PARTIAL TRANSFER AND RELEASE AGREEMENT
This Partial Transfer and Release Agreement (this “ Agreement ”) entered into this 3rd day of August, 2007, is made by and among those parties to a certain purchase and sale agreement, transfer and assumption agreement, and all other interrelated agreements thereto, executed July 7, 2005 (collectively, the “ PSA ”), namely, Calpine Gas Holdings LLC, CPN Pipeline Company, Calpine Corporation, Calpine Producer Services, L.P., Calpine Fuels Corporation and their subsidiaries and affiliates, as applicable (collectively, “ Calpine ”), on the one hand, and Rosetta Resources Inc., Rosetta Resources Operating LP (individually and as successor by merger with Rosetta Resources California, LLC; Rosetta Resources Rockies, LLC; Rosetta Resources Texas GP, LLC; Rosetta Resources Texas LP, LLC; and Rosetta Resources Texas LP) and Rosetta Resources Offshore, LLC and their subsidiaries and affiliates, as applicable (collectively, “ Rosetta ”), on the other hand. Calpine and Rosetta are sometimes referred to collectively as the “ Parties ” and individually as a “ Party .”
A. The PSA provided for the sale to Rosetta of ultimate ownership and control of all or substantially all of the assets comprising Calpine ’s oil and gas business (the “ Sale Transaction ”).
B. Among the properties to be transferred pursuant to the PSA were the properties listed on Exhibit A attached hereto (collectively, the “ Properties ”).
C. On or about December 20, 2005 (the “ Commencement Date ”), Calpine filed petitions for relief under chapter 11 of the title 11 of the United States Code (the “ Bankruptcy Code ”) in the United States Bankruptcy Court for the Southern District of New York (the “ Bankruptcy Court ”). Calpine’s chapter 11 cases are being jointly administered under Case No. 05-60200-brl (the “ Chapter 11 Cases ”).
D. Because of the Chapter 11 Cases, certain issues remain open with respect to the PSA , and a number of disputes have arisen between the Parties . Among other things, there are open issues with respect to the status of legal title to the Properties as of the Commencement Date.
E. The Parties have reached an interim business solution in connection with the Properties for certain, but not all, of the outstanding disputes on the basis set forth in detail in this Agreement.
NOW THEREFORE, for valuable consideration as exchanged between Calpine and Rosetta in this Agreement, the Parties agree:
1. New Marketing Agreement . Contemporaneously with the execution of this Agreement, each Party agrees to execute, and deliver its respective counterparts of, the New Marketing Agreement attached hereto as Exhibit B (the “ New Marketing Agreement ”), which, among other provisions, extends the primary term for Calpine ’s provision of marketing services for Rosetta until the earlier of: (i) June 30, 2009; or (ii) the date Calpine receives written notice from Rosetta of immediate expiration of the New Marketing Agreement on account of the first to occur of the following: (a) the entry by a court of competent jurisdiction of a final, nonappealable order avoiding the Sale Transaction as a fraudulent or similar transfer; or (b) the Bankruptcy Court’s authorizing Calpine to reject the PSA in whole or in part, unless Rosetta obtains a stay of the effect of such rejection order from a court of competent jurisdiction, in which case, upon the entry of a final nonappealable order authorizing Calpine to reject the PSA in whole or in part (and, in either case, Calpine exercising its authority pursuant to any such rejection order).
2. Resolution of Outstanding Property Issues .
(a) Contemporaneously with the execution of this Agreement, each Party agrees to execute, and deliver its respective counterparts of, all documents attached as Exhibit C and also to complete, promptly following Rosetta’s request, all necessary steps and actions and execute all other documents required to convey to Rosetta (or, as applicable, to irrevocably establish in Rosetta’s name) full legal title in and to (i) the Properties and (ii) all operating rights possessed by Calpine related to the Properties , which conveyances shall be effective, except as provided in Sections 5 and 6 hereof, on and from the “ Effective Date ” (as defined by the PSA ), free and clear of any and all liens, claims and encumbrances arising on or after July 7, 2005 by, through or under Calpine or its actions. The Parties acknowledge and agree that the Parties may be required to provide or execute additional documents with respect to, and to complete, conveyance of the Properties to Rosetta as may be reasonably requested by California State Lands Commission (“ CSLC ”), U.S. Department of Interior, Minerals Management Service (“ MMS ”) or Bureau of Land Management (“ BLM ”) (collectively, “ Regulatory Authorities ”) or Rosetta from time to time which the Parties shall promptly execute (not later than ten (10) days following their receipt). A nonexclusive list of the documents required is set forth in Exhibit C attached hereto.
(b) The Parties agree to take all reasonable steps necessary to obtain acknowledgments from applicable Regulatory Authorities that such authorities will recognize the applicable Rosetta entity as the record title owner and operator of each of the Properties as of the Effective Date .
(c) Following receipt of all required governmental approvals of the transfer to Rosetta of legal title to the Properties , Rosetta agrees to aid and assist Calpine to secure the release of any collateral security Calpine has posted with respect to the Properties . Rosetta agrees to execute and deliver to Calpine all documents required with respect to such release for the items as set forth in Exhibit D , copies of which have been provided to Rosetta , and also to complete all necessary steps and actions and execute all other documents required to secure the release of any collateral security Calpine has posted with respect to the Properties . The Parties acknowledge and agree that Rosetta may be required to provide or execute additional documents to secure such releases as may be reasonably requested by Calpine from time to time which the Parties shall promptly execute (not later than ten (10) days following their receipt). A nonexclusive list of the documents required is set forth in Exhibit D attached hereto.
3. Assumption and Assignment of Contracts and Leases and Related Liabilities . Subject to Section 5(b), Calpine agrees to seek Bankruptcy Court approval, as necessary, to assume pursuant to Section 365(b) of the Bankruptcy Code and assign or otherwise convey to Rosetta in accordance with Section 2 hereof, any and all interest, title or rights Calpine has in or to the Properties and any related operating rights, rights-of-ways, compensatory royalty agreements, easements and leases pertaining to the Properties . Rosetta agrees to assume, effective as of the Assumption Date (as hereinafter defined), all cure obligations (as provided in section 365(b)(1)(A) of the Bankruptcy Code ) in connection with any such assumption related to the Properties and to pay, and indemnify Calpine for, such obligations which shall be set forth or, by agreement of the Parties , otherwise provided for in the Bankruptcy Court order approving such assumption. To the extent Rosetta disputes any cure claims asserted by any counterparties, Calpine agrees to reasonably cooperate in defending against and opposing such asserted cure claims. “ Assumption Date ” shall mean: (i) for liabilities Rosetta assumed pursuant to the PSA , the effective date of such assumption as provided in the PSA ; and (ii) for additional liabilities that Rosetta did not assume pursuant to the PSA but will assume pursuant to this Agreement, the effective date of such assumption agreed to by the applicable Regulatory Authority. The Parties agree to use all reasonable efforts to include in such Bankruptcy Court order any wording as may be reasonably requested by the Regulatory Authorities or either Party , as applicable, in order to effectuate the terms of this Agreement.
4. Assumption of Rights and Liabilities .
(a) Effective as of the Assumption Date, Calpine agrees to assign, and Rosetta agrees to assume, all rights, obligations, duties, benefits, burdens, and claims of Calpine related to any underpayment or overpayment of monies, revenue interests, royalties or other payment obligations to the State of California, acting through the CSLC with respect to that portion of the Properties for which CSLC approvals are outstanding (collectively, the “ CSLC Properties ”), including without limitation: (i) the CSLC’s June 14, 2006 Audit for PRC 415.1 alleging underpayment in the amount of $643,379.92, together with any and all penalties and interest that have continued to accrue thereon; and (ii) the right to pursue, negotiate, resolve, pay any underpayments, and retain any overpayments for its own account with respect to all such CSLC Properties from and after May 1, 2000.
(b) Effective as of the Assumption Date, Rosetta agrees to: (i) assume all of Calpine ’s liabilities associated or arising in connection with the operation or Calpine’s status as lessee of the Properties (including without limitation plugging and abandonment costs and all of the liabilities for the items listed on Exhibit D attached hereto); and (ii) comply with all applicable governmental regulations associated with the Properties , including without limitation maintaining a clean-up/spill response plan for operated MMS leases as may be required by applicable law.
5. Reservation of Rights .
(a) Excepting the conveyance of title to the Properties and attendant rights thereto, including without limitation operating rights, as specifically provided herein, this Agreement is without prejudice to the Parties ’ respective rights, defenses, arguments, remedies, claims and obligations under the PSA and applicable law.
(b) The Parties reserve all rights to argue that any contracts or leases associated with the Properties are real property interests. Notwithstanding the Agreement, nothing herein shall constitute an admission by either Party (or impair its right to argue otherwise) that the Bankruptcy Code mandates assumption and assignment of such leases.
6. No Prejudice . Notwithstanding any language herein to the contrary, nothing in this Agreement including the effectiveness of the conveyances of the Properties on the Effective Date set forth in Section 2 hereof shall prejudice, release or otherwise impair the respective rights, defenses, a