According to the Company’s Form 10-K for the fiscal year ended December 31, 2005, beginning on March 11, 2002, fifteen complaints seeking class action status for securities claims against Calpine and other individual defendants were filed in the U.S. District Court for the Northern District of California against Calpine and certain of its employees, officers, and directors. All of these actions were ultimately assigned to Judge Saundra Brown Armstrong, and Judge Armstrong ordered the actions consolidated for all purposes on August 16, 2002, as In re Calpine Corp. Securities Litigation, Master File No. C 02-1200 SBA. Judge Armstrong denied the motion for class certification on August 10, 2005. In November 2005, the parties executed a settlement agreement. No defendant made any admission of liability. The settlement resolved the only claim remaining in these consolidated actions, which was a claim by two plaintiffs for an alleged violation of Section 11 of the Securities Act of 1933. All of the other claims brought in the consolidated actions were dismissed with prejudice by a February 2004 order. Pursuant to the settlement agreement, on December 5, 2005, Judge Armstrong entered a judgment of dismissal with prejudice, dismissing the consolidated actions and all claims asserted therein with prejudice. The settlement amount has been paid by insurance and the matter is resolved.

As summarized by a law firm’s web site, on August 15, 2002, Judge Saundra Brown Armstrong signed an order consolidating fifteen class action lawsuits into one class action lawsuit. Lead Plaintiffs and Lead Counsel were appointed by an Order dated August 19, 2002. On October 18, 2002, Lead Plaintiffs filed a Consolidated Amended Complaint for violations of the federal securities laws. On January 21, 2003, pursuant to stipulation of the parties and Order of the Court, Lead Plaintiffs filed a Second Consolidated Amended Class Action Complaint naming two individuals and Arthur Andersen LLP ("AA") as additional Defendants. On April 8, 2003, the Individual Defendants and Calpine filed their Motions to Dismiss the 2nd Amended Complaint and on June 23, 2003, AA filed its Motion to Dismiss this complaint. On August 6, 2003, Lead Plaintiffs filed a motion to dismiss AA as a Defendant, which the Court granted. On August 28, 2003, Judge Armstrong issued an Order granting in part and denying in part the Individual Defendants’ and Calpine’s Motions to Dismiss the 2nd Amended Complaint and granting Lead Plaintiffs leave to file a 3rd Amended Complaint. Specifically, the Judge dismissed Lead Plaintiffs’ Sections 10(b) and 20(a) Securities Exchange Act of 1934 claims. On October 17, 2003, Plaintiffs filed a 3rd Amended Complaint which alleges violations of Section 11 of the Securities Act of 1933. This complaint is filed on behalf of all purchasers of the Calpine 8.5% Senior Notes due February 15, 2011 issued pursuant to or traceable to the Registration Statement, the February 2001 Prospectus and the October 2001 Prospectus. Defendants filed a Motion to Dismiss the 3rd Amended Complaint on November 21, 2003 which Plaintiffs opposed. On February 5, 2004, the Court entered an Order denying Defendants’ motion. On February 23, 2004, Defendants filed their Answers to the 3rd Amended Complaint. On April 5, 2004 a motion to appoint Lead Plaintiff and Lead Counsel were filed with the Court and on May 11, 2004, the Court granted the motion. On August 31, 2004, certain Individual Defendants filed a Motion for Summary Judgment. Briefing on the issues was filed both Lead Plaintiff and Defendants and, by Order dated November 2, 2004, Defendants motion was denied. Lead Plaintiff filed a Motion to Certify the Class on February 8, 2005.

The original complaint charges Calpine and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Calpine owns, develops, acquires, and operates power-generation facilities and sells electricity and steam, primarily in the U.S. Calpine's stock, which went public in 1996, on a split adjusted basis, went from $2 at the IPO stage to over $33 in January 2001. The complaint alleges that the Company's stock price was very important because Calpine was planning at this time to build or acquire $15 billion of plants over the next four years. The financing for these plants was based on the performance of its stock because many of its bond buyers were looking to convert to common stock. If the stock did not perform, financing would be difficult to fund the Company's expansion. However, certain of Calpine's manipulative transactions, including those with Enron, such as inflated revenues, began to emerge on December 9, 2001. On December 14, 2001, prior to the market opening, Moody's Investors Service announced that it might cut the credit rating on Calpine's $11.6 billion of debt to junk. In response, Calpine's shares plummeted to $12.50, a more than 26% drop. Then, after the close of the market on December 14, 2001, Moody's Investors Service announced that it had in fact cut its rating of Calpine's debt to junk. As now revealed, at all times during the Class Period, defendants issued false and misleading statements and press releases concerning the Company's sale of and demand for power and the Company's ability to generate sufficient cash revenue to service its debt. During the Class Period, before the disclosure of the true facts, the Individual Defendants sold their personally held Calpine common stock generating more than $34 million in proceeds and the Company raised billions of dollars in a series of debt offerings.