any Sale Group member is, in any jurisdiction, subject to any other
procedures or steps which are analogous to those set out above in this paragraph 18. The
execution and delivery of this Agreement and each Share Purchase Document by the Seller, and
the performance of its obligations under this Agreement and each Share Purchase Document will
not result in the Seller or any Sale Group member being or becoming subject to any other
procedures or steps which are analogous to those set out in sub-paragraphs 18.1, 18.2, 18.4
and 18.6 above in any jurisdiction.
	 
	19.	 	Health and Safety
	 
	19.1	 	So far as the Seller is aware, the Sale Group currently complies in all material respects
with all H&S Laws insofar as they relate to the Business and, so far as the Seller is aware,
has so complied during the Relevant Period.
	 
	19.2	 	So far as the Seller is aware there are no facts or circumstances indicating that any
litigation or arbitration, administrative, regulatory or criminal proceedings as are described
in paragraph 19.3 are pending or threatened against the Sale Group.
	 
	19.3	 	No member of the Sale Group is engaged in any litigation or arbitration, administrative,
regulatory or criminal proceedings involving any liability arising under or pursuant to any
H&S Law whether as plaintiff, defendant or otherwise.
	 
	19.4	 	There are no material health and safety audit reports or material health and safety
assessments relating to the assets and business of the Sale Group prepared in the last twelve
months other than those which have been supplied in the Data Room or are attached to the
Disclosure Letter.
	 
	20.	 	Climate Change
	 
	20.1	 	SCCL has obtained a CHPQA Certificate (as defined in The Climate Change Levy (Combined Heat
and Power Stations) Prescribed Conditions and Efficiency Percentages Regulations 2001 SI 2001
No 1140) in relation to the Facility and has complied with all obligations necessary to
maintain such certification.
	 
	20.2	 	SCCL has in full force and effect in relation to the Facility a valid Secretary of State

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	 	 	(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 BP Chemicals 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 Mitsubishi
Corporation and/or Mitsubishi Heavy Industries to SCCL as security in respect of its
completion of the plume abatement works on the cooling towers at the Facility (the “Mitsubishi
Letter of Credit”) 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 Entergy Power Development Corporation has been made available in the Data Room.
	 
	21.4	 	So far as the Seller is aware, no Remedy Event (as that term is defined in the Site Interface
Agreement) has occurred at any time during the Relevant Period and the Seller is not aware of
any fact or circumstance which would result in a Remedy Event.
	 
	21.5	 	As at the date of this Agreement, BP Gas has not made any payment to SCCL in respect of any
liability it has incurred to SCCL under the Gas Support Agreement during the Contract Year (as
defined in the Gas Support Agreement) commencing on 1 October 2004.
	 
	21.6	 	As at the date of this Agreement, BP Chemicals has not made any payment to SCCL in respect of
any liability it has incurred to SCCL under either the PPA or the SPA during the Contract Year
(as defined in the PPA and the SPA respectively) commencing on 1 October 2004.
	 
	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 defer any aspect of such maintenance programme beyond 31 July
2005.
	 
	21.11	 	So far as the Seller is aware, SCCL has not, since receipt of the letter addressed to SCCL
from BP Chemicals dated 8 February 2002, received from BP Chemicals or any other member of the
BP Group (i) any formal correspondence or (ii) any written notice of, or claim in respect of
any, actual or potential breach of contract, law or regulation, in respect of the issue of
dispersion of salt into the Environment from the Facility’s cooling towers.

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	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)	 	the amount of any individual Claim for which the Seller is finally liable
exceeds £125,000 (excluding interest, costs and expenses) (each a “qualifying claim”);
	 
	 	(b)	 	the aggregate amount of all qualifying claims exceeds £2,500,000 in which event
the

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	 	 	 	Seller shall be liable for the aggregate amount of such qualifying claims and not
the excess only;

	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 shall not exceed £35,000,000 (thirty-five million
pounds); and
	 
	 	(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 exceed £100,000,000 (one hundred million pounds).

	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

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	 	 	 	having effect after Completion;

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

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

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

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

	 	(a)	 	the Purchaser had actual knowledge of it on or before the date of this
Agreement;

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

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

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	5.5	 	If, in respect of any matter which would give rise to a breach of the Warranties, the
Purchaser or the relevant member of the Purchaser’s Group is entitled to claim under any
policy of insurance, then the Purchaser shall make such a claim against its insurers and use
all reasonable endeavours to enforce such claim. The amount actually recovered from any such
insurance claim shall then be applied to reduce or extinguish any Claims for breach of the
Warranties in the manner described in clause 14.
	 
	5.6	 	If at any time a Seller Party pays to the Purchaser or any member of the Purchaser’s Group an
amount pursuant to a Claim (other than a Tax Claim, to which clause 6 of the Tax Covenant
shall apply) and the Purchaser or a member of the Purchaser’s Group subsequently recovers from
some other person any sum in respect of any matter giving rise to such Claim (other than a Tax
Claim) the Purchaser shall pay, or shall procure that the relevant member of the Purchaser’s
Group pays, to the Seller an amount equal to the lesser of (i) the amount paid by the Seller
to the Purchaser or member of the Purchaser’s Group in respect of such Claim and (ii) the sum
(including interest (if any)) recovered from such other person, in each case after deduction
of any reasonable costs (including all legal costs), charges and expenses reasonably incurred
in obtaining such recovery.
	 
	5.7	 	Nothing in this paragraph 5 shall oblige the Purchaser to seek to recover any amounts from a
third party in respect of any matter giving rise to a Claim before or as a condition to
bringing a Claim against any Seller Party.
	 
	6.	 	Remedy
	 
	6.1	 	Without limitation to the Purchaser’s rights under clause 3.6 and except in relation to a
Claim in an action for damages brought under the Tax Covenant, the Purchaser shall have no
rights or remedy whatsoever in respect of any fact, matter or circumstance constituting a
breach of Warranty except pursuant to a Claim for such breach under this Agreement (or any
Claim under any other provision of this Agreement or any claim under any provision of the
Share Purchase Documents in each case) in an action for damages, and the Purchaser hereby
irrevocably waives, releases, discharges and acquits the Seller from any other causes of
action under or in connection with Share Purchase Documents and the transactions contemplated
thereby whether based on statute, regulation or common law, under or in connection with Share
Purchase Documents and the transactions contemplated thereby in respect of the fact, matter or
circumstance giving rise to the breach except for breach of contract under or otherwise as
provided in the Share Purchase Documents and other than in the case of fraud or fraudulent
misrepresentation.
	 
	6.2	 	Without limitation to the Purchaser’s rights under clause 3.6, no party to this Agreement
shall be entitled to rescind or repudiate this Agreement and the Seller shall not be liable
(in equity or tort, under the Misrepresentation Act 1967 or in any other way) in respect of
any misrepresentation provided nothing herein shall affect either party’s rights in respect of
fraud or a fraudulent misrepresentation.
	 
	6.3	 	The Seller shall have no liability in respect of a breach of Warranty notified to the Seller
pursuant to paragraph 2 if such breach is remedied within 30 days of the date such notice is
served and no loss is suffered by the Purchaser in respect thereof.
	 
	7.	 	Tax Claims
	 
	 	 	Clauses 3.1 and 6 of the Tax Covenant shall apply to Tax Warranty Claims.
	 
	8.	 	Priority of Payments in respect of Claims

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	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)	 	first, if a Claim is made against the Seller, the Seller shall make the
relevant payment;
	 
	 	(b)	 	second, if a Claim is not made against the Seller or to the extent the Seller
does not make the relevant payment in full within 5 (five) Business Days of the date on
which such payment is due, the amount of the shortfall shall be paid out of the Escrow
Account (for this purpose disregarding any amounts retained in the Escrow Account the
subject of a Withholding Notice (as defined in the Escrow Agreement) delivered to the
Escrow Agent (other than any Withholding Notice (i) that has been withdrawn in
accordance with clause 5.10 of the Escrow Agreement or (ii) in respect of which the
Escrow Agent has made payment out of the Escrow Account on or prior to such date)); and
	 
	 	(c)	 	third, to the extent there are insufficient funds standing to credit in the
Escrow Account, Calpine shall pay an amount equal to the shortfall.

	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)	 	first, the Seller shall make the relevant payment;
	 
	 	(b)	 	second, to the extent the Seller does not make the relevant payment in full
within 5 (five) Business Days of the date on which such payment is due, the amount of
the shortfall shall be paid out of the Escrow Account (for this purpose disregarding
any amounts retained in the Escrow Account the subject of a Withholding Notice (as
defined in the Escrow Agreement) delivered to the Escrow Agent (other than any
Withholding Notice (i) that has been withdrawn in accordance with clause 5.10 of the
Escrow Agreement or (ii) in respect of which the Escrow Agent has made payment out of
the Escrow Account on or prior to such date));
	 
	 	(c)	 	third, to the extent there are insufficient funds standing to credit in the
Escrow Account, Calpine shall pay an amount equal to the shortfall; and
	 
	 	(d)	 	fourth, if the payments made pursuant to paragraphs 8.2(a) to 8.2(c) inclusive
are insufficient to pay the entire amount due, then the Seller Guarantor shall pay the
shortfall.

	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.

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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 Deed of Adherence 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

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	 	 	persons (other than the BP Director) designated by the Purchaser in writing to the Seller
prior to Completion to retire as a director or secretary of a member of the Sale Group and
presented to the board meetings referred to in paragraph 1 of this Part I;

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

PART II

	1.	 	Following the appointment and resignation of directors referred to in paragraph 1 of Part I
of this Schedule 4, the Purchaser will procure the holding of a meeting of the

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	 	 	directors of SCCL at which the following resolutions will be considered and approved:

	1.1	 	a resolution to approve SCCL’s entry into the Facility Agreement (and the granting of
security by SCCL in respect of amounts due thereunder as required under the terms of the
Facility Agreement), a loan facility agreement between SCCL and the Purchaser (the “Upstream
Loan Agreement”) and the deed of release referred to in paragraph 3.1 of this Part II of
Schedule 4;
	 
	1.2	 	a resolution to approve drawing £275,000,000 (two hundred and seventy-five million pounds)
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

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	3.2	 	comply with the provisions of clauses 6.3.2 and 6.3.3 in their entirety.
	 
	4.	 	Simultaneously with the performance by the Seller of its obligations under paragraph 2 of
Part I of this Schedule 4, the Purchaser shall deliver to the Seller or the Seller’s
Solicitors:
	 
	4.1	 	if not already provided, a copy (certified by the secretary of relevant company to be a true
copy of a resolution in force at Completion) of the resolution of the board of the directors
of the Purchaser and a committee of the board of directors of IPR authorising the execution
and delivery of, and the performance by the Purchaser and IPR of their respective obligations
under, this Agreement and each of the other documents to be executed by the Purchaser and/or
IPR pursuant to this Agreement or directly or indirectly in connection with the transactions
contemplated hereunder (unless previously delivered);
	 
	4.2	 	a counterpart of the Deed of Adherence duly executed as a deed by the Purchaser and by the
Purchaser Guarantors in such a form as may be acceptable to BP International;
	 
	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 BP International.
	 
	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.

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SCHEDULE 5

CONDUCT OF BUSINESS BEFORE COMPLETION

Part I

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

Operation of business; maintenance of assets and undertaking

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

Material contracts

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

Acquisition or disposal of assets, etc

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

Share and/or loan capital; interests in bodies corporate

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

Borrowings and indebtedness; guarantees and other security

	6.	 	not amend, or agree to amend, the terms of its borrowing or indebtedness in the nature of
borrowing or create, incur, or agree to create or incur, borrowing or indebtedness in the
nature of borrowing (except pursuant to (i) overdraft facilities of an amount equal to
£125,000, or similar borrowings created or incurred in the ordinary course of its business
consistent with past practice or (ii) facilities disclosed in the Disclosure Letter where the
borrowing or indebtedness in the nature of borrowing does not exceed the amount available to
be drawn by the relevant Sale Group member under those facilities);
	 
	7.	 	not give, or agree to give, a guarantee, indemnity or other agreement to secure, or incur
financial or other obligations with respect to, another person’s obligation outside the
ordinary course of business consistent with past practice or in any event in excess of
£125,000;

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	8.	 	not make, or agree to make, capital expenditure exceeding in total £500,000 (or its
equivalent at the time) or incur, or agree to incur, a commitment or commitments involving
capital expenditure exceeding in total £500,000 (or its equivalent at the time);

Insurance

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

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

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

Dividends

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

Share capital

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

Tax claims

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

Accounting policies

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

Property

	14.	 	in relation to the Property:

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

Employment; benefits

	15.	 	not amend the terms and conditions of employment or engagement (including any increase in
emoluments) of a director, other officer or employee (except in the usual course of its
business) or provide, or agree to provide, a gratuitous payment or benefit

80

 

	 	 	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
£125,000;
	 
	18.	 	with respect to any litigation or arbitration proceedings or any action, demand or dispute in
existence on the date of this Agreement, consult and provide the Purchaser reasonable
opportunity to make representations or comments in respect thereof;
	 
	19.	 	with respect to any litigation or arbitration proceedings or any action, demand or dispute,
not waive any right;
	 
	20.	 	not release, discharge or compound any liability or claim other than any such liability or
claim in existence as at the date of this Agreement;
	 
	21.	 	conduct its business in all material respects in accordance with all applicable legal and
administrative requirements in any jurisdiction;

Transactions with the Calpine Group

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

Intellectual property

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

Cooperation with the Purchaser

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

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

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	 	 	 	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.	 	undertake that that except for surrendering Allowances pursuant to a condition requiring
surrender in the Greenhouse Gas Emissions Permit, it will not sell, transfer, charge or
dispose of or contract to sell, transfer, charge or dispose of Allowances granted or to be
granted in respect of the Facility for 2006 or any year thereafter;

Hedging Arrangements

	25A. 	 	in connection with the sales of SCCL’s open merchant generating capacity, conduct such sales
in accordance with substantially the same practices exercised, and use commercially reasonable
business judgement substantially the same as that applied in the 12 month period prior to the
signing date of this Agreement;
	 
	25B.	 	it is confirmed that in compliance with paragraph 25, SCCL will, during the period up to
Completion, move to a contracted position at the levels set out below and that, provided
prevailing market prices do not move further than £1/MWh in either direction, the level of
capacity contracted by the time of Completion will not substantially vary from these levels.
In the event of greater variation in prevailing market price, the Seller will continue to
conduct its trading operations in accordance with paragraph 25A above.
	 
	 	 	The expected contracted levels below are in any event subject to:

	 	(i)	 	there being adequate liquidity in the market;
	 
	 	(ii)	 	SCCL’s analysis of the credit implications of any particular trades or market
positions; and
	 
	 	(iii)	 	SCCL’s judgement as to the impact of any planned or expected outages occurring
at the Facility or other prudent operational reasons.

	 	 	 	 	 	 	 	 	 	 	 
	Prevailing Market Base Load Price	 	Expected Contract Levels
	 	 	 	 	 	 	excluding under BP PPA
	Period	 	£/MWh	 	(MW)
	July-05
	 	 	33	 	 	600	 	 	 	 
	Aug-05
	 	 	33	 	 	800	 	 	 	 
	Sep-05
	 	 	33	 	 	800	 	 	 	 
	Winter 05
	 	 	50.0	 	 	800	 	 	 	 
	Summer 06
	 	 	33.5	 	 	600	 	 	 	 

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

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	 	 	under the SCCL Intergroup Debt except:

	 	(a)	 	for payments of interest, fees and other amounts as the same fall due for
payment under the terms of the LuxCo Loan Agreement;
	 
	 	(b)	 	for refinancings or replacements of all or any portion of SCCL Intergroup
Debt where the amount outstanding immediately after giving effect to such refinancing
or replacement is substantially equivalent (having regard to costs, expenses and fees,
as well as to changes in interest rates, in respect of such refinancing or replacement
on an arms’ length basis) to the amount outstanding immediately prior to such
refinancing or replacement or as otherwise contemplated pursuant to the terms of this
Agreement;
	 
	 	(c)	 	for the purposes permitted, required or contemplated by the terms of the
LuxCo Loan Agreement (including clause 18.5 thereof) or of any other loan or financing
agreement to which SCCL or any of its Affiliates is a party (including payments by
SCCL to enable Calpine European Funding (Jersey) Holdings Limited (“Calpine Jersey”)
to meet its obligations under the Intercompany Loan Agreement dated 31 January 2005
among Calpine Jersey and Calpine European Funding (Jersey) Limited),

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

Operational spare parts

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

Part II

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

	1.	 	alter the provisions of any Sale Group member’s Memorandum or Articles of Association (or
like constitutional document) or adopt or pass further regulations or resolutions inconsistent
therewith; or
	 
	2.	 	pass any resolutions in general meeting or by way of written resolution, including, without
limitation, any resolution for winding-up, or to capitalise any profits or any sum standing to
the credit of share premium account or capital redemption reserve fund or any other reserve of
any Sale Group member.

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SCHEDULE 6

DATA ROOM LIST

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SCHEDULE 7

BP AGREEMENTS

	1.	 	A gas supply agreement made between SCCL and BP Gas Marketing dated 18 July 1997, as
amended
	 
	2.	 	An amended and restated gas support agreement made between SCCL and BP Gas Marketing dated 18
July 1997
	 
	3.	 	A power purchase agreement made between SCCL, BP Chemicals and BP Power Trading Limited dated
18 July 1997, as amended
	 
	4.	 	A steam purchase agreement made between SCCL and BP Chemicals dated 18 July 1997, as amended
	 
	5.	 	A participation agreement between SCCL, BP International and others dated 18 July 1997, as
amended
	 
	6.	 	A site interface agreement made between SCCL and BP Chemicals dated 18 July 1997, as amended
	 
	7.	 	CCGT site sublease made between SCCL and BP Chemicals dated 26 September 2003
	 
	8.	 	An energy management services agreement made between SCCL and BP Gas Marketing dated 26
September 2003, as amended;
	 
	9.	 	Grid trade master agreement made between SCCL and BP Gas Marketing dated 26 September 2003
	 
	10.	 	Master netting agreement made between SCCL and BP Gas Marketing dated 26 September 2003
	 
	11.	 	Licence to underlet made between Associated British Ports, BP Chemicals and SCCL dated 26
September 2003
	 
	12.	 	Lease support agreement between SCCL and BP Chemicals dated 14 December 1997
	 
	13.	 	An environmental deed of indemnity between SCCL and BP Chemicals dated 18 July 1997, as
amended
	 
	14.	 	A gas allocation agreement between SCCL and BP Gas Marketing dated 18 July 1997
	 
	15.	 	A pipeline option side letter between SCCL and BP Gas Marketing dated 18 July 1997
	 
	16.	 	A capacity management agreement between BP Gas Marketing and SCCL dated 18 July 1997
	 
	17.	 	A supplemental agreement between BP Chemicals and SCCL dated 21 October 2004

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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

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	 	 	 	 	 	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;
	 
	 	 	 	 	 	 
	 	 	“Environmental Losses”	 	means any Losses incurred by any member of the
Purchaser’s Group to the extent that they
arise from or relate to:
	 
	 	 	 	 	 	 
	 

	 	 	 	(a)
	 	any Purchaser Environmental Proceedings; or
	 
	 	 	 	 	 	 
	 

	 	 	 	(b)
	 	any Credible Environmental Risk,
	 
	 	 	 	 	 	 
	 	 	 	 	which in each case arises from or relates to
an Environmental Condition save to the extent
that such Environmental Condition results from
or is attributable to any Hazardous Substance
which was in the ownership or control of any
member of the BP Group or any person
authorised on behalf of any member of the BP
Group or which emanated from any property
owned

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	 	 	 	 	or occupied by any member of the BP
Group in the vicinity of the Property
(including without limitation the Complex Site
and the NGC Site in each case as defined in
the Environmental Deed);
	 
	 	 	 	 	 	 
	 	 	“Gas Line”	 	means the gas pipeline servicing the Property;
	 
	 	 	 	 	 	 
	 	 	“Hazardous Substance”	 	means any substance capable (whether alone or
in combination with any other) of causing
pollution or contamination of the Environment;
	 
	 	 	 	 	 	 
	 	 	“Landlord’s Action”	 	means any proceedings, claim, action, notice
or demand brought by the Landlord against the
Tenant under clause 3.2 or clauses 4.1 or 4.2
of the Environmental Deed;
	 
	 	 	 	 	 	 
	 	 	“Landlord’s Action Losses”	 	means any Losses incurred by any member of the
Purchaser’s Group to the extent that they
arise from or relate to any Landlord’s Action
to the extent that it arises from an event
which occurred or circumstances which first
arose during the Relevant Period;
	 
	 	 	 	 	 	 
	 	 	“Losses”	 	means all losses, liabilities, damages,
reasonable costs or expenses (including
reasonable legal and other professional costs
or expenses and the costs of Remedial Works)
or charges but excluding any indirect or
consequential losses, and any lost income or
profits or business interruption costs save
where they are awarded to a third party in
Successful Environmental Proceedings;

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

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

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

88

 

	 	 	 	 	 	 	 
	 

	 	 	 	(c)
	 	the carrying out of any investigative work
as is reasonably required in relation to (a)
and (b);
	 
	 	 	 	 	 	 
	 	 	“Successful Environmental
Proceedings”	 	means any Purchaser Environmental Proceedings
or Landlord’s Action to the extent that a
final, unappealable and legally enforceable
finding of liability is obtained by any third
party against a relevant member of the
Purchaser’s Group or the liability which is
the subject of the Purchaser Environmental
Proceedings or Landlord’s Action is admitted
or otherwise settled or agreed in accordance
with paragraph 4.1 of this Schedule.

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

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

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

	 	(a)	 	arises from or is increased by the worsening or aggravation by any person
(other than the Seller or by any person authorised on its behalf) after Completion of
any Environmental Condition or of any other circumstances, states of affairs or
condition comprising the subject matter of any Environmental Claim or any part thereof;
	 
	 	(b)	 	arises from or is increased by any change after Completion of the use of the
Property of the Facility (including without limitation any closure or mothballing of
the Facility or the Property) (or in each case any part thereof);
	 
	 	(c)	 	is increased by any redevelopment of the Property or Facility (or in each case
any part thereof) or the carrying out of any building, engineering or mining works or
operations at the Facility or the Property (or in each case any part thereof) or the
demolition of or a substantial alteration to a building or of a structure at the
Property after Completion but for the avoidance of doubt except for such Losses which
would have arisen if the relevant Environmental Condition had been discovered in the
absence of such redevelopment, building, engineering, demolition etc.;
	 
	 	(d)	 	arises from or is increased by any breach of any applicable provision of this
Schedule by any member of the Purchaser’s Group;

89

 

	 	(e)	 	arises from or is increased by the carrying out of any intrusive investigations
after Completion other than intrusive investigations carried out to comply with any
Environmental Law or any Environmental Approval or are such intrusive investigations
that would be carried out by a reasonable and prudent operator;
	 
	 	(f)	 	arises from or is increased by any change in any Environmental Law after
Completion in circumstances where such Losses or increase in Losses would not have
arisen under Environmental Laws in force at the date hereof. For the avoidance of
doubt the application of the Pollution Prevention and Control Regulations 2000 in the
form they are in at the date hereof (but not otherwise) shall not constitute a change
in law for the purpose of this paragraph;
	 
	 	(g)	 	arises from or is increased by any variation or modification to any
Environmental Approval (save where such variation or modification directly concerns the
remediation of any relevant Environmental Condition and could have been imposed
pursuant to Environmental Laws in force at the date hereof) or the application for or
the issue of any new Environmental Approval after Completion (except for the
application for and first issue of a permit under the Pollution Prevention and Control
Regulations 2000); and/or
	 
	 	(h)	 	arises from or is increased by any amendment or alteration to the Environmental
Deed where such Losses or increase in Losses would not have arisen under the
Environmental Deed in its form at the date hereof.

	3.2	 	In addition to the Seller’s protections contained in Schedule 3 and subject to paragraph 4.6
of this Schedule, the Seller shall not be liable under paragraph 2 of this Schedule in respect
of any Environmental Claim for Remedial Works which exceed (in nature, scope, specification or
extent) what is reasonably required by applicable Environmental Laws (and for the avoidance of
doubt and without limitation, subject to the limitation on the Seller’s liability in paragraph
3.1(f) of this Schedule).
	 
	4.	 	Environmental Proceedings and Remedial Works
	 
	4.1	 	The Purchaser shall ensure that in relation to any matter, written claim or demand or
Purchaser Environmental Proceedings or Landlord’s Action which gives rise or may reasonably
give rise to an Environmental Claim by it that neither it, nor any other member of the
Purchaser’s Group, nor any person on their behalf shall make any settlement, compromise or
admission of liability without the prior written consent of the Seller such consent not to be
unreasonably withheld or delayed.
	 
	4.2	 	The Seller shall have conduct of any Purchaser Environmental Proceedings and Landlord’s
Action (Proceedings).
	 
	4.3	 	The Purchaser shall have conduct of any Remedial Works whether relating to Proceedings or a
Credible Environmental Risk.
	 
	4.4	 	The Seller in its conduct of Proceedings and the Purchaser in its conduct of Remedial Works
as the case may be shall ensure that (subject to implementing appropriate arrangements to
maintain commercial confidentiality and privilege):

	 	(a)	 	reasonably frequent and detailed reports shall be provided to the other
regarding the progress of the matter;
	 
	 	(b)	 	copies of all correspondence and documents passing between the parties to any
Proceedings shall be provided to the other;

90

 

	 	(c)	 	they consult with the other in relation to the matter and take into account the
other’s reasonable concerns provided that the other shall respond promptly to such
consultation;
	 
	 	(d)	 	allow the other person to attend any relevant court, regulatory or other
hearing, site visit or meeting; and
	 
	 	(e)	 	allow the other to participate in discussions with any relevant counsel,
consultants or contractors concerning the scope, nature, specification and extent of
any Remedial Works as the case may be to be carried out and to attend any meeting with
such counsel, consultants or contractors.

	4.5	 	In conducting any Remedial Works pursuant to this Schedule the Purchaser shall:

	 	(a)	 	obtain the Seller’s prior written consent to the scope, nature, specification
and extent of the Remedial Works to be carried out (such consent not to be unreasonably
withheld or delayed);
	 
	 	(b)	 	give the Seller reasonable access to the Property and the Facility so that the
Seller can monitor the progress of such Remedial Works;
	 
	 	(c)	 	not prejudice the conduct of any Environmental Proceedings and comply with the
requirements of any relevant judgment, decision or award of any court, arbitrator or
other tribunal or settlement agreement; and
	 
	 	(d)	 	use cost-effective methods for such Remedial Works.

	4.6	 	For the avoidance of doubt, in conducting any Remedial Works the Purchaser shall be entitled
to implement or undertake any Remedial Works which exceed (in nature, scope, specification or
extent) what is reasonably required by applicable Environmental Laws provided that it shall be
responsible for paying for any increased costs and expenses arising from or relating to so
doing.
	 
	5.	 	Mitigation
	 
	5.1	 	The Purchaser shall and shall procure that each member of the Purchaser Group shall mitigate
its Losses as if a claim under paragraph 2 of this Schedule was a claim for breach of contract
rather than indemnification.
	 
	5.2	 	If the Purchaser (whether on behalf of itself or another member of the Purchaser’s Group) is
seeking to mitigate its Losses it shall consult with and obtain the Seller’s written consent
(such consent not to be unreasonably withheld or delayed) to the nature, scope and extent of
such mitigation. Where it is not clear that the mitigation relates to a valid claim, the
Seller is entitled to consent in principle to such mitigation pending resolution of the
validity of the claim.
	 
	6.	 	Matters Disclosed or Known/Relationship with Warranties
	 
	6.1	 	The covenants under this Schedule shall apply whether or not any Environmental Claim under it
relates to any matter disclosed in the Disclosure Letter or the Data Room or was otherwise
disclosed or known to the Purchaser or other member of the Purchaser’s Group.
	 
	6.2	 	The Purchaser acknowledges and confirms that no Claim can be brought under the Warranties to
the extent that its subject matter falls within the scope of any indemnities contained in this

91

 

	 	 	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.

92

 

APPENDIX I

93

 

	 	 	 	 	 	 	 	 	 
	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

	 	 

94

 

	 	 	 	 	 	 	 	 	 
	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

	 	 

95

 

	 	 	 	 	 	 	 	 	 
	Executed and delivered as a Deed by

	 	 	)	 	 	 	 	 
	 

	 	 	)	 	 	 	 	 
	as attorney for

	 	 	)	 	 	 	 	 
	MITSUI & CO., LTD

	 	 	)	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 

     Attorney
	 	 

	 	 	 
	In the presence of:
	 	 
	 
	 	 
	 

Name

	 	 
	 
	 	 
	 

Address

	 	 
	 
	 	 
	 

Occupation

	 	 

96exv4w3

 

Exhibit 4.3

BP p.l.c.

RULES OF THE BP p.l.c. MEDIUM TERM PERFORMANCE PLAN 2005

	 	 	 	 	 
	 
	 	Adoption:
	 	28 July 2005
	 	 	 	 	 
	 
	 	Expiry Date:
	 	28 July 2015

 

 

Table of Contents

	 	 	 	 	 
	Contents	 	Page	 
	1 Definitions
	 	 	1	 
	2 Granting Performance Units
	 	 	2	 
	3 Performance Units
	 	 	3	 
	4 Making of Awards
	 	 	4	 
	5 Leaving the Group before the end of the Performance Period
	 	 	6	 
	6 Variations in share capital, demergers and special distributions
	 	 	7	 
	7 Exchange of Performance Units
	 	 	8	 
	8 Restrictions on issue of Shares
	 	 	9	 
	9 Terms of employment
	 	 	9	 
	10 General
	 	 	10	 
	11 Changing the Plan and termination
	 	 	12	 
	12 Governing law and jurisdiction
	 	 	12	 
	Schedule 1 US
	 	 	13	 
	Schedule 2 Cash Award
	 	 	15	 
	Schedule 3 Executive Vice Presidents
	 	 	16	 

i

 

Rules of the BP p.l.c. Medium Term Performance Plan 2005

Introduction

This plan sets out the terms on which awards of shares will be made to certain employees of
the Company and its Subsidiaries. Employees selected for participation in the Plan will be granted
a conditional entitlement to an award of shares (“Performance Units”). The extent to which shares
are awarded in respect of Performance Units is subject to continued employment and the satisfaction
of performance conditions over the performance period.

	1	 	Definitions
	 
	 	 	In these rules:
	 
	 	 	“Acquiring Company” means a person who obtains Control of the Company;
	 
	 	 	“ADS” means an American depository share representing ordinary shares of the Company;
	 
	 	 	“Award” means an award of Shares under rule 4;
	 
	 	 	“Award Date” means the date on which an Award is made under any of rules 4, 5 or 6;
	 
	 	 	“Business Day” means a day on which the London Stock Exchange (or, if relevant and if the
Designated Corporate Officer determines, any stock exchange nominated by the Designated
Corporate Officer on which the Shares are traded) is open for the transaction of business;
	 
	 	 	“Cause” means termination in circumstances in which the employer can terminate employment
without notice;
	 
	 	 	“Company” means BP p.l.c.;
	 
	 	 	“Control” has the meaning given to it by Section 840 of the Income and Corporation Taxes Act
1988;
	 
	 	 	“Dealing Restrictions” means restrictions imposed by statute, order, regulation or
Government directive, or by the Model Code or any code adopted by the Company based on the
Model Code;
	 
	 	 	“Designated Corporate Officer” means the Group Chief Executive or other appropriate
Corporate Officer authorised under the BP Management Framework and associated delegations.
The Designated Corporate Officer may be advised by an appropriate Meeting;
	 
	 	 	“Grant Date” means the date which the Plan Administrator sets for the grant of a Performance
Unit;
	 
	 	 	“London Stock Exchange” means London Stock Exchange plc;
	 
	 	 	“Member of the Group” means:

	 	(i)	 	the Company; and
	 
	 	(ii)	 	its Subsidiaries from time to time; and
	 
	 	(iii)	 	any other company which is associated with the Company and is so designated by
the Designated Corporate Officer;

1

 

	 	 	“Model Code” means the UK Listing Authority Model Code for transactions in securities by
directors, certain employees and persons connected with them;
	 
	 	 	“Participant” means a person holding a Performance Unit or his personal representatives;
	 
	 	 	“Performance Conditions” means the conditions imposed under rule 2.4;
	 
	 	 	“Performance Period” means the period over which the Performance Conditions are to be
satisfied which will not normally be less than 3 financial years of the Company;
	 
	 	 	“Performance Unit” means a conditional entitlement to an Award granted to a Participant;
	 
	 	 	“Plan” means these rules known as “The BP p.l.c. Medium Term Performance Plan 2005” as
changed from time to time;
	 
	 	 	“Plan Administrator” means the person or persons appointed by the Designated Corporate
Officer as the plan administrator for the purposes of this Plan;
	 
	 	 	“Regulatory Information Service” means a service that is approved by the Financial Services
Authority as meeting the Primary Information Provider Criteria and is on the list of the
Regulatory Information Services maintained by the Financial Services Authority;
	 
	 	 	“Shareholding Guidelines” means the guidelines established by the Company from time to time
and which provide for certain employees to hold Shares;
	 
	 	 	“Shares” means fully paid ordinary shares in the capital of the Company or where the context
requires ADSs (see rule 4.5);
	 
	 	 	“Subsidiary” means a company which is a subsidiary of the Company within the meaning of
Section 736 of the Companies Act 1985;
	 
	2	 	Granting Performance Units
	 
	2.1	 	Grant
	 
	 	 	Performance Units will be granted by the Company.
	 
	 	 	Performance Units granted under the Plan, and the terms of those Performance Units, must be
approved in advance by the Designated Corporate Officer.
	 
	2.2	 	Eligibility
	 
	 	 	The Company may grant Performance Units to any employee of the Company or any
Subsidiary. However, Performance Units may not be granted to an employee who on the Grant
Date is either (i) a director of the Company or (ii) an employee whose employment has been
or is to be terminated, whether or not notice of termination of employment has been given or
received and whether or not such termination is lawful, unless in the case of (ii) only the
Designated Corporate Officer considers that special circumstances exist.
	 
	 	 	In determining whether or not an employee will be granted Performance Units and the number
of any Performance Units the Company may have regard to the extent to which the employee has
satisfied the Shareholding Guidelines.
	 
	2.3	 	Time of Operation
	 
	 	 	Performance Units may only be granted within 42 days starting on any of the following:

	 	2.3.1	 	the date of adoption of the Plan;

2

 

	 	2.3.2	 	the day after the announcement of the Company’s results through a
Regulatory Information Service for any period;
	 
	 	2.3.3	 	any day on which the Designated Corporate Officer resolves that exceptional
circumstances exist which justify the grant of Performance Units;
	 
	 	2.3.4	 	any day on which changes to the legislation or regulations affecting share
plans are announced, effected or made; or
	 
	 	2.3.5	 	the lifting of Dealing Restrictions which prevented the granting of
Performance Units during any period specified above.

	2.4	 	Conditions

	 	2.4.1	 	Awards in respect of Performance Units shall be subject to the satisfaction
of Performance Conditions specified at the Grant Date. Performance Conditions may be
different for different Participants.
	 
	 	2.4.2	 	The Company, subject to the approval of the Designated Corporate Officer,
may waive or change the Performance Conditions in accordance with their terms or in any
way the Designated Corporate Officer sees fit.
	 
	 	2.4.3	 	Notwithstanding anything else in the Plan, an Award will only be made in
respect of Performance Units to the extent that any Performance Conditions are
satisfied or waived.

	2.5	 	Certificates
	 
	 	 	Each Participant will receive a certificate setting out the terms of the Performance
Units as soon as practicable after the Grant Date. A certificate will include a statement
that English law governs the certificate and its construction. If any certificate is lost or
damaged the Company may replace it on such terms as it decides.
	 
	2.6	 	No payment
	 
	 	 	A Participant is not required to pay for the grant of Performance Units.

	2.7	 	Disclaimer of Performance Units

	 	 	Any Participant may disclaim all or part of his Performance Units within 30 days after
the Grant Date by notice in writing to any person nominated by the Company. If this happens,
the Performance Units will be deemed never to have been granted under the Plan. A
Participant is not required to pay for the disclaimer.
	 
	3	 	Performance Units
	 
	3.1	 	Terms of Grant
	 
	 	 	Performance Units are subject to the rules of the Plan. The terms of the grant of
Performance Units, as determined by the Company and approved by the Designated Corporate
Officer, must be notified to the Participant and must include:

	 	3.1.1	 	the maximum number of Shares which may be comprised in an Award in respect
of Performance Units; and
	 
	 	3.1.2	 	the Performance Conditions specified under rule 2.4.

3

 

	3.2	Rights
	 
	 	A Participant will have no rights of a shareholder (e.g. voting or dividends) in
respect of Performance Units.

	4	 	Making of Awards
	 
	4.1	 	Determination of Performance Conditions and making of Awards
	 
	 	 	As soon as practicable following the end of the Performance Period (or at any other
time where the rules state that the Performance Conditions should be applied) the Designated
Corporate Officer will determine whether and to what extent the Performance Conditions have
been satisfied and how many Shares should be awarded in respect of Performance Units and
whether or not any Shares comprised in an Award in respect of any Participant shall be
restricted under rule 4.7.
	 
	 	 	The maximum number of Shares in respect of which an Award may be made for each Performance
Unit is one Share, and may be a fraction of a Share. However, Awards shall be made in
respect of whole Shares.
	 
	 	 	Once the determination is made under this rule 4.1 the Company will make an Award of Shares.
The determination is the Award Date.
	 
	4.2	 	Consequences
	 
	 	 	To the extent that an Award has been made under any of rules 4, 5 or 6, the Company
will procure the transfer of Shares to the Participant (or as he may direct) as soon as
practicable after the Award Date. Subject to rule 4.7, the Participant will be entitled to
all rights to Shares where the record dates fall after the date of transfer.
	 
	4.3	 	Lapse
	 
	 	 	If a Performance Unit lapses under the Plan an Award cannot be made and a Participant
has no rights in respect of the Performance Unit.
	 
	4.4	 	Cash alternative
	 
	 	 	The Company in its absolute discretion may decide to satisfy Awards by paying an
equivalent amount in cash (subject to the withholding provisions in rule 4.6 (Withholding)).
The cash amount must be equal to the Market Value of the Shares on the Award Date in respect
of which the Award was to be made.
	 
	 	 	For the purposes of this rule, “Market Value” means in relation to a Share on any day:

	 	4.4.1	 	the middle market quotation (as derived from the Daily Official List of the
London Stock Exchange) on the immediately preceding Business Day; or
	 
	 	4.4.2	 	if the Designated Corporate Officer so decides, the average of the middle
market quotations on the three immediately preceding Business Days; and
	 
	 	4.4.3	 	in relation to an ADS on any day the average of the highest and lowest
trading prices or an ADS as derived from the New York Stock Exchange Inc. on the
immediately preceding Business Day or, if the Designated Corporate Officer so decides,
the average of such prices for the three immediately preceding Business Days.

4

 

	4.5	 	ADSs
	 
	 	 	The Plan Administrator may determine that an Award will be made in respect of ADSs and
references in these rules to Shares and Awards etc. shall be construed accordingly.
	 
	4.6	 	Withholding
	 
	 	 	The Company, any employing company or trustee of any employee benefit trust may
withhold such amount and make such arrangements as it considers necessary to meet any
liability to taxation or social security contributions in respect of Awards. These
arrangements may include the sale of any Shares on behalf of the Participant.
	 
	4.7	 	Restrictions on disposal of Shares

	 	4.7.1	 	This rule 4.7 applies where the Plan Administrator determines that having
regard to the Shareholding Guidelines some or all Shares comprised in an Award of a
Participant are to be restricted shares (“Restricted Shares”).
	 
	 	4.7.2	 	Where this rule 4.7 applies the Participant may not sell, transfer, assign,
pledge, encumber or otherwise dispose of the Restricted Shares or any right in respect
of them until a date determined by the Plan Administrator and subject to such
conditions as the Plan Administrator may impose.
	 
	 	4.7.3	 	The restrictions in this rule 4.7 do not apply to a sale of Shares to
comply with rule 4.6 (Withholding) or disposals confirmed to the Participant at the
discretion of the Designated Corporate Officer.
	 
	 	4.7.4	 	In order to give effect to the restrictions in this rule 4.7, the Company
may make such arrangements as it considers appropriate including transferring the
Shares to a nominee to be held on behalf of the Participant or requiring the Company’s
registrar or ADR nominee to notify the Company of any disposal of Restricted Shares.

	4.8	 	Elections
	 
	 	 	The Participant must enter into any elections required by the Plan Administrator,
including elections under Part 7 of the Income Tax (Earnings and Pensions) Act 2003 and
elections to transfer any liability, or agreements to pay, national insurance contributions.
If he does not do so within a period specified by the Plan Administrator the Award will
lapse at the end of that period.
	 
	4.9	 	Dividend equivalents
	 
	 	 	The number of Shares awarded under rule 4.1 shall be increased as determined by the
Plan Administrator to take account of the net dividends paid during the Performance Period
on a number of Shares equal to the number determined under rule 4.1 (“Basic Award”) on the
basis that such dividends were reinvested in Shares at the time of payment and added to the
number of Shares in the Basic Award.

5

 

	5	 	Leaving the Group before the end of the Performance Period
	 
	5.1	 	General rule on leaving employment
	 
	 	 	Unless rules 5.2 or 5.4 applies, if a Participant ceases to be an employee or director
of a Member of the Group before the end of the Performance Period, then all his Performance
Units lapse on the date of cessation.
	 
	5.2	 	Leaving in exceptional circumstances

	 	5.2.1	 	If a Participant ceases to be an employee or director of any Member of the
Group for any of the reasons set out below more than 12 months after the start of the
Performance Period, then his Performance Units do not lapse and an Award may be made to
him at the end of the Performance Period in accordance with rule 4.1. The reasons are:

	 	(i)	 	ill-health, injury or disability;
	 
	 	(ii)	 	retirement at normal retirement age, or otherwise with the
agreement of the Company;
	 
	 	(iii)	 	the Participant’s employing company ceasing to be under the
Control of the Company;
	 
	 	(iv)	 	a transfer of the undertaking, or the part of the undertaking,
in which the Participant works to a person which is neither under the Control
of the Company nor a Member of the Group;
	 
	 	(v)	 	redundancy, but only in circumstances which give rise to a
redundancy payment;
	 
	 	(vi)	 	termination or severance by the Participant’s employer (other
than for Cause or where the termination involves the conduct of the
Participant), subject in both cases to the agreement of the Plan Administrator;
or
	 
	 	(vii)	 	any other reason, if the Designated Corporate Officer so
decides in any particular case.

	 	5.2.2	 	The Designated Corporate Officer and the Plan Administrator must exercise
any discretion provided for in rule 5.2.1 within 30 days after cessation of the
relevant Participant’s employment or office and the Performance Units lapse on the
earlier of the date on which the discretion is exercised and the end of the 30 day
period but for the avoidance of doubt an Award will not be made or Performance Units
lapse before the date of cessation.

	5.3	 	Leaving after the end of the Performance Period but before the making of an Award
	 
	 	 	If a Participant ceases to be an employee or director of any member Group for any
reason in circumstances where the Performance Period has ended but Awards have not been made
(because, for example, any Dealing Restrictions), his Performance Units will not lapse and
Awards may be made in accordance with rule 4.1. Rule 4.2 will equally apply to determine the
consequences of the making of an Award.

6

 

	5.4	 	Death
	 
	 	 	If a Participant dies, his Performance Units do not lapse and an Award may be made to
him as soon as possible after the date of death. The number of Shares awarded will be on the
basis of one half Share for each Performance Unit unless the Designated Corporate Officer
decides otherwise having regard to the performance of the Company as against the Performance
Conditions. For the avoidance of doubt, the Plan Administrator may decide to satisfy such
Awards in cash calculated in accordance with rule 4.9.
	 
	5.5	 	Meaning of “ceasing to be an employee or director”
	 
	 	 	For the purposes of this rule 5, a Participant will not be treated as ceasing to be an
employee or director of a Member of the Group until he ceases to be an employee or director
of all Members of the Group or if he recommences employment with a Member of the Group
within 7 days.
	 
	6	 	Variations in share capital, demergers and special distributions
	 
	6.1	 	Application of rule
	 
	 	 	If, before the transfer of Shares pursuant to an Award, there is:

	 	6.1.1	 	a variation in the equity share capital of the Company, including a
capitalisation or rights issue, sub-division, consolidation or reduction of share
capital; or
	 
	 	6.1.2	 	a demerger (in whatever form) or exempt distribution by virtue of Section
213 of the Income and Corporation Taxes Act 1988; or
	 
	 	6.1.3	 	a special dividend or distribution,

	 	 	then the number of Shares comprised in an Award shall be adjusted in such manner as the
Designated Corporate Officer may determine.
	 
	6.2	 	Takeovers
	 
	 	 	Where, before the end of the Performance Period, a person (or a group of persons acting
in concert) obtains Control of the Company as a result of making an offer to acquire Shares,
an Award will be made to a Participant, subject to rule 6.4 (Exchange) and subject to the
extent to which the Performance Conditions have been satisfied, on the date the person
obtains Control.
	 
	6.3	 	Schemes of arrangement
	 
	 	 	When, before the end of the Performance Period, a court sanctions a compromise or
arrangement in connection with the acquisition of Shares, an Award will be made to a
Participant, subject to rule 6.4 and subject to the extent to which the Performance
Conditions have been satisfied at the time of court sanction. This rule applies to a court
sanction under Section 425 of the Companies Act 1985 or equivalent procedure under local
legislation.
	 
	6.4	 	Exchange
	 
	 	 	An Award will not be made under either rule 6.2 or 6.3 but Performance Units will be
exchanged under rule 7 (Exchange of Performance Units) to the extent that:

7

 

	 	6.4.1	 	an offer to exchange the Performance Units is made and accepted by a
Participant; or
	 
	 	6.4.2	 	the Designated Corporate Officer, with the consent of the Acquiring
Company, decides before the person obtains Control (where rule 6.2 applies) or court
sanction (where rule 6.3 applies) that the Performance Units will be automatically
exchanged.

	6.5	 	Demergers or other corporate events

	 	6.5.1	 	If the Designated Corporate Officer becomes aware that the Company is or is
expected to be affected by any demerger, distribution (other than an ordinary dividend)
or other transaction not falling within rules 6.2 (Takeover), or 6.3 (Schemes of
arrangement) which, in the opinion of the Designated Corporate Officer would affect the
current or future value of any Performance Units, the Designated Corporate Officer may
determine that an Award will be made to a Participant such Award may be subject to the
satisfaction of the Performance Conditions at the discretion of the Designated
Corporate Officer.
	 
	 	6.5.2	 	The Company will notify any Participant who is affected by the Designated
Corporate Officer exercising their discretion under this rule.

	6.6	 	Designated Corporate Officer
	 
	 	 	In this rule, “Designated Corporate Officer” means the person who was the Designated
Corporate Officer immediately before the change of Control.
	 
	6.7	 	Overseas transfer
	 
	 	 	If a Participant is transferred to work in another country and, as a result of that
transfer he would:

	 	6.7.1	 	suffer a tax disadvantage in relation to his Performance Units and/or the
making of an Award (this being shown to the satisfaction of the Designated Corporate
Officer); or
	 
	 	6.7.2	 	become subject to restrictions on his ability to receive or to hold or deal
in the Shares or the proceeds of the sale of the Shares acquired on the making of an
Award because of the security laws or exchange control laws of the country to which he
is transferred;

	 	 	then if the Participant continues to hold an office or employment with a Member of the
Group, the Designated Corporate Officer may in exceptional circumstances decide that the
Awards will be made on a date the Designated Corporate Officer chooses before or after the
transfer takes effect. The Award will be made in respect of the number of Performance Units
the Designated Corporate Officer permits.
	 
	7	 	Exchange of Performance Units
	 
	7.1	 	Timing of exchange
	 
	 	 	Where Performance Units are to be exchanged under rules 6.2 and 6.3 (Takeovers and
Schemes of arrangements) the exchange will take place as soon as practicable after the
relevant event.

8

 

	7.2	 	Exchange terms
	 
	 	 	Where a Participant is granted new performance units in exchange for existing
Performance Units, the new performance units:

	 	7.2.1	 	must be equivalent to the existing Performance Units;
	 
	 	7.2.2	 	are treated as having been acquired at the same time as the existing
Performance Units and Awards will be made in the same manner and at the same time;
	 
	 	7.2.3	 	are governed by the Plan as if references to Shares were references to the
shares over which the new award is granted and references to the Company were
references to the Acquiring Company;
	 
	 	7.2.4	 	may provide (at the discretion of the Designated Corporate Officer) that
the making of Awards is subject to performance conditions.

	8	 	Restrictions on issue of Shares
	 
	 	 	No Shares will be issued or transferred from treasury to satisfy Awards unless the
Company in general meeting approves in advance such issue or transfer if such approval is
required.
	 
	9	 	Terms of employment

	 	9.1.1	 	For the purposes of this rule, “Employee” means any person who is or will
be eligible to be a Participant.
	 
	 	9.1.2	 	This rule applies:

	 	(i)	 	whether the Company has full discretion in the operation of the
Plan, or whether the Company could be regarded as being subject to any
obligations in the operation of the Plan;
	 
	 	(ii)	 	during an Employee’s employment or employment relationship; and
	 
	 	(iii)	 	after the termination of an Employee’s employment or
employment relationship, whether the termination is lawful or unlawful.

	 	9.1.3	 	Nothing in the rules or the operation of the Plan forms part of the
contract of employment or employment relationship of an Employee. The rights and
obligations arising from the employment relationship between the Employee and the
Company are separate from, and are not affected by, the Plan. Participation in the Plan
does not create any right to, or expectation of, continued employment or a continued
employment relationship.
	 
	 	9.1.4	 	The grant of Performance Units on a particular basis in any year does not
create any right to or expectation of the grant of Performance Units on the same basis,
or at all, in any future year.
	 
	 	9.1.5	 	The benefit to an Employee of participating in the Plan shall not form any
part of his remuneration or count as his remuneration for any purpose and shall not be
pensionable.
	 
	 	9.1.6	 	No Employee is entitled to participate in the Plan, or be considered for
participation in it, at a particular level or at all. Participation in one operation of
the Plan does not imply any right to participate, or to be considered for participation in any later
operation of the Plan.

9

 

	 	 	 	 
	 
	 	9.1.7	 	Without prejudice to an Employee’s right in respect of Performance Units or
an Award subject to and in accordance with the express terms of the Plan, no Employee
has any rights in respect of the exercise or omission to exercise any discretion, or
the making or omission to make any decision, relating to the Performance Units or the
Award. Any and all discretions, decisions or omissions relating to the Performance
Units or the Award may operate to the disadvantage of the Employee, even if this could
be regarded as capricious or unreasonable, or could be regarded as in breach of any
implied term between the Employee and his employer, including any implied duty of trust
and confidence. Any such implied term is excluded and overridden by this rule.
	 
	 	9.1.8	 	No Employee has any right to compensation for any loss in relation to the
Plan, including:

	 	(i)	 	any loss or reduction of any rights or expectations under the
Plan in any circumstances or for any reason (including lawful or unlawful
termination of employment or the employment relationship);
	 
	 	(ii)	 	any exercise of a discretion or a decision taken in relation to
Performance Units or an Award or to the Plan, or any failure to exercise a
discretion or take a decision;
	 
	 	(iii)	 	the operation, suspension, termination or amendment of the
Plan.

	 	9.1.9	 	Participation in the Plan is permitted only on the basis that the
Participant accepts all the provisions of its rules, including in particular this rule.
By participating in the Plan, an Employee waives all rights under the Plan, other than
the right to acquire shares subject to and in accordance with the express terms of the
Plan and the Performance Condition, in consideration for, and as a condition of, the
grant of Performance Units under the Plan.
	 
	 	9.1.10	 	Nothing in this Plan confers any benefit, right or expectation on a person
who is not an Employee. No such third party has any rights under the Contracts (Rights
of Third Parties) Act 1999 to enforce any term of this Plan. This does not affect any
other right or remedy of a third party which may exist.
	 
	 	9.1.11	 	Each of the provisions of this rule is entirely separate and independent
from each of the other provisions. If any provision is found to be invalid then it will
be deemed never to have been part of these rules and to the extent that it is possible
to do so, this will not affect the validity or enforceability of any of the remaining
provisions.

	10	 	General
	 
	10.1	 	Decisions are final and binding
	 
	 	 	The decision of the Designated Corporate Officer and where relevant the Plan
Administrator on the interpretation of the Plan or in any dispute relating to Performance
Units or an Award or matter relating to the Plan will be final and conclusive.

10

 

	10.2	 	Documents sent to shareholders
	 
	 	 	The Company may send to Participants copies of any documents or notices normally sent
to the holders of its Shares at or around the same time as issuing them to the holders of
its Shares.
	 
	10.3	 	Costs
	 
	 	 	The Company may ask a Participant’s employer to bear the costs in respect of
Performance Units or an Award to that Participant.
	 
	10.4	 	Regulations
	 
	 	 	The Designated Corporate Officer has the power from time to time to make or vary
regulations for the administration and operation of the Plan but these must be consistent
with its rules.
	 
	10.5	 	Employee trust
	 
	 	 	The Company and any Subsidiary may provide money to the trustee of any trust or any
other person to enable them or him to acquire Shares to be held for the purposes of the
Plan, or enter into any guarantee or indemnity for those purposes, to the extent permitted
by Section 153 of the Companies Act 1985.
	 
	10.6	 	Data protection
	 
	 	 	By participating in the Plan the Participant consents to the holding and processing of
personal data provided by the Participant to the Company for all purposes relating to the
operation of the Plan. These include, but are not limited to:

	 	10.6.1	 	administering and maintaining Participant records;
	 
	 	10.6.2	 	providing information to trustees of any employee benefit trust,
registrars, brokers or third party administrators of the Plan;
	 
	 	10.6.3	 	providing information to future purchasers of the Company or the business
in which the Participant works;
	 
	 	10.6.4	 	transferring information about the Participant to a country or territory
outside the European Economic Area.

	 	 	To the extent a Participant has already entered into any other data protection agreement,
with any Member of the Group this rule 10.6 will be interpreted so as not to be inconsistent
with or to limit that existing or this agreement.
	 
	10.7	 	Consents
	 
	 	 	All allotments and transfers of Shares will be subject to any necessary consents under
any relevant enactments or regulations for the time being in force in the United Kingdom or
elsewhere. The Participant will be responsible for complying with any requirements he needs
to fulfil in order to obtain or avoid the necessity for any such consent.
	 
	10.8	 	Articles of association
	 
	 	 	Any Shares acquired under the Plan are subject to the articles of association of the
Company from time to time in force.

11

 

	10.9	 	Notices

	 	10.9.1	 	Any notice or other document which has to be given to a person who is or
will be eligible to be a Participant under or in connection with the Plan may be:

	 	(i)	 	delivered or sent by post to him at his home address according
to the records of his employing company; or
	 
	 	(ii)	 	sent by e-mail or fax to any e-mail address or fax number which
according to the records of his employing company is used by him;

	 	 	 	or in either case such other address, for example, work address, which the Plan
Administrator considers appropriate.
	 
	 	10.9.2	 	Any notice or other document which has to be given to the Plan
Administrator or other duly appointed agent under or in connection with the Plan may be
delivered or sent by post to it at its registered office (or such other place as the
Designated Corporate Officer or duly appointed agent may from time to time decide and
notify to Participants) or sent by e-mail or fax to any e-mail address or fax number
notified to the Participant.

	 	 	Notices sent by post will be deemed to have been given on the second day after the date of
posting. However, notices sent by or to a Participant who is working overseas will be deemed
to have been given on the seventh day after the date of posting. Notices sent by e-mail or
fax, in the absence of evidence to the contrary, will be deemed to have been received on the
day after sending.
	 
	11	 	Changing the Plan and termination
	 
	11.1	 	Designated Corporate Officer’s powers
	 
	 	 	The Designated Corporate Officer may at any time change the Plan in any way.
	 
	11.2	 	Notice
	 
	 	 	The Plan Administrator may give written notice of any changes made to any Participant
affected.
	 
	11.3	 	National Provisions
	 
	 	 	Notwithstanding any other provision of the Plan, but subject always to rule 11.1 the
Company may amend or add to the provisions of the Plan as he considers necessary or
desirable to take account of, or to mitigate, or to comply with relevant overseas laws
including but not limited to taxation, securities or exchange control laws, provided that
the terms of Performance Units granted to such Participants are not more favourable overall
than the terms of Performance Units granted to other Participants.
	 
	12	 	Governing law and jurisdiction
	 
	 	 	English law governs the Plan and all Performance Units and Awards and their
construction. The English Courts have non-exclusive jurisdiction in respect of disputes
arising under or in connection with the Plan, Performance Units or any Award.

12

 

Schedule 1

US

This United States (“US”) Schedule has been adopted by the Company pursuant to rule 11.3 of
the Plan and shall vary the terms of the Plan (and any other related documents) accordingly for all
US Participants (defined below).

Rule 1 Meaning of Words

“US Participant” means, for purposes of rule 13 (US Tax Compliance and Deferral of Awards) of
this US Schedule, a Participant who is a US citizen or US permanent resident (as evidenced by a
so-called “green card” and participation in a US tax-qualified pension plan sponsored by a Member
of the Group).

For all other purposes under this US Schedule, a “US Participant” means a Participant who is:

	(i)	 	a US citizen;
	 
	(ii)	 	a US permanent resident (as evidenced by a so-called “green card” and participation in a US
tax-qualified pension plan sponsored by a Member of the Group); or
	 
	(iii)	 	a non-US citizen who is posted to the US as of an Award Date and who is (or expected to
become) subject to US taxation as a resident alien.

Rule 4 (Making of Awards) shall be varied by adding the following:

	4.9	 	Deductions and Offsets from Awards
	 
	 	 	It shall be a condition of any Award to a US Participant, including an Award deferred
pursuant to rule 13 of this Schedule, that the Company, a Member of the Group, or another
company employing a US Participant may deduct from and set off against the Award (whether
payable in cash or Shares and whether payable at the Award Date or at a later date pursuant
to rule 13) any debt, obligation, liability, or other amount owed by the US Participant to a
Member of the Group, including but not limited to amounts under an expatriate tax policy (as
currently in effect or as amended from time to time), as determined in the sole discretion
of the Company.

The following shall be added as rule 13:

Rule 13 US Tax Compliance and Deferral of Awards

	13.1	 	Compliance with Section 409A
	 
	 	 	To the extent that that grant of Performance Units results (other than due to a US
Participant’s election described under 13.2 of this Schedule) in the deferral of
compensation under Section 409A of the Internal Revenue Code of 1986, as amended (“Code”),
(1) the Plan is intended to comply with the rules under Section 409A and (2) for persons who
receive such grants or related Awards and are subject to U.S. taxation, the delivery of
Shares or other property in connection with a waiver of Performance Conditions under rule
2.4, in connection with the application of rule 5, or in connection with rules 6.2, 6.3, 6.5
or 6.7 will not occur until the earliest date permitted under Section 409A(a)(2) and (a)(3).

13

 

	 	 	All taxes, penalties, or interest imposed on any Participant due to any failure to comply
with Section 409A of the Code or other tax rule shall be the Participant’s responsibility
and the Company shall have no duty under the Plan to keep the Participant whole.
	 
	13.2	 	Election to Defer
	 
	 	 	To the extent offered by the Company, US Participants may, no later than a date
permitted under Section 409A of the Code, make an election to defer the date on which the
Award shall be distributed.
	 
	13.3	 	Form of Election
	 
	 	 	The election shall be in a form and subject to such terms as prescribed by the Plan
Administrator. It is intended that terms and procedures for such elections and deferrals
shall comply with applicable requirements of Section 409A.
	 
	13.4	 	Notice of Award
	 
	 	 	As of the Award Date, a US Participant who has deferred an Award shall receive notice
of the number of Shares, if any, that comprise his Award, and such Award shall be credited
as notional Shares under a notional Share account.
	 
	13.5	 	Notional Dividends and Other Rights
	 
	 	 	A US Participant’s notional Share account shall be credited with notional dividends as
of the date dividend payments are made to shareholders of record. Notional dividends on
newly awarded notional Shares shall only be credited if those US Participants who did not
defer would be entitled to dividends on their newly awarded Shares. No shareholder voting
rights as such shall arise with respect to notional Shares.
	 
	13.6	 	Distribution of Deferred Accounts
	 
	 	 	A US Participant’s notional Share account shall be distributed in accordance with his
or her distribution election and only those notional Shares that are to be distributed at a
particular point in time shall be converted to actual Shares. The Plan Administrator may
make any arrangements necessary, including the conversion of distributable notional Shares
into cash, if so determined.
	 
	13.7	 	No Fund Created
	 
	 	 	Nothing in these rules shall either require any Member of the Group to make any
contributions or create any fund with respect to an Award that has been deferred prior to a
relevant distribution date or cause any Member of the Group to establish any fund or
otherwise set aside any assets for the purpose of paying Awards with regard to US
Participants.
	 
	13.8	 	Deferrals Subject to General Creditors
	 
	 	 	All deferred Awards shall remain subject to the general creditors of the Company until
their actual distribution to a US Participant.
	 
	13.9	 	Construction
	 
	 	 	The Plan shall be construed to give effect, for US tax purposes, to elective deferrals
pursuant to rules 13.2 and 13.3, consistent with compliance under Section 409A of the Code.

14

 

Schedule 2

Cash Award

	1	 	Rules
	 
	 	 	The rules of the BP p.l.c. Medium Term Performance Plan 2005 (“Plan”) will apply to grants
made under this Schedule 2, as modified by the terms of this Schedule 2.
	 
	2	 	Cash Awards
	 
	 	 	Any Performance Units granted under this Schedule 2 will give Participants a right to
receive a cash sum only. In addition, any dividend equivalents under rule 4.9 of the Plan
will be paid in cash only. No shares may be transferred in satisfaction of grants under this
Schedule 2 and references to Awards and Performance Units shall be construed accordingly.
	 
	3	 	No rights as shareholders
	 
	 	 	As a result only if their participation under this Schedule 2, Participants will have no
rights as shareholders of the Company and no rights to acquire Shares.
	 
	4	 	Payments of cash
	 
	 	 	When the determinations are made under rule 4.1 of the Plan in respect of grants made under
this Schedule 2 then the Plan Administrator will determine the number of Shares which would
have been comprised in an Award had it not been a Cash Award and shall make a cash payment
to the Participant in accordance with rule 4.4.

15

 

Schedule 3

Executive Vice Presidents

	1	 	Rules
	 
	 	 	The rules of the BP p.l.c. Medium Term Performance Plan 2005 (“Plan”) will apply to grants
made under this Schedule 3, as modified by the terms of this Schedule 3.
	 
	2	 	Eligibility
	 
	 	 	This Schedule 3 sets out the terms on which grants may be made to employees who are:
	 
	2.1	 	eligible to participate in the Plan; and
	 
	2.2	 	are either Executive Vice Presidents (but not Directors) of BP p.l.c. or any other
employee the Designated Corporate Officer determines.
	 
	3	 	Definitions
	 
	 	 	In this Schedule:
	 
	3.1	 	“Performance Units” will be known as “Performance Shares”;
	 
	3.2	 	references to grants of Performance Units will be references to awards of
Performance Shares;
	 
	3.3	 	“Awards” will be known as “Vested Shares”;
	 
	3.4	 	references to making an Award will be references to awarding Vested Shares, and
references to Shares comprised in an Award will be to Vested Shares.
	 
	4	 	Conditions and Restrictions
	 
	4.1	 	In this Schedule “Performance Condition” may include any other objective condition
specified at the time the Performance Shares are awarded (for example, a retention period),
and does not have to relate to performance of either the Company or the Participant.
	 
	4.2	 	Rule 4.7.1 shall be replaced by the following rule:
	 
	 	 	“This rule 4.7 applies where a condition has been imposed under rule 2.4 that Shares
comprised in an Award to a Participant are to be retained shares (“Retained Shares”).
	 
	4.3	 	Rule 4.7.2 shall be replaced by the following rule:
	 
	 	 	“Where this rule 4.7 applies, Vested Shares will be retained and held on the Participant’s
behalf for a period determined by the Designated Corporate Officer, or if later, until the
minimum shareholding requirement under the Shareholding Guidelines is met.”
	 
	4.4	 	References to restrictions in rule 4.7 shall be to retention.
	 
	4.5	 	References to Plan Administrator in rule 4.7 shall be replaced with references to
the Designated Corporate Officer.”

16

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