ASSET PURCHASE AGREEMENT

Asset Purchase Agreement

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AQUILA INC | MEP PLEASANT HILL, LLC

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Title: ASSET PURCHASE AGREEMENT
Governing Law: New York Date: 9/25/2006
Industry: Electric Utilities Law Firm: Kirkland & Ellis LLP;Blackwell Sanders Peper Martin LLP

ASSET PURCHASE AGREEMENT, Parties: aquila inc , mep pleasant hill llc

EXECUTION VERSION

Exhibit 10.1

ASSET PURCHASE AGREEMENT

By and Between

MEP PLEASANT HILL, LLC

AS SELLER

And

AQUILA, INC.

AS BUYER

Dated as of September 22, 2006

TABLE OF CONTENTS

Page

ARTICLE 1 PURCHASE AND SALE OF THE ACQUIRED ASSETS

1.1.

Transfer of Acquired Assets

1.2.

Excluded Assets

1.3.

Assumption of Liabilities

1.4.

Excluded Liabilities

1.5.

Non-Assignment of Assigned Contracts

ARTICLE 2 CONSIDERATION

2.1.

Consideration

2.2.

Deposits

ARTICLE 3 CLOSING AND DELIVERIES

3.1.

Closing

3.2.

Seller’s Deliveries

3.3.

Buyer’s Deliveries

3.4.

Certain Contracts and Easements

ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLER

4.1.

Corporate Organization

4.2.

Authorization and Validity

4.3.

No Conflict or Violation

4.4.

Governmental Consents and Approvals

4.5.

Compliance with Law

4.6.

Litigation

4.7.

Material Contracts.

4.8.

Permits

4.9.

Environmental Matters

4.10.

Employee Benefits.

4.11.

Real Property

4.12.

Regulatory Status

4.13.

Taxes

4.14.

Balance Sheet Information

ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER 11

5.1.

Corporate Organization

5.2.

Authorization and Validity

5.3.

No Conflict or Violation

5.4.

Consents, Approvals and Notifications

5.5.

Availability of Funds

5.6.

Adequate Assurances Regarding Assigned Contracts

5.7.

Licenses, Permits, etc.

5.8.

Investigation by Buyer

ARTICLE 6 COVENANTS OF SELLER

6.1.

Actions Before Closing.

6.2.

Conduct of Business Before the Closing Date.

6.3.

Sale Order and Bidding Procedures Order.

6.4.

Consents and Approvals.

6.5.

Access to Properties and Records; Confidentiality.

6.6.

Rejection of Assigned Contracts.

6.7.

Further Assurances.

ARTICLE 7 COVENANTS OF BUYER

7.1.

Actions Before Closing Date.

7.2.

Consents, Approvals and Notifications.

7.3.

Adequate Assurances Regarding Assigned Contracts.

7.4.

Cure of Defaults.

7.5.

Support Obligations.

7.6.

Availability of Business Records.

7.7.

Calpine Marks.

7.8.

Notices

7.9.

Casualty Loss.

ARTICLE 8 BANKRUPTCY PROCEDURES

8.1.

Bankruptcy Actions

8.2.

Bidding Procedures.

ARTICLE 9 EMPLOYEE AND BENEFITS MATTERS

9.1.

Notification of Intent to Employ.

9.2.

Employment Offers.

9.3.

Transferred Employees.

9.4.

Transfer of Assets and Liabilities from Employee Benefit Plans.

9.5.

WARN Act Obligations.

9.6.

Buyer Benefit Plans.

9.7.

Welfare Benefits Claims.

9.8.

COBRA Obligations.

9.9.

Assumption of Liabilities.

9.10.

Flexible Benefit Plan

9.11.

Termination of Business Employees

ARTICLE 10 REGULATORY MATTERS

10.1.

Regulatory Filings.

10.2.

Cooperation; Confidentiality Agreement.

10.3.

Objections or Other Challenges.

ARTICLE 11 TAXES

11.1.

Taxes Related to Purchase of Assets.

11.2.

Proration of Real and Personal Property Taxes.

11.3.

Cooperation on Tax Matters.

11.4.

Retention of Tax Records.

11.5.

Allocation of Purchase Price and Purchase Price Allocation Forms.

11.6.

Unbilled Transactional Taxes

ARTICLE 12 CONDITIONS PRECEDENT TO PERFORMANCE BY PARTIES

12.1.

Conditions Precedent to Performance by Seller and Buyer.

12.2.

Conditions Precedent to Performance by Seller.

12.3.

Conditions Precedent to the Performance by Buyer.

ARTICLE 13 TERMINATION AND EFFECT OF TERMINATION

13.1.

Right of Termination.

13.2.

Termination Without Default.

13.3.

Effect of Failure of Seller’s Conditions to Closing.

13.4.

Effect of Failure of Buyer’s Conditions to Closing.

13.5.

Termination on Alternative Transaction.

ARTICLE 14 MISCELLANEOUS

14.1.

Successors and Assigns.

iii

14.2.

Governing Law; Jurisdiction.

14.3.

Disclosure Schedule Supplements.

14.4.

Transition Services.

14.5.

Warranties Exclusive.

14.6.

Survival of Representations and Warranties.

14.7.

No Recourse Against Third Parties.

14.8.

Mutual Drafting.

14.9.

Expenses.

14.10.

Broker’s and Finder’s Fees.

14.11.

Severability.

14.12.

Notices.

14.13.

Amendments; Waivers.

14.14.

Schedules.

14.15.

Public Announcements.

14.16.

Entire Agreement.

14.17.

Parties in Interest.

14.18.

Headings.

14.19.

Construction

14.20.

Currency.

14.21.

Time of Essence.

14.22.

Counterparts.

14.23.

Delivery by Facsimile Transmission.

ARTICLE 15 DEFINITIONS

15.1.

Certain Terms Defined.

15.2.

All Terms Cross-Referenced.

EXHIBITS

Exhibit A

Form of Assumption Agreement

Exhibit B

Form of Sale Order

Exhibit C

Form of Bidding Procedures Order

DISCLOSURE SCHEDULES

Schedule 1.1(a)

Owned Real Property

Schedule 1.1(b)

Real Estate Leases

Schedule 1.1(c)

Entitled Real Property

Schedule 1.1(d)

Equipment

Schedule 1.1(e)

Supplier Contracts

Schedule 1.1(f)

Other Contracts

Schedule 1.1(g)

Inventory

Schedule 1.1(i)

Permits

Schedule 1.2(a)

Excluded Assets

Schedule 1.2(m)

Calpine Marks

Schedule 1.2(s)

Excluded Assets

Schedule 1.4

Excluded Liabilities

Schedule 4.4

Governmental Consents and Approvals

Schedule 4.5

Compliance with Law

Schedule 4.6

Litigation

Schedule 4.7

Material Contracts

Schedule 4.8

License and Permit Exceptions

Schedule 4.9

Environmental Matters

Schedule 4.10

Employee Benefit Plans

Schedule 4.14

Selected Balance Sheet Information

Schedule 5.4

Consents, Approvals, and Notifications

Schedule 5.7

Licenses, Permits, etc.

Schedule 7.5(a)

Credit Support Obligations

Schedule 12.1(b)

Antitrust and Regulatory Approvals

Schedule 12.1(d)

Material Permits

Schedule 15.1

Permitted Liens

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “ Agreement ”), dated as of September 22, 2006, is made by and between MEP Pleasant Hill, LLC, a Delaware limited liability company (the " Seller "), and Aquila, Inc., a Delaware corporation (the “ Buyer ”). Capitalized terms used in this Agreement are defined or cross-referenced in Article 15 .

BACKGROUND INFORMATION

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

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

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

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

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

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

ARTICLE 1

PURCHASE AND SALE OF THE ACQUIRED ASSETS

1.1. Transfer of Acquired Assets . At the Closing, and upon the terms and conditions herein set forth, Seller shall sell to Buyer, and Buyer shall acquire from Seller, all of Seller’s right, title and interest in, to and under the Acquired Assets free and clear of Liens, claims and other interests (except for Permitted Liens and Assumed Liabilities) pursuant to sections 105, 363 and 365 of the Bankruptcy Code. “ Acquired Assets ” shall mean solely the following property, but shall exclude the Excluded Assets:

(a) the real property owned by Seller and listed on Schedule 1.1(a) of the disclosure schedules accompanying this Agreement (the “ Disclosure Schedules ”), together with any Improvements owned by Seller erected thereon or on the Leased Real Property (the “ Owned Real Property ”);

(b) all of Seller’s rights under the leases of real property, including the Facility Lease, listed on Schedule 1.1(b) of the Disclosure Schedules (the “ Real Estate Leases ” and the real property leased by Seller pursuant to such leases, the “ Leased Real Property ”);

(c) all of Seller’s rights under the easements, rights of way, real property licenses, and other real property entitlements used exclusively in the Business or listed on Schedule 1.1(c) of the Disclosure Schedules (the “ Entitled Real Property ” and, together with the Owned Real Property and the Leased Real Property, the “ Real Property ”);

(d) all of (i) Seller’s owned and leased equipment, spare parts, machinery, furniture, materials, supplies, fixtures, and other personal property used exclusively in the Business, located on the Real Property or listed on Schedule 1.1(d) (the “ Equipment ”); and (ii) any rights of Seller to the warranties and licenses received from manufacturers and lessors of the Equipment;

(e) all of Seller’s rights under outstanding purchase orders or other similar Contracts used exclusively in the Business entered into by Seller with any supplier that are listed on Schedule 1.1(e) of the Disclosure Schedules (“ Supplier Contracts ”);

(f) all of Seller’s rights under the Contracts that are listed on Schedule 1.1(f) of the Disclosure Schedules (the “ Other Contracts ” and, together with the Real Property Leases, the Entitled Real Property constituting Contracts, and the Supplier Contracts, the “ Assigned Contracts ”);

(g) all (i) inventories of fuel, chemicals and gas at or in transit to the Real Property and owned by Seller on the Closing Date, including inventories of the substances listed on Schedule 1.1(g) (the “ Inventory ”), and (ii) any rights of Seller to the warranties received from suppliers with respect to such Inventory;

(h) any computer software or systems located at the Real Property and owned exclusively by Seller and licenses held exclusively by Seller, to the extent transferable, in each case that pertain solely to the Business;

(i) to the extent transferable under applicable Law, all rights of Seller under the permits, authorizations, approvals, registrations, and licenses relating exclusively to the Business issued by any Government (and pending applications for the foregoing) listed on Schedule 1.1(i) of the Disclosure Schedules (“ Permits ”);

(j)

copies of all Business Records;

(k)

all of Seller’s right, title and interest in the Power Plant;

(l) rights to and goodwill represented by the name Aries Energy Center; provided, that nothing in this Section 1.1(l) will give Buyer any rights to any name that includes a Calpine Mark;

(m)

all assets to be acquired by Buyer pursuant to Article 9 ;

(n)

except as provided in Section 1.2(r) , all Emissions Allowances; and

(o)

The Chapter 100 Bond.

1.2. Excluded Assets . Notwithstanding anything to the contrary in this Agreement, the Acquired Assets are the only properties and assets transferred to Buyer under this Agreement. Without limiting the generality of the foregoing, the Acquired Assets do not include (i) any right, title or interest of any Person other than Seller in any property or asset, and (ii) the properties and assets of Seller listed or described in this Section 1.2 (all properties and assets not being acquired by Buyer are herein referred to as the “ Excluded Assets ”):

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

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

(c) other than assets, property, and other rights specifically identified in any Schedule referenced in Section 1.1 above, any assets, property and other rights held or owned by Calpine and its Affiliates not used exclusively by Seller in the operation of the Business;

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

(e)

all of Seller’s rights under Contracts that are not Assigned Contracts;

(f)

all assets to be retained by Seller pursuant to Article 9 ;

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

(h) any asset of Seller that would constitute an Acquired Asset (if owned by Seller on the Closing Date) that is conveyed or otherwise disposed of during the period from the date hereof until the Closing Date either (i) in the Ordinary Course of Business of Seller, (ii) at the direction of the Bankruptcy Court or (iii) as otherwise permitted by the terms of this Agreement;

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

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

(k) all shares of capital stock or other equity interests of Seller and all Affiliates of Seller;

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

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

(n) all rights under any Contract, other than any Assigned Contract, that has been guaranteed by Calpine or an Affiliate of Calpine or to which Calpine is a party;

(o)

all Retained Books and Records;

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

(q) all accounts receivable and other amounts due to Seller from any Affiliate of Seller and all rights and Claims of Seller against any Affiliate of Seller;

(r) all Emissions Allowances utilized in operating the Power Plant prior to the Closing Date; and

(s)

any assets set forth on Schedule 1.2(s) of the Disclosure Schedules.

1.3. Assumption of Liabilities . At the Closing, Buyer shall assume, and Buyer shall hereafter pay, perform and discharge when due, the following liabilities and obligations and no others (collectively, the “ Assumed Liabilities ”):

(a) all liabilities and obligations of Seller under the Assigned Contracts and all cure costs required to be paid pursuant to section 365 of the Bankruptcy Code in connection with the assumption and assignment of the Assigned Contracts;

(b)

all liabilities and obligations of Seller under the Permits;

(d) all liabilities and obligations of Seller for Transaction Taxes payable in connection with the transactions contemplated by this Agreement;

(e) to the extent provided in Article 11 , all liabilities and obligations for any real or personal Taxes relating to the Acquired Assets that may or may not yet be payable for periods after the Closing Date;

(f) all liabilities and obligations of Seller, any of its Affiliates or any of their respective Related Persons arising under or relating to any environmental matter (including any liability or obligation arising under any Environmental Law) relating to the Acquired Assets; and

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

1.4. Excluded Liabilities . Seller shall retain all liabilities and obligations that are not Assumed Liabilities (the “ Excluded Liabilities ”), including: (i) all liabilities and obligations with respect to accounts payable (other than those under Assigned Contracts) arising in connection with the Business or the Acquired Assets and in existence on the Closing Date (the “ Accounts Payable ”); (ii) liabilities directly and solely arising in connection with Excluded Assets and (iii) those listed on Schedule 1.4 of the Disclosure Schedules.

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

ARTICLE 2

CONSIDERATION

2.1. Consideration . The aggregate consideration for the sale and transfer of the Acquired Assets shall be (a) $158,500,000 million in cash (the “ Purchase Price ”), which price is payable and deliverable at the Closing in accordance with Section 3.3 and (b) the assumption by Buyer of the Assumed Liabilities.

2.2. Deposits . On the date hereof, Buyer, Seller, and the Escrow Agent have executed and delivered the Purchase Notice, and Buyer has deposited with the Escrow Agent $7,925,000 million (an amount equal to 5% of the Purchase Price (the “ Initial Deposit ”)). Upon the Bankruptcy Court’s entry of the Sale Order, Buyer shall deposit with the Escrow Agent an additional $7,925,000 million (an amount equal to 5% of the Purchase Price (the “ Additional Deposit ,” and together with the Initial Deposit, the “ Deposits ”). The Deposits shall be held and disbursed pursuant to the terms of the Master Escrow Agreement, the Purchase Notice, and this Agreement.

ARTICLE 3

CLOSING AND DELIVERIES

3.1. Closing . The consummation of the transactions contemplated hereby (the “ Closing ”) shall take place at the offices of Kirkland & Ellis LLP, 153 East 53 ^rd Street, New York, New York at 9:00 a.m. on the third Business Day following the satisfaction or waiver by the appropriate party of all the conditions contained in Article 12 hereof, or on such other date or at such other place and time as may be agreed to by the parties hereto (the “ Closing Date ”).

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

(a) one or more bills of sale and assignment with respect to the Acquired Assets, duly executed by Seller and in a form reasonably acceptable to Buyer;

(b) one or more assignment and assumption agreements, in the form of the Assumption Agreement attached as Exhibit A hereto, duly executed by Seller;

(c)

the Business Records;

(d) special warranty deeds with respect to the Owned Real Property and Entitled Real Property, duly executed by Seller, and in recordable form, and assignments of the Real Estate Leases, each duly executed by Seller and in recordable form; and

(e)

an affidavit of non-foreign status that complies with section 1445 of the Code.

3.3.

Buyer’s Deliveries » . On the Closing Date, in payment for the Acquired Assets:

(a) the Escrow Agent shall pay to Seller the Deposits in accordance with the terms of the Master Escrow Agreement and the Purchase Notice, by wire transfer of immediately

available funds to a bank account designated by Seller in writing to Buyer (the “ Seller’s Account ”);

(b) Buyer shall pay to Seller the Purchase Price, reduced by the amount of the Deposits paid pursuant to Section 3.3(a) , by wire transfer of immediately available funds to Seller’s Account; and

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

3.4. CERTAIN CONTRACTS AND EASEMENTS . UPON THE CLOSING, THE PARTIES AGREE TO TERMINATE, OR TO CAUSE THE TERMINATION OF, (A) THAT CERTAIN EASEMENT FOR ROAD, DATED AUGUST 3, 1999, BETWEEN BUYER AND SELLER, AND (B) THAT CERTAIN GENERATOR BALANCING SERVICE AGREEMENT, DATED MARCH 26, 2004, BETWEEN BUYER AND CALPINE ENERGY SERVICES, L.P. BUYER AND SELLER HEREBY AGREE THAT ALL OBLIGATIONS OF AND CLAIMS AGAINST SELLER ARISING OR EXISTING UNDER THE SAME SHALL BE EXTINGUISHED AS OF THE TIME OF CLOSING.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF SELLER

Seller hereby represents and warrants to Buyer as follows, except in all cases as disclosed in the Disclosure Schedules, as the same may be amended or modified in accordance with Section 14.3 hereof:

4.1. Corporate Organization . Seller is duly organized and validly existing under the Laws of the jurisdiction of its organization. Subject to any necessary authority from the Bankruptcy Court, Seller has all requisite corporate power and authority to own its properties and assets and to conduct its business as now conducted.

4.2. Authorization and Validity . Seller has all requisite limited liability company power and authority to enter into this Agreement and the Purchase Notice and, subject to the Bankruptcy Court’s entry of the Sale Order, to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and the Purchase Notice and, subject to the entry of the Sale Order, the performance by Seller of its obligations hereunder and thereunder have been duly authorized by all necessary limited liability company action by the board of directors or managers and members of Seller, and no other corporate proceedings on the part of Seller are necessary to authorize such execution, delivery and performance. This Agreement and the Purchase Notice have been duly executed by Seller and, subject to the Bankruptcy Court’s entry of the Sale Order, constitute its valid and binding obligation, enforceable against it in accordance with the terms herein and therein.

4.3. No Conflict or Violation . The execution, delivery and subject to (a) the receipt of all Consents set forth on Schedule 4.4 of the Disclosure Schedules, (b) the Bankruptcy Court’s entry of the Sale Order and (c) the receipt of the Antitrust Approvals, the performance by Seller of this Agreement and the Purchase Notice does not and will not (i) violate or conflict with any provision of the certificate of incorporation or by-laws (or equivalent organizational documents) (collectively, the “ Organizational Documents ”) of Seller, (ii) violate any provision of law,

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

4.4. Governmental Consents and Approvals . Schedule 4.4 of the Disclosure Schedules sets forth a true and complete list of each Consent and each declaration to or filing or registration with any Government or other Person that is required in connection with the execution and delivery of this Agreement and the Purchase Notice by Seller or the performance by Seller of its obligations hereunder or thereunder, the failure of which to obtain would reasonably be expected to have a Material Adverse Effect.

4.5. Compliance with Law . With respect to the conduct of the Business and the ownership and operation of the Acquired Assets, Seller is not in violation of any Law (other than Environmental Law, as to which the only representations and warranties made by Seller are those contained in Sections 4.8 and 4.9 hereof) except for violations that would not reasonably be expected to have a Material Adverse Effect. No investigation or review by any Government relating to the conduct of the Business or the ownership or operation of the Acquired Assets is, to the Knowledge of Seller, pending or threatened. Except as set forth on Schedule 4.5 of the Disclosure Schedules and as may result from the Chapter 11 Case, since January 1, 2005, Seller has not received written notice of any violation of any Law (other than with respect to Environmental Law, as to which the only representations and warranties made by Seller are those contained in Sections 4.8 and 4.9 hereof), nor is Seller in default with respect to any Order, applicable to the Business or any of its assets, properties or operation of the Power Plant, other than violations and defaults the consequences of which would not reasonably be expected to have a Material Adverse Effect.

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

4.7.

Material Contracts .

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

(i)

is a Real Estate Lease;

(ii) by its terms requires the payment of over $500,000 for any 12-month period; or

(iii) the consequences of a default under or termination of such Assigned Contract would reasonably be expected to have a Material Adverse Effect (such Assigned Contracts described in this Section 4.7(a) , collectively, the “ Material Contracts ”).

(b) Other than as set forth on Schedule 4.7 of the Disclosure Schedules or in motions or other pleadings or similar items filed with the Bankruptcy Court, neither Seller nor, to Seller’s Knowledge, any other party to any of the Material Contracts has commenced any action against any of the parties to such Material Contracts or given or received any written notice of any material default or violation under any Material Contract that was not withdrawn or dismissed, except only for those defaults that will be cured in accordance with the Sale Order (or that need not be cured under the Bankruptcy Code to permit the assumption and assignment of the Assigned Contracts). To Seller’s Knowledge, each of the Material Contracts is, or will be at the Closing, valid, binding and in full force and effect against Seller, except as otherwise set forth on Schedule 4.7 of the Disclosure Schedules. Correct and complete copies of the Assigned Contracts have been made available to Buyer prior to the date hereof. Except as set forth on Schedule 4.7 of the Disclosure Schedules, on the date hereof there are no, and on the Closing Date there will be no cure amounts owed under any of the Assigned Contracts.

4.8. Permits . Schedule 4.8(a) of the Disclosure Schedules sets forth a complete and correct list of all material Permits and all pending applications therefor obtained by Seller in connection with the Business. As of the date of this Agreement, except as set forth on Schedule 4.8(b) and as would not reasonably be expected to have a Material Adverse Effect, (i) each such Permit is valid and in full force and effect, and is not subject to any pending or, to Seller’s Knowledge, threatened administrative or judicial proceeding to revoke, cancel, suspend or declare such Permit invalid in any respect, (ii) since January 1, 2005, Seller has not received written notice of any violation of any Permit and (iii) Seller is not in material default under any Permit.

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

(a) Seller is in compliance with applicable Environmental Laws, except where such non-compliance would not reasonably be expected to have a Material Adverse Effect.

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

(c) The representations and warranties contained in Section 4.8 and this Section 4.9 are the only representations and warranties made by Seller with respect to matters arising under Environmental Laws or relating to Hazardous Materials.

4.10.

Employee Benefits .

(a) Set forth on Schedule 4.10 of the Disclosure Schedules is a list of all Employee Benefit Plans which Seller maintains or to which Seller contributes. Schedule 4.10 also sets forth the amount of any obligation of Seller for vacation pay.

(b) To Seller’s Knowledge, each Employee Benefit Plan has been maintained, funded and administered in accordance with the material terms of such Employee Benefit Plan and complies in form and in operation in all respects with the applicable requirements of ERISA and the Code.

(c) Each Employee Benefit Plan that is intended to be a tax-qualified plan under Section 401 (a) of the Code has received a favorable determination letter or opinion letter from the Internal Revenue Service to the effect that it meets the requirements of Section 401(a) of the Code.

(d) Seller does not maintain or contribute to any Employee Benefit Plan that is subject to Title IV of ERISA (“ Title IV Plan ”), no such Title IV Plan has been completely or partially terminated, and no proceeding by the Pension Benefit Guaranty Corporation (“ PBGC “) to terminate any Title IV Plan has been instituted or, to Seller’s Knowledge, threatened. Neither Seller nor its ERISA Affiliates have incurred any material liability to the PBGC (other than with respect to PBGC premium payments and minimum funding contributions under Section 302 of ERISA and Section 412 of the Code) or otherwise under Title IV of ERISA with respect to any Title IV Plan.

(e) Neither Seller nor any of its ERISA Affiliates contributes to, has any obligation to contribute to, or has any material liability (including withdrawal liability as defined in Section 4201 of ERISA) under or with respect to any Multiemployer Plan.

(f) Except for any obligations under the Consolidated Omnibus Budget Reconciliation Act of 1985 or comparable provision of state Law, Seller does not provide post-employment medical or life insurance benefits to any former employee and has no obligation to provide post-employment medical or life insurance benefits to any Business Employee.

(g) None of the Business Employee’s employment is subject to a collective bargaining agreement.

(h) Schedule 4.10 of the Disclosure Schedules lists the name, title and base salary of each Business Employee.

4.11. Real Property . Schedules 1.1(a), 1.1(b), and 1.1(c) of the Disclosure Schedules sets forth a complete and correct list of the real property used by Buyer exclusively in the operation of the Business. Seller has made available to Buyer, to the extent within Seller’s possession or control, a copy of all certificates of occupancy for the Real Property and a copy of any variance granted with respect to the Real Property pursuant to applicable zoning Laws, all of which documents are true and complete copies thereof. Seller has disclosed to Buyer (in the electronic data room maintained by Seller in connection with the proposed sale of the Acquired Assets) material existing surveys or topographical maps for the Real Property, title policies, engineering reports and Environmental Reports in Seller’s possession or control.

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

4.13. Taxes . Except as otherwise provided in Article 11 , there are no unpaid Taxes of Seller that will become a liability of Buyer.

4.14. BALANCE SHEET INFORMATION . SCHEDULE 4.14 OF THE DISCLOSURE SCHEDULES SETS FORTH THE NET BOOK VALUES OF CERTAIN ACQUIRED ASSETS AS OF DECEMBER 31, 2005 (THE “ SELECTED BALANCE SHEET INFORMATION ”) AS SUCH VALUES ARE SET FORTH ON SELLER’S BOOKS. SELLER MAKES NO REPRESENTATIONS REGARDING HOW SUCH VALUES WERE PREPARED OR THEIR COMPLIANCE WITH ANY PARTICULAR ACCOUNTING STANDARDS.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF BUYER

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

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

5.2. Authorization and Validity . Buyer has all requisite corporate power and authority to enter into this Agreement and to execute and deliver the Purchase Notice and to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and the Purchase Notice and the performance of Buyer’s obligations hereunder and thereunder have been duly authorized by all necessary corporate action by the board of directors of Buyer, and no other corporate proceedings on the part of Buyer are necessary to authorize such execution, delivery and performance. This Agreement and the Purchase Notice have been duly executed by Buyer and constitute its valid and binding obligation, enforceable against it in accordance with the terms herein and therein.

5.3. No Conflict or Violation . The execution, delivery, and, subject to (a) the receipt of all Consents set forth on Schedule 4.4 of the Disclosure Schedules, (b) the Bankruptcy Court’s entry of the Sale Order and (c) the receipt of the Antitrust Approvals, performance by Buyer of this Agreement and the Purchase Notice, and the operation of the Business by Buyer as it is constituted as of the Closing Date, do not and will not violate or conflict with any provision of the Organizational Documents of Buyer and do not and will not violate any provision of Law, or any Order applicable to Buyer, nor will they result in a breach of or constitute (with due notice or lapse of time or both) a default under any Material Contract to which Buyer is a party or by which it is bound or to which any of its properties or assets is subject.

5.4. Consents, Approvals and Notifications . The execution, delivery and performance of this Agreement and the execution and delivery of the Purchase Notice and the operation of the Business by Buyer as it is constituted as of the Closing Date by Buyer do not require any Consent, or any filing with any Government or any other Person except: (a) as required under any Antitrust Law; (b) for entry of the Sale Order by the Bankruptcy Court; (c) for the Consents set forth in Schedule 5.4 , and (d) for such Consents and filings, the failure to obtain or make

would not reasonably be expected to have a material adverse effect on the ability of Buyer to consummate the transactions contemplated hereby.

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

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

5.7. Licenses, Permits, etc. Subject to obtaining the Consents described in Section 5.4(a) , (b) , and (c) above, and except as provided in Schedule 5.7 of the Disclosure Schedules, Buyer has, or will have as of the Closing Date, all licenses, permits, franchises and authority, whether from a Government or otherwise, including Regulatory Approvals, and has provided any requisite notice to customers necessary to purchase the Acquired Assets and to assume the Assumed Liabilities and to operate the Business as it is constituted as of the Closing Date.

5.8. Investigation by Buyer . Buyer has conducted its own independent review and analysis of the Acquired Assets and the Assumed Liabilities, of the value of such Acquired Assets, and of the business, operations, technology, assets, liabilities, financial condition and prospects of the Business, and Buyer acknowledges that Seller has provided Buyer with access to the personnel, properties, premises and records of the Business for this purpose. Buyer has conducted its own independent review of all Orders of, and all motions, pleadings, and other submissions to, the Bankruptcy Court in connection with the Chapter 11 Case. Buyer acknowledges that the price being paid under this Agreement for the Acquired Assets is the fair value for acquiring the Acquired Assets under the circumstances and that such value, rather than replacement cost, is the appropriate measure of damages if and to the extent Buyer may have had any recourse for any failure to deliver the Acquired Assets in accordance with the terms of this Agreement. In entering into this Agreement, Buyer has relied solely upon its own investigation and analysis, and the representations and warranties made by Seller in this Agreement, and Buyer acknowledges that (a) neither Seller nor any of its Related Persons or Affiliates makes or has made any representation or warranty, either express or implied, as to the accuracy or completeness of any of the information provided or made available to Buyer or any of its Related Persons or Affiliates, except as and only to the extent expressly set forth in Article 4 (which are subject to the limitations and restrictions contained in this Agreement), and (b) to the fullest extent permitted by Law, neither Seller nor any of its Related Persons or Affiliates shall have any liability or responsibility whatsoever to Buyer or its Related Persons or Affiliates on any basis (including in contract or tort, under securities Laws or otherwise) based upon any information provided or made available, or statements made, to Buyer or its Related Persons (or any omissions therefrom), including in respect of the specific representations and warranties of Seller set forth in this Agreement, except, with regard to Seller, as and only to the extent expressly set forth in Article 4 (which are subject to the limitations and restrictions contained in this Agreement). Buyer has no actual knowledge of any condition, event or circumstance that constitutes a breach of any representation, warranty or covenant of Seller in this Agreement.

ARTICLE 6

COVENANTS OF SELLER

Seller hereby covenants to Buyer as follows:

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

6.2. Conduct of Business Before the Closing Date . Without the prior written consent of Buyer or the authorization of the Bankruptcy Court, after notice and a hearing, between the date hereof and the Closing Date, Seller shall not, except as required or expressly permitted pursuant to the terms hereof, (i) make any material change in the Acquired Assets, taken as a whole, (ii) enter into any agreement with respect to the Business or the Acquired Assets that would be required to be disclosed under Schedule 4.7 of the Disclosure Schedules, or (iii) enter into any material transaction other than an Alternative Transaction, in each case other than in the Ordinary Course of Business consistent with past practices. Without limitation of the foregoing, except as may be required by the Bankruptcy Court, from the date hereof until the Closing, Seller shall use commercially reasonable efforts to maintain the Power Plant and conduct the Business in substantially the same manner as conducted by Seller in the Ordinary Course of Business, taking into account business exigencies arising as a result of Seller’s financial condition and status as a filer under Chapter 11 of the Bankruptcy Code. Furthermore, Seller shall maintain at the Power Plant the spare parts located at, or in transit to, the Power Plant as of the date of this Agreement, subject to ordinary use for the operation of the Power Plant, and Seller shall not use at any other facility owned by Calpine or any of its Affiliates any of the spare parts located at the Power Plant. Without limiting the generality of the foregoing, prior to the Closing Seller shall not, and shall not permit any of its Affiliates to (x) sell, lease, or transfer any assets relating to or forming part of the Business or the Acquired Assets (except for the depletion of Inventory and spare parts in the Ordinary Course of Business), (y) amend in any material respect any Assigned Contract, or (z) fail to maintain in full force and effect insurance policies covering the Acquired Assets, in form and amount consistent with past practice. Seller agrees to notify Buyer promptly following any forced outage at the Power Plant, and to provide Buyer reasonable notice prior to any major maintenance or testing activities involving the Acquired Assets.

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

6.4. Consents and Approvals . Seller shall use commercially reasonable efforts to obtain all Consents required to be obtained by Seller, and to provide notification to all Persons required to be notified by Seller, in connection with the execution, delivery and performance by them of this Agreement.

6.5. Access to Properties and Records; Confidentiality . Seller shall afford to Buyer, and to the accountants, counsel and representatives of Buyer, reasonable access during normal business hours throughout the period prior to the Closing Date (or the earlier termination of this

Agreement pursuant to Article 13 ) to all books and records of Seller relating to the Business if (w) permitted under Law, (x) such books and records are not subject to confidentiality agreements, provided that Seller shall use its commercially reasonable efforts to obtain a waiver of any such confidentiality restrictions in order to permit such access, (y) disclosing such books and records would not adversely affect any attorney client, work product or like privilege and (z) such books and records do not relate to any confidential proprietary models or other information of Seller or any of its Affiliates pertaining to energy project evaluation, energy or natural gas price curves or projections or other economic or other predictive models. Upon reasonable prior notice, Seller shall also afford Buyer reasonable access to the Business, all operations of the Business, and to all Acquired Assets throughout the period prior to the Closing Date. Without limiting the generality of the foregoing, Seller agrees to allow representatives of Buyer to observe any major maintenance or testing activities involving the Acquired Assets. The rights of access contained in this Section 6.5 are granted subject to, and on, the following terms and conditions: (A) any such investigation shall not include physical testing or samplings, and shall be exercised in such a manner as not to interfere unreasonably with the operation of the Business; (B) during the period from the date hereof to the Closing Date, all information provided to Buyer or its agents or representatives by or on behalf of Seller or their agents or representatives (whether pursuant to this Section 6.5 or otherwise) shall be governed by and subject to the Confidentiality Agreement, dated as of March 22, 2006, by and among Buyer and Calpine (the “ Confidentiality Agreement ”); (C) such rights of access shall not affect or modify the conditions set forth in Article 12 in any way; and (D) all such rights of access shall be at Buyer’s sole cost, expense and risk; and Buyer shall indemnify Seller for any damages, suits, claims, proceedings, fines, judgments, costs or expenses (including attorneys’ fees and incidental, consequential or punitive damages (collectively, “ Losses ”)) that Seller or any third party may suffer as a result of Buyer’s exercise of its rights under this Section 6.5 ; and (E) Buyer shall comply with and adhere to all of Seller’s safety policies and procedures.

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

6.7. Further Assurances . Upon the request and at the sole expense of Buyer at any time after the Closing Date, Seller shall execute and deliver such documents as Buyer or its counsel may reasonably request to effectuate the purposes of this Agreement. With respect to any litigation and claims that are Assumed Liabilities, Seller shall render all reasonable assistance that Buyer may request in defending such litigation or claim and shall make available to Buyer, on reasonable terms, personnel of Seller and its Affiliates most knowledgeable about the matter in question. If after the Closing Seller (or any Affiliate or creditor of Seller) shall receive any payment or revenue that belongs to Buyer pursuant to this Agreement, Seller shall promptly remit or caused to be remitted the same to Buyer, without set-off or deduction of any kind or nature.

ARTICLE 7

COVENANTS OF BUYER

Buyer hereby covenants to Seller as follows:

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

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

7.3. Adequate Assurances Regarding Assigned Contracts . With respect to each Assigned Contract, to the extent requested by the Bankruptcy Court, Seller or the counterparty to such Contract, Buyer shall provide the Bankruptcy Court, Seller or such counterparty, as the case may be, adequate assurance of the future performance of such Assigned Contract by Buyer.

7.4. Cure of Defaults . Buyer shall, on or prior to the Closing, cure any and all defaults under the Assigned Contracts that are required to be cured under the Bankruptcy Code, so that such Contracts may be assumed by Seller and assigned to Buyer in accordance with the provisions of section 365 of the Bankruptcy Code. Buyer may, at its option, amend Schedule 1.1(f) for the sole purpose of identifying that certain Maintenance Contract, dated June 30, 2000, between Seller and Siemens Westinghouse Power Corporation (the “ Siemens Agreement ”) as an Assigned Contract; provided that (a) Buyer satisfies its cure obligations as required by this Section 7.4 and (b) Buyer acknowledges that Seller makes no representations or warranties regarding the Siemens Agreement, including but not limited to pursuant to Section 4.7 herein.

7.5.

Support Obligations .

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

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

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

(iii) posting surety or performance bonds issued by an investment grade institution having a cred

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